Preferred Apartment Communities, Inc. Reports Results for First Quarter 2020

Three months ended March 31,

2020

2019

% change

Revenues (in thousands)

$

131,102

$

111,506

17.6

%

Per share data:

Net income (loss) (1)

$

(4.44)

$

(0.66)

-

FFO (2)

$

(3.42)

$

0.39

-

FFO excluding Internalization costs (2)

$

0.31

$

0.39

(20.5)

%

Core FFO (2)

$

0.38

$

0.41

(7.3)

%

AFFO (2)

$

0.47

$

0.32

46.9

%

Dividends (3)

$

0.2625

$

0.26

1.0

%

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

(2)FFO, Core FFO and AFFO results are presented per basic weighted average share of Common Stock and Class A Unit in our Operating Partnership outstanding for the periods indicated. See Reconciliations of FFO Attributable to Common Stockholders and Unitholders, Core FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders and Definitions of Non-GAAP Measures.

(3)Per share of Common Stock and Class A Unit outstanding.

2020 Cash Collections of Certain Rental Revenues (1)

January

February

March

April

Multifamily

99.4

%

99.4

%

99.1

%

97.7

%

Student housing

99.8

%

99.9

%

99.5

%

97.3

%

Office

99.7

%

99.5

%

98.7

%

96.3

%

Grocery-anchored retail:

Grocery anchors

100.0

%

100.0

%

100.0

%

100.0

%

In-line tenants

98.7

%

98.9

%

95.8

%

66.7

%

Occupancy:

Multifamily

95.1

%

95.5

%

95.7

%

94.3

%

Student housing

96.1

%

96.3

%

96.2

%

96.2

%

Percent leased:

Office

96.3

%

96.3

%

96.7

%

95.9

%

Grocery-anchored retail

92.9

%

92.6

%

92.6

%

92.5

%

(1) Percent of revenue billed includes base rent, operating expense escalations, pet, garage, parking and storage rent. Figures are before any effect of rent deferrals.

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

(B) 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.

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

Property

Location (MSA)

Units / Leasable square feet

Multifamily community:

Altis Wiregrass Ranch

Tampa, Florida

392

units

Grocery-anchored shopping centers:

Wakefield Crossing

Raleigh, North Carolina

75,927

LSF

Midway Market

Dallas, Texas

85,599

LSF

161,526

Office properties:

4th & Brevard

Charlotte, North Carolina

1.74

acres

Owned as of March 31, 2020 (1)

Potential additions from real estate loan investment portfolio (2) (3)

Potential total

Multifamily communities:

Properties

35

9

44

Units

10,637

2,543

13,180

Grocery-anchored shopping centers:

Properties

54

—

54

Gross leasable area (square feet)

6,208,278

—

6,208,278

Student housing properties:

Properties

8

1

9

Units

2,011

175

2,186

Beds

6,095

543

6,638

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.

(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)  Excludes our 251 Armour property, comprising 35,000 rentable square feet that is under development.

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

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

Three months ended:

(in thousands)

3/31/2020

3/31/2019

Net (loss) income

$

(179,523)

$

(2,280)

Add:

Equity stock compensation

230

311

Depreciation and amortization

49,509

45,289

Interest expense

29,593

26,756

Management fees

3,099

7,829

Corporate G&A and other

6,365

1,418

Management Internalization

178,793

45

Loan loss allowance

5,133

—

Waived asset management and general and administrative expense fees

(1,136)

(2,629)

Less:

Interest revenue on notes receivable

13,439

11,288

Interest revenue on related party notes receivable

2,537

5,802

Miscellaneous revenues

3,260

23

Income from consolidated VIEs

—

141

Gain on extinguishment of debt

—

(17)

Gains on land condemnation and trading investment

479

4

Property net operating income

72,348

59,498

Less:

Non-same-store property revenues

(74,248)

(58,003)

Add:

