Preferred Apartment Communities, Inc. Reports Results for Third Quarter 2020
11/09/2020 - 05:27 PM
ATLANTA , Nov. 9, 2020 /PRNewswire/ -- Preferred Apartment Communities, Inc. (NYSE: APTS) ("we," "our," the "Company," "Preferred Apartment Communities" or "PAC") today reported results for the quarter ended September 30, 2020 . 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.
Our operating results are presented below.
Three months ended
Nine months ended
2020
2019
% change
2020
2019
% change
Revenues (in thousands)
$
126,697
$
120,203
5.4
%
$
381,076
$
345,561
10.3
%
Per share data:
Net income (loss) (1)
$
(0.79)
$
(0.71)
—
$
(6.21)
$
(2.02)
—
FFO (2)
$
0.17
$
0.31
(45.2)
%
$
(3.17)
$
1.06
—
Core FFO (2)
$
0.26
$
0.35
(25.7)
%
$
0.77
$
1.14
(32.5)
%
AFFO (2)
$
0.07
$
0.12
(41.7)
%
$
0.58
$
0.66
(12.1)
%
Dividends (3)
$
0.1750
$
0.2625
(33.3)
%
$
0.6125
$
0.785
(22.0)
%
(1)
(2)
(3)
"We are very pleased to report another quarter of operational outperformance across all of our product types, as our high quality, Sunbelt-focused portfolio of Class A multifamily, grocery-anchored retail and office, continued to be a market leader in the third quarter. Our collections of recurring rent were in excess of 99% , 96% , and 99% for our multi-housing, grocery anchored retail, and office portfolios, respectively, adjusted for deferrals. While we continue to navigate the short and long term economic and human impacts of the COVID-19 pandemic, we believe that our best-in- class asset management, combined with our suburban Sunbelt focus, and its associated broad positive economic drivers, provides stability for our portfolio, in the current environment and over the longer term.
Due to our operational success, we were able to focus our efforts on furthering key strategic goals for PAC, which includes closing the sale of our student housing assets for approximately $478 million Joel Murphy , Preferred Apartment Communities' President and Chief Executive Officer.
Financial
Our net loss per share was $(0.79) $(0.71) September 30, 2020 and 2019, respectively. Funds From Operations, or FFO, for the three months ended September 30, 2020 was $0.17 $0.26 September 30, 2020 as compared to $0.35 September 30, 2019 and was similarly impacted by the items listed above. Our FFO per share result increased to $0.17 $(0.01) $0.26 $0.22 $0.07 $0.05 22.1% for the third quarter 2020 from the second quarter 2020. Our Core FFO payout ratio to Common Stockholders and Unitholders was approximately 67.8% and our Core FFO payout ratio to our preferred stockholders was approximately 73.0% . (A) Our AFFO payout ratio to Common Stockholders and Unitholders was approximately 95.1% for the trailing twelve months ended September 30, 2020 . Our AFFO payout ratio to our preferred stockholders was approximately 90.9% for the third quarter 2020, 78.5% for the nine months ended September 30, 2020 and 75.1% for the trailing twelve months ended September 30, 2020 .(A) Our AFFO payout ratios were negatively impacted by the reduced level of accrued interest received on our real estate loan investment portfolio and increased property insurance rates. We have approximately $24.8 million As of September 30, 2020 , our total assets were approximately $4.7 billion September 30, 2019 of approximately $5.3 billion $585.8 million 18% . Excluding the consolidated VIE mortgage pool assets from the September 30, 2019 total, our total assets grew approximately $49.3 million (A) We calculate the Core FFO and AFFO payout ratios to Common Stockholders as the ratio of Common Stock dividends and distributions to Core FFO and AFFO. We calculate the Core FFO and AFFO payout ratios to preferred stockholders as the ratio of Preferred Stock dividends to the sum of Preferred Stock dividends and Core FFO and AFFO. Since our operations resulted in a net loss from continuing operations for the periods presented, a payout ratio based on net loss is not calculable. See Definitions of Non-GAAP Measures.
The following chart details monthly cash collections of rental revenues before and after the effect of rent deferrals across all our
operating business lines as of November 9, 2020:
2020 Cash Collections of Recurring Rental Revenues (1)
Unadjusted for rent
First
April
May
June
July
August
September
October
Multifamily
99.9
%
98.8
%
98.8
%
98.8
%
98.8
%
99.0
%
99.0
%
98.5
%
Student housing
99.9
%
97.9
%
97.0
%
97.4
%
97.0
%
98.6
%
98.8
%
98.9
%
Office
99.8
%
98.8
%
97.3
%
97.8
%
98.9
%
99.7
%
99.9
%
99.8
%
Grocery-anchored retail (2)
99.4
%
91.5
%
89.7
%
91.5
%
94.1
%
95.0
%
96.4
%
95.6
%
2020 Cash Collections of Recurring Rental Revenues (1)
Adjusted for rent deferrals:
First
April
May
June
July
August
September
October
Multifamily
99.9
%
99.7
%
99.5
%
98.9
%
98.9
%
99.0
%
99.0
%
98.5
%
Student housing
99.9
%
98.4
%
97.4
%
97.4
%
97.0
%
98.6
%
98.8
%
98.9
%
Office
99.8
%
99.7
%
99.8
%
99.9
%
99.8
%
99.7
%
99.9
%
99.8
%
Grocery-anchored retail (2)
99.5
%
96.8
%
95.2
%
95.7
%
96.7
%
96.0
%
97.0
%
96.5
%
(1)
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 monthly occupancy and percent leased rates across all our operating business lines:
2020 Monthly Occupancy and Percentages Leased
First
April
May
June
July
August
September
October
Occupancy:
Multifamily (stabilized)
95.5
%
94.4
%
94.4
%
95.2
%
95.1
%
96.0
%
95.6
%
95.4
%
Student housing
96.1
%
96.0
%
95.8
%
95.8
%
95.9
%
95.1
%
95.3
%
95.5
%
Percent leased:
Office
96.7
%
95.9
%
96.2
%
96.2
%
96.1
%
95.9
%
95.5
%
95.4
%
Grocery-anchored retail (1)
92.6
%
92.5
%
92.5
%
92.7
%
92.8
%
92.8
%
92.5
%
92.4
%
(1) Includes an investment in an unconsolidated joint venture that is not prorated for our ownership percentage.
Operational
Our average recurring rental revenue collections before and after any effect of rent deferrals for the third quarter 2020 were approximately 99.0% and 99.0% for multifamily communities, 99.5% and 99.8% for office properties and 95.2% and 96.5% for grocery-anchored retail properties, respectively. Rent deferments provided to our residents/tenants primarily related to a change of timing of rent payments with no significant changes to total payments or term. As of September 30, 2020 , we have deferred $1.5 million 3.1% cumulatively over the last two quarters. Including this deferred rent, we have accounted for 96.6% and 95.9% of third quarter and second quarter retail recurring rental revenue, respectively. In addition to the deferrals, we granted approximately $324,000 0.7% of retail recurring rental revenues cumulatively over the last two 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 have also reserved $928,000 3.4% of total retail revenues (inclusive of straight line rent) in the third quarter, increasing our total reserves to $2.5 million 3.0% of total retail revenues year to date, which is 0.7% of total company and other property revenues. On July 31, 2020 , we received approximately $18.7 million $375,000 As of September 30, 2020 , the average age of our multifamily communities was approximately 6.3 years, which is the youngest in the public multifamily REIT industry. As of September 30, 2020 , all of our owned multifamily communities had achieved stabilization, which we define as reaching 93% physical occupancy for three full months in a quarter. Financing and Capital Markets
On July 10, 2020 , we closed on a refinancing of the mortgage on our Citrus Village multifamily community. The new instrument has a principal amount of $40.9 million 2.95% per annum and matures on August 1, 2027 . Monthly interest-only payments are due through August 31, 2022 . As of September 30, 2020 , approximately 94.1% of our permanent property-level mortgage debt has fixed interest rates and approximately 4.2% 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 3.68% for residential properties, 4.13% for office properties and 3.91% for grocery-anchored retail properties. At September 30, 2020 , our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 54.0% . During the third quarter 2020, we issued and sold an aggregate of 34,603 shares of Series A1 Redeemable Preferred Stock, resulting in net proceeds of approximately $31.1 million $7.6 million $4.5 million During the third quarter 2020, we issued a total of 42,465 shares of preferred stock and redeemed 37,391 shares of preferred stock for a net total of 5,074 shares issued. Significant Transactions
On July 15, 2020 , we contributed our Neapolitan Way grocery-anchored shopping center into an unconsolidated 50/50 joint venture from which we collected approximately $19.2 million $3.3 million $6.9 million We retain a 50% financial and voting interest in the property. On September 3, 2020 , we closed on a real estate loan investment of up to approximately $20.7 million Atlanta, Georgia . The aggregate carrying amount of our real estate loan investment portfolio was approximately $309.6 million September 30, 2020 . Business Update Related to COVID-19
Since the onset of COVID-19, the Company has taken various actions in response to the pandemic, including offering extended rent deferral options and abatements in only very limited circumstances. While the effects and trends in the pandemic range from market to market, we continue to adjust our business operations to address the needs of our residents, tenants and associates on an asset by asset basis. Our property management and asset management teams continuously respond and adapt appropriately to any onsite, tenant and/or property management request, while following all applicable safety and social distancing guidelines as the situation continues to evolve and change. All of our multifamily communities, student housing properties, grocery-anchored shopping centers and office buildings have operated throughout the pandemic and in compliance with government-imposed COVID-19 guidelines and mandates. While we expect the impacts of COVID-19 generally to continue into 2021, the effects on our operations have been manageable and we believe this will continue barring a dramatic change in the trajectory of the pandemic.
