PREFERRED APARTMENT COMMUNITIES INC - FORM 8-K - EX-99.2 - 1Q16 - SUPPLEMENTAL FINANCIAL DATA - May 2, 2016

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Table of Contents

Company Profile
 
 
 
2

Financial Summary of the First Quarter 2016
3

2016 Guidance
 
 
 
3

Highlights of the First Quarter 2016 and Subsequent Events
3

Consolidated Statements of Operations
5

Reconciliation of Funds From Operations Attributable to Common Stockholders and Unitholders, Normalized Funds From Operations Attributable to Common Stockholders and Unitholders, and Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders to Net Loss Attributable to Common Stockholders
6

Notes to Reconciliation of Funds From Operations Attributable to Common Stockholders and Unitholders, Normalized Funds From Operations Attributable to Common Stockholders and Unitholders, and Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders to Net Loss Attributable to Common Stockholders
7

Consolidated Balance Sheets
8

Consolidated Statements of Cash Flows
9

Real Estate Loan Portfolio
10

Multifamily Communities
11

Capital Expenditures
12

Retail Portfolio
13

Multifamily Same Store Financial Data
14

Definitions of Non-GAAP Measures
15





















FIRST QUARTER 2016 - SUPPLEMENTAL FINANCIAL DATA | 1

                        

Preferred Apartment Communities, Inc.     

Preferred Apartment Communities, Inc. (NYSE: APTS), or the Company, is a Maryland corporation formed primarily to acquire and operate multifamily properties in select targeted markets throughout the United States. As part of our business strategy, we may enter into forward purchase contracts or purchase options for to-be-built multifamily communities and we may make real estate related loans, provide deposit arrangements, or provide performance assurances, as may be necessary or appropriate, in connection with the construction of multifamily communities and other properties. As a secondary strategy, we also may acquire or originate senior mortgage loans, subordinate loans or mezzanine debt secured by interests in multifamily properties, membership or partnership interests in multifamily properties and other multifamily related assets and invest not more than 20% of our assets in other real estate related investments, such as grocery-anchored shopping centers, senior mortgage loans, subordinate loans or mezzanine debt secured by interests in grocery-anchored shopping centers, membership or partnership interests in grocery-anchored shopping centers and other grocery-anchored shopping center related assets as determined by Preferred Apartment Advisors, LLC, or our Manager, as appropriate for us. At March 31, 2016, the Company was the approximate 96.3% owner of Preferred Apartment Communities Operating Partnership, L.P., or the Operating Partnership. We elected to be taxed as a real estate investment trust under the Internal Revenue Code of 1986, as amended, commencing with our tax year ended December 31, 2011.
 


Forward-Looking Statements
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Estimates of future earnings, guidance, goals and performance are, by definition, and certain other statements in this Supplemental Financial Data Report may constitute, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, achievements or transactions to be materially different from the results, guidance, goals, performance, achievements or transactions expressed or implied by the forward-looking statements. Factors that impact such forward-looking statements include, among others, our business and investment strategy; legislative or regulatory actions; the state of the U.S. economy generally or in specific geographic areas; economic trends and economic recoveries; our ability to obtain and maintain deb t or equity financing; financing and advance rates for our target assets; our leverage level; changes in the values of our assets; availability of attractive investment opportunities in our target markets; our ability to maintain our qualification as a real estate investment trust, or REIT, for U.S. federal income tax purposes; our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended; availability of quality personnel; our understanding of our competition and market trends in our industry; and interest rates, real estate values, the debt securities markets and the general economy.

Except as otherwise required by the federal securities laws, we assume no liability to update the information in this Supplemental Financial Data Report.

We refer you to the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the twelve months ended December 31, 2015 that was filed with the Securities and Exchange Commission, or SEC, on March 14, 2016, which discusses various factors that could adversely affect our financial results. Such risk factors and information may have been updated or supplemented by our Form 10-Q and Form 8-K filings and other documents filed after March 14, 2016 and from time to time with the SEC.











FIRST QUARTER 2016 - SUPPLEMENTAL FINANCIAL DATA | 2

                        

Financial Summary of the First Quarter 2016

(See Definitions of Non-GAAP Measures on page 15)
 
Three months ended:
 
Change inc (dec):
 
3/31/2016
 
3/31/2015
 
Amount
 
Percentage
 
 
 
 
 
 
 
 
Revenues
$
41,735,781

 
$
21,344,515

 
$
20,391,266

 
95.5
%
 
 
 
 
 
 
 
 
FFO
$
3,949,699

 
$
3,967,734

 
$
(18,035
)
 
—

 
 
 
 
 
 
 
 
FFO per share (1)
$
0.17

 
$
0.18

 
$
(0.01
)
 
—

 
 
 
 
 
 
 
 
Acquisition costs and other adjustments
3,062,875

 
1,234,369

 
$
1,828,506

 
148.1
%
 
 
 
 
 
 
 
 
NFFO
$
7,012,574

 
$
5,202,103

 
$
1,810,471

 
34.8
%
 
 
 
 
 
 
 
 
NFFO per share (1)
$
0.30

 
$
0.24

 
$
0.06

 
25.0
%
 
 
 
 
 
 
 
 
AFFO (plus preferred dividends)
16,817,602

 
8,113,243

 
$
8,704,359

 
107.3
%
Preferred dividends
(7,881,735
)
 
(3,172,897
)
 
 
 
 
AFFO
$
8,935,867

 
$
4,940,346

 
$
3,995,521

 
80.9
%
 
 
 
 
 
 
 
 
AFFO per share (1)
$
0.38

 
$
0.22

 
$
0.16

 
72.7
%
 
 
 
 
 
 
 
 
Dividends per share of Common Stock
$
0.1925

 
$
0.175

 
$
0.018

 
10.3
%
 
 
 
 
 
 
 
 
Cash flow from operations
$
13,390,115

 
$
7,736,003

 
$
5,654,112

 
73.1
%
 
 
 
 
 
 
 
 
Total assets
$
1,536,835,447

 
$
788,866,257

 
$
747,969,190

 
94.8
%
Weighted average shares of Common Stock
 
 
 
 
 
 
 
and Units outstanding
23,600,373

 
22,094,074

 
 
 
 


(1)“Per share” refers to per weighted average share of Common Stock and Class A Unit in our Operating Partnership outstanding for the periods indicated. See Reconciliation of Funds From Operations Attributable to Common Stockholders and Unitholders, Normalized Funds From Operations Attributable to Common Stockholders and Unitholders, and Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders to Net Loss Attributable to Common Stockholders and Definitions of Non-GAAP Measures on pages 6 and 15.

2016 Guidance:  
NFFO - We currently project NFFO to be in the range of $1.24 - $1.32 per share(1) for the full year 2016.
Revenue - We currently project total revenues to be in the range of $175 million - $200 million for the full year 2016.

Highlights of the First Quarter 2016 and Subsequent Events

•
Normalized Funds From Operations Attributable to Common Stockholders and Unitholders, or NFFO, was $7,012,574, or $0.30 per share for the first quarter 2016, an increase of 25.0% on a per share basis from our NFFO result of $5,202,103, or $0.24 per share for the first quarter 2015.

•
Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders, or AFFO, was $8,935,867, or $0.38 per share for the first quarter 2016, an increase of 72.7% on a per share basis from our AFFO result of $4,940,346, or $0.22 per share for the first quarter 2015. AFFO is calculated after deductions for all preferred dividends.

