Form 8-K Clipper Realty Inc. For: Mar 08
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
March 8, 2018
CLIPPER REALTY INC.
(Exact Name of Registrant as Specified in Charter)
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Maryland |
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001-38010 |
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47-4579660 |
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(State or Other |
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(Commission |
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(IRS Employer |
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Jurisdiction of |
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File Number) |
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Identification No.) |
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Incorporation) |
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4611 12th Avenue, Suite 1L |
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11219 |
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(Address of Principal Executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code: (718) 438-2804
Former name or former address, if changed since last report: N/A
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2.):
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☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition
On March 8, 2018, Clipper Realty Inc. issued a press release announcing its financial results for the quarterly and annual period ended December 31, 2017. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
The information in this Form 8-K under Item 2.02 and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific referencing in such filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits:
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Exhibit Number |
Exhibit Description |
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99.1 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Clipper Realty Inc. |
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(Registrant) |
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By: |
/s/ David Bistricer |
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Name: |
David Bistricer |
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Title: |
Co-Chairman and Chief Executive Officer |
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Date: March 8, 2018
Exhibit Index
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Exhibit Number |
Exhibit Description |
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99.1 |
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Press Release dated March 8, 2018, announcing financial results for the quarterly and annual period ended December 31, 2017 |
Exhibit 99.1
Clipper Realty Inc. Announces Fourth Quarter and Full-Year 2017 Results
Records Record Revenues and Earnings; Completes Significant Refinancings
NEW YORK, March 8, 2018 /Business Wire/ -- Clipper Realty Inc. (NYSE: CLPR) (the “Company”), a leading owner and operator of multifamily residential and commercial properties in the New York metropolitan area, today announced financial and operating results for the three months and year ended December 31, 2017.
Highlights for the Three Months and Year Ended December 31, 2017
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Grew revenues by 12.7% to a record $27.3 million for the fourth quarter 2017, and by 11.8% to a record $104.0 million for the year ended December 31, 2017, compared to the same periods in 2016 |
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Achieved record quarterly income from operations of $7.5 million and record quarterly net operating income (“NOI”)1 of $14.8 million for the fourth quarter 2017; achieved record annual NOI of $56.4 million for the year ended December 31, 2017 |
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Reduced net loss by 51% to $1.5 million, or $0.04 per share, for the fourth quarter 2017, and by 51% to $6.0 million, or $0.15 per share, for the year ended December 31, 2017, compared to the same periods in 2016 |
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Increased adjusted funds from operations (“AFFO”)1 by 61% to $4.5 million, or $0.10 per share, for the fourth quarter 2017, and by 67% to $16.7 million, or $0.38 per share, for the year ended December 31, 2017, compared to the same periods in 2016 |
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Acquired 10 West 65th Street, a residential property in Manhattan, for $79.0 million in October |
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Declared a dividend of $0.095 for the fourth quarter 2017, representing a 12% increase over the dividend for the same period in 2016 |
In addition to the 2017 highlights above, on February 21, 2018, the Company completed the refinancings (the “Refinancings”) of existing debt on its Flatbush Gardens and Tribeca House properties that lower the interest rates on the loans, fix the rates on the debt of all of its operating properties, reduce annual debt service by approximately $6.6 million and provide additional liquidity. With the proceeds of the Refinancings, the Company repaid the Flatbush Gardens and the Tribeca House loans, and the net remaining proceeds of $21.5 million increased the Company’s cash position.
David Bistricer, Co-Chairman and Chief Executive Officer, commented,
“We are pleased with the completion of debt refinancings at our Flatbush Gardens and Tribeca House properties in February. These new facilities improve our capital structure, mitigate interest rate risk, reduce annual debt service requirements, and provide greater flexibility and liquidity for Clipper Realty to execute our strategic plan.
We are also pleased with our fourth quarter 2017 results which demonstrate solid revenue growth and continuing high levels of NOI and AFFO, and reflect the quality of our property portfolio and the operational excellence of our team. With strong management and prudent capital improvements, we believe our properties will contribute meaningfully to our cash flow growth over time. As we progress through 2018 and beyond, we remain focused on executing our strategic initiatives, which include driving cash flow, increasing scale, enhancing efficiencies through asset repositioning and expertly operating our high-quality portfolio, to create long-term value for our shareholders. We are excited to continue to grow our portfolio through the acquisition of 10 West 65th Street.”