Real Estate Assets
At September 30, 2020 , 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
investment
portfolio (2) (3)
Potential total
Residential properties:
Properties
44
12
56
Units
12,936
3,315
16,251
Beds
6,095
543
6,638
Grocery-anchored shopping centers:
Properties
54
—
54
Gross leasable area (square feet)
6,208,278
—
6,208,278
Office buildings:
Properties
9
(4)
1
10
Rentable square feet
3,169,000
195,000
3,364,000
(1)
One multifamily community, two student housing properties, 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)
The Company has terminated various purchase option agreements in exchange for termination fees. These properties
are excluded from the potential additions from our real estate loan investment portfolio.
(4)
Brevard land parcel that is slated for future development.
Same-Store Multifamily Communities Financial Data
The following chart presents 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 following multifamily communities containing an aggregate 8,694 units, or 79.6% of our multifamily units:
Aster at Lely Resort
Avenues at Cypress
Avenues at Northpointe
Citi Lakes
Lenox Village
Retreat at Lenox Village
Overton Rise
Sorrel
Venue at Lakewood Ranch
Avenues at Creekside
525 Avalon Park
Vineyards
Citrus Village
Retreat at Greystone
City Vista
Founders Village
Luxe at Lakewood Ranch
Adara at Overland Park
Summit Crossing I
Summit Crossing II
Aldridge at Town Village
City Park View
Crosstown Walk
Claiborne Crossing
Reserve at Summit Crossing
Colony at Centerpointe
Lux at Sorrel
Green Park
Vestavia Reserve
Same-store net operating income is a non-GAAP measure that is most directly comparable to net income (loss), as shown in the reconciliations below. 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)
9/30/2020
9/30/2019
Net loss
$
(3,602)
$
(2,137)
Add:
Equity stock compensation
582
305
Depreciation and amortization
51,794
46,239
Interest expense
29,879
28,799
Management fees
—
8,611
Corporate G&A and other
7,898
1,364
Management Internalization
577
818
Provision for expected credit losses
(152)
—
Waived asset management and general and administrative expense fees
—
(3,081)
Less:
Interest revenue on notes receivable
10,649
12,608
Interest revenue on related party notes receivable
609
2,546
Miscellaneous revenues
608
—
Income from consolidated VIEs
—
591
Loss from unconsolidated joint venture
(120)
—
Loss on extinguishment of debt
(518)
(15)
Gains on sale of real estate and land condemnation
3,310
—
Property net operating income
72,438
65,188
Less:
Non-same-store property revenues
(77,447)
(67,559)
Add:
Non-same-store property operating expenses
26,524
23,872
Same-store net operating income
$
21,515
$
21,501
Multifamily Communities' Same Store Net Operating Income
Three months ended:
(in thousands)
9/30/2020
9/30/2019
$ change
% change
Revenues:
Rental and other property revenues
$
37,383
$
37,490
$
(107)
(0.3)
%
Operating expenses:
Property operating and maintenance
6,733
7,167
(434)
(6.1)
%
Payroll
3,022
3,019
3
0.1
%
Real estate taxes and insurance
6,113
5,803
310
5.3
%
Total operating expenses
15,868
15,989
(121)
(0.8)
%
Same-store net operating income
$
21,515
$
21,501
$
14
0.1
%
Same-store average physical occupancy
95.6
%
95.6
%
Corporate level expenses related to the management and operations of the Multifamily and Student housing property portfolios 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)
Nine months ended:
(in thousands)
9/30/2020
9/30/2019
Net loss
$
(199,075)
$
(6,094)
Add:
Equity stock compensation
1,058
922
Depreciation and amortization
153,096
137,191
Interest expense
90,608
83,166
Management fees
3,099
24,649
Corporate G&A and other
23,109
4,171
Management Internalization
179,828
1,143
Provision for expected credit losses
5,463
—
Waived asset management and general and administrative expense fees
(1,136)
(8,505)
Less:
Interest revenue on notes receivable
34,495
35,989
Interest revenue on related party notes receivable
3,750
9,980
Miscellaneous revenues
4,560
1,023
Income from consolidated VIEs
—
1,316
Loss from unconsolidated joint venture
(120)
—
Loss on extinguishment of debt
(6,674)
(84)
Gains on sale of real estate and land condemnation
3,789
751
Property net operating income
216,250
187,668
Less:
Non-same-store property revenues
(226,417)
(187,737)
Add:
Non-same-store property operating expenses
75,318
64,282
Same-store net operating income
$
65,151
$
64,213
Multifamily Communities' Same Store Net Operating Income
Nine months ended:
(in thousands)
9/30/2020
9/30/2019
$ change
% change
Revenues:
Rental and other property revenues
$
111,855
$
110,833
$
1,022
0.9
%
Operating expenses:
Property operating and maintenance
19,473
20,388
(915)
(4.4)
%
Payroll
8,817
8,711
106
1.2
%
Real estate taxes and insurance
18,414
17,521
893
5.1
%
Total operating expenses
46,704
46,620
84
0.2
%
Same-store net operating income
$
65,151
$
64,213
$
938
1.5
%
Corporate level expenses related to the management and operations of the Multifamily and Student housing property portfolios 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 August 6, 2020 , we declared a quarterly dividend on our Common Stock of $0.17 5October 15, 2020 to all stockholders of record on September 15, 2020 . In conjunction with the Common Stock dividend, the Company's operating partnership declared a distribution on its Class A Units of $0.17 5October 15, 2020 to all Class A Unit holders of record as of September 15, 2020 .
Monthly Dividends on Preferred Stock
We declared monthly dividends of $5.00 $33.0 million 6% annual yield. We declared monthly dividends of $5.00 $1.2 million 6% annual yield. We declared dividends totaling approximately $1.5 million 5.75% in year one of issuance to 7.50% in year eight and thereafter. We declared dividends totaling approximately $157,000 a dividend rate that escalates from 6.1% in year one of issuance to 7.1% in year ten and thereafter.
Subsequent to Quarter End
Between October 1, 2020 and October 31, 2020 , we issued 13,986 shares of Series A1 Preferred Stock and collected net proceeds of approximately $12.6 million $2.8 million
On November 3, 2020 , we announced via a press release the closing on that day of the sale of student housing assets to an unrelated third party for a sales price of $478.7 million
On November 9, 2020 , the Company adjourned its Special Meeting of Stockholders to November 19, 2020 to provide stockholders with additional time to vote on Proposal 1 (Approval of the Articles of Amendment to the Company's charter to give bylaw access to stockholders) and Proposal 2 (Approval of the Articles of Amendment to the Company's charter to reduce the Company's call period on its Series A Redeemable Preferred Stock from 10 years to 5 years). The required vote to approve each Proposal is two-thirds of the Company's outstanding shares entitled to vote. As of November 5, 2020 , approximately 65.4% of the Company's outstanding shares had been voted on Proposal 1 and Proposal 2 and, of these shares, approximately 97.9% and 95.7% had been voted in favor of Proposal 1 and Proposal 2, respectively.
On November 2, 2020 , we closed on the acquisition of The Blake, a 281-unit multifamily community located in Orlando, Florida .
On November 5, 2020 , our board of directors declared a quarterly dividend on our Common Stock of $0.17 5January 15, 2021 to stockholders of record on December 15, 2020 . Even though this dividend will be paid in 2021, if and to the extent this dividend is taxable, the Company intends for this dividend to be taxable in 2020.
Conference Call and Supplemental Data
We will hold our quarterly conference call on Tuesday, November 10, 2020 at 11:00 a.m. Eastern Time to discuss our third quarter 2020 results. To participate in the conference call, please dial in to the following:
Live Conference Call Details Domestic Dial-in Number: 1-877-883-0383 International Dial-in Number: 1-412-902-6506 Company: Preferred Apartment Communities, Inc. Date: Tuesday, November 10, 2020 Time: 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time ) Passcode: 2463393
The live broadcast of PAC's third quarter 2020 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 available from 3:00 PM Eastern Time on Tuesday , November 10, through 11:59 PM Eastern Time on Wednesday , December 9, 2020. The replay can be accessed by dialing 1-877-344-7529 or 1-412-317-0088 for international participants. The passcode for the replay is 10149020. A replay of the webcast will also be available on the Company's website for a limited time.
A replay of the call will be archived on PAC's' website under Investors/News and Events/Events.
2020 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. Acquisition activity by its nature can cause material variation in our reported depreciation and amortization expense and interest income. Since net income (loss) per share is calculated net of depreciation and amortization expense, our net income (loss) results can fluctuate, possibly significantly, depending upon the timing of the closing of acquisitions. For this reason, we are unable to reasonably forecast this measure or provide a reconciliation of our projected FFO per share to this measure.
FFO per share - Due to the inherent uncertainty of the scope, duration and rapidly evolving nature of the economic and social disruption from the COVID-19 pandemic, we have withdrawn our guidance for 2020.
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 nine-month periods ended September 30, 2020 and 2019 appear in the attached report, as well as on our website using the following link:
https://investors.pacapts.com/q3-2020-quarterly-supplemental-financial-data
Forward-Looking Statements
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Estimates of future earnings, guidance, goals and performance are, by definition, and certain other statements in this Earnings Release and Supplemental Financial Data Report may constitute, "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, achievements or transactions to be materially different from the results, guidance, goals, performance, achievements or transactions expressed or implied by the forward-looking statements. 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 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 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; our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended; availability of quality personnel; our understanding of our competition and market trends in our industry; and interest rates, real estate values, the debt securities markets and the general economy.
Except as otherwise required by the federal securities laws, we assume no liability to update the information in this Earnings Release and Supplemental Financial Data Report.
