Exhibit 99.2

 

 

 

Third Quarter 2014

 

Supplemental Operating and Financial Data

 

 

 

The Estates at Wake Forest

Wake Forest, NC

 

Trade Street Residential, Inc.

19950 W. Country Club Drive, Suite 800

Aventura, Florida 33180

786-248-5200

www.tradestreetresidential.com

 

 

Trade Street Residential, Inc.

Third Quarter 2014

Supplemental Financial Information

 

Table of Contents		Page
Earnings Release		3
Operating Results		9
Funds From Operations and Core Funds From Operations		10
Consolidated Balance Sheets		11
Operating Properties Table		12
Same Store Comparisons		13
Acquisitions, Pipeline, Dispositions and Held for Sale		15
NOI, Average Occupancy and Average Monthly Rent Summary		16
Debt Summary		17
Capitalized Cost Summary		18
Non-GAAP Financial Measures and Reconciliation		19
NOI Bridge		21

 

 

 

 

Trade Street RESIDENTIAL RELEASES Third Quarter 2014 Results

 

– Increases Same Store Average Monthly Rent 3.9% to $903 –

– Reports Core FFO of $0.09 Per Diluted Share –

– Board of Directors Initiates Comprehensive Review of Strategic Alternatives –

 

AVENTURA, FL, November 3, 2014 – Trade Street Residential, Inc. (NASDAQ: TSRE) (the “Company”), a vertically integrated and self-managed real estate investment trust ("REIT") focused on acquiring, owning, operating and managing high-quality, conveniently located, apartment communities in mid-sized cities and suburban submarkets of larger cities primarily in the southeastern United States and Texas, today announced consolidated results for the third quarter ended September 30, 2014.

 

Operational and Financial Highlights for Third Quarter 2014

 

·

Reported Core FFO of $3.1 million, or $0.09 per diluted share.

 

·

Same store net operating income, or same store NOI, increased 2.2% compared to the same period in the prior year. Over the same period, same store revenue increased 3.6% and same store expenses increased 5.4%. Stabilized non-same store communities provided $5.2 million of NOI during the quarter, an improvement of $3.7 million over the same period in the prior year and $0.6 million over the second quarter of 2014.

 

·

Same store average occupancy was 96.1% at quarter end, a decrease of 20 basis points compared to the same period last year. Stabilized non-same store average occupancy was 95.6% at quarter end, a 310 basis point improvement over the second quarter of 2014.

 

·

Same store average monthly rent increased to $903 per unit, an increase of 3.9% compared to the same period last year. Stabilized non same store average monthly rent was $1,101 at quarter end, an increase of 1.5% from the average of $1,085 per unit over the second quarter of 2014.

 

“We are pleased to deliver positive results for the third quarter of 2014, largely as a result of our team’s continued hard work and dedication to improving our operating performance across our entire portfolio,” stated Richard Ross, Chief Executive Officer of Trade Street Residential. “During the quarter we generated higher rental rates while maintaining high occupancies, helping us achieve meaningful improvement in our operating margins, Core FFO and cash flows. As we look to the end of 2014, we remain optimistic about the continued earnings momentum for the Company.”

 

Mr. Ross continued, “Given the progress we are making across our business and the improving regional economies where we operate, we believe we have many options available to us to better realize the value of our assets for our stockholders. As a result of the inquiries we have received involving potential strategic opportunities, the Board of Directors has decided to explore a broad range of potential strategic alternatives to enhance stockholder value. We have one of the youngest portfolios of well-located apartment communities in some of the most attractive markets across the Sunbelt. Since our IPO in May 2013, we have improved the quality of our portfolio, enhanced our margins, increased our cash flow and strengthened our balance sheet. This strategic process is being conducted to assess how we can achieve our full potential while we continue to focus on maximizing value for stockholders.”

 

 

 

 

Financial Results for the Three Months Ended September 30, 2014

 

Net loss attributable to common stockholders for the third quarter of 2014 was a net loss of ($9.1) million, compared to net income of $1.4 million for the same period in the prior year. The change in net income was primarily the result of an impairment charge of $8.0 million during the third quarter of 2014 versus a one-time gain of $6.9 million on acquired assets in the prior year quarter. This impairment charge is associated with reporting these land holdings at estimated disposition value due either to their inclusion in the previously-announced redemption of Class A preferred stock or a non-binding sales contract effected subsequent to quarter end and primarily related to reclassification of the Millenia Phase II parcel from land held for future development to land held for sale. The net loss per basic and diluted share for the third quarter of 2014 was ($0.25), a change from earnings per share of $0.12 in the prior year period, primarily as a result of the foregoing factors.

 

Funds from Operations, or FFO, for the third quarter of 2014 was $2.9 million, or $0.08 per diluted share, as compared to a deficit of ($1.7) million, or ($0.15) per diluted share in the prior year period. The increase in FFO is largely the result of the addition of eight new operating properties since the third quarter of 2013. Core FFO for the third quarter of 2014 was $3.1 million, or $0.09 per diluted share, as compared to income of $0.1 million, or $0.01 per diluted share in the prior year period.

 

Portfolio Performance

 

Same store NOI for the third quarter of 2014 was $2.9 million, an increase of 2.2% as compared to the third quarter of the prior year, driven primarily by a 3.6% increase in same store revenue, partially offset by a 5.4% increase in same store property expenses. Average rent increased to $903 per unit, up 3.9% from last year. Average occupancy for the quarter was 96.1%, down less than 20 basis points from a year ago. The increase in same store expenses was primarily attributable to increased property taxes.

