Exhibit 99.2 

 

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter 2017

Supplemental Financial Information

(Unaudited)

 

Table of Contents

 

Second Quarter Earnings Release	3
Financial and Operating Highlights	15
Share and Dividend Information	16
EBITDA and Interest Information	17
Financial Statistics	18
Recent Acquisitions and Pending Investments	19
Recent Dispositions	20
Investments in Unconsolidated Real Estate Joint Ventures and Notes and Accrued Interest Receivable from Related Parties	21
Portfolio Information	22
Development Properties	23
Condensed Consolidated Balance Sheets	24
Consolidated Statements of Operations	25
Reconciliation of Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO)	26
Debt Summary Information	27
Third Quarter 2017 Outlook	29
Definitions of Non-GAAP Financial Measures	30

 

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are based upon the Company’s present expectations, but these statements are not guaranteed to occur, including statements relating to the Company’s operating environment, operating trends, and outlook. 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. Investors should not place undue reliance upon forward-looking statements. For further discussion of the factors that could affect outcomes, please refer to the “Risk Factors” set forth in Item 1A of the Company’s Annual Report on Form 10-K filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on February 22, 2017, and subsequent filings by the Company with the SEC, including our periodic reports. We claim the safe harbor protection for forward looking statements contained in the Private Securities Litigation Reform Act of 1995.

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

 

Corporate Headquarters

712 Fifth Ave., 9th Floor

New York, NY 10019

877.826.BLUE

PRESS RELEASE

For Immediate Release

 

Bluerock Residential Growth REIT Announces Second Quarter 2017 Results

 

New York, NY (August 8, 2017) – Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG) (“the Company”) announced today its financial results for the quarter ended June 30, 2017.

 

Highlights

 

•

Total revenues grew 47% to $27.0 million for the quarter from $18.4 million for the prior year quarter primarily as a result of significant investment activity in the past year, offset by the sales of four properties in 2017 and one in 2016.

 

•

Net income attributable to common stockholders for the second quarter of 2017 was $0.67 per share, as compared to net loss attributable to common shareholders of $(0.24) per share in the prior year period. Net income (loss) attributable to common stockholders included non-cash expenses of $0.66 per share in the second quarter of 2017 vs. $0.45 per share for the prior year period.

 

•

Adjusted funds from operations attributable to common stockholders (“AFFO”) was $3.3 million for the quarter compared to $4.4 million for the prior year quarter.

 

•

AFFO per share is $0.13 for the second quarter of 2017 as compared to $0.21 for the second quarter of 2016, and exceeded guidance of $0.01 - $0.02.

 

•

Pro forma AFFO per share of $0.36 for the second quarter exceeded pro forma guidance of $0.26 to $0.28 per share.

 

•

The Company paid the full amount of the second quarter’s base management fees in LTIP Units in lieu of cash payment. This favorably impacted AFFO per share and pro forma AFFO per share by $0.10 and $0.09, respectively.

 

•

Property Net Operating Income (NOI) grew 30% to $14.3 million for the quarter, from $11.0 million in the prior year quarter.

 

•

Property NOI margins were 57.3% of revenue for the quarter, compared to 59.8% of revenue in the prior year quarter. Property NOI margins were impacted by the sales of more stabilized assets with proceeds being recycled into replacement properties with higher growth opportunities, which require time to realize margin improvement.

 

•

Same store NOI increased 2.3% for the quarter, as compared to the prior year quarter.

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

•

Consolidated real estate investments, at cost, increased 10% to $1.1 billion at June 30, 2017 from $1.0 billion at December 31, 2016.

 

•

The Company invested in a portfolio of five operating properties totaling 1,408 units for a total purchase price of approximately $188.9 million during the second quarter.

 

•

The Company declared a monthly dividend for July 2017 of $0.096666 per share on the Company's Class A common stock.

 

•

The Company sold 50,501 shares of Series B preferred stock with associated warrants at a public offering price of $1,000 per unit, for gross proceeds of approximately $50.5 million during the second quarter, an increase in gross proceeds of 114% over the first quarter.

 

Management Commentary

 

“We are pleased to report the acquisition of a portfolio of five operating properties totaling 1,408 units for approximately $189 million, continued momentum in the Series B preferred continuous offering raise with second quarter gross proceeds of over $50 million and the recycling of capital through the disposition of interests in three properties at significant gains during the second quarter,” said Ramin Kamfar, the Company’s Chairman and CEO. “Importantly, on August 4, 2017, we also signed definitive agreements to effect the Company’s internalization of its external management function, which will be subject to a vote of our common stockholders at our upcoming annual meeting of stockholders.”

 

Second Quarter Acquisition and Disposition Activity

 

•

On April 26, 2017, the Company sold its interest in the Lansbrook Village apartments in Palm Harbor, Florida at a total sale price of approximately $82.4 million, recognized a pro rata gain of $16.1 million, with net proceeds of approximately $19.1 million to the Company, generating an internal rate of return of 25% on BRG’s equity investment in the project, for an equity multiple of 1.71x.

 

•

On May 24, 2017, the Company sold its interest in the Fox Hill apartments in Austin, Texas at a total sale price of approximately $46.5 million, recognized a pro rata gain of $10.3 million, with net proceeds of approximately $16.4 million to the Company, generating an internal rate of return of 26% on BRG’s equity investment in the project, for an equity multiple of 1.62x.

 

•

On June 9, 2017, the Company acquired a 90% investment in a 1,408-unit five-property portfolio of multifamily communities located in San Antonio and Tyler, Texas. The total purchase price of approximately $188.9 million includes the assumption of approximately $146.4 million of existing mortgage debt.

 

•

On June 30, 2017, the Company sold its interest in the MDA apartments in Chicago, Illinois at a total sale price of approximately $18.3 million, recognized a pro rata gain of $6.4 million, with net proceeds of approximately $11.0 million to the Company, generating an internal rate of return of 22% on BRG’s equity investment in the project, for an equity multiple of 2.23x.

 

Pending Investments at June 30, 2017

 

•

The Company has an agreement which entitles the Company to make a 80% investment in a 384-unit apartment community located in Houston, Texas, known as Villages at Cypress Creek, subject to certain conditions. The total purchase price is expected to be approximately $40.7 million.

 

•

The Company has an agreement which entitles the Company to make a 98% investment in a 336-unit apartment community located in Orlando, Florida, known as Citrus Tower, subject to certain conditions. The total purchase price is expected to be approximately $55.3 million.