We refer you to the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2019 that was filed with the SEC on March 3, 2020 , which discuss various factors that could adversely affect our financial results. Such risk factors and information may be updated or supplemented by our Form 10-K, Form 10-Q and Form 8-K filings and other documents filed from time to time with the SEC.
Additional Information
The SEC has declared effective the registration statement filed by the Company for each of the offerings to which this communication may relate. Before you invest, you should read the final prospectus, and any prospectus supplements, forming a part of the registration statement and other documents the Company has filed with the SEC for more complete information about the Company and the offering to which this communication may relate. In particular, you should carefully read the risk factors described in the final prospectus and in any related prospectus supplement and in the documents incorporated by reference in the final prospectus and any related prospectus supplement to which this communication may relate. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov . Alternatively, the Company or its dealer manager, Preferred Capital Securities, LLC, 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
(In thousands, except per-share figures)
2020
2019
Revenues:
Rental and other property revenues
$
114,831
$
105,049
Interest income on loans and notes receivable
10,649
12,608
Interest income from related parties
609
2,546
Miscellaneous revenues
608
—
Total revenues
126,697
120,203
Operating expenses:
Property operating and maintenance
19,278
16,493
Property salary and benefits
6,054
5,360
Property management costs
983
3,534
Real estate taxes and insurance
16,078
14,474
General and administrative
7,898
1,364
Equity compensation to directors and executives
582
305
Depreciation and amortization
51,794
46,239
Asset management and general and administrative expense
fees to related party
—
8,611
Provision for expected credit losses
(152)
—
Management internalization expense
577
818
Total operating expenses
103,092
97,198
Waived asset management and general and administrative
expense fees
—
(3,081)
Net operating expenses
103,092
94,117
Operating income before gain on sale of real estate and loss from
unconsolidated joint venture
23,605
26,086
Loss from unconsolidated joint venture
(120)
—
Gain on sale of real estate, net
3,261
—
Operating income
26,746
26,086
Interest expense
29,879
28,799
Change in fair value of net assets of consolidated
VIEs from mortgage-backed pools
—
591
Loss on extinguishment of debt
(518)
(15)
Gain on land condemnation
49
—
Net loss
(3,602)
(2,137)
Consolidated net loss attributable to non-controlling interests
108
59
Net loss attributable to the Company
(3,494)
(2,078)
Dividends declared to preferred stockholders
(35,909)
(29,446)
Earnings attributable to unvested restricted stock
(96)
(5)
Net loss attributable to common stockholders
$
(39,499)
$
(31,529)
Net loss per share of Common Stock available to
common stockholders, basic and diluted
$
(0.79)
$
(0.71)
Weighted average number of shares of Common Stock outstanding,
basic and diluted
49,689
44,703
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 September 30,
(In thousands, except per-share figures)
2020
2019
Net loss attributable to common stockholders (See note 1)
$
(39,499)
$
(31,529)
Add:
Depreciation of real estate assets
41,282
37,381
Amortization of acquired intangible assets and deferred leasing costs
9,978
8,386
Net loss attributable to Class A Unitholders (See note 2)
(50)
(59)
Gain on sale of real estate
(3,261)
—
FFO attributable to common stockholders and unitholders
8,450
14,179
Acquisition and pursuit costs
3
—
Loan cost amortization on acquisition term notes and loan coordination fees (See note 3)
505
511
Payment of costs related to property refinancing
509
170
Internalization costs (See note 4)
577
818
Deemed dividends for redemptions of and non-cash dividends on preferred stock
3,061
152
Expenses incurred on the potential call of preferred stock (See note 5)
46
—
Expenses related to the COVID-19 global pandemic (See note 6)
138
—
Core FFO attributable to common stockholders and unitholders
13,289
15,830
Add:
Non-cash equity compensation to directors and executives
582
305
Non-cash (income) expense for current expected credit losses (See note 7)
(761)
—
Amortization of loan closing costs (See note 8)
1,288
1,168
Depreciation/amortization of non-real estate assets
621
472
Net loan origination fees received (See note 9)
415
148
Deferred interest income received (See note 10)
375
—
Amortization of lease inducements (See note 11)
448
435
Less:
Amortization of purchase option termination revenues in excess of cash received (See note 12)
(421)
(1,283)
Non-cash loan interest income (See note 10)
(3,317)
(3,763)
Cash received for sale of K Program securities in excess of noncash revenues
—
(281)
Cash paid for loan closing costs
(106)
(29)
Amortization of acquired real estate intangible liabilities and SLR (See note 13)
(4,887)
(4,293)
Amortization of deferred revenues (See note 14)
(940)
(940)
Normally recurring capital expenditures (See note 15)
(2,983)
(2,379)
AFFO attributable to common stockholders and Unitholders
$
3,603
$
5,390
Common Stock dividends and distributions to Unitholders declared:
Common Stock dividends
$
8,780
$
11,823
Distributions to Unitholders (See note 2)
226
225
Total
$
9,006
$
12,048
Common Stock dividends and Unitholder distributions per share
$
0.1750
$
0.2625
FFO per weighted average basic share of Common Stock and Unit outstanding
$
0.17
$
0.31
Core FFO per weighted average basic share of Common Stock and Unit outstanding
$
0.26
$
0.35
AFFO per weighted average basic share of Common Stock and Unit outstanding
$
0.07
$
0.12
Weighted average shares of Common Stock and Units outstanding: (A)
Basic:
Common Stock
49,689
44,703
Class A Units
742
868
Common Stock and Class A Units
50,431
45,571
Diluted Common Stock and Class A Units (B)
50,433
45,768
Actual shares of Common Stock outstanding, including 548 and 20 unvested shares
of restricted Common Stock at September 30, 2020 and 2019, respectively.
50,449
45,355
Actual Class A Units outstanding at September 30, 2020 and 2019, respectively.
742
856
Total
51,191
46,211
(A) Units and Unitholders refer to Class A Units in our Operating Partnership (as defined in note 2), 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 1.47% weighted average non-controlling interest in the Operating Partnership for the three-month period ended September 30, 2020.
(B) Since our 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 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 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)
Nine months ended September 30,
(In thousands, except per-share figures)
2020
2019
Net loss attributable to common stockholders (See note 1)
$
(300,270)
$
(88,497)
Add:
Depreciation of real estate assets
122,053
109,408
Amortization of acquired intangible assets and deferred leasing costs
28,933
26,402
Net loss attributable to Class A Unitholders (See note 2)
(3,393)
(138)
Gain on sale of real estate
(3,261)
—
FFO attributable to common stockholders and unitholders
(155,938)
47,175
Acquisition and pursuit costs
381
—
Loan cost amortization on acquisition term notes and loan coordination fees (See note 3)
1,711
1,491
Payment of costs related to property refinancing
7,372
594
Internalization costs (See note 4)
179,828
1,143
Deemed dividends for redemptions of and non-cash dividends on preferred stock
6,377
371
Expenses incurred on the potential call of preferred stock (See note 5)
46
—
Expenses related to the COVID-19 global pandemic (See note 6)
586
—
Earnest money forfeited by prospective asset purchaser
(2,750)
—
Core FFO attributable to common stockholders and unitholders
37,613
50,774
Add:
Non-cash equity compensation to directors and executives
1,058
922
Non-cash (income) expense for current expected credit losses (See note 7)
3,647
—
Amortization of loan closing costs (See note 8)
3,631
3,458
Depreciation/amortization of non-real estate assets
1,793
1,381
Net loan origination fees received (See note 9)
882
674
Deferred interest income received (See note 10)
8,652
5,078
Amortization of lease inducements (See note 11)
1,334
1,295
Amortization of purchase option termination revenues in excess of cash received (See note 12)
(96)
(2,370)
Non-operating miscellaneous revenues
2,750
—
Less:
Non-cash loan interest income (See note 10)
(9,445)
(10,745)
Non-cash revenues from mortgage-backed securities
—
(696)
Cash paid for loan closing costs
(106)
(37)
Amortization of acquired real estate intangible liabilities and SLR (See note 13)
(13,684)
(12,375)
Amortization of deferred revenues (See note 14)
(2,821)
(2,821)
Normally recurring capital expenditures (See note 15)
(6,525)
(5,122)
AFFO attributable to common stockholders and Unitholders
$
28,683
$
29,416
Common Stock dividends and distributions to Unitholders declared:
Common Stock dividends
29,895
34,599
Distributions to Unitholders (See note 2)
559
683
Total
30,454
35,282
Common Stock dividends and Unitholder distributions per share
$
0.6125
$
0.785
FFO per weighted average basic share of Common Stock and Unit outstanding
$
(3.17)
$
1.06
Core FFO per weighted average basic share of Common Stock and Unit outstanding
$
0.77
$
1.14
AFFO per weighted average basic share of Common Stock and Unit outstanding
$
0.58
$
0.66
Weighted average shares of Common Stock and Units outstanding: (A)
Basic:
Common Stock
48,351
43,703
Class A Units
776
875
Common Stock and Class A Units
49,127
44,578
Diluted Common Stock and Class A Units (B)
49,144
45,235
Actual shares of Common Stock outstanding, including 548 and 20 unvested shares
of restricted Common Stock at September 30, 2020 and 2019, respectively.
50,449
45,355
Actual Class A Units outstanding at September 30, 2020 and 2019, respectively.
742
856
Total
51,191
46,211
(A) Units and Unitholders refer to Class A Units in our Operating Partnership (as defined in note 2), 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 1.58% weighted average non-controlling interest in the Operating Partnership for the nine-month period ended September 30, 2020.