 

On a sequential quarter basis, third quarter 2014 same store revenue increased 1.8% compared to the second quarter of 2014, while same store property expenses increased 2.4%, resulting in a same store NOI increase of 1.2%.

 

For the nine months ended September 30, 2014, same store revenue increased 5.0%, same store property expenses increased 6.5%, and same store NOI increased 3.7%, compared to the nine months ended September 30, 2013.

 

 

 

 

Balance Sheet and Financing Activity

 

As of September 30, 2014, the Company had total debt outstanding of $344.9 million at a weighted average interest rate of 3.9% and a weighted average term-to-maturity of 7.2 years. Of the total debt outstanding, $297.9 million is fixed rate debt at a weighted average interest rate of 4.0% and a weighted average term-to-maturity of 8.0 years.

 

Dividend

 

On September 15, 2014, the Company’s Board of Directors announced a dividend of $0.095 per share and unit, payable to holders of record of common stock and common units of the operating partnership as of September 30, 2014, which was paid on October 15, 2014.

 

Strategic Alternatives Review

 

In response to several inquiries regarding potential strategic transactions, the Company’s Board of Directors today announced a review of strategic alternatives to enhance stockholder value. Such review will include (among other alternatives): a sale, merger, acquisition or other form of business combination; sale or acquisition of assets; or a debt or equity recapitalization. The Company has not made a decision to pursue any specific strategic transaction or any other strategic alternative, and there is no set timetable for completion of this strategic review process. There can be no assurance that the exploration of strategic alternatives will result in the completion of any transaction or other alternative. The Board of Directors does not intend to disclose further developments regarding the evaluation of strategic alternatives until such time as the Board has determined the outcome of the process or otherwise has deemed that disclosure is appropriate.

 

The Company has retained J.P. Morgan Securities LLC as its financial advisor and Morrison & Foerster LLP as its legal advisors to assist the Board in its evaluation of strategic alternatives.

 

"The Board of Directors and management team are committed to further enhancing value for all Trade Street stockholders," said Richard Ross, Trade Street’s Chief Executive Officer. "We’ve taken strategic actions over the past year to improve the quality of our apartment portfolio, simplify our capital structure, and strengthen our balance sheet. Given the improving fundamentals of the multi-family housing market, we believe now is a prudent time to explore strategic alternatives. This process with J.P. Morgan will help ensure that Trade Street achieves its full potential while we continue to build on our track record of stockholder value creation."

 

Subsequent Events

 

Redemption of Class A Preferred Stock

 

In October, the Company redeemed all of the outstanding 309,130 shares of Class A Preferred Stock of the Company. The Class A Preferred Stock, with a liquidation preference of $30.9 million, was redeemed on October 17, 2014 in exchange for four land parcels and approximately $5.0 million in cash. The cash portion of the consideration was funded with cash on hand. As a result of this transaction, the Company incurred an impairment charge of approximately $8.0 million in the third quarter of 2014.

 

 

 

 

Management Transition

 

Effective November 3, 2014, Ryan Hanks has stepped down as the Company’s Chief Operating Officer and Chief Investment Officer. Mr. Hanks will continue in a consulting capacity until completion of the Board of Directors review of strategic alternatives.

 

“We are grateful for Ryan’s contributions to the Company in building such a high-quality portfolio of well-located properties and wish him continued success in his future endeavors,” said Mack Pridgen, Chairman of the Board of Directors.

 

Conference Call and Webcast

 

The Company will host a webcast and conference call on Monday, November 3, 2014 at 11:00 a.m. Eastern Time to review third quarter results and discuss recent events. To participate in the call, please dial 877-705-6003 (domestic) or 201-493-6725 (international). The live webcast will be available at www.tradestreetresidential.com in the Investors section. A replay of the conference call will be available through December 3, 2014, by dialing 877-870-5176 (domestic) or 858-384-5517 (international) and entering the pass code 13594175. Supplemental financial information is available in the Investor Relations section of the Company’s website under Financial Information.

 

About Trade Street Residential, Inc.

 

Trade Street Residential, Inc. is a vertically integrated and self-managed real estate investment trust focused on acquiring, owning, operating and managing conveniently located, garden-style and mid-rise apartment communities in mid-sized cities and suburban submarkets of larger cities primarily in the southeastern United States, including Texas.

 

Forward-Looking Statements

 

This press release contains forward-looking statements within the meaning of the federal securities laws, including statements related to the offering and the expected use of the net proceeds therefrom, which are based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. Forward looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts, including statements related to the Board of Director’s review of strategic alternatives. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" or the negative of these words and phrases or similar words or phrases, which are predictions of or indicate future events or trends and which do not relate solely to historical matters. While forward-looking statements reflect the Company's good faith beliefs, assumptions and expectations, they are not guarantees of future performance. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes, except as may be required by law. For a further discussion of these and other factors that could impact the Company's future results, performance or transactions, see the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2013, which the Company filed with the Securities and Exchange Commission on March 26, 2014.