Non-same-store property operating expenses

24,179

19,871

Same-store net operating income

$

22,279

$

21,366

Multifamily Communities' Same Store Net Operating Income

Three months ended:

(in thousands)

3/31/2020

3/31/2019

$ change

% change

Revenues:

Rental and other property revenues

$

37,618

$

36,390

$

1,228

3.4

%

Operating expenses:

Property operating and maintenance

6,412

6,340

72

1.1

%

Payroll

2,811

2,849

(38)

(1.3)

%

Real estate taxes and insurance

6,116

5,835

281

4.8

%

Total operating expenses

15,339

15,024

315

2.1

%

Same-store net operating income

$

22,279

$

21,366

$

913

4.3

%

Same-store average physical occupancy

95.5

%

94.9

%

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.

Preferred Apartment Communities, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

Three months ended March 31,

(In thousands, except per-share figures)

2020

2019

Revenues:

Rental and other property revenues

$

111,866

$

94,393

Interest income on loans and notes receivable

13,439

11,288

Interest income from related parties

2,537

5,802

Miscellaneous revenues

3,260

23

Total revenues

131,102

111,506

Operating expenses:

Property operating and maintenance

16,800

12,879

Property salary and benefits

5,191

4,657

Property management fees

2,003

3,267

Real estate taxes and insurance

15,525

14,090

General and administrative

6,364

1,420

Equity compensation to directors and executives

230

311

Depreciation and amortization

49,509

45,289

Asset management and general and administrative expense

fees to related party

3,099

7,829

Loan loss allowance

5,133

—

Management internalization expense

178,793

45

Total operating expenses

282,647

89,787

Waived asset management and general and administrative

expense fees

(1,136)

(2,629)

Net operating expenses

281,511

87,158

Operating (loss) income before gain on sale of trading investment

(150,409)

24,348

Gain on sale of trading investment

—

4

Operating (loss) income

(150,409)

24,352

Interest expense

29,593

26,756

Change in fair value of net assets of consolidated

VIEs from mortgage-backed pools

—

141

Loss on extinguishment of debt

—

(17)

Gain on land condemnation

479

—

Net loss

(179,523)

(2,280)

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

3,141

(492)

Net loss attributable to the Company

(176,382)

(2,772)

Dividends declared to preferred stockholders

(33,068)

(25,539)

Earnings attributable to unvested restricted stock

(2)

(2)

Net loss attributable to common stockholders

$

(209,452)

$

(28,313)

Net loss per share of Common Stock available to

 common stockholders, basic and diluted

$

(4.44)

$

(0.66)

Weighted average number of shares of Common Stock outstanding,

basic and diluted

47,129

42,680

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 March 31,

(In thousands, except per-share figures)

2019

Net (loss) income attributable to common stockholders (See note 1)

$

(209,452)

$

(28,313)

Add:

Depreciation of real estate assets

39,775

35,717

Depreciation of real estate assets attributable to joint ventures

8,982

9,123

Net (loss) income attributable to Class A Unitholders (See note 2)

(3,094)

492

FFO attributable to common stockholders and unitholders

(163,789)

17,019

Acquisition and pursuit costs

246

—

Loan cost amortization on acquisition term notes and loan coordination fees (See note 3)

678

487

Payment of costs related to property refinancing

—

55

Internalization costs (See note 4)

178,793

45

Noncash dividends on preferred stock

544

96

Noncash (income) expense for current expected credit losses (See note 5)

4,530

—

Extraordinary Event - COVID-19 Expense

29

—

Earnest money forfeited by prospective asset purchaser

(2,750)

—

Core FFO attributable to common stockholders and unitholders

18,281

17,702

Add:

Non-cash equity compensation to directors and executives

230

311

Amortization of loan closing costs (See note 6)

1,166

1,131

Depreciation/amortization of non-real estate assets

556

449

Net loan fees received (See note 7)

267

401

Deferred interest income received (See note 8)