•
As of March 31, 2016, our total assets were approximately $1.5 billion, an increase of approximately $0.7 billion, or 94.8% compared to our total assets of approximately $0.8 billion at March 31, 2015.

•
Total revenues for the first quarter 2016 were approximately $41.7 million, an increase of approximately $20.4 million, or 95.5%, compared to approximately $21.3 million for the first quarter 2015.

FIRST QUARTER 2016 - SUPPLEMENTAL FINANCIAL DATA | 3

                        


•
Cash flow from operations for the first quarter 2016 was approximately $13.4 million, an increase of approximately $5.7 million, or 73.1%, compared to approximately $7,736,003 for the first quarter 2015.

•
Our Common Stock dividend of $0.1925 per share for the first quarter 2016 represents a growth rate of 10.0% from our first quarter 2015 dividend of $0.175 per share and a growth rate of approximately 11.5% on an annualized basis since June 30, 2011, the first quarter end following our initial public offering in April 2011.

•
At March 31, 2016, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 56.6%.

•
For the first quarter 2016, our average occupancy was 94.2%. As of March 31, 2016, our retail portfolio was 94.3% leased.

•
For the first quarter 2016, our NFFO payout ratio to our Common Stockholders and Unitholders was approximately 64.9% and our AFFO payout ratio to Common Stockholders and Unitholders was approximately 51.0%. (2) 

•
For the first quarter 2016, our NFFO payout ratio (before the deduction of preferred dividends) to our Series A Preferred Stockholders was approximately 52.9% and our AFFO payout ratio (before the deduction of preferred dividends) to our Series A Preferred Stockholders was approximately 46.9%. (2) 

•
As of February 24, 2016, we held a nonrefundable deposit from a prospective purchaser of our Trail Creek multifamily community located in Hampton, Virginia and as of that date, reclassified the assets and mortgage note from held and used to held for sale. We expect the sale of Trail Creek to close in May 2016.

•
During the first quarter 2016, we converted two existing bridge loans to real estate investment loans and added one new real estate investment loan, two new bridge loans and a member loan with an aggregate commitment amount of up to approximately $69.5 million, to partially finance two planned multifamily community projects and two student housing projects. The loans pay current monthly interest ranging from 8.5% to 11.0% per annum and all but one of the loans accrue deferred interest ranging from 3.0% to 5.0% per annum.

•
During the first quarter 2016, we acquired three multifamily communities, located in each of Tampa, Florida, Orlando, Florida, and Atlanta, Georgia, consisting of an aggregate of 1,164 multifamily units. We also acquired one grocery-anchored shopping center in the Atlanta, Georgia market comprising approximately 75,000 aggregate square feet of gross leasable area.

•
With the closing of the acquisitions referenced above, we owned as of quarter-end 22 multifamily communities consisting of an aggregate of 7,300 units and 15 grocery-anchored shopping centers comprising an aggregate of approximately 1,354,000 square feet of gross leasable area. Upon completion of all the projects partially financed by our real estate loan portfolio and if we were to acquire all the underlying properties, we would own 19 additional multifamily communities, comprising an aggregate of 4,699 additional units, and including seven additional student housing communities with 4,818 beds and one retail shopping center.

•
On April 20, 2016, we closed on a real estate investment loan of up to approximately $9.4 million in support of a proposed second phase of a 140-unit, 556-bed student housing project adjacent to the campus of Texas Tech University in Lubbock, Texas. We also received a purchase option to acquire the property upon stabilization.

•
On April 29, 2016, we closed on a portfolio of six grocery-anchored shopping centers, with an aggregate of 535,252 square feet of GLA, located in various southeastern U. S. markets. The total purchase price was approximately $68.7 million.





(1) “Per share” refers to per weighted average share of Common Stock and Class A Unit in our Operating Partnership outstanding for the periods indicated. See Reconciliation of Funds From Operations Attributable to Common Stockholders and Unitholders, Normalized Funds From Operations Attributable to Common Stockholders and Unitholders, and Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders to Net Loss Attributable to Common Stockholders and Definitions of Non-GAAP Measures on pages 6 and 15.

(2) We calculate the NFFO and AFFO payout ratios to Common Stockholders and Unitholders as the ratio of Common Stock dividends and distributions to Unitholders to NFFO or AFFO, respectively. We calculate the NFFO and AFFO payout ratios to Series A Preferred Stockholders as the ratio of Preferred Stock dividends to the sum of Preferred Stock dividends and NFFO or AFFO, respectively. See Definitions of Non-GAAP Measures on page 15.

FIRST QUARTER 2016 - SUPPLEMENTAL FINANCIAL DATA | 4

                        

Preferred Apartment Communities, Inc.
Consolidated Statements of Operations
(Unaudited)
 
 
Three months ended March 31,
 
 
2016
 
2015
Revenues:
 
 
 
 
Rental revenues
 
$
28,255,599

 
$
13,141,120

Other property revenues
 
3,760,083

 
1,969,767

Interest income on loans and notes receivable
 
6,942,159

 
4,875,086

Interest income from related parties
 
2,777,940

 
1,358,542

Total revenues
 
41,735,781

 
21,344,515

 
 
 
 
 
Operating expenses:
 
 
 
 
Property operating and maintenance
 
4,021,362

 
2,079,359

Property salary and benefits reimbursement to related party
2,363,463

 
1,117,573

Property management fees
1,228,021

 
570,406

Real estate taxes
 
5,173,441

 
2,076,677

General and administrative
 
919,952

 
458,204

Equity compensation to directors and executives
610,425

 
590,308

Depreciation and amortization
 
15,346,726

 
7,945,428

Acquisition and pursuit costs
2,652,705

 
423,592

Acquisition fees to related parties
 
110,880

 
760,300

Asset management fees to related party
 
2,766,086

 
1,350,890

Insurance, professional fees, and other expenses
 
1,306,981

 
705,552

 
 
 
 
 
Total operating expenses
 
36,500,042

 
18,078,289

Asset management and general and administrative expense fees deferred
(269,601
)
 
(345,960
)
 
 
 
 
 
Net operating expenses
 
36,230,441

 
17,732,329

Operating income
 
5,505,340

 
3,612,186

Interest expense
 
8,894,830

 
4,377,115

 
 
 
 
 
Net loss
 
(3,389,490
)
 
(764,929
)
Consolidated net loss attributable
 
 
 
 
to non-controlling interests
 
88,561

 
9,699

 
 
 
 
 
Net loss attributable to the Company
 
(3,300,929
)
 
(755,230
)
 
 
 
 
 
Dividends declared to Series A preferred stockholders
 
(7,881,735
)
 
(3,172,897
)
Earnings attributable to unvested restricted stock
 
(1,451
)
 
(6,863
)
 
 
 
 
 
Net loss attributable to common stockholders
 
$
(11,184,115
)
 
$
(3,934,990
)
 
 
 
 
 
Net loss per share of Common Stock available to common stockholders,
 
 
 
basic and diluted
 
$
(0.49
)
 
$
(0.18
)
 
 
 
 
 
Dividends per share declared on Common Stock
 
$
0.1925

 
$
0.175

Weighted average number of shares of Common Stock outstanding,
 
 
 
basic and diluted
 
22,983,741

 
21,813,974





FIRST QUARTER 2016 - SUPPLEMENTAL FINANCIAL DATA | 5

                        