(B) Since our 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 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 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
Net Loss Attributable to Common Stockholders
1)
Rental and other property revenues and property operating expenses for the three-month and nine-month periods ended September 30, 2020 include activity for the properties acquired during the period only from their respective dates of acquisition. In addition, these periods include activity for the properties acquired since September 30, 2019. Rental and other property revenues and expenses for the three-month and nine-month periods ended September 30, 2019 include activity for the acquisitions made during that period only from their respective dates of acquisition.
2)
Non-controlling interests in Preferred Apartment Communities Operating Partnership, L.P., or our Operating Partnership, consisted of a total of 742,413 Class A Units as of September 30, 2020. 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 1.47% and 1.90% for the three-month periods ended September 30, 2020 and 2019, respectively.
3)
We paid loan coordination fees to Preferred Apartment Advisors, LLC, or our Former Manager, to reflect the administrative effort involved in arranging debt financing for acquired properties prior to the Internalization. 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 September 30, 2020, aggregate unamortized loan coordination fees were approximately $12.8 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 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.
5)
This adjustment adds back expenses incurred by us to effect an amendment of the Company's charter necessary to allow us to redeem outstanding shares of our Series A Preferred Stock beginning on the fifth anniversary of the date of issuance of the shares of Series A Preferred Stock, rather than the tenth anniversary.
6)
This additive adjustment to FFO consists of one-time 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.
7)
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 FFO in calculating Core FFO.
8)
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. Effective April 13, 2018, the maximum borrowing capacity on the Revolving Line of Credit was increased from $150 million to $200 million . These loan closing costs are also amortized over the lives of the respective loans and the Revolving Line of Credit, and this non-cash amortization expense is an addition to FFO in the calculation of AFFO. Neither we nor the Operating Partnership have any recourse liability in connection with any of the mortgage loans, nor do we have any cross-collateralization arrangements with respect to the assets securing the mortgage loans, other than security interests in 49% of the equity interests of the subsidiaries owning such assets, granted in connection with our Revolving Line of Credit, which provides for full recourse liability. At September 30, 2020, unamortized loan costs on all the Company's indebtedness were approximately $32.3 million , which will be amortized over a weighted average remaining loan life of approximately 8.9 years.
9)
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 (see note 10).
10)
This adjustment reflects the receipt during the periods presented of additional interest income (described in note 9 above) which was earned and accrued on various real estate loans prior to those periods and previously deducted in our calculation of AFFO.
11)
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.
12)
Effective March 6, 2020, our purchase option on the Falls at Forsyth multifamily community was extinguished in conjunction with the loan repayment; effective January 1, 2019, we terminated our purchase options on the Sanibel Straits, Newbergh, Wiregrass and Cameron Square multifamily communities and the Solis Kennesaw student housing property; on May 7, 2018, we terminated our purchase options on the Bishop Street multifamily community and the Haven Charlotte student housing property, both of which are (or were) partially supported by real estate loan investments held by us. In exchange, we arranged to receive termination fees aggregating approximately $17.2 million from the developers, which are recorded as revenue over the period beginning on the date of election 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 all periods presented, we had recognized termination fee revenues in excess of cash received, resulting in the negative adjustments shown to Core FFO in our calculation of AFFO.
13)
This adjustment reflects straight-line rent adjustments and the reversal of the non-cash amortization of below-market and above-market lease intangibles, which were recognized in conjunction with our acquisitions and which are amortized over the estimated average remaining lease terms from the acquisition date for multifamily communities and over the remaining lease terms for grocery-anchored shopping center assets and office buildings. At September 30, 2020, the balance of unamortized below-market lease intangibles was approximately $54.5 million , which will be recognized over a weighted average remaining lease period of approximately 8.7 years.
14)
This adjustment removes the non-cash amortization of deferred revenue recorded by us in conjunction with Company-owned lessee-funded tenant improvements in our office buildings.
15)
We deduct from Core FFO normally recurring capital expenditures that are necessary to maintain our assets' revenue streams in the calculation of AFFO. This adjustment also deducts from Core FFO capitalized amounts for third party costs during the period to originate or renew leases in our grocery-anchored shopping centers and office buildings. This adjustment includes approximately $28,000 and $100,000 of recurring capitalized expenditures incurred at our corporate offices during the three-month and nine-month periods ended September 30, 2020, respectively. No adjustment is made in the calculation of AFFO for nonrecurring capital expenditures. See Capital Expenditures, Grocery-Anchored Shopping Center Portfolio, and Office Buildings Portfolio sections for definitions of these terms.
See Definitions of Non-GAAP Measures.
Preferred Apartment Communities, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except per-share par values)
September 30,
December 31,
Assets
Real estate
Land
$
657,286
$
635,757
Building and improvements
3,361,174
3,256,223
Tenant improvements
175,400
167,275
Furniture, fixtures, and equipment
357,010
323,381
Construction in progress
23,677
11,893
Gross real estate
4,574,547
4,394,529
Less: accumulated depreciation
(542,161)
(421,551)
Net real estate
4,032,386
3,972,978
Real estate loan investments, net
307,033
325,790
Real estate loan investments to related parties, net
2,568
23,692
Total real estate and real estate loan investments, net
4,341,987
4,322,460
Cash and cash equivalents
30,337
94,381
Restricted cash
65,690
42,872
Notes receivable
2,894
17,079
Note receivable and revolving lines of credit due from related parties
9,011
24,838
Accrued interest receivable on real estate loans
24,784
25,755
Acquired intangible assets, net of amortization
133,297
154,803
Deferred loan costs on Revolving Line of Credit, net of amortization
879
1,286
Deferred offering costs
4,721
2,147
Tenant lease inducements, net
18,655
19,607
Investment in unconsolidated joint venture
6,851
—
Tenant receivables and other assets
91,956
65,332
Total assets
$
4,731,062
$
4,770,560
Liabilities and equity
Liabilities
Mortgage notes payable, net of deferred loan costs and mark-to-market adjustment
$
2,765,793
$
2,567,022
Revolving line of credit
33,000
—
Term note payable, net of deferred loan costs
—
69,489
Unearned purchase option termination fees
1,164
2,859
Deferred revenue
36,909
39,722
Accounts payable and accrued expenses
66,283
42,191
Deferred liability to Former Manager
23,373
—
Contingent liability due to Former Manager
14,867
—
Accrued interest payable
8,538
8,152
Dividends and partnership distributions payable
20,971
23,519
Acquired below market lease intangibles, net of amortization
54,483
62,611
Prepaid rent, security deposits and other liabilities
34,823
20,879
Total liabilities
3,060,204
2,836,444
Commitments and contingencies
Equity
Stockholders' equity
Series A Redeemable Preferred Stock, $0.01 par value per share; 3,050 shares authorized; 2,226 and 2,161 shares
issued; 1,991 and 2,028 shares outstanding at September 30, 2020 and December 31, 2019, respectively
20
20
Series A1 Redeemable Preferred Stock, $0.01 par value per share; up to 1,000 shares authorized;
103 and 5 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
—
—
Series M Redeemable Preferred Stock, $0.01 par value per share; 500 shares authorized; 106 shares
issued; 91 and 103 shares outstanding at September 30, 2020 and December 31, 2019, respectively
1
1
Series M1 Redeemable Preferred Stock, $0.01 par value per share; up to 1,000 shares authorized;
13 and zero shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
—
—
Common Stock, $0.01 par value per share; 400,067 shares authorized; 49,901 and 46,443 shares issued
and outstanding at September 30, 2020 and December 31, 2019, respectively
499
464
Additional paid-in capital
1,882,149
1,938,057
Accumulated (deficit) earnings
(210,218)
(7,244)
Total stockholders' equity
1,672,451
1,931,298
Non-controlling interest
(1,593)
2,818
Total equity
1,670,858
1,934,116
Total liabilities and equity
$
4,731,062
$
4,770,560
Preferred Apartment Communities, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Nine-month periods ended
(In thousands)
2020
2019
Operating activities:
Net (loss) income
$
(199,075)
$
(6,094)
Reconciliation of net (loss) income to net cash provided by operating activities:
Depreciation and amortization expense
153,096
137,191
Amortization of above and below market leases
(6,145)
(4,525)
Deferred revenues and other noncash revenues amortization
(3,710)
(4,720)
Purchase option termination fee amortization
(4,896)
(6,900)
Amortization of equity compensation, lease incentives and other non-cash expenses
3,027
2,414
Deferred loan cost amortization
5,177
4,752
Non-cash accrued interest income on real estate loan investments
(9,208)
(10,206)
Receipt of accrued interest income on real estate loans
10,179
2,318
Gains on sales of real estate loan investments, net
—
(751)
Gain on sale of real estate loan and land condemnation
(3,789)
—
Loss from unconsolidated joint ventures
120
—
Cash received for purchase option terminations
4,800
1,330
Loss on extinguishment of debt
6,674
84
Non-cash payment of interest on related party line of credit
—
(637)
Mortgage interest received from consolidated VIEs
—
(13,398)
Mortgage interest paid to other participants of consolidated VIEs
—
13,398
Increase in provision for expected credit losses
5,463
—
Changes in operating assets and liabilities:
(Increase) in tenant receivables and other assets
(15,769)
(12,379)
(Increase) in tenant lease incentives
(382)
(570)
Increase in accounts payable and accrued expenses
46,821
22,399
Increase in deferred liability to Former Manager
22,851
—
Increase in contingent liability
15,013
—
Decrease in accrued interest, prepaid rents and other liabilities
(249)
730
Net cash provided by (used in) operating activities
29,998
124,436
Investing activities:
Investments in real estate loans
(42,193)
(74,668)
Repayments of real estate loans
71,146
—
Notes receivable issued
(793)
(5,399)
Notes receivable repaid
15,012
2,169
Notes receivable issued and draws on lines of credit by related parties
(9,624)
(30,434)
Repayments of notes receivable and lines of credit by related parties
4,546
26,222
Sale of real estate loan investment
—
747
Origination fees received on real estate loan investments
882
1,347
Origination fees paid to Former Manager on real estate loan investments
—
(674)
Purchases of mortgage backed securities (K program), net of acquisition costs
—
(18,656)
Mortgage principal received from consolidated VIEs
—
5,024
Purchases of mortgage-backed securities
—
(12,278)
Proceeds from sales of mortgage-backed securities
—
53,445
Acquisition of properties
(185,970)
(442,415)
Proceeds from sale of interest in unconsolidated joint venture
19,221
—
Return of capital from investment in unconsolidated joint venture
12,250
—
Proceeds from land condemnation
787
—
Receipt of insurance proceeds for capital improvements
—
746
Additions to real estate assets - improvements
(39,158)
(34,251)
Investment in property development
(50)
—
Deposits paid on acquisitions
(1,227)
(952)
Net cash used in investing activities
(155,171)
(530,027)
Preferred Apartment Communities, Inc.