8,277

2,760

Amortization of lease inducements (See note 9)

439

428

Non-operational miscellaneous revenues

2,750

—

Cash received in excess of amortization of purchase option termination revenues  (See note 10)

760

296

Less:

Non-cash loan interest income (See note 8)

(3,019)

(3,324)

Cash received for sale of K Program securities in excess of noncash revenues

—

(141)

Cash paid for loan closing costs

—

(3)

Amortization of acquired real estate intangible liabilities and SLR (See note 11)

(4,653)

(3,758)

Amortization of deferred revenues (See note 12)

(940)

(940)

Normally recurring capital expenditures (See note 13)

(1,418)

(1,180)

AFFO attributable to common stockholders and Unitholders

$

22,696

$

14,132

Common Stock dividends and distributions to Unitholders declared:

Common Stock dividends

$

12,491

$

11,195

Distributions to Unitholders (See note 2)

203

229

Total

$

12,694

$

11,424

Common Stock dividends and Unitholder distributions per share

$

0.2625

$

0.26

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

$

(3.42)

$

0.39

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

$

0.38

$

0.41

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

$

0.47

$

0.32

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

Basic:

Common Stock

47,129

42,680

Class A Units

827

880

Common Stock and Class A Units

47,956

43,560

Diluted Common Stock and Class A Units (B)

47,957

44,199

Actual shares of Common Stock outstanding, including 7 and 6 unvested shares

 of restricted Common Stock at March 31, 2020 and 2019, respectively.

47,585

43,244

Actual Class A Units outstanding at March 31, 2020 and 2019, respectively.

775

879

Total

48,360

44,123

(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 1.72% weighted average non-controlling interest in the Operating Partnership for the three-month period ended March 31, 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.

1)

Rental and other property revenues and property operating expenses for the quarter ended March 31, 2020 include activity for the properties acquired during the period only from their respective dates of acquisition. In addition, the first quarter 2020 includes activity for the properties acquired since March 31, 2019. Rental and other property revenues and expenses for the first quarter 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 774,687 Class A Units as of March 31, 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 1.72% and 2.02% for the three-month periods ended March 31, 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 March 31, 2020, aggregate unamortized loan coordination fees were approximately $14.0 million, which will be amortized over a weighted average remaining loan life of approximately 10.3 years.

4)

This adjustment reflects the add-back of consideration paid to the owners of the Former Manager and due diligence and pursuit costs incurred by the Company related to the internalization of the functions performed by the Former Manager.

5)

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.

6)

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 March 31, 2020, unamortized loan costs on all the Company's indebtedness were approximately $25.2 million, which will be amortized over a weighted average remaining loan life of approximately 9.1 years.

7)

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 8).

8)

This adjustment reflects the receipt during the periods presented of additional interest income (described in note 7 above) which was earned and accrued prior to those periods presented on various real estate loans.

9)

This adjustment removes the non-cash amortization of costs incurred to induce tenants to lease space in our office buildings and grocery-anchored shopping centers.

10)

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 the quarters ended March 31, 2020 and 2019, we had received cash in excess of recognized termination fee revenues, resulting in the positive adjustments shown to Core FFO in our calculation of AFFO.

11)

This adjustment reflects straight-line rent adjustments and the reversal of the non-cash amortization of below-market and above-market lease intangibles, which were recognized in conjunction with our acquisitions and which are amortized over the estimated average remaining lease terms from the acquisition date for multifamily communities and over the remaining lease terms for grocery-anchored shopping center assets and office buildings. At March 31, 2020, the balance of unamortized below-market lease intangibles was approximately $60.5 million, which will be recognized over a weighted average remaining lease period of approximately 9.1 years.

12)

This adjustment removes the non-cash amortization of deferred revenue recorded by us in conjunction with Company-owned lessee-funded tenant improvements in our office buildings.

13)

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 $40,000 of recurring capitalized expenditures incurred at our corporate offices during the three months ended March 31, 2020. 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.