1 Net operating income (“NOI”) and adjusted funds from operations (“AFFO”) are non-GAAP financial measures. For a definition of these financial measures and a reconciliation of such measures to the most comparable GAAP measures, see “Reconciliation of Non-GAAP Measures” at the end of this release
Financial Results
Revenues grew by $3.1 million, or 12.7%, to $27.3 million for the fourth quarter 2017, compared to $24.2 million for the fourth quarter 2016. Revenues grew by $10.9 million, or 11.8%, to $104.0 million in the year ended December 31, 2017, compared to $93.0 million for the year ended December 31, 2016. The growth was attributable to a lease renewal on approximately one-third of the office space at the 250 Livingston property effective January 2017, increases in residential rent per square foot at the Flatbush Gardens property, increases in residential rent per square foot and occupancy at the Tribeca House property, the acquisition of the 10 West 65th Street property in October 2017 and, for the annual period, the acquisition of the Aspen property in June 2016.
Net loss for the fourth quarter 2017 was $1.5 million, or $0.04 per share, compared to $3.1 million, or $0.09 per share, for the fourth quarter 2016, representing an improvement of approximately 51%. Net loss for the year ended December 31, 2017, was $6.0 million, or $0.15 per share, compared to $12.3 million, or $0.34 per share, for the year ended December 31, 2016, representing an improvement of approximately 51%. The reduction in net loss in both periods was due to higher revenue and reduced interest expense, partially offset by higher real estate taxes, operating expenses, general and administrative expenses, depreciation and amortization and, for the annual period, the acquisition of the Aspen property in June 2016.
AFFO for the fourth quarter 2017 was $4.5 million, or $0.10 per share, compared to $2.8 million, or $0.07 per share, for the fourth quarter 2016. AFFO for the year ended December 31, 2017, was $16.7 million, or $0.38 per share, compared to $10.0 million, or $0.26 per share, for the year ended December 31, 2016. These increases reflect the above-mentioned improvements in revenue and operating expense changes and, for the annual period, the acquisition of the Aspen property in June 2016.
Balance Sheet
Notes payable (excluding unamortized loan costs) was $855.1 million at December 31, 2017, compared to $764.6 million at December 31, 2016. The balance at December 31, 2017, included the $34.4 million and $59.0 million mortgage loans obtained in connection with the 10 West 65th Street and 107 Columbia Heights acquisitions, respectively, discussed below.
In the first quarter 2017, the Company completed its initial public offering in which it sold approximately 6.4 million shares at $13.50 per share, raising approximately $86.3 million of gross proceeds.
2018 Refinancings
As discussed above, in February 2018, the Company completed the Refinancings.
The Company refinanced Flatbush Gardens with a ten-year $246 million initial fixed rate secured first mortgage loan with New York Community Bank, the property’s current lender, which matures March 2028, bears interest at a fixed rate of 3.5% per annum for the first five years and is interest-only for thirty months.
The Company refinanced Tribeca House with a ten-year $360 million fixed rate secured loan which matures March 2028, bears interest at a fixed rate of 4.506% per annum and is interest-only for the entire term.
With the proceeds, the Company repaid (i) both of the Tribeca House loans totaling $410 million due November 2018, which bore interest at a blended one-month LIBOR + 3.75% annual rate, and (ii) both of the Flatbush Gardens mortgage loans totaling approximately $168 million due October 2024, which bore interest at a fixed 3.875% annual rate. Net remaining proceeds of $21.5 million increased the Company’s cash position.
Acquisitions
In October 2017, the Company completed the acquisition of a residential property at 10 West 65th Street in Manhattan, which comprises approximately 76,000 square feet plus 53,000 square feet of air rights, for $79.0 million. The 82-unit property is located near Lincoln Center and Central Park in the Upper West Side neighborhood. The Company plans to invest incremental capital to enhance the property. In connection with the acquisition, the Company obtained a $34.4 million, ten-year mortgage loan secured by the property. The note bears interest at 3.375% for the first five years and thereafter at the prime rate plus 2.75% (subject to an option to fix the rate), and requires interest-only payments for the first two years and monthly principal and interest payments thereafter based on a 30-year amortization schedule.