 

 

 

 

Non-GAAP Financial Measures

 

As defined by the National Association of Real Estate Investment Trusts, FFO represents net income (loss) (computed in accordance with U.S. generally accepted accounting principles ("GAAP")), excluding gains (or losses) from sales of property and bargain purchase gains, plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis. The Company presents FFO attributable to common stockholders because management considers it to be an important supplemental measure of the Company’s operating performance, believes it assists in the comparison of the Company’s operating performance between periods to that of different REITs and believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their operating results. As such, the Company also excludes the impact of noncontrolling interests, only as they relate to operating partnership units, in the calculation. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization unique to real estate, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income. In October 2011, NAREIT communicated to its members that the exclusion of impairment write-downs of depreciable real estate is consistent with the definition of FFO and prior periods should be restated to be consistent with this guidance.

 

The Company also uses core funds from operations, or Core FFO, as an operating measure. Core FFO includes adjustments to exclude the impact of straight-line adjustments for ground leases, gains and losses from extinguishment of debt, transaction costs related to acquisitions and reorganization, management transition costs and certain other non-cash items. The Company believes that these adjustments are appropriate in determining Core FFO as they are not indicative of the operating performance of the Company’s assets. In addition, the Company believes that Core FFO is a useful supplemental measure for the investing community to use in comparing the Company to other REITs as most REITs provide some form of adjusted or modified FFO.

 

 

 

 

Management believes that net operating income (“NOI”) is a useful measure of our operating performance. We define NOI as total property revenues less total property operating expenses, excluding depreciation and amortization. Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REITs. We believe that this measure provides an operating perspective not immediately apparent from GAAP operating income or net income. We use NOI to evaluate our performance on a same store and non-same store basis. NOI allows us to evaluate the operating performance of our properties because it measures the core operations of property performance by excluding corporate level expenses and other items not related to property operating performance and captures trends in rental housing and property operating expenses.

 

The Company defines same store communities as communities owned and stabilized for the entirety of both periods presented, excluding properties held for sale. Reconciliations of net income attributable to common stockholders to FFO, Core FFO, NOI, and same store NOI are included in the Supplemental Information posted on the Company’s website.

 

Investor Relations:

 

Stephen Swett

786-248-6099
ir@trade-street.com

 

Media Contact:

 

Jason Chudoba, ICR for Trade Street

646-277-1249

Jason.Chudoba@icrinc.com

 

 

Trade Street Residential, Inc.

3rd Quarter 2014

Operating Results

(Unaudited)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
in thousands, except per share data		2014				2013				2014				2013
Property revenues
Rental revenue		$	13,831			$	7,168			$	37,330			$	17,864
Other property revenues			1,475				859				4,039				1,885
Total property revenues			15,306				8,027				41,369				19,749
Property expenses
Property operations and maintenance			4,323				2,576				11,972				6,295
Real estate taxes and insurance			2,128				982				6,369				2,633
Total property expenses			6,451				3,558				18,341				8,928
Other expenses
General and administrative			1,943				3,099				6,356				6,482
Management transition expenses			-				-				9,291				-
Interest expense			3,381				2,210				9,572				6,110
Depreciation and amortization			4,922				3,312				15,389				8,479
Development and pursuit costs			217				52				356				67
Acquisition costs			-				472				1,641				916
Amortization of deferred financing cost			236				275				788				994
Loss on early extinguishment of debt			-				-				1,629				1,146
Total other expenses			10,699				9,420				45,022				24,194
Other income			1				26				45				70
Income (loss) from unconsolidated joint venture			20				(13	)			21				42
Impairment associated with land holdings			(7,962	)			-				(7,962	)			(613	)
Gain on sales of real estate assets			353				-				353				-
Gain on bargain purchase			-				6,900				-				6,900
INCOME (LOSS) FROM CONTINUING OPERATIONS			(9,432	)			1,962				(29,537	)			(6,974	)
Income (loss) from operation of discontinued rental property, including gains/losses on disposals			-				(80	)			-				1,696
NET INCOME (LOSS)			(9,432	)			1,882				(29,537	)			(5,278	)
(Income) loss allocated to noncontrolling interest holders			566				(258	)			1,907				911
Dividends declared and accreted on preferred stock and units			(234	)			(234	)			(693	)			(707	)
Dividends to restricted stockholders			-				(29	)			-				(29	)
Extinguishment of equity securities			-				-				-				11,716
Adjustments attributable to participating securities			14				(1	)			44				(2,492	)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS		$	(9,086	)		$	1,360			$	(28,279	)		$	4,121
Earnings (loss) per common share - basic and diluted
Continuing operations		$	(0.25	)		$	0.13			$	(0.81	)		$	0.31
Discontinued operations			-				(0.01	)			-				0.21
Net earnings (loss) attributable to common stockholders		$	(0.25	)		$	0.12			$	(0.81	)		$	0.52
Weighted average number of shares - basic and diluted			36,468				11,099				34,908				7,931
Dividends declared per common share		$	0.0950			$	0.0950			$	0.2850			$	0.3375

 

 

Trade Street Residential, Inc.