Reconciliation of Funds From Operations Attributable to Common Stockholders and Unitholders,
Normalized Funds From Operations Attributable to Common Stockholders and Unitholders, and
Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders
to Net Loss Attributable to Common Stockholders (A)
 
 
 
 
 
 
Three months ended:
 
 
 
 
 
03/31/2016
 
03/31/2015
 
 
 
 
 
 
 
 
Net loss attributable to common stockholders (See note 1)
$
(11,184,115
)
 
$
(3,934,990
)
 
 
 
 
 
 
 
 
Add:
Loss attributable to non-controlling interests (See note 2)
(88,561
)
 
(9,699
)
 
Depreciation of real estate assets
 
11,083,625

 
5,308,610

 
Amortization of acquired real estate intangible assets and deferred leasing costs
4,138,750

 
2,603,813

 
 
 
 
 
 
 
 
Funds from operations attributable to common stockholders and Unitholders
3,949,699

 
3,967,734

 
 
 
 
 
 
 
 
Add:
Acquisition and pursuit costs
 
 
2,763,585

 
1,183,892

 
Loan cost amortization on acquisition term note (See note 3)
79,833

 
50,477

 
Amortization of loan coordination fees paid to the Manager (See note 4)
107,844

 
—

 
Costs incurred from extension of management agreement with advisor (See note 6)
111,613

 
—

 
 
 
 
 
 
 
 
Normalized funds from operations attributable to common stockholders and Unitholders
7,012,574

 
5,202,103

 
 
 
 
 
 
 
 
 
Non-cash equity compensation to directors and executives
610,425

 
590,308

 
Amortization of loan closing costs (See note 5)
 
503,530

 
297,061

 
Depreciation/amortization of non-real estate assets
 
124,351

 
33,005

 
Net loan fees received (See note 7)
 
701,369

 
195,049

 
Deferred interest income received (See note 8)
 
4,208,906

 
1,040,879

Less:
Non-cash loan interest income (See note 7)
 
(3,238,910
)
 
(1,909,220
)
 
Cash paid for loan closing costs
(4,234
)
 
(96,658
)
 
Amortization of acquired real estate intangible liabilities (See note 9)
(494,232
)
 
(206,028
)
 
Normally recurring capital expenditures and leasing costs (See note 10)
(487,912
)
 
(206,153
)
 
 
 
 
 
 
 
 
Adjusted funds from operations attributable to common stockholders and Unitholders
$
8,935,867

 
$
4,940,346

 
 
 
 
 
 
 
 
Common Stock dividends and distributions to Unitholders declared:
 
 
 
 
Common Stock dividends
 
 
$
4,435,489

 
$
3,850,754

 
Distributions to Unitholders (See note 2)
 
117,395

 
49,063

 
Total
 
 
 
$
4,552,884

 
$
3,899,817

 
 
 
 
 
 
 
 
Common Stock dividends and Unitholder distributions per share
 
$
0.1925

 
$
0.175

 
 
 
 
 
 
 
 
FFO per weighted average basic share of Common Stock and Unit outstanding
$
0.17

 
$
0.18

NFFO per weighted average basic share of Common Stock and Unit outstanding
$
0.30

 
$
0.24

AFFO per weighted average basic share of Common Stock and Unit outstanding
$
0.38

 
$
0.22

Weighted average shares of Common Stock and Units outstanding: (A)
 
 
 
 
Basic:
 
 
 
 
 
 
 
Common Stock
 
 
22,983,741

 
21,813,974

 
Class A Units
 
 
 
616,632

 
280,100

 
Common Stock and Class A Units
 
23,600,373

 
22,094,074

 
 
 
 
 
 
 
 
 
Diluted Common Stock and Class A Units (B)
 
24,192,250

 
22,314,081

 
 
 
 
 
 
 
 
Actual shares of Common Stock outstanding, including 7,536 and 39,216 unvested shares
 
 
 
 of restricted Common Stock at March 31, 2016 and 2015, respectively
23,070,562

 
22,170,406

Actual Class A Units outstanding
 
 
886,520

 
280,360

 
Total
 
 
 
23,957,082

 
22,450,766

 
 
 
 
 
 
 
 
(A) Units and Unitholders refer to Class A Units in our Operating Partnership, 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 2.6% weighted average non-controlling interest in the Operating Partnership for the three-month period ended March 31, 2016.
(B) Since our NFFO and 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. 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.


FIRST QUARTER 2016 - SUPPLEMENTAL FINANCIAL DATA | 6

                        


Notes to Reconciliation of Funds From Operations Attributable to Common Stockholders and Unitholders, Normalized Funds From Operations Attributable to Common Stockholders and Unitholders, and Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders to Net Loss Attributable to Common Stockholders

1)
Rental and other property revenues and expenses for the three-month period ended March 31, 2016 include activity for the three multifamily communities and one grocery-anchored shopping center acquired during 2016 only from their respective dates of acquisition. In addition, the 2016 period includes a full quarter of activity for the seven multifamily communities and four grocery-anchored shopping centers acquired during the second, third and fourth quarters of 2015. Rental and other property revenues and expenses for the three-month period ended March 31, 2015 include activity for the two multifamily communities acquired during the first quarter 2015 only from their respective dates of acquisition.

2)
Non-controlling interests in our Operating Partnership consisted of a total of 886,520 Class A Units as of March 31, 2016. 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 2.61% and 1.27% for the three-month periods ended March 31, 2016 and 2015, respectively.

3)
We incurred loan closing costs for the acquisition of the Village at Baldwin Park multifamily community during the first quarter 2016 on our $35 million acquisition term loan facility with Key Bank National Association, or 2016 Term Loan. These costs were deferred and are being amortized over the life of the 2016 Term Loan. We also incurred loan closing costs for the acquisition of the Avenues at Northpointe and Avenues at Cypress multifamily communities in 2015 on our $32 million acquisition term loan facility with Key Bank National Association, or 2015 Term Loan. These costs were deferred and were amortized over the life of the 2015 Term Loan until it was repaid in full on May 12, 2015. Since the amortization expense of these deferred costs is similar in character to acquisition costs, they are therefore an additive adjustment in the calculation of NFFO.

4)
We pay loan coordination fees to Preferred Apartment Advisors, LLC, our Manager, related to obtaining mortgage financing for acquired properties. These loan coordination fees are amortized over the lives of the respective mortgage loans, and this non-cash amortization expense is an addition to FFO in the calculation of NFFO.

5)
We incur loan closing costs on our existing mortgage loans, which are secured on a property-by-property basis by each of our acquired multifamily communities and retail assets, and also for occasional amendments to our $70 million revolving line of credit with Key Bank National Association, or our Revolving Line of Credit. These loan closing costs are also amortized over the lives of the respective loans and the Revolving Line of Credit, and this non-cash amortization expense is an addition to NFFO 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, 2016, aggregate unamortized loan costs were approximately $11.1 million, which will be amortized over a weighted average remaining loan life of approximately 5.5 years.

6)
We incurred legal costs pertaining to the current negotiation of an extension of our management agreement with our Manager. Such costs are an additive adjustment to FFO in our calculation of NFFO.

7)
We receive loan fees in conjunction with the origination of certain real estate loans. 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 in excess of amortization income, after the payment of acquisition fees to our Manager are additive adjustments in the calculation of AFFO. Correspondingly, the non-cash income recognized under the effective interest method is a deduction in the calculation of AFFO. We also accrue over the lives of certain loans 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 to a third party. This non-cash income is deducted from NFFO in the calculation of AFFO.