Preferred Apartment Communities, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except per-share par values)

March 31, 2020

December 31, 2019

Assets

Real estate

Land

$

665,585

$

635,757

Building and improvements

3,329,579

3,256,223

Tenant improvements

172,136

167,275

Furniture, fixtures, and equipment

341,542

323,381

Construction in progress

16,131

11,893

Gross real estate

4,524,973

4,394,529

Less: accumulated depreciation

(461,957)

(421,551)

Net real estate

4,063,016

3,972,978

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

292,905

325,790

Real estate loan investments to related parties, net

2,568

23,692

Total real estate and real estate loan investments, net

4,358,489

4,322,460

Cash and cash equivalents

120,128

94,381

Restricted cash

43,665

42,872

Notes receivable

7,321

17,079

Note receivable and revolving lines of credit due from related parties

9,011

24,838

Accrued interest receivable on real estate loans

20,186

25,755

Acquired intangible assets, net of amortization

154,351

154,803

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

1,118

1,286

Deferred offering costs

3,085

2,147

Tenant lease inducements, net

19,168

19,607

Tenant receivables and other assets

90,877

65,332

Total assets

$

4,827,399

$

4,770,560

Liabilities and equity

Liabilities

Mortgage notes payable, net of deferred loan costs and mark-to-market adjustment

$

2,606,251

$

2,567,022

Revolving line of credit

191,500

—

Term note payable, net of deferred loan costs

—

69,489

Unearned purchase option termination fees

2,019

2,859

Deferred revenue

38,782

39,722

Accounts payable and accrued expenses

43,797

42,191

Deferred liability to Former Manager

22,982

—

Contingent liability due to Former Manager

14,911

—

Accrued interest payable

8,707

8,152

Dividends and partnership distributions payable

24,415

23,519

Acquired below market lease intangibles, net of amortization

60,481

62,611

Security deposits and other liabilities

35,405

20,879

Total liabilities

3,049,250

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; 2,075 and 2,028 shares outstanding at March 31, 2020 and December 31, 2019, respectively

21

20

Series A1 Redeemable Preferred Stock, $0.01 par value per share; up to 1,000 shares authorized;

  37 and 5 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively

—

—

Series M Redeemable Preferred Stock, $0.01 par value per share; 500 shares authorized; 106 shares

  issued; 98 and 103 shares outstanding at March 31, 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;

  2 and zero shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively

—

—

Common Stock, $0.01 par value per share; 400,067 shares authorized; 47,129 and 46,443 shares issued

and outstanding at March 31, 2020 and December 31, 2019, respectively

476

464

Additional paid-in capital

1,969,534

1,938,057

Accumulated (deficit) earnings

(191,040)

(7,244)

Total stockholders' equity

1,778,992

1,931,298

Non-controlling interest

(843)

2,818

Total equity

1,778,149

1,934,116

Total liabilities and equity

$

4,827,399

$

4,770,560

Preferred Apartment Communities, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

Three-month periods ended March 31,

(In thousands)

2020

2019

Operating activities:

Net (loss) income

$

(179,523)

$

(2,280)

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

Depreciation and amortization expense

49,509

45,289

Amortization of above and below market leases

(1,705)

(1,436)

Deferred revenues and fee income amortization

(1,269)

(1,498)

Purchase option termination fee amortization

(4,040)

(4,233)

Amortization of equity compensation, lease incentives, and other noncash expenses

849

805

Deferred loan cost amortization

1,781

1,552

(Increase) in accrued interest income on real estate loan investments

(3,296)

(3,551)

Receipt of accrued interest income on real estate loans

8,865

—

Gains on sales of trading investment

—

(4)

Gain on land condemnation, net of expenses

(479)

—

Cash received for purchase option terminations

4,800

1,330

Loss on extinguishment of debt

—

17

Loan loss allowance

5,133

—

Mortgage interest received from consolidated VIEs

—

2,598

Mortgage interest paid to other participants of consolidated VIEs

—

(2,598)