3rd Quarter 2014

Funds From Operations and Core Funds from Operations

(Unaudited)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
in thousands, except per share data		2014				2013				2014				2013
Net income (loss) attributable to common stockholders		$	(9,086	)		$	1,360			$	(28,279	)		$	4,121
Adjustments related to earnings per share computation (1)			(14	)			1				(44	)			(9,224	)
Impairment associated with land holdings			7,484				-				7,448				507
Real estate depreciation and amortization - continuing operations			4,709				2,858				14,642				7,015
Real estate depreciation and amortization - discontinued operations			-				-				-				364
Real estate depreciation and amortization - unconsolidated joint venture			96				80				283				239
Gain on bargain purchase			-				(5,954	)			-				(5,709	)
Gain on sales of real estate assets (2)			(332	)			-				(330	)			(1,610	)
Funds from operations attributable to common stockholders (3)		$	2,857			$	(1,655	)		$	(6,280	)		$	(4,297	)
Management transition expenses			-				-				8,691				-
Acquisition costs			-				407				1,535				758
Loss on early extinguishment of debt			-				-				1,524				955
Non-cash straight-line adjustment for ground lease expenses			-				89				-				256
Non-cash stock awards			122				1,076				292				1,191
Non-cash accretion of preferred stock and units			156				156				462				495
Core funds from operations attributable to common stockholders (3)		$	3,135			$	73			$	6,224			$	(642	)
Per share data
Funds from operations - diluted		$	0.08			$	(0.15	)		$	(0.18	)		$	(0.53	)
Core funds from operations - diluted		$	0.09			$	0.01			$	0.18			$	(0.08	)
Weighted average common shares outstanding - diluted(4)(5)			36,723				11,394				35,133				8,082

 

1	See notes B and G to consolidated financial statements as filed in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.
2	Includes gains from sales of real estate assets reflected as part of continued and discontinued operations in the Company's statements of operations.
3	See page 19 for the Company's definition of these non-GAAP measures. Individual line items included in the computations are net of noncontrolling interests and include results from discontinued operations where applicable. The three and nine months ended September 30, 2013 amounts have been reclassified to conform to the current year presentation.
4	Includes non-vested portion of restricted stock awards.
5	The calculations of funds from operations and core funds from operations are reflected net of noncontrolling interests. Accordingly, noncontrolling interests represented by 2,344 Operating Partnership common units during the three and nine months ended September 30, 2014 and 2013 are not included in the determination of diluted weighted-average common shares outstanding. If these calculations had considered noncontrolling interests and the 2,344 common units had been included as part of diluted weighted-average shares outstanding, there would have been no impact on the per share amounts of funds from operations or core funds from operations.

 

 

Trade Street Residential, Inc.
3rd Quarter 2014	Consolidated Balance Sheets
(Unaudited)

 

in thousands		September 30, 2014				December 31, 2013
ASSETS
Real estate assets
Land and improvements		$	88,559			$	58,560
Buildings and improvements			464,439				272,849
Furniture, fixtures, and equipment			15,649				9,016
			568,647				340,425
Less accumulated depreciation			(23,899	)			(14,369	)
Net investment in operating properties			544,748				326,056
Land held for future development (including $0 and $1,477 of consolidated variable interest entity, respectively)			-				31,963
Real estate assets held for sale			24,125				-
Net real estate assets			568,873				358,019
Investment in unconsolidated joint venture, held for sale			2,279				2,421
Cash and cash equivalents (including $0 and $148 of consolidated variable interest entity, respectively)			16,713				9,037
Restricted cash and lender reserves			2,660				3,203
Deferred financing costs, net			4,908				3,022
Intangible assets, net			663				1,571
Prepaid expenses and other assets			2,314				10,363
Assets related to real estate assets held for sale			585				-
			30,122				29,617
TOTAL ASSETS		$	598,995			$	387,636
LIABILITIES
Indebtedness		$	344,863			$	249,584
Accrued interest payable			886				840
Accounts payable and accrued expenses			7,437				6,119
Dividends payable			3,789				1,247
Security deposits, deferred rent and other liabilities			1,795				1,443
Liabilities related to real estate assets held for sale			421				-
TOTAL LIABILITIES			359,191				259,233
Commitments & contingencies			-				-
STOCKHOLDERS' EQUITY
Class A preferred stock; $0.01 par value; 423 shares authorized, 309 shares issued and outstanding at September 30, 2014 and December 31, 2013			3				3
Common stock, $0.01 par value per share; 1,000,000 authorized; 36,723 and 11,469 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively			367				115
Additional paid-in capital			303,529				162,681
Accumulated deficit			(79,683	)			(52,053	)
TOTAL STOCKHOLDERS' EQUITY - TRADE STREET RESIDENTIAL, INC.			224,216				110,746
Noncontrolling interests			15,588				17,657
TOTAL STOCKHOLDERS' EQUITY			239,804				128,403
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	598,995			$	387,636

 

 

Trade Street Residential, Inc.
3rd Quarter 2014	Operating Properties Table
(Unaudited)

 