8)
The Company records deferred interest revenue on certain of its real estate loans. These adjustments reflect the receipt during the periods presented of interest income which was earned and accrued prior to those periods presented on various real estate loans.

9)
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 the Company’s 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 retail assets. At March 31, 2016, the balance of unamortized below-market lease intangibles was approximately $8.9 million, which will be recognized over a weighted average remaining lease period of approximately 8.2 years.
        
10)
We deduct from NFFO normally recurring capital expenditures that are necessary to maintain our assets’ revenue streams in the calculation of AFFO. No adjustment is made in the calculation of AFFO for nonrecurring capital expenditures, which totaled $1,593,847 and $109,925 for the three-month periods ended March 31, 2016 and 2015, respectively. This adjustment also deducts from NFFO capitalized amounts for third party costs during the period to originate or renew leases in our grocery-anchored shopping centers.




See Definitions of Non-GAAP Measures beginning on page 15.



FIRST QUARTER 2016 - SUPPLEMENTAL FINANCIAL DATA | 7

                        

Preferred Apartment Communities, Inc.
Consolidated Balance Sheets
(Unaudited)
 
 
 
March 31, 2016
 
December 31, 2015
 
 
 
 
 
Assets
 
 
 
 
Real estate
 
 
 
Land
 
$
174,662,174

 
$
141,729,264

Building and improvements
908,022,540

 
733,417,442

Tenant improvements
6,029,479

 
5,781,199

Furniture, fixtures, and equipment
102,159,856

 
86,092,408

Construction in progress
814,623

 
609,400

Gross real estate
1,191,688,672

 
967,629,713

Less: accumulated depreciation
(59,160,582
)
 
(48,155,874
)
Net real estate
1,132,528,090

 
919,473,839

Property held for sale (net of accumulated depreciation of $6,034,171 and $5,838,792)
33,666,369

 
33,817,081

Real estate loans, net
169,409,097

 
180,688,293

Real estate loans to related party, net
91,221,265

 
57,313,465

Total real estate and real estate loans, net
1,426,824,821

 
1,191,292,678

 
 
 
 
 
Cash and cash equivalents
4,703,505

 
2,439,605

Restricted cash
13,597,705

 
12,539,440

Notes receivable
12,864,229

 
18,489,247

Note receivable and revolving line of credit due from related party
26,181,955

 
19,454,486

Accrued interest receivable on real estate loans
13,219,191

 
14,294,648

Acquired intangible assets, net of amortization
22,094,521

 
19,381,473

Deferred loan costs, net of amortization
443,654

 
488,770

Deferred offering costs
5,031,237

 
5,834,304

Tenant receivables and other assets
11,874,629

 
11,314,382

 
 
 
 
 
Total assets
$
1,536,835,447

 
$
1,295,529,033

 
 
 
 
 
Liabilities and equity
 
 
 
Liabilities
 
 
 
Mortgage notes payable, principal amount
$
818,291,100

 
$
668,836,291

Less: deferred loan costs, net of amortization
(10,642,652
)
 
(8,099,517
)
Mortgage notes payable, net of deferred loan costs
807,648,448

 
660,736,774

Mortgage note held for sale
 
28,109,000

 
28,109,000

Revolving line of credit
17,000,000

 
34,500,000

Term note payable
30,000,000

 
—

Less: deferred loan costs, net of amortization
(5,611
)
 
—

Term note payable, net of deferred loan costs
29,994,389

 
—

Real estate loan participation obligation
13,769,962

 
13,544,160

Accounts payable and accrued expenses
12,274,575

 
12,644,818

Accrued interest payable
2,524,558

 
1,803,389

Dividends and partnership distributions payable
7,322,267

 
6,647,507

Acquired below market lease intangibles, net of amortization
8,899,620

 
9,253,450

Security deposits and other liabilities
3,466,767

 
2,836,145

Total liabilities
931,009,586

 
770,075,243

 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
Equity
 
 
 
 
Stockholder's equity
 
 
 
Series A Redeemable Preferred Stock, $0.01 par value per share; 1,050,000
 
 
 
   shares authorized; 587,219 and 486,182 shares issued; 583,110 and 482,964
 
 
 
shares outstanding at March 31, 2016 and December 31, 2015, respectively
5,831

 
4,830

Common Stock, $0.01 par value per share; 400,066,666 shares authorized;
 
 
 
  23,063,026 and 22,761,551 shares issued and outstanding at
 
 
 
March 31, 2016 and December 31, 2015, respectively
230,630

 
227,616

Additional paid-in capital
621,265,574

 
536,450,877

Accumulated deficit
(16,999,449
)
 
(13,698,520
)
      Total stockholders' equity
604,502,586

 
522,984,803

Non-controlling interest
1,323,275

 
2,468,987

Total equity
605,825,861

 
525,453,790

 
 
 
 
 
Total liabilities and equity
$
1,536,835,447

 
$
1,295,529,033


FIRST QUARTER 2016 - SUPPLEMENTAL FINANCIAL DATA | 8

                        

Preferred Apartment Communities, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
 
 
 
Three months ended March 31,
 
 
2016
 
2015
Operating activities:
 
 
 
 
Net loss
 
$
(3,389,490
)
 
$
(764,929
)
Reconciliation of net (loss) income to net cash provided by operating activities:
 
 
 
Depreciation expense
 
11,203,056

 
5,340,425

Amortization expense
 
4,143,670

 
2,605,003

Amortization of above and below market leases
(265,410
)
 
(183,431
)
Deferred fee income amortization
(264,197
)
 
(158,817
)
Deferred loan cost amortization
691,207

 
347,538

Decrease (increase) in accrued interest income on real estate loans
1,075,458

 
(817,449
)
Equity compensation to executives and directors
610,425

 
590,308

Deferred cable income amortization
(4,616
)
 
(4,936
)
Changes in operating assets and liabilities:
 
 
 
(Increase) decrease in tenant receivables and other assets
(86,020
)
 
279,136

(Decrease) increase in accounts payable and accrued expenses
(1,267,380
)
 
257,372

Increase in accrued interest payable
721,170

 
37,407

Increase in prepaid rents
113,055

 
193,338

Increase in security deposits and other liabilities
109,187

 
15,038

Net cash provided by operating activities
13,390,115

 
7,736,003

 
 
 
 
 
Investing activities:
 
 
 
 
Investment in real estate loans
 
(56,970,287
)
 
(24,279,317
)
Repayments of real estate loans
 
27,695,229

 
5,206,045

Notes receivable issued
 
(3,870,191
)
 
(2,554,590
)
Notes receivable repaid
 
9,505,081

 
7,195,294

Note receivable issued to and draws on line of credit by related party
(12,382,910
)
 
(3,880,139
)
Repayments of line of credit by related party
5,508,066

 
2,097,135

Acquisition fees received on real estate loans
1,403,422

 
439,428

Acquisition fees paid on real estate loans
(701,369
)
 
(219,714
)
Acquisition fees paid to real estate loan participants
—

 
(24,665
)
Acquisition of properties
 
(220,850,440
)
 
(76,230,876
)
Additions to real estate assets - improvements
(1,461,711
)
 
(466,840
)
Deposits paid on acquisitions
 
(2,644,056
)
 