Changes in operating assets and liabilities:

(Increase) in tenant receivables and other assets

(10,775)

(8,376)

(Increase) in tenant lease incentives

—

(102)

Increase in accounts payable and accrued expenses

24,190

1,290

Increase in deferred liability to Former Manager

22,851

—

Increase in Contingent liability

15,000

—

Decrease in accrued interest, prepaid rents and other liabilities

(1,282)

(2,441)

Net cash provided by operating activities

(69,391)

26,362

Investing activities:

Investments in real estate loans

(11,631)

(29,795)

Repayments of real estate loans

53,896

—

Notes receivable issued

(249)

(1,890)

Notes receivable repaid

10,041

—

Notes receivable issued and draws on lines of credit by related parties

(9,624)

(13,952)

Repayments of notes receivable and lines of credit by related parties

4,546

8,330

Origination fees received on real estate loan investments

267

801

Origination fees paid to Manager on real estate loan investments

—

(401)

Purchases of mortgage backed securities (K program), net of acquisition costs

—

(30,934)

Mortgage principal received from consolidated VIEs

—

679

Sales of mortgage-backed securities

—

53,445

Acquisition of properties

(125,107)

(32,540)

Receipt of insurance proceeds for capital improvements

—

746

Proceeds from land condemnation

738

—

Additions to real estate assets - improvements

(12,817)

(7,917)

Deposits paid on acquisitions

(915)

(511)

Net cash used in investing activities

(90,855)

(53,939)

Financing activities:

Proceeds from mortgage notes payable

81,413

57,275

Repayments of mortgage notes payable

(42,252)

(38,324)

Payments for deposits and other mortgage loan costs

(1,694)

(996)

Payments to real estate loan participants

—

(5,223)

Proceeds from lines of credit

284,000

126,200

Payments on lines of credit

(92,500)

(166,200)

Proceeds from (repayment of) Term Loans

(70,000)

—

Mortgage principal paid to other participants of consolidated VIEs

—

(679)

Preferred Apartment Communities, Inc.

Consolidated Statements of Cash Flows - continued

(Unaudited)

Three-month periods ended March 31,

(In thousands)

2020

2019

Proceeds from repurchase agreements

—

4,857

Payments for repurchase agreements

—

(4,857)

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

89,398

128,573

Proceeds from exercises of warrants

44

3,921

Payments for redemptions of preferred stock

(9,890)

(2,006)

Common Stock dividends paid

(12,156)

(10,840)

Preferred stock dividends paid

(32,732)

(25,097)

Payments for deferred offering costs

(7,042)

(832)

Contributions from non-controlling interests

197

—

Net cash provided by financing activities

186,786

65,772

Net increase in cash, cash equivalents and restricted cash

26,540

38,195

Cash, cash equivalents and restricted cash, beginning of year

137,253

87,690

Cash, cash equivalents and restricted cash, end of period

$

163,793

$

125,885

Project/Property

Location

Maturity date

Optional extension date

Total loan

commitments

Carrying amount (1) as of

Current / deferred interest %

per annum

March 31, 2020

December 31, 2019

Multifamily communities:

(in thousands)