In May 2017, the Company completed the acquisition of a residential property at 107 Columbia Heights in Brooklyn, which comprises approximately 154,000 square feet, in vacant condition, for $87.5 million or $568 per square foot. The property is located in the historic Brooklyn Heights neighborhood. The Company is in the process of repositioning the property. In connection with the acquisition, the Company obtained (a) a $59.0 million mortgage loan, secured by the property, and (b) a construction loan, secured by the property, that will provide up to $14.7 million for eligible capital improvements and carrying costs; the notes bear interest at one-month LIBOR plus 3.85% and mature in May 2020. The property is carried on the balance sheet as real estate under development.
Capital Expenditures
The Company continues to strategically invest in its properties, selectively repositioning assets and driving ongoing rent growth. The Company incurred $22.8 million, primarily on major renovation projects, for the year ended December 31, 2017, compared to $18.5 million in the same period in 2016. At the Tribeca House property, the expenditures were to upgrade units and common areas, including the lobby. At the Flatbush Gardens property, comprising 59 buildings and nearly 22 acres, the expenditures included the replacement of a major terrace area, installation of security cameras, lighting and refurbishment of all basement areas, and installation of new mailboxes and new laundry rooms. At the 141 Livingston Street property, the expenditures were to refurbish elements of the building as agreed under the lease with the City of New York. At the 107 Columbia Heights property, the expenditures were to commence development of the property and were funded primarily from the associated construction loan.
Dividend
The Company today declared its fourth quarter dividend of $0.095 per share to shareholders of record on March 22, 2018, payable March 29, 2018. This amount represents a 12% increase over the dividend for the same period in 2016.
Conference Call and Supplemental Material
The Company will host a conference call on March 8, 2018, at 5:00 PM Eastern Time to discuss fourth quarter and full-year 2017 results. The conference call can be accessed by dialing 800-346-7359 or 973-528-0008, conference entry code 102845. A replay of the call will be available from March 8, 2018, following the call, through March 22, 2018, by dialing 800-332-6854 or 973-528-0005, replay conference ID 102845. Supplemental data to this release can be found under the “Quarterly Earnings” navigation tab on the “Investors” page of our website at www.clipperrealty.com. The Company’s filings with the Securities and Exchange Commission (“SEC”) will be filed at www.sec.gov under Clipper Realty Inc.
About Clipper Realty
Clipper Realty Inc. (NYSE: CLPR) is a self-administered and self-managed real estate company that acquires, owns, manages, operates and repositions multifamily residential and commercial properties in the New York metropolitan area, with a portfolio in Manhattan and Brooklyn. For more information on Clipper Realty Inc., please visit www.clipperrealty.com.
Forward-Looking Statements
Various statements contained in this press release, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. These forward-looking statements may include estimates concerning the timing of certain acquisitions, the amount of capital projects and the success of specific properties. Our forward-looking statements are generally accompanied by words such as "estimate," "project," "predict," "believe," "expect," "intend," "anticipate," "potential," "plan" or other words that convey the uncertainty of future events or outcomes. The forward-looking statements in this press release speak only as of the date of this press release.
We disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control and which may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. For a discussion of these and other important factors that could affect our actual results, please refer to our filings with the Securities and Exchange Commission, including the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2016.