(541,475
)
Decrease in restricted cash
1,808,375

 
387,260

Net cash used in investing activities
(252,960,791
)
 
(92,872,454
)
 
 
 
 
 
Financing activities:
 
 
 
 
Proceeds from mortgage notes payable
151,640,000

 
50,778,000

Payment for mortgage debt
(2,185,191
)
 
(670,762
)
Payments for deposits and other mortgage loan costs
(3,716,469
)
 
(830,311
)
Proceeds from real estate loan participants
67,066

 
3,215,801

Proceeds from lines of credit
 
87,500,000

 
14,400,000

Payments on lines of credit
 
(105,000,000
)
 
(38,900,000
)
Proceeds from term loan
 
35,000,000

 
32,000,000

Repayment of the term loan
 
(5,000,000
)
 
(13,000,000
)
Proceeds from sales of Units, net of offering costs and redemptions
90,090,574

 
44,317,018

Proceeds from sales of Common Stock
—

 
5,381,848

Proceeds from exercises of warrants
5,548,468

 
53,945

Common stock dividends paid
 
(4,314,999
)
 
(3,697,436
)
Preferred stock dividends paid
 
(7,391,620
)
 
(2,931,927
)
Distributions to non-controlling interests
(53,241
)
 
(25,377
)
Payments for deferred offering costs
(350,012
)
 
(452,825
)
Net cash provided by financing activities
241,834,576

 
89,637,974

 
 
 
 
 
Net decrease in cash and cash equivalents
2,263,900

 
4,501,523

Cash and cash equivalents, beginning of period
2,439,605

 
3,113,270

Cash and cash equivalents, end of period
$
4,703,505

 
$
7,614,793




FIRST QUARTER 2016 - SUPPLEMENTAL FINANCIAL DATA | 9

                        


Real Estate Loans
 
 
 
 
Total units upon
 
Loan balance at March 31,
 
Total loan
 
Purchase option window
 
Purchase option price
Project/Property
(1) 
Location
 
completion
 
2016 (2)
 
 commitments
 
Begin
 
End
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
City Vista
 
Pittsburgh, PA
 
272

 
16,107,735

 
16,107,735

 
2/1/2017
 
5/31/2017
 
43,560,271

Haven West
(3) 
Atlanta, GA
 
160

 
6,784,167

 
6,940,795

 
8/1/2016
 
1/31/2017
 
26,138,466

Haven 12
(4) 
Starkville, MS
 
152

 
5,815,849

 
6,116,384

 
9/1/2016
 
11/30/2016
 
(5) 
Founders' Village
(6) 
Williamsburg, VA
 
247

 
9,866,000

 
10,346,000

 
2/1/2017
 
5/31/2017
 
44,266,000

Encore
(7) 
Atlanta, GA
 
340

 
10,958,200

 
10,958,200

 
1/8/2018
 
5/8/2018
 
(5) 
Encore Capital
(7) 
Atlanta, GA
 
—

 
6,208,758

 
9,758,200

 
N/A
 
N/A
 
N/A
Palisades
(6) 
Northern VA
 
304

 
16,070,000

 
17,270,000

 
3/1/2017
 
7/31/2017
 
(5) 
Fusion
 
Irvine, CA
 
280

 
43,926,413

 
59,052,583

 
1/1/2018
 
4/1/2018
 
(5) 
Green Park
(6) 
Atlanta, GA
 
310

 
12,624,455

 
13,464,372

 
11/1/2017
 
2/28/2018
 
(5) 
Stadium Village
 (6,7) 
Atlanta, GA
 
198

 
13,329,868

 
13,424,995

 
9/1/2016
 
11/30/2016
 
(5) 
Summit Crossing III
 
Atlanta, GA
 
172

 
7,246,400

 
7,246,400

 
8/1/2017
 
11/30/2017
 
(5) 
Overture
 
Tampa, FL
 
180

 
5,739,958

 
6,920,000

 
1/1/2018
 
5/1/2018
 
(5) 
Aldridge at Town Village
 
Atlanta, GA
 
300

 
9,988,338

 
10,975,000

 
11/1/2017
 
2/28/2018
 
(5) 
18 Nineteen
(8) 
Lubbock, TX
 
217

 
14,821,811

 
15,598,352

 
10/1/2017
 
12/31/2017
 
(5) 
Haven South
(9) 
Waco, TX
 
250

 
14,521,286

 
15,455,668

 
10/1/2017
 
12/31/2017
 
(5) 
Haven46
(10) 
Tampa, FL
 
158

 
2,770,706

 
9,819,662

 
11/1/2018
 
1/31/2019
 
(5) 
Bishop Street
(11) 
Atlanta, GA
 
232

 
6,973,723

 
12,693,457

 
10/1/2018
 
12/31/2018
 
(5) 
Dawson Marketplace
(12) 
Atlanta, GA
 
—

 
11,823,399

 
12,857,005

 
12/16/2017
 
12/15/2018
 
(13) 
Hidden River
 
Tampa, FL
 
300

 
—

 
4,734,960

 
9/1/2018
 
12/31/2018
 
(5) 
Hidden River Capital
 
Tampa, FL
 
—

 
3,416,958

 
5,380,000

 
N/A
 
N/A
 
N/A
CityPark II
 
Charlotte, NC
 
200

 
108,006

 
3,364,800

 
5/1/2018
 
8/31/2018
 
(5) 
CityPark II Capital
 
Charlotte, NC
 
—

 
3,138,200

 
3,916,000

 
N/A
 
N/A
 
N/A
Crescent Avenue
(14) 
Atlanta, GA
 
—

 
6,000,000

 
6,000,000

 
N/A
 
N/A
 
N/A
Haven Northgate
(15) 
College Station, TX
 
427

 
33,750,000

 
33,750,000

 
N/A
 
N/A
 
N/A
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,699

 
261,990,230

 
$
312,150,568

 
 
 
 
 
 
Unamortized loan origination fees
 
 
 
(1,359,868
)
 
 
 
 
 
 
 
 
Carrying amount
 
 
 
 
 
$
260,630,362

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1 
) 
All loans pertain to developments of multifamily communities, except as otherwise indicated.
(2 
) 
Loan balances presented are principal amounts due.
 
(3 
) 
Real estate loan in support of a completed 160-unit, 568-bed student housing community adjacent to the campus of the University of West Georgia.
(4 
) 
Real estate loan in support of a completed 152-unit, 536-bed student housing community adjacent to the campus of Mississippi State University.
(5 
) 
The purchase price is to be calculated based upon market cap rates at the time of exercise of the purchase option, with discounts ranging from between 20 and 60 basis points, depending on the loan.
(6 
) 
Loan balance includes 25% loan participation by an unrelated third party syndicate of lenders.
 
(7 
) 
Real estate loan in support of a completed 198-unit, 792-bed student housing community adjacent to the campus of Kennesaw State University in Atlanta, Georgia.
(8 
) 
Real estate loan of up to approximately $15.6 million in support of a planned 217-unit, 732-bed student housing community adjacent to the campus of Texas Tech University.
(9 
) 
Real estate loan in support of a planned 250-unit, 840-bed student housing community adjacent to the campus of Baylor University.
(10 
) 
On March 29, 2016, our bridge loan was converted to a real estate loan in support of a planned 158-unit, 542-bed student housing community adjacent to the campus of the University of South Florida.
(11 
) 
On February 18, 2016, our bridge loan was converted to a real estate loan in support of a planned multifamily community in Atlanta, Georgia.
(12 
) 
Real estate loan in support of a planned approximate 200,000 square foot retail center in the Atlanta, Georgia market.
(13 
) 
Includes 10 purchase options to acquire a tract and 14 outlots with a purchase price at a 20 basis point discount to market.
(14 
) 
Bridge loan in support of a proposed multi-use property in Atlanta, Georgia.
 