Palisades

Northern VA

5/17/2020

5/17/2021

$

17,270

$

17,250

$

17,250

8 / 0  (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

118,326

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

4,536

4,440

8.5 / 4.5

Sanibel Straights

Fort Myers, FL

2/3/2021

2/3/2022

9,416

9,038

8,846

8.5 / 5.5

Sanibel Straights Capital

Fort Myers, FL

2/3/2021

2/3/2022

6,193

6,059

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

5,979

5,653

8.5 / 5.5

V & Three

Charlotte, NC

8/15/2021

8/15/2022

10,336

10,336

10,336

8.5 / 5

V & Three Capital

Charlotte, NC

8/18/2021

8/18/2022

7,338

6,713

6,571

8.5 / 5

Cameron Square

Alexandria, VA

10/11/2021

10/11/2023

21,340

18,985

18,582

8.5 / 3

Cameron Square Capital

Alexandria, VA

10/11/2021

10/11/2023

8,850

8,413

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

4,336

4,245

8.5 / 4

E-Town

Jacksonville, FL

6/14/2022

6/14/2023

16,697

14,865

14,550

8.5 / 3.5

Vintage

Destin, FL

3/24/2022

3/24/2024

10,763

9,126

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

2,306

2,258

8.5 / 3.5

Kennesaw Crossing

Atlanta, GA

9/1/2023

9/1/2024

14,810

9,921

7,616

8.5 / 5.5

Vintage Horizon West

Orlando, FL

10/11/2022

10/11/2024

10,900

8,454

8,275

8.5 / 5.5

Chestnut Farms

Charlotte, NC

2/28/2025

N/A

13,372

806

—

8.5 / 5.5

Student housing properties:

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

12,759

12,489

8.5 / 4

New Market Properties:

Dawson Marketplace

Atlanta, GA

N/A

N/A

—

—

12,857

—

Preferred Office Properties:

8West

Atlanta, GA

11/29/2022

11/29/2024

19,193

6,194

4,554

8.5 / 5

$

373,182

310,317

352,582

Unamortized loan origination fees

(1,500)

(1,476)

Allowance for loan losses

(13,344)

(1,624)

Carrying amount

$

295,473

$

349,482

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

(2) Pursuant to an amendment of the loan agreement, effective January 1, 2019, the loan ceased accruing deferred interest.

Total units upon

Purchase option window

Project/Property

Location

completion (1)

Begin

End

Multifamily communities:

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)

Student housing property:

Solis Kennesaw II

Atlanta, GA

175

(6)

(6)

Office property:

8West

Atlanta, GA

(6)

(7)

(7)

2,718

(1) We evaluate each project individually and we make no assurance that we will acquire any of the underlying properties from our real estate loan investment portfolio. The purchase options held by us on the 464 Bishop, Haven Charlotte, Sanibel Straights, Wiregrass, Newbergh, Cameron Square, Solis Kennesaw and Falls at Forsyth projects were terminated, in exchange for an aggregate $17.2 million in termination fees from the developers.

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

(3) The option period window begins on the earlier of June 21, 2024 and the number of days indicated beyond the achievement of a 93% physical occupancy rate by the underlying property.

(4) The option period window begins on the later of one year following receipt of final certificate of occupancy or 90 days  beyond the achievement of a 93% physical occupancy rate by the underlying property and ends 60 days beyond the option period beginning date.

(5) We hold a right of first offer on the property, at a to-be-agreed-upon market price.

(6) The option period begins on October 1 of the second academic year following project completion and ends on the following December 31. The developer may elect to expedite the option period to begin December 1, 2020 and end on December 31, 2020.

(7) The project plans are for the construction of a class A office building consisting of approximately 195,000 rentable square feet; 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.

Principal balance as of

Acquisition/

refinancing date

March 31, 2020

December 31, 2019

Maturity date

Interest rate

Interest only through date (1)

Multifamily communities:

(in thousands)

Summit Crossing

10/31/2017

$

37,472

$

37,651

11/1/2024

3.99

%

Fixed rate

N/A

Summit Crossing II

3/20/2014

13,168

13,221

4/1/2021

4.49

%

Fixed rate

N/A

Vineyards

9/26/2014

33,213

33,382

10/1/2021

3.68

%

Fixed rate

N/A

Avenues at Cypress

2/13/2015

20,578

20,704

9/1/2022

3.43

%

Fixed rate

N/A

Avenues at Northpointe

2/13/2015

26,163

26,313

3/1/2022

3.16

%

Fixed rate

N/A

Venue at Lakewood Ranch