Contact
Investors:
Michael Frenz, Head of Capital Markets
(718) 438-2804 x2274
M: (917) 576-7750
Email: [email protected]
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Clipper Realty Inc. |
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Consolidated Balance Sheets |
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(In thousands, except for share data) |
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December 31, 2017 |
December 31, 2016 |
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ASSETS |
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Investment in real estate |
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Land and improvements |
$ | 497,343 | $ | 433,666 | ||||
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Building and improvements |
463,727 | 435,318 | ||||||
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Tenant improvements |
3,023 | 2,986 | ||||||
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Furniture, fixtures and equipment |
10,245 | 9,281 | ||||||
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Real estate under development |
96,268 | - | ||||||
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Total investment in real estate |
1,070,606 | 881,251 | ||||||
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Accumulated depreciation |
(73,714 | ) | (58,174 | ) | ||||
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Investment in real estate, net |
996,892 | 823,077 | ||||||
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Cash and cash equivalents |
8,274 | 37,547 | ||||||
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Restricted cash |
13,730 | 11,105 | ||||||
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Tenant and other receivables, net of allowance for doubtful accounts of $2,524 and $2,768, respectively |
6,569 | 4,485 | ||||||
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Deferred rent |
3,514 | 3,825 | ||||||
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Deferred costs and intangible assets, net |
11,894 | 13,953 | ||||||
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Prepaid expenses and other assets |
11,546 | 11,216 | ||||||
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TOTAL ASSETS |
$ | 1,052,419 | $ | 905,208 | ||||
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LIABILITIES AND EQUITY |
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Liabilities: |
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Notes payable, net of unamortized loan costs of $11,170 and $10,134, respectively |
$ | 843,946 | $ | 754,459 | ||||
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Accounts payable and accrued liabilities |
9,067 | 8,982 | ||||||
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Security deposits |
6,048 | 6,248 | ||||||
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Below-market leases, net |
5,075 | 6,862 | ||||||
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Other liabilities |
2,692 | 2,441 | ||||||
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TOTAL LIABILITIES |
866,828 | 778,992 | ||||||
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Equity: |
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Preferred stock, $0.01 par value, 12.5% Series A cumulative non-voting, $137,500 liquidation preference; zero and 132 shares issued and outstanding, respectively |
- | - | ||||||
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Common stock, $0.01 par value; 500,000,000 shares authorized, 17,812,755 and 11,422,606 shares issued and outstanding, respectively |
178 | 114 | ||||||
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Additional paid-in-capital |
92,273 | 46,671 | ||||||
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Accumulated deficit |
(17,539 | ) | (8,584 | ) | ||||
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Total stockholders' equity |
74,912 | 38,201 | ||||||
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Non-controlling interests |
110,679 | 88,015 | ||||||
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TOTAL EQUITY |
185,591 | 126,216 | ||||||
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TOTAL LIABILITIES AND EQUITY |
$ | 1,052,419 | $ | 905,208 | ||||
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Clipper Realty Inc. |
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Consolidated Statements of Operations |
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(In thousands, except per share data) |
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Three Months Ended December 31, |
Year Ended December 31, |
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2017 |
2016 |
2017 |
2016 |
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(unaudited) |
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REVENUES |
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Residential rental income |
$ | 18,993 | $ | 17,760 | $ | 73,667 | $ | 67,165 | ||||||||
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Commercial income |
5,496 | 4,715 | 21,914 | 18,558 | ||||||||||||
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Tenant recoveries |
1,879 | 1,092 | 5,102 | 4,061 | ||||||||||||
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Garage and other income |
955 | 671 | 3,269 | 3,221 | ||||||||||||
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TOTAL REVENUES |
27,323 | 24,238 | 103,952 | 93,005 | ||||||||||||
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OPERATING EXPENSES |
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Property operating expenses |
6,841 | 6,557 | 27,029 | 25,442 | ||||||||||||
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Real estate taxes and insurance |
5,680 | 4,717 | 20,685 | 17,740 | ||||||||||||
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General and administrative |
2,659 | 2,088 | 9,944 | 8,405 | ||||||||||||
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Acquisition costs |
32 | (81 | ) | 69 | 326 | |||||||||||
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Depreciation and amortization |
4,637 | 4,649 | 16,721 | 15,295 | ||||||||||||
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TOTAL OPERATING EXPENSES |