Property Name		Location		Year Built/ Renovated (1)		Date Acquired		Number of Units				Average Unit Size (Sq. Ft.)				Average Physical Occupancy (2)
The Pointe at Canyon Ridge		Sandy Springs, GA		1986/2007		09/18/08			494				920				94.8	%
Arbors River Oaks		Memphis, TN		1990/2010		06/09/10			191				1,136				96.6	%
The Estates at Perimeter (3)		Augusta, GA		2007		09/01/10			240				1,109				95.4	%
Lakeshore on the Hill		Chattanooga, TN		1969/2005		12/14/10			123				1,168				95.6	%
The Trails of Signal Mountain		Chattanooga, TN		1975		05/26/11			172				1,185				97.9	%
Mercé Apartments		Addison, TX		1991/2007		10/31/11			114				653				95.1	%
Fox Trails		Plano, TX		1981		12/06/11			286				960				96.3	%
Millenia 700		Orlando, FL		2012		12/03/12			297				952				96.2	%
Westmont Commons		Asheville, NC		2003&2008		12/12/12			252				1,009				97.3	%
Bridge Pointe		Huntsville, AL		2002		03/04/13			178				1,047				97.9	%
St. James at Goose Creek		Goose Creek, SC		2009		05/16/13			244				976				95.7	%
Creekstone at RTP		Durham, NC		2013		05/17/13			256				1,043				96.3	%
Talison Row at Daniel Island		Charleston, SC		2013		08/26/13			274				989				92.4	%
Fountains Southend		Charlotte, NC		2013		09/24/13			208				844				96.9	%
The Estates at Wake Forest		Wake Forest, NC		2013		01/21/14			288				1,047				85.3	%
Miller Creek at Germantown		Memphis, TN		2012/2013		01/21/14			330				1,049				97.4	%
The Aventine Greenville		Greenville, SC		2013		02/06/14			346				961				93.3	%
Waterstone at Brier Creek		Raleigh, NC		2013/2014		03/10/14			232				1,137				85.7	%
Avenues at Craig Ranch		McKinney, TX		2013		03/18/14			334				1,006				93.9	%
Waterstone at Big Creek		Alpharetta, GA		2013		04/07/14			270				1,131				98.4	%
Total / Weighted average									5,129				1,013				94.8	%

 

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
Total operating properties (end of period)			20				20
Total operating apartment units (end of period)			5,129				5,129
Total operating apartment units - wholly owned, continuing operations (end of period)			4,889				4,889
Total operating apartment units (weighted average)			5,129				4,786
Total operating apartment units - wholly owned, continuing operations (weighted average)			4,889				4,546

 

1	The extent of the renovations included within the term “renovated” depends on the individual apartment community, but “renovated” generally refers to the replacement of siding, roof, wood, windows or boilers, updating of gutter systems, renovation of leasing centers and interior rehabilitation, including updated appliances, countertops, vinyl plank flooring, fixtures, fans and lighting, or some combination thereof.
2	Average physical occupancy for the three months ended September 30, 2014 represents the average occupancy of the total number of units occupied at each apartment community during the period divided by the total number of units at each apartment community.
3	The Company owns a 50% interest in this apartment community through an unconsolidated joint venture.  The Company's interest in this joint venture was classified as held for sale at September 30, 2014 as a result of executing a contract for sale on that date that is expected to close prior to the end of 2014.

 

 

 

Trade Street Residential, Inc.
3rd Quarter 2014	Same Store NOI Comparisons(1)
(Unaudited)

 

		Year-to Date Comparisons
		Nine Months Ended September 30,
in thousands, except per unit data		2014				2013				% Change
Revenues		$	15,939			$	15,184				5.0	%
Expenses			7,305				6,860				6.5	%
Net operating income (NOI) (2)		$	8,634			$	8,324				3.7	%
Average physical occupancy (3)			95.9	%			95.0	%			0.9	%
Average monthly rental rate (4)		$	890			$	862				3.2	%

 

 

		Quarter to Quarter Comparisons
		Three Months Ended September 30,
		2014				2013				% Change
Revenues		$	5,410			$	5,221				3.6	%
Expenses			2,475				2,348				5.4	%
Net operating income (NOI) (2)		$	2,935			$	2,873				2.2	%
Average physical occupancy (3)			96.1	%			96.3	%			(0.2	)%
Average monthly rental rate (4)		$	903			$	869				3.9	%

 

 

		Sequential Quarter Comparisons
		Three Months Ended
		September 30, 2014				June 30, 2014				% Change
Revenues		$	5,410			$	5,316				1.8	%
Expenses			2,475				2,416				2.4	%
Net operating income (NOI) (2)		$	2,935			$	2,900				1.2	%
Average physical occupancy (3)			96.1	%			96.2	%			(0.1	)%
Average monthly rental rate (4)		$	903			$	888				1.7	%

 

 

1	The Company defines “Same Store” as properties owned and stabilized since January 1, 2013 through September 30, 2014. For newly constructed or lease-up properties or properties undergoing significant redevelopment, we consider a property to be stabilized at the earlier of (i) attainment of 90% physical occupancy or (ii) the one-year anniversary of completion of development or redevelopment. No properties owned since January 1, 2013 were under construction or undergoing redevelopment and, as a result, no properties owned since January 1, 2013 were excluded from the same store portfolio. For the periods presented, "Same Store" properties are comprised of: The Pointe at Canyon Ridge, Arbor River Oaks, Lakeshore on the Hill, The Trails of Signal Mountain, Mercé Apartments, Fox Trails, Millenia 700, and Westmont Commons.
2	See page 19 for the Company's definition of this non-GAAP measure and page 21 for a reconciliation of this non-GAAP measure to net income (loss) attributable to common stockholders.
3	Average physical occupancy for the periods presented represent the average of the total number of units occupied at each apartment community during the respective period divided by the total number of units at each apartment community.
4	Average monthly rental rates for the periods presented are the Company’s market rents after “loss to lease” and concessions, but before vacancy, discounted employee units, model units, and bad debt for the respective periods.