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

Second Quarter 2017 Financial Results

 

Net income attributable to common stockholders for the second quarter of 2017 was $17.6 million, compared to a net loss of $5.0 million in the prior year period. The change was primarily driven by positive increases in property NOI of $3.3 million, interest income of $2.1 million and a gain on sale of real estate investments of $43.8 million, offset by increases in management fees of $4.7 million, depreciation and amortization expense of $2.6 million, interest expense of $3.2 million, loss on extinguishment of debt of $1.6 million, preferred stock dividends and accretion of $3.8 million and non-controlling income allocation of $10.2 million.

 

AFFO for the second quarter of 2017 was $3.3 million, or $0.13 per diluted share, compared to $4.4 million, or $0.21 per share in the prior year period. AFFO was primarily impacted by increases in property NOI of $3.3 million arising from significant investment activity offset by sales of properties, interest income of $2.1 million and offset by interest expense of $2.5 million and preferred stock dividends of $3.4 million.

 

Same Store Portfolio Performance

 

Same store NOI for the second quarter of 2017 increased by 2.3% from the same period in the prior year. There was a 2.4% increase in same store property revenues compared to the same prior year period, primarily attributable to a 3.5% increase in average rental rates offset by a 52 basis point decrease in average occupancy. Same store expenses increased 2.6% due to an increase in repair and maintenance across the portfolio.

 

Management Internalization

 

On August 4, 2017, the Company announced that it had entered into definitive agreements providing for the Company’s internalization of the external management function currently provided by the Manager and the direct employment of the Manager’s existing management team and certain other employees. The internalization consideration will be calculated pursuant to a formula established in the Management Agreement at the time of the Company’s initial public offering in April 2014 and is expected to be approximately $41-$42 million. To further align the interests of the Company’s management team with those of the Company’s stockholders, 99.9% of the consideration will be paid in equity, comprised of units of limited partnership interest (“OP Units”) in the Company’s operating partnership, and shares of Class C Common Stock, which are being issued to provide the recipients with a voting franchise commensurate with their economic interest in the OP Units. Upon closing of the internalization, which is expected to close in the fourth quarter of 2017, the Company will become a self-managed real estate investment trust. The proposed transaction was unanimously approved by the Special Committee of independent directors and the Company’s full board of directors, but remains subject to approval of the issuances of equity by a majority of disinterested stockholders voting at the Company’s annual meeting of stockholders and other customary closing conditions.

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

Dividend Details

 

On July 10, 2017, our board of directors authorized, and we declared, a monthly dividend for July 2017 of $0.096666 per share on our Class A common stock, payable to the stockholders of record as of July 25, 2017, which was paid in cash on August 4, 2017. Holders of OP and LTIP Units are entitled to receive "distribution equivalents" at the same time as dividends are paid to holders of our Class A common stock. A portion of each dividend may constitute a return of capital for tax purposes. There is no assurance that we will continue to declare dividends or at this rate.

 

On August 4, 2017, we announced that our board of directors has initiated, in conjunction with a financial advisor, a review of the appropriate Company’s dividend policy for the Company’s Class A Common stock. The board’s evaluation will consider factors including, but not limited to, achieving a sustainable dividend covered by current recurring AFFO (vs. pro forma AFFO), multifamily and small cap peer ratios, providing financial flexibility for the Company, and achieving an appropriate balance between the retention of capital to invest and grow net asset value, and the importance of current distributions. The board is expected to complete its review of the dividend policy for the Company’s Class A Common Stock in the fourth quarter of 2017.

 

On July 10, 2017, our board of directors authorized, and we declared, a monthly dividend of $5.00 per share of Series B preferred stock, payable to the stockholders of record as of July 25, 2017, which was paid in cash on August 4, 2017, and as of August 25, 2017, and September 25, 2017, which will be paid in cash on September 5, 2017 and October 5, 2017, respectively.

 

The board’s review of dividend policy will address the dividend policy for the Company’s Class A Common Stock only. The terms of each series of the Company’s issued and outstanding preferred stock provide for fixed annual dividend rates, and are not subject to adjustment at the board’s discretion.

 

Q3 2017 Outlook

 

For the third quarter of 2017, the Company anticipates AFFO in the range of ($0.03) to ($0.02) per share, and $0.25 to $0.27 per share on a pro forma basis. For assumptions underlying earnings guidance, please see page 29 of Company’s Q2 2017 Earnings Supplement available under Investor Relations on the Company’s website (www.bluerockresidential.com). Pro forma AFFO is used for illustrative purposes only, is hypothetical and does not represent historical performance or management’s estimates or projections for future performance.

 

Conference Call

 

All interested parties can listen to the live conference call at 11:00 AM ET on Tuesday, August 8, 2017 by dialing +1 (866) 843-0890 within the U.S., or +1 (412) 317-6597, and requesting the "Bluerock Residential Conference."

 

For those who are not available to listen to the live call, the conference call will be available for replay on the Company’s website two hours after the call concludes, and will remain available until September 8, 2017 at http://services.choruscall.com/links/brg170808.html, as well as by dialing +1 (877) 344-7529 in the U.S., or +1 (412) 317-0088 internationally, and requesting conference number 10111174.

 

The full text of this Earnings Release and additional Supplemental Information is available in the Investor Relations section on the Company’s website at http://www.bluerockresidential.com.

 

About Bluerock Residential Growth REIT, Inc.

 

Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG) is a real estate investment trust that focuses on acquiring a diversified portfolio of Class A institutional-quality apartment properties in demographically attractive growth markets to appeal to the renter by choice. The Company’s objective is to generate value through off-market/relationship-based transactions and, at the asset level, through improvements to operations and properties. BRG generally invests with strategic regional partners, including some of the best-regarded private owner-operators in the United States, making it possible to operate as a local sharpshooter in each of its markets while enhancing off-market sourcing capabilities. The Company is included in the Russell 2000 and Russell 3000 Indexes. BRG has elected to be taxed as a real estate investment trust (REIT) for U.S. federal income tax purposes.

 

For more information, please visit the Company’s website at www.bluerockresidential.com.