19,849 | 17,930 | 74,448 | 67,208 | ||||||||||||
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INCOME FROM OPERATIONS |
7,474 | 6,308 | 29,504 | 25,797 | ||||||||||||
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Interest expense, net |
(8,997 | ) | (9,387 | ) | (35,505 | ) | (38,136 | ) | ||||||||
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Net loss |
(1,523 | ) | (3,079 | ) | (6,001 | ) | (12,339 | ) | ||||||||
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Net loss attributable to non-controlling interests |
908 | 2,147 | 3,644 | 8,604 | ||||||||||||
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Dividends attributable to preferred shares |
- | (8 | ) | (8 | ) | (19 | ) | |||||||||
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Net loss attributable to common stockholders |
$ | (615 | ) | $ | (940 | ) | $ | (2,365 | ) | $ | (3,754 | ) | ||||
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Basic and diluted net loss per share |
$ | (0.04 | ) | $ | (0.09 | ) | $ | (0.15 | ) | $ | (0.34 | ) | ||||
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Weighted average common shares / OP units |
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Common shares outstanding |
17,813 | 11,423 | 17,021 | 11,423 | ||||||||||||
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OP units outstanding |
26,317 | 26,317 | 26,317 | 26,317 | ||||||||||||
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Diluted shares outstanding |
44,130 | 37,740 | 43,338 | 37,740 | ||||||||||||
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Clipper Realty Inc. |
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Consolidated Statements of Cash Flows |
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(In thousands) |
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Year Ended December 31, |
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| 2017 | 2016 | |||||||
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss |
$ | (6,001 | ) | $ | (12,339 | ) | ||
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Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation |
15,540 | 13,502 | ||||||
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Amortization of deferred financing costs |
2,899 | 5,200 | ||||||
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Amortization of deferred costs and intangible assets |
2,750 | 3,269 | ||||||
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Amortization of above- and below-market leases |
(1,729 | ) | (1,730 | ) | ||||
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Deferred rent |
311 | 56 | ||||||
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Stock-based compensation |
3,110 | 2,523 | ||||||
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Change in fair value of interest rate caps |
261 | (139 | ) | |||||
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Changes in operating assets and liabilities: |
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Restricted cash |
(2,625 | ) | (768 | ) | ||||
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Tenant and other receivables |
(2,084 | ) | (3,009 | ) | ||||
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Prepaid expenses, other assets and deferred costs |
(1,620 | ) | (979 | ) | ||||
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Accounts payable and accrued liabilities |
(89 | ) | 3,656 | |||||
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Security deposits |
(200 | ) | 238 | |||||
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Other liabilities |
251 | (130 | ) | |||||
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Net cash provided by operating activities |
10,774 | 9,350 | ||||||
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Additions to land, buildings and improvements |
(20,276 | ) | (18,162 | ) | ||||
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Cash paid in connection with acquisition of real estate |
(167,380 | ) | (103,123 | ) | ||||
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Net cash used in investing activities |
(187,656 | ) | (121,285 | ) | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Proceeds and costs from sale of common stock |
78,685 | (1,590 | ) | |||||
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(Redemption) sale of preferred stock |
(145 | ) | 132 | |||||
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Payments of mortgage notes |
(3,895 | ) | (515,650 | ) | ||||
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Proceeds from mortgage notes |
94,417 | 559,500 | ||||||
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Dividends and distributions |
(16,565 | ) | (9,951 | ) | ||||
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Loan costs and other |
(4,888 | ) | (8,291 | ) | ||||
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Net cash provided by financing activities |
147,609 | 24,150 | ||||||
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Net increase (decrease) in cash and cash equivalents |
(29,273 | ) | (87,785 | ) | ||||
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Cash and cash equivalents - beginning of period |
37,547 | 125,332 | ||||||
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Cash and cash equivalents - end of period |
$ | 8,274 | $ | 37,547 | ||||
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Supplemental cash flow information: |
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Cash paid for interest, net of capitalized interest of $2,852 in 2017 |
$ | 33,614 | $ | 33,536 | ||||
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Other non-cash items capitalized to real estate under development |
2,448 | - | ||||||
Clipper Realty Inc.
Reconciliation of Non-GAAP Measures
(In thousands, except per share data)
(Unaudited)
Non-GAAP Financial Measures
We disclose and discuss funds from operations (“FFO”), adjusted funds from operations (“AFFO”), adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”), and net operating income (“NOI”) all of which meet the definition of “non-GAAP financial measure” set forth in Item 10(e) of Regulation S-K promulgated by the SEC.