Consolidated Statements of Cash Flows - continued
(Unaudited)
Nine-month periods ended
(In thousands)
2020
2019
Financing activities:
Proceeds from mortgage notes payable
377,749
329,905
Repayments of mortgage notes payable
(173,409)
(106,728)
Payments for deposits and other mortgage loan costs
(10,911)
(6,738)
Debt prepayment and other debt extinguishment costs
(5,733)
—
Payments to real estate loan participants
—
(5,223)
Proceeds from lines of credit
321,000
240,200
Payments on lines of credit
(288,000)
(247,200)
Repayment of Term Loan
(70,000)
—
Mortgage principal paid to other participants of consolidated VIEs
—
(5,024)
Proceeds from repurchase agreements
—
4,857
Payments for repurchase agreements
—
(4,857)
Proceeds from sales of preferred stock and Units, net of offering costs and redemptions
159,096
380,016
Proceeds from sales of Common Stock
4,522
—
Proceeds from exercises of Warrants
24
9,875
Payments for redemptions of preferred stock
(82,003)
(7,995)
Common Stock dividends paid
(33,271)
(33,617)
Preferred stock dividends and Class A Unit distributions paid
(104,428)
(81,025)
Payments for deferred offering costs
(10,669)
(3,386)
Contributions from non-controlling interests
99
2,050
Distributions to non-controlling interests
(119)
—
Net cash provided by financing activities
83,947
465,110
Net (decrease) increase in cash, cash equivalents and restricted cash
(41,226)
59,519
Cash, cash equivalents and restricted cash, beginning of year
137,253
87,690
Cash, cash equivalents and restricted cash, end of period
$
96,027
$
147,209
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 / interest %
September 30,
December 31,
Residential Properties:
(in thousands)
Palisades
Northern VA
5/17/2021
N/A
$
—
$
—
$
17,250
(2)
Wiregrass
Tampa, FL
N/A
N/A
—
—
14,976
—
Wiregrass Capital
Tampa, FL
N/A
N/A
—
—
4,240
—
Berryessa
San Jose, CA
2/13/2021
2/13/2023
137,616
123,533
115,819
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
4,736
4,440
8.5 / 4.5
Sanibel Straights
Fort Myers, FL
2/3/2021
2/3/2022
9,416
9,416
8,846
8.5 / 5.5
Sanibel Straights Capital
Fort Myers, FL
2/3/2021
2/3/2022
6,193
6,193
5,930
8.5 / 5.5
Falls at Forsyth
Atlanta, GA
N/A
N/A
—
—
21,513
—
Newbergh
Atlanta, GA
1/31/2021
1/31/2022
11,749
11,749
11,699
8.5 / 5.5
Newbergh Capital
Atlanta, GA
1/31/2021
1/31/2022
6,176
6,176
5,653
8.5 / 5.5
V & Three
Charlotte, NC
8/15/2021
8/15/2022
10,336
10,335
10,336
8.5 / 5
V & Three Capital
Charlotte, NC
8/18/2021
8/18/2022
7,338
7,008
6,571
8.5 / 5
Cameron Square
Alexandria, VA
10/11/2021
10/11/2023
21,340
19,887
18,582
8.5 / 3
Cameron Square Capital
Alexandria, VA
10/11/2021
10/11/2023
8,850
8,783
8,235
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
4,527
4,245
8.5 / 4
E-Town
Jacksonville, FL
6/14/2022
6/14/2023
16,697
15,519
14,550
8.5 / 3.5
Vintage
Destin, FL
3/24/2022
3/24/2024
10,763
9,529
8,932
8.5 / 4
Hidden River II
Tampa, FL
10/11/2022
10/11/2024
4,462
4,462
3,012
8.5 / 3.5
Hidden River II Capital
Tampa, FL
10/11/2022
10/11/2024
2,763
2,408
2,258
8.5 / 3.5
Kennesaw Crossing
Atlanta, GA
9/1/2023
9/1/2024
14,810
12,746
7,616
8.5 / 5.5
Vintage Horizon West
Orlando, FL
10/11/2022
10/11/2024
10,900
8,826
8,275
8.5 / 5.5
Chestnut Farms
Charlotte, NC
2/28/2025
N/A
13,372
8,968
—
8.5 / 5.5
Vintage Jones Franklin
Raleigh, NC
11/14/2023
5/14/2025
10,000
3,251
—
8.5 / 5.5
Solis Cumming Town Center
Atlanta, GA
9/3/2024
9/3/2026
20,681
1,983
—
8.5 / 5.5
Haven 12
Starkville, MS
11/30/2020
N/A
6,116
6,116
6,116
8.5 / 0
Solis Kennesaw II
Atlanta, GA
5/5/2022
5/5/2024
13,613
13,227
12,489
8.5 / 4
New Market Properties:
Dawson Marketplace
Atlanta, GA
N/A
N/A
—
—
12,857
—
Office property:
8West
Atlanta, GA
11/29/2022
11/29/2024
19,193
10,663
4,554
8.5 / 5
$
386,593
323,629
352,582
Unamortized loan origination fees
(1,567)
(1,476)
Allowances for expected loan losses and doubtful accounts
(12,461)
(1,624)
Carrying amount
$
309,601
$
349,482
(1)
(2) $18.7 million in full satisfaction of the principal and all interest due on the loan.
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 September 30, 2020 , 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
Residential properties:
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)
E-Town
Jacksonville, FL
332
S + 90 days (3)
S + 150 days (3)
Vintage
Destin, FL
282
(4)
(4)
Hidden River II
Tampa, FL
204
S + 90 days (2)
S + 150 days (2)
Kennesaw Crossing
Atlanta, GA
250
(5)
(5)
Vintage Horizon West
Orlando, FL
340
(4)
(4)
Solis Chestnut Farm
Charlotte, NC
256
(5)
(5)
Vintage Jones Franklin
Raleigh, NC
277
(4)
(4)
Solis Kennesaw II
Atlanta, GA
175
(6)
(6)
Solis Cumming Town Center
Atlanta, GA
320
(5)
(5)
Office property:
8West
Atlanta, GA
(7)
(7)
(7)
3,315
(1)
real estate loan investment portfolio.
(2) 93% physical occupancy
rate by the underlying property.
(3)
a 93% physical occupancy rate by the underlying property.
(4)
the achievement of a 93% physical occupancy rate by the underlying property and ends 60 days beyond the option period beginning date.
(5)
(6)
December 31. The developer may elect to expedite the option period to begin December 1, 2020 and end on December 31, 2020.
(7)
our purchase option window opens 90 days following the achievement of 90% lease commencement and ends on November 30,
2024 (subject to adjustment). Our purchase option is at the to-be-agreed-upon market value. In the event the property is sold to a
third party, we would be due a fee based on a minimum multiple of 1.15 times the total commitment amount of the real estate loan
investment, less the amounts actually paid by the borrower, up to and including payment of accrued interest and repayment of
principal at the time of the sale.