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

Forward Looking Statements

 

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are based upon the Company’s present expectations, but these statements are not guaranteed to occur, including, without limitation, with respect to the completion of the proposed internalization on the terms described or at all and the expected benefits of the proposed internalization. Among others, the following uncertainties and other factors could cause actual results to differ from those set forth in the forward-looking statements: the failure to receive, on a timely basis or otherwise, the required approval by the Company’s stockholders, governmental or regulatory agencies and third parties; the risk that a condition to closing of the proposed internalization may not be satisfied; and the Company’s ability to consummate the proposed internalization. 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. Investors should not place undue reliance upon forward-looking statements. For further discussion of the factors that could affect outcomes, please refer to the risk factors set forth in Item 1A of the Company’s Annual Report on Form 10-K filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on February 22, 2017, and subsequent filings by the Company with the SEC. We claim the safe harbor protection for forward looking statements contained in the Private Securities Litigation Reform Act of 1995.

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

Portfolio Summary

 

The following is a summary of our operating real estate and development properties as of June 30, 2017:

 

Operating Properties		Location		Number of Units				Year Built/ Renovated (1)				Ownership Interest				Average Rent (2)				% Occupied (3)
ARIUM at Palmer Ranch		Sarasota, FL			320				2016				95	%		$	1,212				95	%
ARIUM Grandewood		Orlando, FL			306				2005				95	%			1,246				95	%
ARIUM Gulfshore		Naples, FL			368				2016				95	%			1,242				94	%
ARIUM Palms		Orlando, FL			252				2008				95	%			1,232				96	%
ARIUM Pine Lakes		Port St. Lucie, FL			320				2003				85	%			1,116				95	%
ARIUM Westside		Atlanta, GA			336				2008				90	%			1,415				95	%
Ashton Reserve		Charlotte, NC			473				2015				100	%			1,045				97	%
Enders Place at Baldwin Park		Orlando, FL			220				2003				90	%			1,648				96	%
James on South First		Austin, TX			250				2016				90	%			1,189				96	%
Marquis at Crown Ridge		San Antonio, TX			352				2009				90	%			968				96	%
Marquis at Stone Oak		San Antonio, TX			335				2007				90	%			1,403				90	%
Marquis at The Cascades I		Tyler, TX			328				2007				90	%			1,123				97	%
Marquis at The Cascades II		Tyler, TX			254				2009				90	%			1,026				93	%
Marquis at TPC		San Antonio, TX			139				2008				90	%			1,459				91	%
Nevadan		Atlanta, GA			480				1990				90	%			1,090				95	%
Park & Kingston		Charlotte, NC			168				2015				96	%			1,174				97	%
Preston View		Morrisville, NC			382				2000				92	%			1,013				96	%
Roswell City Walk		Roswell, GA			320				2015				98	%			1,462				96	%
Sorrel		Frisco, TX			352				2015				95	%			1,199				92	%
Sovereign		Fort Worth, TX			322				2015				95	%			1,269				95	%
The Brodie		Austin, TX			324				2001				93	%			1,100				96	%
The Preserve at Henderson Beach		Destin, FL			340				2009				100	%			1,312				99	%
Wesley Village		Charlotte, NC			301				2010				92	%			1,270				97	%
Whetstone		Durham, NC			204				2015				(4	)			1,196				94	%
Operating Properties Subtotal/Average					7,446											$	1,208				95	%
Development Properties		Location			Planned Number of Units												Pro Forma Average Rent (5)
Alexan CityCentre		Houston, TX			340											$	2,144
Alexan Southside Place		Houston, TX			270												2,012
APOK Townhomes		Boca Raton, FL			90												2,549
Crescent Perimeter		Atlanta, GA			320												1,749
Domain Phase 1		Garland, TX			299												1,469
Flagler Village		Fort Lauderdale, FL			384												2,481
Helios		Atlanta, GA			282												1,486
Lake Boone Trail		Raleigh, NC			245												1,271
Vickers Village		Roswell, GA			79												3,176
West Morehead		Charlotte, NC			286												1,507
Development Properties Subtotal/Average					2,595											$	1,876
Operating and Development Properties Total/Average					10,041											$	1,380

 

⁽¹⁾ Represents date of last significant renovation or year built if there were no renovations.

⁽²⁾ Represents the average effective monthly rent per occupied unit for all occupied units for the three months ended June 30, 2017.

⁽³⁾ Percent occupied is calculated as (i) the number of units occupied as of June 30, 2017, divided by (ii) total number of units, expressed as a percentage.

⁽⁴⁾ Whetstone is currently a preferred equity investment providing a stated investment return.

⁽⁵⁾ The Company holds a preferred equity investment with an option to convert into partial ownership of the underlying asset upon stabilization, except Flagler Village. APOK Townhomes, Domain Phase 1, and West Morehead are mezzanine loan investments with an option to purchase indirect property interest upon maturity. Pro forma average rent represents the average pro forma effective monthly rent per occupied unit for all expected occupied units upon stabilization.

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

Consolidated Statement of Operations

For the Three and Six Months Ended June 30, 2017 and 2016

(Unaudited and dollars in thousands except for share and per share data)

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2017				2016				2017				2016
Revenues
Net rental income		$	23,615			$	17,513			$	47,482			$	33,441
Other property revenues			1,336				886				2,608				1,592
Interest income from related parties			2,097				—				3,620				—
Total revenues			27,048				18,399				53,710				35,033
Expenses
Property operating			10,646				7,389				20,476				13,982
General and administrative			1,696				1,704				3,146				2,978
Management fees			6,163				1,415				8,931				2,629
Acquisition and pursuit costs			18				249				3,200				1,457
Management internalization			340				—				820				—
Depreciation and amortization			10,387				7,789				21,331				15,298
Total expenses			29,250				18,546				57,904				36,344
Operating loss			(2,202	)			(147	)			(4,194	)			(1,311	)
Other income (expense)
Other income			17				—				17				—
Preferred returns and equity in income of unconsolidated real estate joint ventures			2,605				2,775				5,177				5,543
Gain on sale of real estate investments			33,574				—				50,040				—
Gain on sale of real estate joint venture interest			10,238				—				10,238				—
Loss on early extinguishment of debt			(1,639	)			—				(1,639	)			—
Interest expense, net			(7,825	)			(4,589	)			(14,943	)			(8,817	)
Total other income (expense)			36,970				(1,814	)			48,890				(3,274	)
Net income (loss)			34,768				(1,961	)			44,696				(4,585	)
Preferred stock dividends			(6,381	)			(2,968	)			(12,233	)			(4,451	)
Preferred stock accretion			(647	)			(168	)			(984	)			(293	)
Net income (loss) attributable to noncontrolling interests
Operating partnership units			186				(75	)			129				(136	)
Partially-owned properties			9,985				21				18,771				(14	)
Net income (loss) attributable to noncontrolling interests			10,171				(54	)			18,900				(150	)
Net income (loss) attributable to common stockholders		$	17,569			$	(5,043	)		$	12,579			$	(9,179	)
Net income (loss) per common share - Basic		$	0.67			$	(0.24	)		$	0.49			$	(0.45	)
Net income (loss) per common share – Diluted		$	0.67			$	(0.24	)		$	0.49			$	(0.45	)
Weighted average basic common shares outstanding			26,075,911				20,686,652				25,535,178				20,604,124
Weighted average diluted common shares outstanding			26,076,572				20,686,652				25,535,839				20,604,124