While management and the investment community in general believe that presentation of these measures provides useful information to investors, neither FFO, AFFO, Adjusted EBITDA, nor NOI should be considered as an alternative to net income or income from operations as an indication of our performance. We believe that to understand our performance further, FFO, AFFO, Adjusted EBITDA, and NOI should be compared with our reported net income or income from operations and considered in addition to cash flows computed in accordance with GAAP, as presented in our consolidated financial statements.
Funds From Operations and Adjusted Funds From Operations
FFO is defined by the National Association of Real Estate Investment Trusts (“NAREIT”) as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property and impairment adjustments, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Our calculation of FFO is consistent with FFO as defined by NAREIT.
AFFO is defined by us as FFO excluding amortization of identifiable intangibles incurred in property acquisitions, straight-line rent adjustments to revenue from long-term leases, amortization costs incurred in originating debt, interest rate cap mark-to-market, amortization of non-cash equity compensation and acquisition costs, less recurring capital expenditures.
Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. In fact, real estate values have historically risen or fallen with market conditions. FFO is intended to be a standard supplemental measure of operating performance that excludes historical cost depreciation and valuation adjustments from net income. We consider FFO useful in evaluating potential property acquisitions and measuring operating performance. We further consider AFFO useful in determining funds available for payment of distributions. Neither FFO nor AFFO represent net income or cash flows from operations computed in accordance with GAAP. You should not consider FFO and AFFO to be alternatives to net income as reliable measures of our operating performance; nor should you consider FFO and AFFO to be alternatives to cash flows from operating, investing or financing activities (computed in accordance with GAAP) as measures of liquidity.
Neither FFO nor AFFO measure whether cash flow is sufficient to fund all of our cash needs, including principal amortization, capital improvements and distributions to stockholders. FFO and AFFO do not represent cash flows from operating, investing or financing activities computed in accordance with GAAP. Further, FFO and AFFO as disclosed by other REITs might not be comparable to our calculations of FFO and AFFO.
The following table sets forth a reconciliation of FFO and AFFO for the periods presented to net loss before allocation to non-controlling interests, computed in accordance with GAAP (amounts in thousands):
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Three Months Ended December 31, |
Year Ended December 31, |
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2017 |
2016 |
2017 |
2016 |
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FFO |
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Net loss |
$ | (1,523 | ) | $ | (3,079 | ) | $ | (6,001 | ) | $ | (12,339 | ) | ||||
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Real estate depreciation and amortization |
4,637 | 4,649 | 16,721 | 15,295 | ||||||||||||
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FFO |
$ | 3,114 | $ | 1,570 | $ | 10,720 | $ | 2,956 | ||||||||
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AFFO |
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FFO |
$ | 3,114 | $ | 1,570 | $ | 10,720 | $ | 2,956 | ||||||||
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Amortization of real estate tax intangible |
392 | 290 | 1,568 | 1,476 | ||||||||||||
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Amortization of above- and below-market leases |
(432 | ) | (373 | ) | (1,729 | ) | (1,730 | ) | ||||||||
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Straight-line rent adjustments |
74 | 116 | 311 | 56 | ||||||||||||
|
Amortization of debt origination costs |
736 | 947 | 2,899 | 5,200 | ||||||||||||
|
Interest rate cap mark-to-market |
(98 | ) | (148 | ) | 261 | (139 | ) | |||||||||
|
Amortization of LTIP awards |
841 | 632 | 3,110 | 2,523 | ||||||||||||
|
Acquisition costs |
32 | (81 | ) | 69 | 326 | |||||||||||
|
Recurring capital spending |
(116 | ) | (135 | ) | (527 | ) | (670 | ) | ||||||||
|
AFFO |
$ | 4,543 | $ | 2,818 | $ | 16,682 | $ | 9,998 | ||||||||
|
AFFO Per Share/Unit |
$ | 0.10 | $ | 0.07 | $ | 0.38 | $ | 0.26 | ||||||||
Adjusted Earnings Before Interest, Income Taxes, Depreciation and Amortization
We believe that Adjusted EBITDA is a useful measure of our operating performance. We define Adjusted EBITDA as net loss before allocation to non-controlling interests, plus real estate depreciation and amortization, amortization of identifiable intangibles, straight-line rent adjustments to revenue from long-term leases, amortization of non-cash equity compensation, interest expense (net) and acquisition costs.