  

 

Trade Street Residential, Inc.
3rd Quarter 2014	Same Store Operating Expense Comparisons
(Unaudited)

 

		Year-to Date Comparisons
		Nine Months Ended September 30,
in thousands		2014				2013				$ Change				% Change				% of 2014 Actual
Property taxes		$	1,973			$	1,785			$	188				10.5	%			27.0	%
Salaries and benefits for on-site employees			1,951				1,928				23				1.2	%			26.7	%
Utilities			1,095				1,034				61				5.9	%			15.0	%
Repairs and maintenance			493				503				(10	)			(2.0	)%			6.7	%
Make ready/turnover			408				349				59				16.9	%			5.6	%
Property insurance			373				360				13				3.6	%			5.1	%
Other			1,012				901				111				12.3	%			13.9	%
Total same store		$	7,305			$	6,860			$	445				6.5	%			100.0	%

 

 

		Quarter to Quarter Comparisons
		Three Months Ended September 30,
		2014				2013				$ Change				% Change				% of 2014 Actual
Property taxes		$	668			$	573			$	95				16.6	%			27.0	%
Salaries and benefits for on-site employees			652				646				6				0.9	%			26.3	%
Utilities			380				361				19				5.3	%			15.4	%
Repairs and maintenance			213				181				32				17.7	%			8.6	%
Make ready/turnover			156				149				7				4.7	%			6.3	%
Property insurance			103				124				(21	)			(16.9	)%			4.2	%
Other			303				314				(11	)			(3.5	)%			12.2	%
Total same store		$	2,475			$	2,348			$	127				5.4	%			100.0	%

 

 

		Sequential Quarter Comparisons
		Three Months Ended
		September 30, 2014				June 30, 2014				$ Change				% Change				% of 2014 Actual
Property taxes		$	668			$	632			$	36				5.7	%			27.0	%
Salaries and benefits for on-site employees			652				631				21				3.3	%			26.3	%
Utilities			380				346				34				9.8	%			15.4	%
Repairs and maintenance			213				161				52				32.3	%			8.6	%
Make Ready/turnover			156				147				9				6.1	%			6.3	%
Property insurance			103				143				(40	)			(28.0	)%			4.2	%
Other			303				356				(53	)			(15.0	)%			12.2	%
Total same store		$	2,475			$	2,416			$	59				2.4	%			100.0	%

 

 

Trade Street Residential, Inc.
3rd Quarter 2014	Acquisitions, Pipeline, Dispositions, and Held for Sale
(Unaudited)

 

		in thousands, except unit data
Acquisitions:										Percent Leased at				Date		Gross				Debt Balance at
		Property		Location		Units				September 30, 2014				Acquired		Purchase Price				September 30, 2014
		The Estates at Wake Forest		Wake Forest, NC			288				95.5	%		1/21/2014		$	37,250			$	18,625
		Miller Creek at Germantown		Memphis, TN			330				98.2	%		1/21/2014			43,750				26,250
		The Aventine Greenville		Greenville, SC			346				96.0	%		2/6/2014			41,866				21,000
		Waterstone at Brier Creek		Raleigh, NC			232				91.4	%		3/10/2014			32,682				16,250
		Avenues at Craig Ranch		McKinney, TX			334				95.5	%		3/18/2014			42,375				21,200
		Waterstone at Big Creek		Alpharetta, GA			270				99.6	%		4/7/2014			40,500				Line of Credit
		Total acquisitions nine months ended September 30					1,800									$	238,423			$	103,325

 

Acquisition pipeline:

Anticipated

Contract

Planned

Percent

Close

Purchase

Project

Location

Units

Leased

Date

Price

Waterstone at Big Creek, Phase II

Alpharetta, GA

100

-

1Q15

$

15,000

Total acquisition pipeline

100

-

$

15,000

 

Dispositions:										Date		Gross				Gain
		Property		Location		Units				Sold		Sale Price				Realized
		Post Oak		Louisville, KY			126			7/11/2014		$	8,000			$	353
		Total dispositions nine months ended September 30					126					$	8,000			$	353

 

Land held for sale:														Carrying
						Planned								Value as of
		Project		Location		Units				Acreage				September 30, 2014
		The Estates at Maitland		Maitland, FL			416				6.1			$	9,000
		Millenia Phase II		Orlando, FL			403				7.0				6,188
		Midlothian Town Center - East		Midlothian, VA			238				8.4				3,492
		Venetian		Fort Myers, FL			436				23.0				3,960
		Sunnyside		Panama City Beach, FL			212				22.0				1,485
		Total land held for sale					1,705				66.5			$	24,125

 

 

Trade Street Residential, Inc.
3rd Quarter 2014	NOI, Average Occupancy and Average Monthly Rent Summary
(Unaudited)

 

in thousands, except unit data

 

Multifamily communities:

as of September 30, 2014

 

										NOI				Avg Physical				Avg Monthly
		Units				Communities				Quarter Ended				Occupancy (1)				Rent/Unit
Same Store Communities (2)			1,929				8			$	2,935				96.1	%		$	903
Stabilized non-same store communities (3)			2,440				9				5,200				95.6	%			1,101
Lease-up communities (4)			520				2				696				85.5	%			959
Other (5)			-				-				24				-				-
Wholly-owned communities			4,889				19			$	8,855				94.7	%		$	1,008
Joint venture communities (6)			240				1				219				95.4	%			992
Total multifamily communities			5,129				20			$	9,074				94.8	%		$	1,007

 