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

Consolidated Balance Sheets

Second Quarter 2017

(Unaudited and dollars in thousands except for share and per share amounts)

 

		June 30, 2017				December 31, 2016
ASSETS
Net Real Estate Investments
Land		$	147,562			$	142,274
Buildings and improvements			930,471				848,445
Furniture, fixtures and equipment			29,148				27,617
Construction in progress			24,890				10,878
Total Gross Real Estate Investments			1,132,071				1,029,214
Accumulated depreciation			(35,269	)			(42,137	)
Total Net Real Estate Investments			1,096,802				987,077
Cash and cash equivalents			139,292				82,047
Restricted cash			41,048				45,402
Notes and accrued interest receivable from related parties			56,849				21,267
Due from affiliates			1,240				948
Accounts receivable, prepaid and other assets			6,193				8,610
Preferred equity investments and investments in unconsolidated real estate joint ventures			94,184				91,132
In-place lease intangible assets, net			5,175				4,839
Total Assets		$	1,440,783			$	1,241,322
LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY
Mortgages payable		$	775,591			$	710,575
Accounts payable			3,416				1,669
Other accrued liabilities			19,006				13,431
Due to affiliates			6,831				2,409
Distributions payable			8,326				7,328
Total Liabilities			813,170				735,412
8.250% Series A Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 10,875,000 shares authorized, and 5,721,460 issued and outstanding as of June 30, 2017 and December 31, 2016			138,605				138,316
Series B Redeemable Preferred Stock, liquidation preference $1,000 per share, 150,000 shares authorized, 95,552 and 21,482 issued and outstanding as of June 30, 2017 and December 31, 2016, respectively			84,058				18,938
7.6250% Series C Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares authorized, 2,323,750 issued and outstanding as of June 30, 2017 and December 31, 2016			56,202				56,095
Equity
Stockholders’ Equity
Preferred stock, $0.01 par value, 230,975,000 shares authorized; none issued and outstanding			—				—
7.125% Series D Cumulative Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares authorized, 2,850,602 issued and outstanding as of June 30, 2017 and December 31, 2016			68,710				68,760
Common stock - Class A, $0.01 par value, 747,586,185 shares authorized; 24,191,951 and 19,567,506 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively			242				196
Additional paid-in-capital			321,948				257,403
Distributions in excess of cumulative earnings			(87,130	)			(84,631	)
Total Stockholders’ Equity			303,770				241,728
Noncontrolling Interests
Operating partnership units			2,017				2,216
Partially owned properties			42,961				48,617
Total Noncontrolling Interests			44,978				50,833
Total Equity			348,748				292,561
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY		$	1,440,783			$	1,241,322

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

Non-GAAP Financial Measures

 

The foregoing supplemental financial data includes certain non-GAAP financial measures that we believe are helpful in understanding our business and performance, as further described below. Our definition and calculation of these non-GAAP financial measures may differ from those of other REITs, and may, therefore, not be comparable.

 

Funds from Operations and Adjusted Funds from Operations

 

Funds from operations attributable to common stockholders (“FFO”) is a non-GAAP financial measure that is widely recognized as a measure of REIT operating performance. We consider FFO to be an appropriate supplemental measure of our operating performance as it is based on a net income analysis of property portfolio performance that excludes non-cash items such as depreciation. The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time. Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT, using historical accounting for depreciation, could be less informative. We define FFO, consistent with the National Association of Real Estate Investment Trusts, or (“NAREIT's”) definition, as net income, computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus depreciation and amortization of real estate assets, plus impairment write-downs of depreciable real estate, 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.

 

In addition to FFO, we use adjusted funds from operations attributable to common stockholders (“AFFO”). AFFO is a computation made by analysts and investors to measure a real estate company's operating performance by removing the effect of items that do not reflect ongoing property operations. To calculate AFFO, we further adjust FFO by adding back certain items that are not added to net income in NAREIT's definition of FFO, such as acquisition and pursuit costs, equity based compensation expenses, and any other non-recurring or non-cash expenses, which are costs that do not relate to the operating performance of our properties, and subtracting recurring capital expenditures (and when calculating the quarterly incentive fee payable to our Manager only, we further adjust FFO to include any realized gains or losses on our real estate investments).

 

Our calculation of AFFO differs from the methodology used for calculating AFFO by certain other REITs and, accordingly, our AFFO may not be comparable to AFFO reported by other REITs. Our management utilizes FFO and AFFO as measures of our operating performance after adjustment for certain non-cash items, such as depreciation and amortization expenses, and acquisition and pursuit costs that are required by GAAP to be expensed but may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods. Furthermore, although FFO, AFFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we also believe that FFO and AFFO may provide us and our stockholders with an additional useful measure to compare our financial performance to certain other REITs. We also use AFFO for purposes of determining the quarterly incentive fee, if any, payable to our Manager.

 

Neither FFO nor AFFO is equivalent to net income, including net income attributable to common stockholders, or cash generated from operating activities determined in accordance with GAAP. Furthermore, FFO and AFFO do not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO nor AFFO should be considered as an alternative to net income, including net income attributable to common stockholders, as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity.

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

We have acquired interests in thirteen additional operating properties and three development investments and sold six properties subsequent to June 30, 2016. The results presented in the table below are not directly comparable and should not be considered an indication of our future operating performance.