Mortgage Indebtedness
The following table presents certain details regarding our mortgage notes payable:
Principal balance as of
Acquisition/ refinancing
September 30,
December 31,
Maturity
Interest
Basis point 1 Month
Interest only (1)
Multifamily communities:
(in thousands)
Summit Crossing
10/31/2017
$
37,115
$
37,651
11/1/2024
3.99
%
Fixed rate
N/A
Summit Crossing II
6/30/2020
20,700
13,221
7/1/2030
2.94
%
278
7/31/2022
Vineyards
9/26/2014
32,877
33,382
10/1/2021
3.68
%
Fixed rate
N/A
Avenues at Cypress
6/30/2020
28,366
20,704
7/1/2027
2.96
%
Fixed rate
7/31/2022
Avenues at Northpointe
6/29/2020
33,546
26,313
7/1/2027
2.79
%
Fixed rate
7/31/2022
Venue at Lakewood Ranch
6/30/2020
36,555
28,076
7/1/2030
2.99
%
Fixed rate
7/31/2022
Aster at Lely Resort
6/29/2020
50,400
31,094
7/1/2030
2.95
%
Fixed rate
7/31/2022
CityPark View
6/25/2020
29,000
20,089
7/1/2030
2.75
%
Fixed rate
7/31/2023
Avenues at Creekside
7/31/2015
38,251
38,871
8/1/2024
1.76
%
160
N/A
Citi Lakes
7/29/2019
40,517
41,079
8/1/2029
3.66
%
Fixed rate
N/A
Stone Creek
6/22/2017
19,539
19,800
7/1/2052
3.22
%
Fixed rate
N/A
Lenox Village Town Center
2/28/2019
38,335
38,813
3/1/2029
4.34
%
Fixed rate
N/A
Retreat at Lenox
12/21/2015
16,844
17,114
1/1/2023
4.04
%
Fixed rate
N/A
Overton Rise
2/1/2016
37,818
38,428
8/1/2026
3.98
%
Fixed rate
N/A
Village at Baldwin Park
7/31/2020
69,881
70,607
1/1/2054
3.59
%
Fixed rate
N/A
Crosstown Walk
6/30/2020
46,500
30,246
7/1/2027
2.92
%
Fixed rate
7/31/2022
525 Avalon Park
6/15/2017
63,580
64,519
7/1/2024
3.98
%
Fixed rate
N/A
City Vista
7/1/2016
33,126
33,674
7/1/2026
3.68
%
Fixed rate
N/A
Sorrel
8/24/2016
30,921
31,449
9/1/2023
3.44
%
Fixed rate
N/A
Citrus Village
7/10/2020
40,900
28,796
8/1/2027
2.95
%
Fixed rate
8/31/2022
Retreat at Greystone
11/21/2017
33,597
34,053
12/1/2024
4.31
%
Fixed rate
N/A
Founders Village
3/31/2017
29,781
30,202
4/1/2027
4.31
%
Fixed rate
N/A
Claiborne Crossing
4/26/2017
25,615
25,948
6/1/2054
2.89
%
Fixed rate
N/A
Luxe at Lakewood Ranch
7/26/2017
37,112
37,662
8/1/2027
3.93
%
Fixed rate
N/A
Adara at Overland Park
9/27/2017
30,178
30,624
4/1/2028
3.90
%
Fixed rate
N/A
Aldridge at Town Village
10/31/2017
36,066
36,569
11/1/2024
4.19
%
Fixed rate
N/A
Reserve at Summit Crossing
9/29/2017
18,992
19,276
10/1/2024
3.87
%
Fixed rate
N/A
Overlook at Crosstown Walk
11/21/2017
21,144
21,450
12/1/2024
3.95
%
Fixed rate
N/A
Colony at Centerpointe
12/20/2017
31,616
32,120
10/1/2026
3.68
%
Fixed rate
N/A
Lux at Sorrel
1/9/2018
30,022
30,474
2/1/2030
3.91
%
Fixed rate
N/A
Green Park
2/28/2018
37,973
38,525
3/10/2028
4.09
%
Fixed rate
N/A
The Lodge at Hidden River
9/27/2018
40,384
40,903
10/1/2028
4.32
%
Fixed rate
N/A
Vestavia Reserve
11/9/2018
36,671
37,130
12/1/2030
4.40
%
Fixed rate
N/A
CityPark View South
11/15/2018
23,479
23,767
6/1/2029
4.51
%
Fixed rate
N/A
Artisan at Viera
8/8/2019
39,287
39,824
9/1/2029
3.93
%
Fixed rate
N/A
Five Oaks at Westchase
10/17/2019
30,978
31,448
11/1/2031
3.27
%
Fixed rate
N/A
Horizon at Wiregrass Ranch
4/23/2020
51,636
—
5/1/2030
2.90
%
Fixed rate
N/A
Parkside at the Beach
4/30/2020
45,037
—
5/1/2030
2.95
%
Fixed rate
N/A
Total multifamily communities
1,344,339
1,173,901
Grocery-anchored shopping centers:
Spring Hill Plaza
9/17/2019
8,016
8,167
10/1/2031
3.72
%
Fixed rate
N/A
Parkway Town Centre
9/17/2019
7,917
8,067
10/1/2031
3.72
%
Fixed rate
N/A
Woodstock Crossing
8/8/2014
2,833
2,877
9/1/2021
4.71
%
Fixed rate
N/A
Deltona Landings
8/16/2019
6,178
6,289
9/1/2029
4.18
%
Fixed rate
N/A
Powder Springs
8/13/2019
7,800
7,951
9/1/2029
3.65
%
Fixed rate
(3)
Barclay Crossing
8/16/2019
6,124
6,233
9/1/2029
4.18
%
Fixed rate
N/A
Parkway Centre
8/16/2019
4,450
4,530
9/1/2029
4.18
%
Fixed rate
N/A
The Market at Salem Cove
10/6/2014
8,936
9,075
11/1/2024
4.21
%
Fixed rate
N/A
Independence Square
8/27/2015
11,253
11,455
9/1/2022
3.93
%
Fixed rate
N/A
Royal Lakes Marketplace
4/12/2019
9,403
9,572
5/1/2029
4.29
%
Fixed rate
N/A
The Overlook at Hamilton Place
12/22/2015
19,195
19,509
1/1/2026
4.19
%
Fixed rate
N/A
Summit Point
10/30/2015
11,213
11,494
11/1/2022
3.57
%
Fixed rate
N/A
East Gate Shopping Center
4/29/2016
5,158
5,277
5/1/2026
3.97
%
Fixed rate
N/A
Fury's Ferry
4/29/2016
5,959
6,096
5/1/2026
3.97
%
Fixed rate
N/A
Rosewood Shopping Center
4/29/2016
4,002
4,095
5/1/2026
3.97
%
Fixed rate
N/A
Southgate Village
4/29/2016
7,115
7,279
5/1/2026
3.97
%
Fixed rate
N/A
The Market at Victory Village
5/16/2016
8,792
8,911
9/11/2024
4.40
%
Fixed rate
N/A
Wade Green Village
4/7/2016
7,530
7,655
5/1/2026
4.00
%
Fixed rate
N/A
Lakeland Plaza
7/15/2016
26,842
27,459
8/1/2026
3.85
%
Fixed rate
N/A
University Palms
8/8/2016
12,129
12,421
9/1/2026
3.45
%
Fixed rate
N/A
Cherokee Plaza
4/12/2019
24,427
24,867
5/1/2027
4.28
%
Fixed rate
N/A
Sandy Plains Exchange
8/8/2016
8,473
8,676
9/1/2026
3.45
%
Fixed rate
N/A
Thompson Bridge Commons
8/8/2016
11,326
11,599
9/1/2026
3.45
%
Fixed rate
N/A
Heritage Station
8/8/2016
8,383
8,585
9/1/2026
3.45
%
Fixed rate
N/A
Oak Park Village
8/8/2016
8,651
8,859
9/1/2026
3.45
%
Fixed rate
N/A
Shoppes of Parkland
8/8/2016
15,489
15,702
9/1/2023
4.67
%
Fixed rate
N/A
Champions Village
10/18/2016
27,400
27,400
11/1/2021
3.25
%
300
(4)
11/1/2021
Castleberry-Southard
4/21/2017
10,791
10,959
5/1/2027
3.99
%
Fixed rate
N/A
Rockbridge Village
6/6/2017
13,383
13,597
7/5/2027
3.73
%
Fixed rate
N/A
Irmo Station
7/26/2017
9,829
10,038
8/1/2030
3.94
%
Fixed rate
N/A
Maynard Crossing
8/25/2017
17,079
17,449
9/1/2032
3.74
%
Fixed rate
N/A
Woodmont Village
9/8/2017
8,153
8,320
10/1/2027
4.13
%
Fixed rate
N/A
West Town Market
9/22/2017
8,321
8,503
10/1/2025
3.65
%
Fixed rate
N/A
Crossroads Market
12/5/2017
17,746
18,112
1/1/2030
3.95
%
Fixed rate
N/A
Anderson Central
3/16/2018
11,320
11,539
4/1/2028
4.32
%
Fixed rate
N/A
Greensboro Village
5/22/2018
8,093
8,250
6/1/2028
4.20
%
Fixed rate
N/A
Governors Towne Square
5/22/2018
10,768
10,976
6/1/2028
4.20
%
Fixed rate
N/A
Conway Plaza
6/29/2018
9,419
9,549
7/5/2028
4.29
%
Fixed rate
N/A
Brawley Commons
7/6/2018
17,632
17,963
8/1/2028
4.36
%
Fixed rate
N/A
Hollymead Town Center
12/21/2018
26,296
26,758
1/1/2029
4.64
%
Fixed rate
N/A
Gayton Crossing
1/17/2019
17,379
17,679
2/1/2029
4.71
%
Fixed rate
N/A
Free State Shopping Center
5/28/2019
45,763
46,391
6/1/2029
3.99
%
Fixed rate
N/A
Polo Grounds Mall
6/12/2019
13,047
13,227
7/1/2034
3.93
%
Fixed rate
N/A
Disston Plaza
6/12/2019
17,661
17,905
7/1/2034
3.93
%
Fixed rate
N/A
Fairfield Shopping Center
8/16/2019
19,750
19,750
8/16/2026
2.21
%
205
8/16/2022
Berry Town Center
11/14/2019
11,852
12,025
12/1/2034
3.49
%
Fixed rate
N/A
Hanover Shopping Center
12/19/2019
31,417
32,000
12/19/2026
3.62
%
Fixed rate
N/A
Wakefield Crossing
1/29/2020
7,777
—
2/1/2032
3.66
%
Fixed rate
N/A
Total grocery-anchored shopping centers (5)
618,470
621,090
Student housing properties:
North by Northwest
6/1/2016
30,594
31,209
10/1/2022
4.02
%
Fixed rate
N/A
SoL
10/31/2018
35,238
35,656
11/1/2028
4.71
%
Fixed rate
N/A
Stadium Village
10/27/2017
44,561
45,228
11/1/2024
3.80
%
Fixed rate
N/A
Ursa
12/18/2017
—
31,400
1/5/2020
N/A
N/A
N/A
The Tradition
5/10/2018
30,000
30,000
6/6/2021
5.45
%
375
(6)
6/6/2021
Knightshade
5/31/2018
47,125
47,125
9/1/2025
4.09
%
Fixed rate
9/30/2020
The Bloc
6/27/2018
28,966
28,966
7/9/2021
5.25
%
355
(7)
7/9/2021
Total student housing properties
216,484
249,584
Office buildings:
Brookwood Center
8/29/2016
30,124
30,716
9/10/2031
3.52
%
Fixed rate
N/A
Galleria 75
11/4/2016
5,184
5,340
7/1/2022
4.25
%
Fixed rate
N/A
Three Ravinia
12/30/2016
115,500
115,500
1/1/2042
4.46
%
Fixed rate
1/31/2022
Westridge at La Cantera
11/13/2017
50,801
51,834
12/10/2028
4.10
%
Fixed rate
N/A
Armour Yards
1/29/2018
39,600
40,000
2/1/2028
4.10
%
Fixed rate
N/A
150 Fayetteville
7/31/2018
114,243
114,400
8/10/2028
4.27
%
Fixed rate
9/9/2020
Capitol Towers
12/20/2018
123,252
124,814
1/10/2037
4.60
%
Fixed rate
N/A
CAPTRUST Tower
7/25/2019
82,650
82,650
8/1/2029
3.61
%
Fixed rate
7/31/2029
Morrocroft Centre
3/19/2020
70,000
—
4/10/2033
3.40
%
Fixed rate
4/10/2025
251 Armour Yards (8)
1/22/2020
3,522
—
1/22/2025
4.50
%
Fixed rate
1/21/2023
Total office buildings
634,876
565,254
Grand total
2,814,169
2,609,829
Less: deferred loan costs
(44,338)
(38,185)
Less: below market debt adjustment
(4,038)
(4,622)
Mortgage notes, net
$
2,765,793
$
2,567,022
Footnotes to Mortgage Notes Table
(1)
(2) 5.0% , resulting in a cap on the combined rate of 6.6% .