1	Average physical occupancy for the three months ended September 30, 2014 represents the average occupancy of the total number of units occupied at each apartment community during the period divided by the total number of units at each apartment community.
2	For 2014 "Same Store" properties are comprised of: The Pointe at Canyon Ridge, Arbor River Oaks, Lakeshore on the Hill, The Trails of Signal Mountain, Mercé Apartments, Park at Fox Trails, Estates at Millenia, and Westmont Commons.
3	Communities that were stabilized for the quarter ended September 30, 2014, but do not meet the criteria for "Same Store" properties. These include: Bridge Pointe, St. James at Goose Creek, Creekstone at RTP, Fountains Southend, Talison Row at Daniel Island, Miller Creek at Germantown, Waterstone at Big Creek, Aventine Greenville, and Avenues at Craig Ranch.
4	The Estates at Wake Forest and Waterstone at Brier Creek are currently in lease-up for the quarter ended September 30, 2014.
5	Includes one community sold during the quarter ended September 30, 2014.
6	The Company owns a 50% interest in this apartment community through an unconsolidated joint venture. The Company's interest in this joint venture was classified as held for sale at September 30, 2014 as a result of executing a contract for sale on that date that is expected to close prior to the end of 2014.

 

 

 

Trade Street Residential, Inc.
3rd Quarter 2014	Debt Summary
(Unaudited)

  

in thousands
Debt Maturities(1)
as of September 30, 2014
		Scheduled Repayments												% of
Year		Amortization				Maturities				Total				Total
Remainder of 2014		$	110			$	-			$	110				0.0	%
2015			1,210				-				1,210				0.4	%
2016			1,976				-				1,976				0.6	%
2017			3,410				53,258				56,668				16.4	%
2018			3,803				7,664				11,467				3.3	%
Thereafter			20,205				253,227				273,432				79.3	%
Total		$	30,714			$	314,149			$	344,863				100.0	%

 

Floating vs. Fixed Rate Debt:(1)										Weighted Average
		Balance at				% of				Interest				Years to
		September 30, 2014				Total				Rate				Maturity
Fixed rate debt		$	297,863				86.4	%			4.03	%			8.00
Floating rate debt			47,000				13.6	%			2.69	%			2.33
Total		$	344,863				100.0	%			3.85	%			7.22

 

Unconsolidated Debt:

Balance at

YTD

Interest

Property

September 30, 2014

Amortization

Rate

Maturity

The Estates at Perimeter(2)

$

17,371

$

230

4.245

%

09/01/2017

 

1	Wholly owned, continuing operations.
2	Reflects 100% of debt whereas the Company owns a 50% interest in this apartment community through an unconsolidated joint venture. The Company's interest in this joint venture was classified as held for sale at September 30, 2014 as a result of executing a contract for sale on that date that is expected to close prior to the end of 2014.

 

 

 

Trade Street Residential, Inc.
3rd Quarter 2014	Capitalized Costs Summary
(Unaudited)

  

		Three Months Ended								Nine Months Ended
in thousands, except per unit data		September 30, 2014								September 30, 2014
		Total				Per Unit				Total				Per Unit
Recurring capital expenditures:
Flooring & Carpeting		$	222			$	45			$	518			$	114
Appliances			77				16				259				57
HVAC			30				6				60				13
Other			11				2				23				5
Total recurring capital expenditures		$	340			$	69			$	860			$	189
Non-recurring capital expenditures:
Plumbing		$	-			$	-			$	15			$	3
Rehab of Apartments			152				31				340				75
Furniture, Fixtures and Equipment			57				12				189				42
Other			121				25				483				106
Total non-recurring capital expenditures		$	330			$	68			$	1,027			$	226
Weighted average units - wholly owned, continuing operations							4,889								4,546

 

 

Trade Street Residential, Inc.
3rd Quarter 2014	Non-GAAP Financial Measures and Reconciliations
(Unaudited)

 

The supplemental financial data contained in this document contains certain non-GAAP financial measures management believes are useful in understanding our business and evaluating our performance. Our definitions and calculations of these non-GAAP financial measures may differ from those of other equity REITs, and thus may not be comparable to other REITs. The non-GAAP financial measures should not be considered as an alternative to net income as an indication of our operating performance, or to net cash provided by operating activities as a measure of our liquidity.

 

Funds from Operations ("FFO")

 

As defined by the National Association of Real Estate Investment Trusts, FFO represents net income (loss) (computed in accordance with U.S. generally accepted accounting principles ("GAAP")), excluding gains (or losses) from sales of property and bargain purchase gains, plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis. The Company presents FFO attributable to common stockholders because management considers it to be an important supplemental measure of the Company’s operating performance, believes it assists in the comparison of the Company’s operating performance between periods to that of different REITs and believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their operating results. As such, the Company also excludes the impact of noncontrolling interests, only as they relate to operating partnership units, in the calculation. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization unique to real estate, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income. In October 2011, NAREIT communicated to its members that the exclusion of impairment write-downs of depreciable real estate is consistent with the definition of FFO and prior periods should be restated to be consistent with this guidance.

 

Core Funds from Operations ("Core FFO")

 

The Company also uses core funds from operations, or Core FFO, as an operating measure. Core FFO includes adjustments to exclude the impact of straight-line adjustments for ground leases, gains and losses from extinguishment of debt, transaction costs related to acquisitions and reorganization, management transition costs and certain other non-cash items. The Company believes that these adjustments are appropriate in determining Core FFO as they are not indicative of the operating performance of the Company’s assets. In addition, the Company believes that Core FFO is a useful supplemental measure for the investing community to use in comparing the Company to other REITs as most REITs provide some form of adjusted or modified FFO.