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2017				2016				2017				2016
Net income (loss) attributable to common stockholders		$	17,569			$	(5,043	)		$	12,579			$	(9,179	)
Common stockholders pro-rata share of:
Real estate depreciation and amortization(1)			9,326				6,769				19,129				13,239
Gain on sale of real estate assets			(26,548	)			—				(33,945	)			—
Gain on sale of joint venture interests			(6,332	)			—				(6,332	)			—
FFO Attributable to Common Stockholders		$	(5,985	)		$	1,726			$	(8,569	)		$	4,060
Common stockholders pro-rata share of:
Amortization of non-cash interest expense			773				65				1,246				148
Acquisition and pursuit costs			18				227				3,024				1,373
Management internalization process expense			336				—				811				—
Loss on early extinguishment of debt			1,534				—				1,534				—
Non-recurring income			(16	)			—				(16	)			—
Non-cash preferred returns and equity in income of unconsolidated real estate joint ventures			(487	)			—				(487	)			—
Normally recurring capital expenditures			(331	)			(208	)			(622	)			(416	)
Preferred stock accretion			641				166				974				289
Non-cash equity compensation			6,846				2,400				10,011				4,218
AFFO Attributable to Common Stockholders		$	3,329			$	4,376			$	7,906			$	9,672
Weighted average common shares outstanding - diluted			26,076,572				20,688,631				25,535,839				20,611,802
PER SHARE INFORMATION:
FFO Attributable to Common Stockholders - diluted		$	(0.23	)		$	0.08			$	(0.34	)		$	0.20
AFFO Attributable to Common Stockholders - diluted		$	0.13			$	0.21			$	0.31			$	0.47
Pro forma AFFO Attributable to Common Stockholders - diluted (2)		$	0.36				N/A				N/A				N/A

 

---

⁽¹⁾    The real estate depreciation and amortization amount includes our share of consolidated real estate-related depreciation and amortization of intangibles, less amounts attributable to noncontrolling interests, and our similar estimated share of unconsolidated depreciation and amortization, which is included in earnings of our unconsolidated real estate joint venture investments.

 

⁽²⁾ Pro forma AFFO for the three months ended June 30, 2017 assumes the investment of $104 million in estimated available cash had occurred on April 1, 2017:

 

										Investment
#		Investment		MSA		# Units				Amount ($MM's)
1		Acquisition - Identified Assets		San Antonio & Tyler, TX			1,408			$	48
2		Mezzanine Loan - Identified Developments		Atlanta, GA			399				7
3		Acquisition - Unidentified Assets, assumes 5.75% cap rate		-			-				17
4		Mezzanine Loan - Unidentified		-			-				32
		Total								$	104

 

The pro forma guidance is being presented solely for purposes of illustrating the potential impact of these pipeline transactions, as well as future investments to be made with funds we have available for investment, as if they had occurred at April 1, 2017, based on information currently available to management and assumptions management has made with respect to our future pipeline.

 

The Company is providing no assurances that any of the above transactions are probable, or that they will close or that management will identify or acquire investments consistent with our pipeline assumptions, and the failure to do so would significantly impact pro forma guidance. The actual timing of these investments, if and when made, will vary materially from the assumed timing reflected in the pro forma guidance, and actual quarterly results will differ significantly from the pro forma guidance shown above. Investors should not rely on pro forma guidance as a forecast of the actual performance of the Company.

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

Earnings Before Interest, Income Taxes, Depreciation and Amortization ("EBITDA")

 

EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, calculated on a consolidated basis. We consider EBITDA to be an appropriate supplemental measure of our performance because it eliminates depreciation, income taxes, interest and non-recurring items, which permits investors to view income from operations unobscured by non-cash items such as depreciation, amortization, the cost of debt or non-recurring items. Below is a reconciliation of net income (loss) attributable to common stockholders to EBITDA (unaudited and dollars in thousands).

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2017				2016				2017				2016
Net income (loss) attributable to common stockholders		$	17,569			$	(5,043	)		$	12,579			$	(9,179	)
Net income (loss) attributable to noncontrolling interest			10,171				(54	)			18,900				(150	)
Preferred stock dividends			6,381				2,968				12,233				4,451
Preferred stock accretion			647				168				984				293
Interest expense, net			7,825				4,589				14,943				8,817
Depreciation and amortization			10,387				7,789				21,331				15,298
EBITDA		$	52,980			$	10,417			$	80,970			$	19,530
Acquisition and pursuit costs			18				249				3,200				1,457
Management internalization process expense			340				-				820				-
Non-cash equity compensation			6,919				2,436				10,119				4,281
Non-recurring income			(17	)			-				(17	)			-
Gain on sale of real estate investments			(33,574	)			-				(50,040	)			-
Gain on sale of real estate joint venture interest			(10,238	)			-				(10,238	)			-
Loss on early extinguishment of debt			1,639				-				1,639				-
Non-cash preferred returns and equity in income of unconsolidated real estate joint ventures			(491	)			-				(491	)			-
Adjusted EBITDA		$	17,576			$	13,102			$	35,962			$	25,268

 

Recurring Capital Expenditures

 

We define recurring capital expenditures as expenditures that are incurred at every property and exclude development, investment, revenue enhancing and non-recurring capital expenditures.

 

Non-Recurring Capital Expenditures

 

We define non-recurring capital expenditures as expenditures for significant projects that upgrade units or common areas and projects that are revenue enhancing.

 

Same Store Properties

 

Same store properties are conventional multifamily residential apartments which were owned and operational for the entire periods presented, including each comparative period.

 

Property Net Operating Income ("Property NOI")

 

We believe that net operating income, or 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 and interest. 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 because NOI 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. However, NOI should only be used as an alternative measure of our financial performance.

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

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

 

		Three Months Ended (1)								Six Months Ended (2)
		June 30,								June 30,
		2017				2016				2017				2016
Net income (loss) attributable to common stockholders		$	17,569			$	(5,043	)		$	12,579			$	(9,179	)
Add pro-rata share:
Depreciation and amortization			9,326				6,769				19,129				13,239
Amortization of non-cash interest expense			773				65				1,246				148
Management fees			6,099				1,394				8,836				2,591
Acquisition and pursuit costs			18				227				3,024				1,373
Loss on early extinguishment of debt			1,534				-				1,534				-
Corporate operating expenses			1,679				1,666				3,112				2,935
Management internalization process expense			336				-				811				-
Preferred dividends			6,314				2,924				12,101				4,385
Preferred stock accretion			641				166				974				289
Less pro-rata share:
Other income			16				-				16				-
Preferred returns and equity in income of unconsolidated real estate joint ventures			2,577				2,733				5,121				5,462
Interest income from related parties			2,075				-				3,581				-
Gain on sale of joint venture interest			6,332				-				6,332				-
Gain on sale of real estate assets			26,548				-				33,945				-
Pro-rata share of properties' income			6,741				5,435				14,351				10,319
Add:
Noncontrolling interest pro-rata share of property income			856				1,065				2,103				2,081
Total property income			7,597				6,500				16,454				12,400
Add:
Interest expense, net			6,708				4,510				13,160				8,651
Net operating income			14,305				11,010				29,614				21,051
Less:
Non-same store net operating income			8,112				4,955				18,806				10,941
Same store net operating income		$	6,193			$	6,055			$	10,808			$	10,110

 

⁽¹⁾ Same Store sales for the three months ended June 30, 2017 related to the following properties: Enders Place at Baldwin Park, ARIUM Grandewood, Park & Kingston, ARIUM Palms, Ashton Reserve, Sovereign, ARIUM at Palmer Ranch, ARIUM Gulfshore, and The Preserve at Henderson Beach.