We believe that this measure provides an operating perspective not immediately apparent from GAAP income from operations or net income. We consider Adjusted EBITDA to be a meaningful financial measure of our core operating performance.
However, Adjusted EBITDA should only be used as an alternative measure of our financial performance. Further, other REITs may use different methodologies for calculating Adjusted EBITDA, and accordingly, our Adjusted EBITDA may not be comparable to that of other REITs.
The following table sets forth a reconciliation of Adjusted EBITDA for the periods presented to net loss before allocation to non-controlling interests, computed in accordance with GAAP (amounts in thousands):
|
Three Months Ended December 31, |
Year Ended December 31, |
|||||||||||||||
|
2017 |
2016 |
2017 |
2016 |
|||||||||||||
|
Adjusted EBITDA |
||||||||||||||||
|
Net loss |
$ | (1,523 | ) | $ | (3,079 | ) | $ | (6,001 | ) | $ | (12,339 | ) | ||||
|
Real estate depreciation and amortization |
4,637 | 4,649 | 16,721 | 15,295 | ||||||||||||
|
Amortization of real estate tax intangible |
392 | 290 | 1,568 | 1,476 | ||||||||||||
|
Amortization of above- and below-market leases |
(432 | ) | (373 | ) | (1,729 | ) | (1,730 | ) | ||||||||
|
Straight-line rent adjustments |
74 | 116 | 311 | 56 | ||||||||||||
|
Amortization of LTIP awards |
841 | 632 | 3,110 | 2,523 | ||||||||||||
|
Interest expense, net |
8,997 | 9,387 | 35,505 | 38,136 | ||||||||||||
|
Acquisition costs |
32 | (81 | ) | 69 | 326 | |||||||||||
|
Adjusted EBITDA |
$ | 13,018 | $ | 11,541 | $ | 49,554 | $ | 43,743 | ||||||||
Net Operating Income
We believe that NOI is a useful measure of our operating performance. We define NOI as income from operations plus real estate depreciation and amortization, general and administrative expenses, acquisition costs, amortization of identifiable intangibles and straight-line rent adjustments to revenue from long-term leases. We believe that this measure is widely recognized and provides an operating perspective not immediately apparent from GAAP operating income or net income. We use NOI to evaluate our performance because NOI allows us to evaluate the operating performance of our company by measuring the core operations of property performance and capturing trends in rental housing and property operating expenses. NOI is also a widely used metric in valuation of properties.
However, NOI should only be used as an alternative measure of our financial performance. Further, other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to that of other REITs.
The following table sets forth a reconciliation of NOI for the periods presented to income from operations, computed in accordance with GAAP (amounts in thousands):
|
Three Months Ended December 31, |
Year Ended December 31, |
|||||||||||||||
|
2017 |
2016 |
2017 |
2016 |
|||||||||||||
|
NOI |
||||||||||||||||
|
Income from operations |
$ | 7,474 | $ | 6,308 | $ | 29,504 | $ | 25,797 | ||||||||
|
Real estate depreciation and amortization |
4,637 | 4,649 | 16,721 | 15,295 | ||||||||||||
|
General and administrative |
2,659 | 2,088 | 9,944 | 8,405 | ||||||||||||
|
Acquisition costs |
32 | (81 | ) | 69 | 326 | |||||||||||
|
Amortization of real estate tax intangible |
392 | 290 | 1,568 | 1,476 | ||||||||||||
|
Amortization of above- and below-market leases |
(432 | ) | (373 | ) | (1,729 | ) | (1,730 | ) | ||||||||
|
Straight-line rent adjustments |
74 | 116 | 311 | 56 | ||||||||||||
|
NOI |
$ | 14,836 | $ | 12,997 | $ | 56,388 | $ | 49,625 | ||||||||