 

Net Operating Income ("NOI")

 

Management believes that net operating income (“NOI”) is a useful measure of our operating performance. We define NOI as total property revenues less total property operating expenses, excluding depreciation and amortization. Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REITs. We believe that this measure provides an operating perspective not immediately apparent from GAAP operating income or net income. We use NOI to evaluate our performance on a same store and non-same store basis. NOI allows us to evaluate the operating performance of our properties because it measures the core operations of property performance by excluding corporate level expenses and other items not related to property operating performance and captures trends in rental housing and property operating expenses.

 

 

The Company defines same store communities as communities owned and stabilized for the entirety of both periods presented, excluding properties held for sale. Reconciliations of net income attributable to common stockholders to FFO, Core FFO, NOI, and same store NOI are included in the Supplemental Information posted on the Company’s website.

 

The following table reflects same store and non-same store contributions to consolidated NOI together with a reconciliation of NOI to net income (loss) attributable to common stockholders, as computed in accordance with GAAP:

 

 

 

Trade Street Residential, Inc.
3rd Quarter 2014	NOI Bridge
(Unaudited)

  

		Three Months Ended September 30,								Nine Months Ended September 30,
in thousands		2014				2013				2014				2013
Property Revenues (1)
Same Store (8 properties)		$	5,410			$	5,221			$	15,939			$	15,184
Non Same Store (11 properties)			9,845				2,523				24,785				3,694
Other (1 property)(2)			51				283				645				871
Total property revenues		$	15,306			$	8,027			$	41,369			$	19,749
Property Expenses (1)
Same Store (8 properties)		$	2,475			$	2,348			$	7,305			$	6,860
Non Same Store (11 properties)			3,949				1,046				10,675				1,616
Other (1 property)(2)			27				164				361				452
Total property expenses		$	6,451			$	3,558			$	18,341			$	8,928
Net Operating Income (1)(3)
Same Store (8 properties)		$	2,935			$	2,873			$	8,634			$	8,324
Non Same Store (11 properties)			5,896				1,477				14,110				2,078
Other (1 property)(2)			24				119				284				419
Total property net operating income		$	8,855			$	4,469			$	23,028			$	10,821
Reconciliation of NOI to GAAP Net Loss
Total property net operating income		$	8,855			$	4,469			$	23,028			$	10,821
Other income			1				26				45				70
Gain on sales of real estate assets			353				-				353				-
Gain on bargain purchase			-				6,900				-				6,900
Depreciation and amortization			(4,922	)			(3,312	)			(15,389	)			(8,479	)
Development and pursuit costs			(217	)			(52	)			(356	)			(67	)
Interest expense			(3,381	)			(2,210	)			(9,572	)			(6,110	)
Amortization of deferred financing cost			(236	)			(275	)			(788	)			(994	)
Loss on early extinguishment of debt			-				-				(1,629	)			(1,146	)
General and administrative			(1,943	)			(3,099	)			(6,356	)			(6,482	)
Management transition expenses			-				-				(9,291	)			-
Impairment associated with land holdings			(7,962	)			-				(7,962	)			(613	)
Acquisition costs			-				(472	)			(1,641	)			(916	)
Income from unconsolidated joint venture			20				(13	)			21				42
Income (loss) from continuing operations			(9,432	)			1,962				(29,537	)			(6,974	)
Discontinued operations			-				(80	)			-				1,696
Net income (loss)			(9,432	)			1,882				(29,537	)			(5,278	)
(Income) loss allocated to noncontrolling interests			566				(258	)			1,907				911
Adjustments related to earnings per share computation (4)			(220	)			(264	)			(649	)			8,488
Income (loss) attributable to common stockholders		$	(9,086	)		$	1,360			$	(28,279	)		$	4,121
Income from Discontinued Operations
Property revenues			-				1,325				-				5,115
Property expenses			-				(1,059	)			-				(3,120	)
Property net operating income			-				266				-				1,995
Other expenses			-				(9	)			-				(46	)
Depreciation and amortization			-				-				-				(440	)
Interest expense			-				(234	)			-				(1,396	)
Amortization of deferred financing costs			-				-				-				(46	)
Loss on extinguishment of debt			-				-				-				(8	)
Deferred portion of ground lease amortization			-				(103	)			-				(309	)
Gain on sale of discontinued operations			-				-				-				1,946
Income (loss) from discontinued operations		$	-			$	(80	)		$	-			$	1,696

 

	1	The Company defines “Same Store” as properties owned and stabilized since January 1, 2013 through September 30, 2014 excluding properties held for sale. For newly constructed or lease-up properties or properties undergoing significant redevelopment, we consider a property to be stabilized at the earlier of (i) attainment of 90% physical occupancy or (ii) the one-year anniversary of completion of development or redevelopment. No properties owned since January 1, 2013 were under construction or undergoing redevelopment and, as a result, no properties owned since January 1, 2013 were excluded from the same store portfolio.

	2	Includes one community sold during the quarter ended September 30, 2014.

	3	See page 19 for the Company's definition of this non-GAAP measure.

4

See notes B and G to consolidated financial statements as filed in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.