(15 
) 
Bridge loan in support of a planned 427-unit, 808-bed student housing community adjacent to the campus of Texas A&M University.

FIRST QUARTER 2016 - SUPPLEMENTAL FINANCIAL DATA | 10

                        




Multifamily Communities
 
 
 
 
 
 
 
 
Three months ended March 31, 2016
Property
 
Location
 
Number of units
 
Average unit size (sq. ft.)
 
Average occupancy
 
Average rent per unit
 
 
 
 
 
 
 
 
 
 
 
Ashford Park
 
Atlanta, GA
 
408

 
1,008

 
97.7
%
 
$
1,159

Lake Cameron
 
Raleigh, NC
 
328

 
940

 
92.6
%
 
$
888

McNeil Ranch
 
Austin, TX
 
192

 
1,071

 
94.4
%
 
$
1,224

Stone Rise
 
Philadelphia, PA
 
216

 
1,079

 
92.2
%
 
$
1,415

Enclave at Vista Ridge
 
Dallas, TX
 
300

 
1,079

 
94.7
%
 
$
1,121

Stoneridge Farms
 
Nashville, TN
 
364

 
1,153

 
95.2
%
 
$
1,005

Vineyards
 
Houston, TX
 
369

 
1,122

 
92.2
%
 
$
1,111

 
 
 
 
 
 
 
 
 
 
 
Same-store properties
 
 
 
2,177

 
 
 
94.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Trail Creek
 
Hampton, VA
 
300

 
1,084

 
—
%
 
$
1,171

Summit Crossing
 
Atlanta, GA
 
485

 
1,053

 
—
%
 
$
1,203

Sandstone Creek
 
Kansas City, KS
 
364

 
1,135

 
—
%
 
$
1,014

Aster at Lely Resort
 
Naples, FL
 
308

 
979

 
97.6
%
 
$
1,330

CityPark View
 
Charlotte, NC
 
284

 
948

 
91.1
%
 
$
1,059

Avenues at Cypress
 
Houston, TX
 
240

 
1,166

 
90.9
%
 
$
1,373

Venue at Lakewood Ranch
 
Sarasota, FL
 
237

 
1,001

 
97.3
%
 
$
1,576

Avenues at Creekside
 
San Antonio, TX
 
395

 
974

 
89.4
%
 
$
1,132

Citi Lakes
 
Orlando, FL
 
346

 
984

 
—
%
 
$
1,335

Avenues at Northpointe
 
Houston, TX
 
280

 
1,154

 
93.4
%
 
$
1,380

Lenox Portfolio
 
Nashville, TN
 
474

 
886

 
97.1
%
 
$
1,140

Stone Creek
 
Houston, TX
 
246

 
852

 
—
%
 
$
1,016

Overton Rise
 
Atlanta, GA
 
294

 
1,018

 
—
%
 
$
—

Baldwin Park
 
Orlando, FL
 
528

 
1,069

 
—
%
 
$
—

Crosstown Walk
 
Tampa, FL
 
342

 
980

 
—
%
 
$
—

 
 
 
 
 
 
 
 
 
 
 
Non same-store properties
 
 
 
5,123

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
7,300

 
 
 
94.2
%
 
 

For the three-month period ended March 31, 2016, our average occupancy was 94.2%. We define average occupancy as market rent reduced by vacancy losses. All of our multifamily properties are included in this calculation except for properties which are not yet stabilized, which we define as properties having first achieved 93% physical occupancy (Citi Lakes was not yet stabilized at the beginning of the first quarter), properties which are owned for less than the entire reporting period (Overton Rise, Baldwin Park, and Crosstown Walk), and properties which are undergoing significant capital projects or are adding additional phases (Summit Crossing, Stone Creek and Sandstone Creek).





FIRST QUARTER 2016 - SUPPLEMENTAL FINANCIAL DATA | 11

                        



Capital Expenditures

We regularly incur capital expenditures related to our owned properties. Capital expenditures may be nonrecurring and discretionary, as part of a strategic plan intended to increase a property’s value and corresponding revenue-generating ability, or may be normally recurring and necessary to maintain the income streams and present value of a property. Certain capital expenditures may be budgeted and reserved for upon acquiring a property as initial expenditures necessary to bring a property up to our standards or to add features or amenities that we believe make the property a compelling value to prospective residents or retail tenants in its individual market. These budgeted nonrecurring capital expenditures in connection with an acquisition are funded from the capital source(s) for the acquisition and are not dependent upon subsequent property operating cash flows for funding.

For the three-month period ended March 31, 2016, our capital expenditures were as follows:
 
 
Nonrecurring capital expenditures
 
Recurring capital expenditures
 
 
 
 
Budgeted at acquisition
 
Other
 
Total
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
Multifamily communities:
 
 
 
 
 
 
 
 
 
 
Summit Crossing
 
$
—

 
$
46,736

 
$
46,736

 
$
31,021

 
$
77,757

Trail Creek
 
—

 
10,110

 
10,110

 
23,587

 
33,697

Stone Rise
 
—

 
37,987

 
37,987

 
9,404

 
47,391

Ashford Park
 
—

 
1,258

 
1,258

 
33,127

 
34,385

McNeil Ranch
 
—

 
7,000

 
7,000

 
13,001

 
20,001

Lake Cameron
 
—

 
72,133

 
72,133

 
19,174

 
91,307

Stoneridge
 
75,104

 
10,322

 
85,426

 
33,567

 
118,993

Vineyards
 
45,222

 
12,735

 
57,957

 
31,277

 
89,234

Enclave
 
159,576

 
5,069

 
164,645

 
27,182

 
191,827

Sandstone
 
89,857

 
2,677

 
92,534

 
36,142

 
128,676

Cypress
 
77,666

 
—

 
77,666

 
9,056

 
86,722

Northpointe
 
25,121

 
2,000

 
27,121

 
6,087

 
33,208

Lakewood Ranch
 
94,869

 
2,881

 
97,750

 
5,822

 
103,572

Aster at Lely
 
—

 
3,000

 
3,000

 
14,965

 
17,965

CityPark View
 
—

 
—

 
—

 
2,754

 
2,754

Mansions at Creekside
 
15,000

 
—

 
15,000

 
36,904

 
51,904

Citilakes
 
23,120

 
—

 
23,120

 
10,447

 
33,567

Stone Creek
 
51,570

 
—

 
51,570

 
15,411

 
66,981

Lenox Portfolio
 
21,200

 
—

 
21,200

 
26,888

 
48,088

Village at Baldwin Park
 
24,751

 
—

 
24,751

 
33,665

 
58,416

Crosstown Walk
 
—

 
—

 
—

 
4,331

 
4,331

Overton Rise
 
—

 
—

 
—

 
1,745

 
1,745

 
 
 
 
 
 
 
 
 
 
 
 
 
703,056

 
213,908

 
916,964

 
425,557

 
1,342,521

Retail:
 
 
 