 

⁽²⁾ Same Store sales for the six months ended June 30, 2017 related to the following properties: Enders Place at Baldwin Park, ARIUM Grandewood, Park & Kingston, ARIUM Palms, Ashton Reserve, Sovereign, ARIUM at Palmer Ranch, and ARIUM Gulfshore.

 

Contact

(Media)

Josh Hoffman

(208) 475.2380

jhoffman@bluerockre.com

##

 

 

Bluerock Residential Growth REIT, Inc.

Financial and Operating Highlights

For the Three and Six Months Ended June 30, 2017

(Unaudited and dollars in thousands except for share and per share data)

 

		Three Months Ended												Six Months Ended
		June 30,												June 30,
OPERATING INFORMATION		2017				2016				% Change				2017				2016				% Change
Total revenue		$	27,048			$	18,399				47.0	%		$	53,710			$	35,033				53.3	%
Property NOI margins			57.3	%			59.8	%			-4.2	%			59.1	%			60.1	%			-1.7	%
Property NOI		$	14,305			$	11,010				29.9	%		$	29,614			$	21,051				40.7	%
General and administrative expenses as a percentage of revenue(1)			3.5	%			3.7	%			-5.4	%			3.6	%			3.8	%			-5.3	%
Net income (loss) per common share - Diluted		$	0.67			$	(0.24	)			-			$	0.49			$	(0.45	)			-
AFFO attributable to common shareholders per share(2)		$	0.13			$	0.21				-38.1	%		$	0.31			$	0.47				-34.0	%
Pro forma AFFO attributable to common shareholders per share(3)		$	0.36				N/A				-				N/A				N/A				-
Dividend per share		$	0.29			$	0.29				-			$	0.58			$	0.58				-

 

 

⁽¹⁾ General and administrative expenses exclude non-cash expense, such as non-cash equity compensation.

 

⁽²⁾ See page 30 for the Company's definition of this non-GAAP measurement and reasons for using it.

 

⁽³⁾ Pro forma AFFO for the three months ended June 30, 2017 assumes the investment of $104 million in estimated available cash had occurred on April 1, 2017:

 

												Investment
#		Investment		MSA				# Units				Amount ($MM's)
1		Acquisition - Identified Assets			San Antonio & Tyler, TX				1,408			$	48
2		Mezzanine Loan - Identified Developments			Atlanta, GA				399				7
3		Acquisition - Unidentified Assets, assumes 5.75% cap rate			-				-				17
4		Mezzanine Loan - Unidentified			-				-				32
		Total										$	104

 

The pro forma guidance is being presented solely for purposes of illustrating the potential impact of these pipeline transactions, as well as future investments to be made with funds we have available for investment, as if they had occurred at April 1, 2017, based on information currently available to management and assumptions management has made with respect to our future pipeline.

 

The Company is providing no assurances that any of the above transactions are probable, or that they will close or that management will identify or acquire investments consistent with our pipeline assumptions, and the failure to do so would significantly impact pro forma guidance. The actual timing of these investments, if and when made, will vary materially from the assumed timing reflected in the pro forma guidance, and actual quarterly results will differ significantly from the pro forma guidance shown above. Investors should not rely on pro forma guidance as a forecast of the actual performance of the Company.

 

 

Bluerock Residential Growth REIT, Inc.

Share and Dividend Information

Second Quarter 2017

(Unaudited and dollars in thousands except for share and per share data)

 

Weighted Average Common Stock and Units Outstanding for the quarter ended June 30, 2017
Class A Common Stock			24,191,577
LTIP Units			1,884,995
Weighted Average Common Stock and LTIP Units Outstanding, Diluted			26,076,572
OP Units			275,494
Weighted Average Common Stock and Total Units Outstanding, Diluted			26,352,066
Outstanding Common Stock and Units at June 30, 2017			26,449,308
Outstanding 8.250% Series A Cumulative Redeemable Preferred Stock at June 30, 2017			5,721,460
Outstanding Series B Redeemable Preferred Stock at June 30, 2017			95,552
Outstanding 7.625% Series C Cumulative Redeemable Preferred Stock at June 30, 2017			2,323,750
Outstanding 7.125% Series D Cumulative Preferred Stock at June 30, 2017			2,850,602
Common Stock Dividend Yield
Annualized common stock dividend rate (1)		$	1.16
Price per common share (2)		$	12.89
Annualized common stock dividend yield			9.00	%

 

⁽¹⁾ Annualized rate based on $0.29 per common share quarterly dividend for the quarter ending June 30, 2017, paid monthly. Actual dividend amounts will be determined by the Board of Directors.

 

⁽²⁾ Closing common stock price of $12.89 as of June 30, 2017.

 

 

Bluerock Residential Growth REIT, Inc.

EBITDA and Interest Information

Second Quarter 2017

(Unaudited and dollars in thousands)

 

		Consolidated
		Three Months Ended
		June 30, 2017
Q2 EBITDA CALCULATION
Net (loss) income attributable to common stockholders		$	17,569
Net (loss) income attributable to noncontrolling interest			10,171
Preferred stock dividends			6,381
Preferred stock accretion			647
Interest expense, net			7,825
Depreciation and amortization			10,387
EBITDA (1)		$	52,980
Acquisition and pursuit costs			18
Management internalization process expense			340
Non-cash equity compensation			6,919
Non-recurring income			(17	)
Gain on sale of real estate investments			(33,574	)
Gain on sale of real estate joint venture interest			(10,238	)
Loss on early extinguishment of debt			1,639
Non-cash equity in earnings of unconsolidated joint ventures			(491	)
Adjusted EBITDA		$	17,576
Modified Q2 EBITDA calculation (2)
Adjusted EBITDA		$	17,576
Adjustment			264
Modified Q2 EBITDA		$	17,840
Modified Q2 EBITDA annualized		$	71,360
Modified Q2 interest calculation (2)(3)
Interest Expense		$	6,816
Adjustment			1
Modified Q2 interest expense		$	6,817
Modified Q2 interest expense annualized		$	27,268

 

⁽¹⁾ See page 31 for a reconciliation of net income attributable to common stockholders to EBITDA and the Company's definition of EBITDA and reasons for using it.