(3)
(4) 3.25% .
(5)
(6) 5.45% .
(7) 5.25% .
(8)
Multifamily Communities
As of September 30, 2020, our multifamily community portfolio consisted of the following properties:
Three months ended September 30, 2020
Property
Location
Number of
units
Average unit
size (sq. ft.)
Average
physical
occupancy
Average rent
per unit
Same-Store Communities:
Aldridge at Town Village
Atlanta, GA
300
969
96.1
%
$
1,409
Green Park
Atlanta, GA
310
985
96.7
%
$
1,483
Overton Rise
Atlanta, GA
294
1,018
97.6
%
$
1,593
Summit Crossing I
Atlanta, GA
345
1,034
97.6
%
$
1,242
Summit Crossing II
Atlanta, GA
140
1,100
97.9
%
$
1,337
The Reserve at Summit Crossing
Atlanta, GA
172
1,002
95.5
%
$
1,374
Avenues at Cypress
Houston, TX
240
1,170
95.8
%
$
1,454
Avenues at Northpointe
Houston, TX
280
1,167
95.4
%
$
1,408
Vineyards
Houston, TX
369
1,122
95.1
%
$
1,205
Avenues at Creekside
San Antonio, TX
395
974
95.6
%
$
1,201
Aster at Lely Resort
Naples, FL
308
1,071
94.0
%
$
1,438
Sorrel
Jacksonville, FL
290
1,048
94.9
%
$
1,336
Lux at Sorrel
Jacksonville, FL
265
1,025
95.1
%
$
1,394
525 Avalon Park
Orlando, FL
487
1,394
94.4
%
$
1,512
Citi Lakes
Orlando, FL
346
984
94.0
%
$
1,465
Luxe at Lakewood Ranch
Sarasota, FL
280
1,105
96.0
%
$
1,492
Venue at Lakewood Ranch
Sarasota, FL
237
1,001
92.3
%
$
1,536
Crosstown Walk
Tampa, FL
342
1,070
96.0
%
$
1,334
Overlook at Crosstown Walk
Tampa, FL
180
986
96.9
%
$
1,404
Citrus Village
Tampa, FL
296
980
95.6
%
$
1,336
Lenox Village
Nashville, TN
273
906
95.5
%
$
1,319
Regent at Lenox
Nashville, TN
18
1,072
98.1
%
$
1,359
Retreat at Lenox
Nashville, TN
183
773
96.0
%
$
1,254
CityPark View
Charlotte, NC
284
948
96.0
%
$
1,169
CityPark View South
Charlotte, NC
200
1,005
93.7
%
$
1,283
Colony at Centerpointe
Richmond, VA
255
1,149
98.3
%
$
1,383
Founders Village
Williamsburg, VA
247
1,070
96.1
%
$
1,397
Retreat at Greystone
Birmingham, AL
312
1,100
97.0
%
$
1,356
Vestavia Reserve
Birmingham, AL
272
1,113
97.1
%
$
1,561
Adara Overland Park
Kansas City, KS
260
1,116
94.6
%
$
1,403
Claiborne Crossing
Louisville, KY
242
1,204
97.1
%
$
1,342
City Vista
Pittsburgh, PA
272
1,023
92.4
%
$
1,450
Total/Average Same-Store Communities
8,694
95.6
%
Stabilized Communities:
Stone Creek
Houston, TX
246
852
94.4
%
$
1,203
Artisan at Viera
Melbourne, FL
259
1,070
94.3
%
$
1,694
Village at Baldwin Park
Orlando, FL
528
1,069
94.9
%
$
1,677
Parkside at the Beach
Panama City Beach, FL
288
1,041
95.5
%
$
1,398
Lodge at Hidden River
Tampa, FL
300
980
95.4
%
$
1,387
Five Oaks at Westchase
Tampa, FL
218
983
94.6
%
$
1,510
Wiregrass Ranch
Tampa, FL
392
973
96.9
%
$
1,479
Total/Average Stabilized Communities
2,231
95.6
%
Total multifamily community units
10,925
For the three-month period ended September 30, 2020 , our average same-store multifamily communities' physical occupancy was 95.6% . We calculate average same-store physical occupancy for quarterly periods as the average number of occupied units on the 20th day of each of the trailing three months from the reporting period end date and that have been owned for at least 15 full months as of the end of the first quarter of each year. We exclude the operating results of properties for which construction of adjacent phases has commenced, properties which are undergoing significant capital projects, have sustained significant casualty losses, or are being marketed for sale as of the end of the reporting period. 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 September 30, 2020 , our average stabilized physical occupancy was 95.6% . We calculate average stabilized physical occupancy for quarterly periods as the average number of occupied units on the 20th day of each of the trailing three months from the reporting period end date.
For the three-month period ended September 30, 2020 , our average economic occupancy was 95.4% . 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 September 30, 2020 . 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.All of our multifamily communities were stabilized for the three-month period ended September 30, 2020 .
Student Housing Properties
As of September 30, 2020, our student housing portfolio consisted of the following properties:
Three months ended September 30, 2020
Property
Location
Number of units
Number of beds
Average unit
size (sq. ft.)
Average
physical
occupancy
Average rent
per bed
Student housing properties:
North by Northwest
Tallahassee, FL
219
679
1,250
92.2
%
$
696
SoL
Tempe, AZ
224
639
1,296
99.3
%
$
740
Stadium Village (1)
Atlanta, GA
198
792
1,466
93.0
%
$
721
Ursa (1)
Waco, TX
250
840
1,634
98.6
%
$
600
The Tradition
College Station, TX
427
808
539
92.6
%
$
567
Knightshade
Orlando, FL
221
894
2,036
95.8
%
$
787
The Bloc
Lubbock, TX
140
556
1,394
93.5
%
$
523
Rush
Charlotte, NC
332
887
1,224
97.7
%
$
765
Total/Average
2,011
6,095
95.4
%
$
681
(1) 99% equity interest in a joint venture which owns both Stadium Village and Ursa.
Capital Expenditures
We regularly incur capital expenditures related to our owned multifamily communities and student housing properties. Capital expenditures may be nonrecurring and discretionary, as part of a strategic plan intended to increase a property's value and corresponding revenue-generating ability, or may be normally recurring and necessary to maintain the income streams and present value of a property. Certain capital expenditures may be budgeted and reserved for upon acquiring a property as initial expenditures necessary to bring a property up to our standards or to add features or amenities that we believe make the property a compelling value to prospective residents in its individual market. These budgeted nonrecurring capital expenditures in connection with an acquisition are funded from the capital source(s) for the acquisition and are not dependent upon subsequent property operating cash flows for funding. Since the onset of COVID, all nonrecurring and discretionary capital expenditures have been reviewed individually and approved on as needed basis. There are regular recurring and life safety/operational capital expenditures which remain necessary for the continued normal operation of our properties. These have continued without interruption.
For the three-month period ended September 30, 2020, our capital expenditures for student housing properties 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
$
178
$
16.28
$
—
$
—
$
178
$
16.28
Carpets
531
48.90
—
—
531
48.90
Wood / vinyl flooring
42
3.94
125
11.51
167
15.45
Mini blinds and ceiling fans
72
6.66
—
—
72
6.66
Fire safety
—
—
220
20.40
220
20.40
HVAC
254
23.49
—
—
254
23.49
Computers, equipment, misc.
25
2.22
109
10.08
134
12.30
Elevators
—
—
25
2.24
25
2.24
Exterior painting
—
—
53
4.24
53
4.24
Leasing office and other common amenities
11
1.02
292
26.88
303
27.90
Major structural projects
—
—
1,073
99.80
1,073
99.80
Cabinets and countertop upgrades
—
—
416
38.66
416
38.66
Landscaping and fencing
—
—
15
1.09
15
1.09
Parking lot
—
—
36
3.32
36
3.32
Signage and sanitation
—
—
58
5.37
58
5.37
Totals
$
1,113
$
102.51
$
2,422
$
223.59
$
3,535
$
326.10
For the three-month period ended September 30, 2020, our capital expenditures for student housing properties consisted
of:
Capital Expenditures - Student Housing Properties
Recurring
Non-recurring
Total
(in thousands, except per-bed figures)
Amount
Per Bed
Amount
Per Bed
Amount
Per Bed
Appliances
$
49
$
8.16
$
—
$
—
$
49
$
8.16
Carpets
198
32.45
—
—
198
32.45
Wood / vinyl flooring
9
1.50
—
—
9
1.50
Mini blinds and ceiling fans
17
2.81
—
—
17
2.81
Fire safety
—
—
41
6.76
41
6.76
HVAC
101
16.52
—
—
101
16.52
Computers, equipment, misc.