 
 
 
 
 
 
 
Woodstock Crossing
 
—

 
6,250

 
6,250

 
185

 
6,435

Parkway Town Centre
 
—

 
—

 
—

 
9,385

 
9,385

Barclay Crossing
 
198,123

 
—

 
198,123

 
—

 
198,123

Deltona Landings
 
—

 
—

 
—

 
1,963

 
1,963

Kingwood Glen
 
—

 
4,689

 
4,689

 
—

 
4,689

Parkway Centre
 
—

 
25,032

 
25,032

 
31,183

 
56,215

Powder Springs
 
—

 
—

 
—

 
3,600

 
3,600

Salem Cove
 
—

 
—

 
—

 
4,574

 
4,574

Independence Square
 
437,539

 
—

 
437,539

 
7,227

 
444,766

Royal Lakes Marketplace
 
—

 
—

 
—

 
4,238

 
4,238

Summit Point
 
—

 
5,250

 
5,250

 
—

 
5,250

 
 
 
 
 
 
 
 
 
 
 
Total
 
635,662

 
41,221

 
676,883

 
62,355

 
739,238

 
 
 
 
 
 
 
 
 
 
 
 
 
$
1,338,718

 
$
255,129

 
$
1,593,847

 
$
487,912

 
$
2,081,759



FIRST QUARTER 2016 - SUPPLEMENTAL FINANCIAL DATA | 12

                        


Retail Portfolio

Our retail portfolio consists of the following properties:

Property name
 
Location
 
Year built
 
GLA (1)
 
Percent leased
 
Anchor tenant
 
 
 
 
 
 
 
 
 
 
 
Woodstock Crossing
 
Atlanta, GA
 
1994
 
66,122

 
92.6
%
 
 Kroger
Parkway Centre
 
Columbus, GA
 
1999
 
53,088

 
97.4
%
 
 Publix
Powder Springs
 
Atlanta, GA
 
1999
 
77,853

 
92.8
%
 
 Publix
Royal Lakes Marketplace
 
Atlanta, GA
 
2008
 
119,493

 
84.4
%
 
 Kroger
Summit Point
 
Atlanta, GA
 
2004
 
111,970

 
83.1
%
 
 Publix
Wade Green Village
 
Atlanta, GA
 
1993
 
74,978

 
93.2
%
 
 Publix
Parkway Town Centre
 
Nashville, TN
 
2005
 
65,587

 
92.4
%
 
 Publix
Spring Hill Plaza
 
Nashville, TN
 
2005
 
61,570

 
100.0
%
 
 Publix
Salem Cove
 
Nashville, TN
 
2010
 
62,356

 
97.8
%
 
 Publix
The Overlook at Hamilton Place
 
Chattanooga, TN
 
1992
 
213,095

 
98.6
%
 
The Fresh Market
Barclay Crossing
 
Tampa, FL
 
1998
 
54,958

 
100.0
%
 
 Publix
Deltona Landings
 
Orlando, FL
 
1999
 
59,966

 
95.5
%
 
 Publix
Kingwood Glen
 
Houston, TX
 
1998
 
103,397

 
100.0
%
 
 Kroger
Independence Square
 
Dallas, TX
 
1977
 
140,218

 
94.6
%
 
Tom Thumb
Sweetgrass Corner
 
Charleston, SC
 
1999
 
89,124

 
96.2
%
 
 Bi-Lo
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,353,775

 
 
 
 

(1) Gross leasable area, or GLA, represents the total amount of property square footage that can be leased to tenants.

As of March 31, 2016, our retail portfolio was 94.3% leased. We define percent leased as the percentage of gross leasable area that is leased, including lease agreements that have been fully executed which have not yet commenced.

Details regarding lease expirations (assuming no exercise of tenant renewal options) within our retail assets as of March 31, 2016 were:

 
Total retail portfolio
 
Number of leases
 
Leased GLA
 
Percent of leased GLA
 
 
 
 
 
 
Month to month
4

 
6,714

 
0.5
%
2016
27

 
62,676

 
4.9
%
2017
52

 
101,373

 
7.9
%
2018
38

 
114,655

 
9.0
%
2019
28

 
261,025

 
20.5
%
2020
32

 
131,208

 
10.3
%
2021
15

 
28,474

 
2.2
%
2022
2

 
3,239

 
0.3
%
2023
3

 
12,300

 
1.0
%
2024
10

 
221,745

 
17.4
%
2025
5

 
135,641

 
10.6
%
2026+
6

 
197,201

 
15.4
%
 
 
 
 
 
 
 
222

 
1,276,251

 
100.0
%





FIRST QUARTER 2016 - SUPPLEMENTAL FINANCIAL DATA | 13

                        




Multifamily Same Store Financial Data

The following chart presents same store operating results for the Company’s multifamily communities that have been owned for at least 15 full months, enabling comparisons of the current reporting period to the prior year comparative period. Multifamily communities approved for disposition by the investment committee of our Manager (both phases of Trail Creek) are excluded from these results. Additionally, the Company excludes the same store operating results of properties for which construction of adjacent phases have commenced (the Company holds a real estate loan partially supporting a third phase of the Summit Crossing multifamily community, which is excluded as well). For the periods presented, same store operating results consist of the operating results of our Stone Rise, Lake Cameron, Ashford Park, McNeil Ranch Enclave at Vista Ridge, Stoneridge Farms at Hunt Club and Vineyards multifamily communities. Same store net operating income is a non-GAAP measure that is most directly comparable to net income, with a reconciliation following below.

Same Store Net Operating Income
Stone Rise, Ashford Park, McNeil Ranch, Lake Cameron, Enclave at Vista Ridge, Stoneridge Farms at Hunt Club and Vineyards Multifamily Communities
 
 
 
 
 
 
 
 
 
 
 
Three months ended:
 
 
 
 
 
 
3/31/2016
 
3/31/15
 
$ inc
 
% inc
Revenues:
 
 
 
 
 
 
 
 
Rental revenues
 
$
6,916,985

 
$
6,639,294

 
$
277,691

 
4.2
%
Other property revenues
 
854,598

 
846,591

 
$
8,007

 
0.9
%
Total revenues
 
7,771,583

 
7,485,885

 
$
285,698

 
3.8
%
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Property operating and maintenance
 
1,177,150

 
1,136,625

 
$
40,525

 
3.6
%
Payroll
 
699,943

 
693,213

 
$
6,730

 
1.0
%
Property management fees
 
312,973

 
302,164

 
$
10,809

 
3.6
%
Real estate taxes
 
1,183,393

 
1,050,772

 
$
132,621

 
12.6
%
Other
 
266,032

 
265,485

 
$
547

 
0.2
%
Total operating expenses
 
3,639,491

 
3,448,259

 
$
191,232

 
5.5
%
 
 
 
 
 
 
 
 
 
Same store net operating income
 
$
4,132,092

 
$
4,037,626

 
$
94,466

 
2.3
%


FIRST QUARTER 2016 - SUPPLEMENTAL FINANCIAL DATA | 14

                        

Reconciliation of Same Store Net Operating Income (NOI) to Net Loss
 
 
 
 
 
 
 
Three months ended:
 
 
3/31/2016
 
3/31/15
 
 
 
 
 
Same store net operating income
 
$
4,132,092

 
$
4,037,626

 
 
 
 
 
Add:
 
 
 