 

⁽²⁾ Adjustment to EBITDA and interest expense represents the estimated impact over the full period of the following investment activity assuming the transactions had occurred on April 1, 2017: (i) sales of Fox Hill, Lansbrook Village, and MDA Apartments; (ii) acquisitions of Marquis at Crown Ridge, Marquis at Stone Oak, Marquis at The Cascades I, Marquis at The Cascades II, and Marquis at TPC; and (iii) additional investment in Alexan CityCentre. Actual results may differ significantly from the presented, adjusted amounts including annualized amounts.

 

⁽³⁾ Interest expense excludes fair market value adjustments and amortization of deferred financing costs.

 

 

Bluerock Residential Growth REIT, Inc.

Financial Statistics

Second Quarter 2017

(Unaudited and dollars in thousands)

 

		Consolidated
		Three Months Ended
		June 30, 2017
Interest Coverage Ratio
Modified Q2 EBITDA *		$	17,840
Modified Q2 interest expense (4) *		$	6,817
Interest Coverage Ratio			2.62	x
Quarterly Fixed Charge Coverage Ratio
Modified Q2 interest expense (4) *		$	6,817
Preferred stock dividends		$	6,381
Total fixed charges		$	13,198
Modified Q2 EBITDA *		$	17,840
Modified Q2 EBITDA fixed charge coverage ratio			1.35	x
Net Debt / Modified EBITDA Ratio
Total debt (1)		$	781,602
Less: cash (3)		$	(180,340	)
Net debt (less cash)		$	601,262
Modified Q2 EBITDA (annualized)*		$	71,360
Net Debt / Modified EBITDA Ratio			8.43	x
Leverage as a Percentage of assets
Total debt (1)		$	781,602
Total undepreciated assets (2)		$	1,476,052
Total Debt / Total Undepreciated Assets			53.0	%
Net Debt / Net Undepreciated Assets			46.4	%
Leverage as a Percentage of Enterprise Value
Total market cap (5)		$	717,642
Total debt (1)		$	781,602
Total Enterprise Value		$	1,499,244
Total Debt / Total Enterprise Value			52.1	%
Net Debt / Total Enterprise Value			40.1	%

 

⁽¹⁾ Total debt excludes amortization of fair market value adjustments of $2.1 million and deferred financing costs of $8.1 million.

 

⁽²⁾ Total undepreciated assets is calculated as total assets plus accumulated depreciation on real estate assets.

 

⁽³⁾ Cash includes cash, cash equivalents, and restricted cash.

 

⁽⁴⁾ Interest expense excludes fair market value adjustments and amortization of deferred financing costs.

 

⁽⁵⁾ Total market cap is calculated by using common shares, preferred shares, and equivalents (LTIP Units) times the June 30, 2017 closing share prices.

 

* Adjustment to EBITDA and interest expense represents the estimated impact over the full period of the following investment activity assuming the transactions had occurred on April 1, 2017: (i) sales of Fox Hill, Lansbrook Village, and MDA Apartments; (ii) acquisitions of Marquis at Crown Ridge, Marquis at Stone Oak, Marquis at The Cascades I, Marquis at The Cascades II, and Marquis at TPC; and (iii) additional investment in Alexan CityCentre. Actual results may differ significantly from the presented, adjusted amounts including annualized amounts. See prior page for calculations.

 

 

Bluerock Residential Growth REIT, Inc.

Recent Acquisitions and Pending Investments

(Unaudited and dollars in millions)

 

Summary of Recent Acquisitions and Pending Investments

 

Property		Location		Date of Investment		Year Built/ Renovated(1)				Number of Units				Ownership Interest in Property				Purchase Price				Average Rent(2)
Recent Acquisitions
Preston View		Morrisville, NC		2/17/2017			2000				382				91.8	%		$	59.5			$	1,013
Wesley Village		Charlotte, NC		3/9/2017			2010				301				91.8	%			57.2				1,270
Marquis at Crown Ridge		San Antonio, TX		6/9/2017			2009				352				90.0	%			39.5				968
Marquis at Stone Oak		San Antonio, TX		6/9/2017			2007				335				90.0	%			55.4				1,403
Marquis at The Cascades I		Tyler, TX		6/9/2017			2007				328				90.0	%			44.7				1,123
Marquis at The Cascades II		Tyler, TX		6/9/2017			2009				254				90.0	%			28.5				1,026
Marquis at TPC		San Antonio, TX		6/9/2017			2008				139				90.0	%			20.9				1,459
Total/Average for recent acquisitions											2,091							$	305.7			$	1,151
Pending Investments at June 30, 2017
Citrus Tower		Orlando, FL					2006				336				97.6	%		$	55.3			$	1,235
Villages at Cypress Creek		Houston, TX					2001				384				80.0	%			40.7				1,069
Total/Average for pending investments											720							$	96.0			$	1,146
Total recent acquisitions and pending investments											2,811							$	401.7			$	1,150

 

⁽¹⁾ All dates are for the year construction was completed.

 

⁽²⁾ Represents the average effective monthly rent per occupied unit for all occupied units for the three months ended June 30, 2017. The average rent for the development projects and the pending investments is pro forma based on underwriting.

 

 

Bluerock Residential Growth REIT, Inc.

Recent Dispositions

(Unaudited and dollars in millions)

 

Summary of Recent Dispositions

 

Property		Location		Date Sold		Number of Units				Ownership Interest in Property				Sale Price				BRG Net Proceeds				IRR				Equity Multiple
Village Green of Ann Arbor		Ann Arbor, MI		2/22/2017			520				48.6	%		$	71.4			$	13.6				38	%			2.32
Lansbrook Village		Palm Harbor, FL		4/26/2017			621				90.0	%		$	82.4			$	19.1				25	%			1.71
Fox Hill		Austin, TX		5/24/2017			288				94.6	%		$	46.5			$	16.4				26	%			1.62
MDA Apartments (1)		Chicago, IL		6/30/2017			190				35.3	%		$	18.3			$	11.0				22	%			2.23
Total/Weighted Average							1,619							$	218.6			$	60.1				27	%			1.86

 

⁽¹⁾ Represents sale of the Company's 35% joint venture interest in MDA Apartments.

 

 

Bluerock Residential Growth REIT, Inc.