42
6.94
58
9.54
100
16.48
Elevators
—
—
—
—
—
—
Exterior painting
—
—
—
—
—
—
Leasing office and other common amenities
—
—
46
7.68
46
7.68
Major structural projects
—
—
150
24.49
150
24.49
Cabinets and counter top upgrades
—
—
8
1.26
8
1.26
Landscaping and fencing
—
—
—
—
—
—
Parking lot
—
—
5
0.88
5
0.88
Signage and sanitation
—
—
14
2.17
14
2.17
Unit furniture
127
20.72
—
—
127
20.72
Totals
$
543
$
89.10
$
322
$
52.78
$
865
$
141.88
Grocery-Anchored Shopping Center Portfolio
As of September 30, 2020, our grocery-anchored shopping center portfolio consisted of the following properties:
Property name
Location
Year built
GLA (1)
Percent leased
Grocery anchor
tenant
Castleberry-Southard
Atlanta, GA
2006
80,018
100.0
%
Publix
Cherokee Plaza
Atlanta, GA
1958
102,864
100.0
%
Kroger
Governors Towne Square
Atlanta, GA
2004
68,658
95.9
%
Publix
Lakeland Plaza
Atlanta, GA
1990
301,711
95.3
%
Sprouts
Powder Springs
Atlanta, GA
1999
77,853
92.5
%
Publix
Rockbridge Village
Atlanta, GA
2005
102,432
84.4
%
Kroger
Roswell Wieuca Shopping Center
Atlanta, GA
2007
74,370
100.0
%
The Fresh Market
Royal Lakes Marketplace
Atlanta, GA
2008
119,493
93.9
%
Kroger
Sandy Plains Exchange
Atlanta, GA
1997
72,784
93.8
%
Publix
Summit Point
Atlanta, GA
2004
111,970
88.2
%
Publix
Thompson Bridge Commons
Atlanta, GA
2001
92,587
97.5
%
Kroger
Wade Green Village
Atlanta, GA
1993
74,978
88.7
%
Publix
Woodmont Village
Atlanta, GA
2002
85,639
97.2
%
Kroger
Woodstock Crossing
Atlanta, GA
1994
66,122
100.0
%
Kroger
East Gate Shopping Center
Augusta, GA
1995
75,716
92.2
%
Publix
Fury's Ferry
Augusta, GA
1996
70,458
98.0
%
Publix
Parkway Centre
Columbus, GA
1999
53,088
95.1
%
Publix
Greensboro Village
Nashville, TN
2005
70,203
98.3
%
Publix
Spring Hill Plaza
Nashville, TN
2005
66,693
100.0
%
Publix
Parkway Town Centre
Nashville, TN
2005
65,587
100.0
%
Publix
The Market at Salem Cove
Nashville, TN
2010
62,356
100.0
%
Publix
The Market at Victory Village
Nashville, TN
2007
71,300
97.9
%
Publix
The Overlook at Hamilton Place
Chattanooga, TN
1992
213,095
99.3
%
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 (5)
Naples, FL
1985
137,580
90.6
%
Publix
Berry Town Center
Orlando, FL
2003
99,441
84.2
%
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
97.5
%
Publix
Barclay Crossing
Tampa, FL
1998
54,958
100.0
%
Publix
Polo Grounds Mall
West Palm Beach, FL
1966
130,285
100.0
%
Publix
Kingwood Glen
Houston, TX
1998
103,397
97.1
%
Kroger
Independence Square
Dallas, TX
1977
140,218
86.1
%
Tom Thumb
Midway Market
Dallas, TX
2002
85,599
90.3
%
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
93.3
%
Walmart
Fairview Market
Greenville Spartanburg, SC
1998
46,303
97.0
%
Aldi
Brawley Commons
Charlotte, NC
1997
122,028
99.2
%
Publix
West Town Market
Charlotte, NC
2004
67,883
97.7
%
Harris Teeter
Heritage Station
Raleigh, NC
2004
72,946
100.0
%
Harris Teeter
Maynard Crossing
Raleigh, NC
1996
122,781
92.7
%
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
92.8
%
Harris Teeter
Free State Shopping Center
Washington, DC
1970
264,152
97.3
%
Giant
4,922,612
95.6
%
Redevelopment properties:
Champions Village
Houston, TX
1973
383,346
78.8
%
Randalls
Sweetgrass Corner
Charleston, SC
1999
89,124
29.1
%
(2)
Conway Plaza
Orlando, FL
1966
117,705
83.4
%
Publix
Hanover Center (4)
Wilmington, NC
1954
305,346
93.5
%
Harris Teeter
Gayton Crossing
Richmond, VA
1983
158,316
(3)
78.7
%
Kroger
Fairfield Shopping Center (4)
Virginia Beach, VA
1985
231,829
86.5
%
Food Lion
1,285,666
80.6
%
Grand total/weighted average
6,208,278
92.5
%
(1)
Gross leasable area, or GLA, represents the total amount of property square footage that can be leased to tenants.
(2)
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.
(3)
The GLA figure shown excludes the GLA of the Kroger store, which is owned by others.
(4)
Property is owned through a consolidated joint venture.
(5)
Investment in an unconsolidated joint venture that is not prorated for our ownership percentage.
As of September 30, 2020 , our grocery-anchored shopping center portfolio was 92.5% leased. We define percent leased as the percentage of gross leasable area that is leased, 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 September 30, 2020 were:
Totals
Number of
leases
Leased
GLA
Percent of
leased GLA
Month to
15
26,829
0.5
%
2020
28
65,785
1.2
%
2021
163
543,700
9.5
%
2022
179
623,975
10.9
%
2023
141
675,024
11.8
%
2024
126
1,157,997
20.2
%
2025
115
961,966
16.8
%
2026
37
311,271
5.4
%
2027
29
204,881
3.6
%
2028
29
359,151
6.3
%
2029
25
151,566
2.6
%
2030 +
33
658,168
11.2
%
Total
920
5,740,313
5740313
100.0
%
The Company's grocery-anchored shopping center portfolio contained the following anchor tenants as of September
30, 2020:
Tenant
GLA
Percent of
total GLA
Publix
1,179,030
19.0%
Kroger
581,593
9.4%
Harris Teeter
273,273
4.4%
Wal-Mart
183,211
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%
The Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 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 2020 totaled approximately $1.1 million
Office Building Portfolio
As of September 30, 2020, our office building portfolio consisted of the following properties:
Property Name
Location
GLA
Percent leased
Three Ravinia
Atlanta, GA
814,000
95
%
150 Fayetteville
Raleigh, NC
560,000
91
%
Capitol Towers
Charlotte, NC
479,000
98
%
CAPTRUST Tower
Raleigh, NC
300,000
99
%
Westridge at La Cantera
San Antonio, TX
258,000
100
%
Morrocroft Centre
Charlotte, NC
291,000
92
%
Armour Yards
Atlanta, GA
187,000
91
%
Brookwood Center
Birmingham, AL
169,000
100
%
Galleria 75
Atlanta, GA
111,000
97
%
Total/Average
3,169,000
96
%
The Company's office building portfolio includes the following significant tenants:
Rentable square
Percent of Rent
Annual Base Rent (in
InterContinental Hotels Group
520,000
14.2
%
$
12,276
Albemarle
162,000
6.7
%
5,727
CapFinancial
105,000
4.3
%
3,733
USAA
129,000
3.7
%
3,196
Vericast
129,000
3.4
%
2,953
Total
1,045,000
32.3
%
$
27,885
The Company defines Annual Base Rent as the current monthly base rent annualized under the respective leases.
The Company's leased square footage of its office building portfolio expires according to the following schedule:
Office building portfolio
Percent of
Year of lease
expiration
Rented square
rented
feet
square feet
2020
48,000
1.6
%
2021
224,000
7.5
%
2022
112,000
3.7
%
2023
127,000
4.3
%
2024
268,000
9.0
%
2025
255,000
8.5
%
2026
266,000
8.9
%
2027
328,000
11.0
%
2028
239,000
8.0
%
2029
57,000
1.9
%
2030+
1,064,000
35.6
%
Total
2,988,000
100.0
%
The Company recognized second-generation capital expenditures within its office building portfolio of approximately $211,000
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 the potential call 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; amortization of loan closing costs; weather-related property operating losses; amortization of loan coordination fees paid to the Manager; depreciation and amortization of non-real estate assets; non-cash (income) expense for current expected credit losses; net loan origination fees received; accrued interest income received; cash received for purchase option terminations; non-operating miscellaneous revenues; non-cash dividends on Series M Preferred Stock and mShares; 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 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.
Multifamily Communities' Same-Store Net Operating Income ("NOI")
We use same store net operating income as an operational metric for our same-store 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 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, Class A office buildings, and student housing properties. 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 properties. As of September 30, 2020 , the Company owned or was invested in 125 properties in 15 states, predominantly in the Southeast region of the United States .
http://www.prnewswire.com/news-releases/preferred-apartment-communities-inc-reports-results-for-third-quarter-2020-301169116.html
SOURCE Preferred Apartment Communities, Inc.