 
Non-same-store property revenues
 
24,244,099

 
7,625,003

Less:
 
 
 
 
Non-same-store property operating expenses
10,440,127

 
2,948,060

 
 
 
 
 
Property net operating income
 
17,936,064

 
8,714,569

Add:
 
 
 
 
Interest revenues on notes receivable
 
6,942,159

 
4,875,086

Interest revenues on related party notes receivable
 
2,777,940

 
1,358,542

Less:
 
 
 
 
Equity stock compensation
 
610,425

 
590,308

Depreciation and amortization
 
15,346,726

 
7,945,428

Interest expense
 
8,894,830

 
4,377,115

Acquisition costs
 
2,652,705

 
423,592

Acquisition costs to related party
 
110,880

 
760,300

Management fees
 
2,766,086

 
1,350,890

Other corporate expenses
 
933,602

 
611,453

 
 
 
 
 
Asset management and general and administrative expense fees deferred
(269,601
)
 
(345,960
)
 
 
 
 
 
Net loss
 
$
(3,389,490
)
 
$
(764,929
)

Definitions of Non-GAAP Measures

Funds From Operations Attributable to Common Stockholders and Unitholders (FFO)

Analysts, managers and investors have, since the first real estate investment trusts were created, made certain adjustments to reported net income amounts under U.S. GAAP in order to better assess these vehicles’ liquidity and cash flows. FFO is one of the most commonly utilized Non-GAAP measures currently in practice. In its 2002 White Paper on Funds From Operations, which was most recently revised in 2012, the National Association of Real Estate Investment Trusts, or NAREIT, standardized the definition of how Net income/loss should be adjusted to arrive at FFO, in the interests of uniformity and comparability. The NAREIT definition of FFO (and the one reported by the Company) is:

Net income/loss:
• excluding impairment charges on and gains/losses from sales of depreciable property;
• plus depreciation and amortization of real estate assets and deferred leasing costs; and
• after adjustments for the Company's proportionate share of unconsolidated partnerships and joint ventures.

Not all companies necessarily utilize the standardized NAREIT definition of FFO, so caution should be taken in comparing the Company’s reported FFO results to those of other companies. The Company’s FFO results are comparable to the FFO results of other companies that follow the NAREIT definition of FFO and report these figures on that basis. The Company believes FFO is useful to investors as a supplemental gauge of our operating and cash-generating results. FFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders.



FIRST QUARTER 2016 - SUPPLEMENTAL FINANCIAL DATA | 15

                        

Normalized Funds From Operations Attributable to Common Stockholders and Unitholders (NFFO)

Normalized FFO makes certain adjustments to FFO, which are either not likely to occur on a regular basis or are otherwise not representative of the Company’s ongoing operating performance. For example, since the Company is acquiring properties on a regular basis, it incurred substantial costs related to such acquisitions, which are required under GAAP to be recognized as expenses when they are incurred. The Company adds back any such acquisition and pursuit costs, including costs incurred in connection with obtaining short term debt financing for acquisitions and beginning January 1, 2016, amortization of loan coordination fees, to FFO in its calculation of NFFO since such costs are not representative of our fund generating results on an ongoing basis. The Company also adds back any costs incurred related to the negotiations of extensions of our management agreement with our Manager, realized losses on debt extinguishment and any non-cash dividends in this calculation. NFFO figures reported by us may not be comparable to those NFFO figures reported by other companies.

We utilize NFFO as a measure of the operating performance of our portfolio of real estate assets. We believe NFFO is useful to investors as a supplemental gauge of our operating performance and is useful in comparing our operating performance with other real estate companies that are not as involved in ongoing acquisition activities. NFFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders.

Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders (AFFO)

AFFO makes further adjustments to NFFO results in order to arrive at a more refined measure of operating and financial performance. There is no industry standard definition of AFFO and practice is divergent across the industry. The Company calculates AFFO as:
 
NFFO, plus:
• non-cash equity compensation to directors and executives;
• amortization of loan closing costs, excluding costs incurred in connection with obtaining short term financing related to acquisitions;
• depreciation and amortization of non-real estate assets;
• net loan fees received; and
• deferred interest income received;

less:
• non-cash loan interest income;
• cash paid for pursuit costs on abandoned acquisitions;
• cash paid for loan closing costs;
• amortization of acquired real estate intangible liabilities; and
• normally-recurring capital expenditures and capitalized retail direct leasing costs.

AFFO figures reported by us may not be comparable to those AFFO figures reported by other companies. We utilize AFFO as another measure of the operating performance of our portfolio of real estate assets. We believe AFFO is useful to investors as a supplemental gauge of our operating performance and is useful in comparing our operating performance with other real estate companies. AFFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders.


FIRST QUARTER 2016 - SUPPLEMENTAL FINANCIAL DATA | 16

                        

Same Store Net Operating Income (NOI)

The Company uses same store net operating income as an operational metric for properties the Company has owned for at least 15 full months, enabling comparisons of those properties’ operating results between the current reporting period and the prior year comparative period. The Company defines net operating income as rental and other property revenues, less total property and maintenance expenses, property management fees, real estate taxes, general and administrative expenses, and property insurance. The Company believes that net operating income is an important supplemental measure of operating performance for a REIT’s operating real estate because it provides a measure of the core operations, rather than factoring in depreciation and amortization, financing costs, acquisition costs, and other corporate expenses. Net operating income is a widely utilized measure of comparative operating performance in the REIT industry, but is not a substitute for its closest GAAP-compliant measure, net income/loss.

Additional Information

The SEC has declared effective the registration statement (including prospectus) filed by the Company for each of the offerings to which this communication may relate. Before you invest, you should read the final prospectus, and any prospectus supplements, forming a part of the registration statement and other documents the Company has filed with the SEC for more complete information about the Company and the offering to which this communication may relate. In particular, you should carefully read the risk factors described in the final prospectus and in any related prospectus supplement and in the documents incorporated by reference in the final prospectus and any related prospectus supplement to which this communication may relate. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively the Company or its dealer manager, International Assets Advisory, LLC (with respect to the offering of up to a maximum of 900,000 Units, with each Unit consisting of one share of Series A Redeemable Preferred Stock and one Warrant to purchase up to 20 shares of our Common Stock, or the Follow-On Offering), or its sales agent, MLV & Co. LLC (with respect to the issuance and offering of up to $100 million of its Common Stock from time to time in an "at the market" offering, or the ATM Offering), will arrange to send you the prospectus if you request it by calling Leonard A. Silverstein at (770) 818-4100, or writing to 3284 Northside Parkway NW, Suite 150, Atlanta, Georgia 30327.

The final prospectus for the Follow-On Offering, dated October 11, 2013, can be accessed through the following link: http://www.sec.gov/Archives/edgar/data/1481832/000148183213000128/a424b3prospectus900m.htm

The final prospectus and prospectus supplement for the ATM Offering, dated July 19, 2013 and February 28, 2014, respectively, can be accessed through the following link:

http://www.sec.gov/Archives/edgar/data/1481832/000148183214000015/prospectussupplementatm-20.htm

For further information:             
Leonard A. Silverstein, President and Chief Operating Officer
Preferred Apartment Communities, Inc.
lsilverstein@pacapts.com
+1-770-818-4147

FIRST QUARTER 2016 - SUPPLEMENTAL FINANCIAL DATA | 17

PREFERRED APARTMENT COMMUNITIES INC Reports

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