Investments in Unconsolidated Real Estate Joint Ventures and Notes and Accrued Interest Receivable from Related Parties

For the Three and Six Months Ended June 30, 2017

(Unaudited and dollars in thousands)

 

Investments in Unconsolidated Real Estate Joint Ventures

 

Multifamily Community Name		Investment as of April 1, 2017				Additional Investments (Dispositions) during the quarter				Investment as of June 30, 2017				Preferred Return				Income Earned for the Three Months Ended June 30, 2017				Income Earned for the Six Months Ended June 30, 2017
Alexan CityCentre		$	7,733			$	1,525			$	9,258				15	%		$	325			$	626
Alexan Southside			19,015				-				19,015				15	%			733				1,373
APOK Townhomes			7				-				7					*			-				-
Domain Phase 1			12				-				12					*			-				141
EOS			-				-				-				15	%			-				(22	)
Flagler Village			24,184				472				24,656					*			(2	)			(4	)
Helios			16,360				-				16,360				15	%			612				1,217
Lake Boone Trail			11,929				1				11,930				15	%			446				867
West Morehead			14				-				14					*			-				-
Whetstone **			12,932				-				12,932				15	%			491				979
		$	92,186			$	1,998			$	94,184							$	2,605			$	5,177

 

* The property is currently an equity method investment with common ownership.

** Commencing April 1, 2017, the Whetstone preferred income is being accrued and not paid currently. 

 

Notes and Accrued Interest Receivable from Related Parties

 

Multifamily Community Name		Note Receivable as of April 1, 2017				Change				Note Receivable as of June 30, 2017				Note Receivable Interest				Interest Income Earned for the Three Months Ended June 30, 2017				Interest Income Earned for the Six Months Ended June 30, 2017
APOK Townhomes		$	11,365			$	(5	)		$	11,360				15	%		$	420			$	807
Domain Phase 1			20,511				17				20,528				15	%			758				992
West Morehead			24,971				(10	)			24,961				15	%			919				1,821
		$	56,847			$	2			$	56,849							$	2,097			$	3,620

 

 

Bluerock Residential Growth REIT, Inc.

Portfolio Information

Second Quarter 2017

(Unaudited)

 

Multifamily Community Name		Location		Number of Units				Year Built/ Renovated(1)				Average Rent(2)				Revenue per Occupied Unit(3)				Average Occupancy
Operating Properties:
ARIUM at Palmer Ranch		Sarasota, FL			320				2016			$	1,212			$	1,238				94.2	%
ARIUM Grandewood		Orlando, FL			306				2005				1,246				1,291				94.9	%
ARIUM Gulfshore		Naples, FL			368				2016				1,242				1,254				94.3	%
ARIUM Palms		Orlando, FL			252				2008				1,232				1,262				93.0	%
ARIUM Pine Lakes		Port St. Lucie, FL			320				2003				1,116				1,219				95.4	%
ARIUM Westside		Atlanta, GA			336				2008				1,415	(4)			1,444	(4)			94.1	%
Ashton Reserve		Charlotte, NC			473				2015				1,045				1,050				96.9	%
Enders Place at Baldwin Park		Orlando, FL			220				2003				1,648				1,723				94.7	%
James on South First		Austin, TX			250				2016				1,189				1,267				94.7	%
Marquis at Crown Ridge		San Antonio, TX			352				2009				968				1,012				95.8	%
Marquis at Stone Oak		San Antonio, TX			335				2007				1,403				1,441				89.5	%
Marquis at The Cascades I		Tyler, TX			328				2007				1,123				1,197				93.1	%
Marquis at The Cascades II		Tyler, TX			254				2009				1,026				1,078				92.1	%
Marquis at TPC		San Antonio, TX			139				2008				1,459				1,504				89.4	%
Nevadan		Atlanta, GA			480				1990				1,090				1,130				95.2	%
Park & Kingston		Charlotte, NC			168				2015				1,174				1,226				96.5	%
Preston View		Morrisville, NC			382				2000				1,013				1,069				93.2	%
Roswell City Walk		Roswell, GA			320				2015				1,462				1,504				94.8	%
Sorrel		Frisco, TX			352				2015				1,199				1,243				92.2	%
Sovereign		Fort Worth, TX			322				2015				1,269				1,344				95.4	%
The Brodie		Austin, TX			324				2001				1,100				1,181				94.4	%
The Preserve at Henderson Beach		Destin, FL			340				2009				1,312				1,362				96.5	%
Wesley Village		Charlotte, NC			301				2010				1,270				1,298				96.8	%
Whetstone		Durham, NC			204				2015				1,196				1,288				91.4	%
Total Operating Properties					7,446							$	1,208			$	1,257				94.2	%
Development Properties:
Alexan CityCentre		Houston, TX			340							$	2,144	(5)			N/A				N/A
Alexan Southside Place		Houston, TX			270								2,012	(5)			N/A				N/A
APOK Townhomes		Boca Raton, FL			90								2,549	(5)			N/A				N/A
Crescent Perimeter		Atlanta, GA			320								1,749	(5)			N/A				N/A
Domain Phase 1		Garland, TX			299								1,469	(5)			N/A				N/A
Flagler Village		Fort Lauderdale, FL			384								2,481	(5)			N/A				N/A
Helios		Atlanta, GA			282								1,486	(5)			N/A				N/A
Lake Boone Trail		Raleigh, NC			245								1,271	(5)			N/A				N/A
Vickers Village		Roswell, GA			79								3,176	(5)			N/A				N/A
West Morehead		Charlotte, NC			286								1,507	(5)			N/A				N/A
Total Development Properties					2,595							$	1,876				N/A				N/A
Total Operating and Development Properties					10,041							$	1,380			$	1,257				94.2	%
Pending Properties:
Citrus Tower		Orlando, FL			336				2006			$	1,235				N/A				N/A
Villages at Cypress Creek		Houston, TX			384				2001				1,069				N/A				N/A
Total Pending Properties					720							$	1,146				N/A				N/A
Total Portfolio Including Pending Properties					10,761							$	1,365			$	1,257				94.2	%

 

⁽¹⁾ Represents date of last significant renovation or year built if there were no renovations.

⁽²⁾ Represents the average effective monthly rent per occupied unit for all occupied units for the three months ended June 30, 2017.

⁽³⁾ Revenue per occupied unit is total revenue divided by average number of occupied units for the three months ended June 30, 2017.

⁽⁴⁾ Represents average rent and revenue per occupied unit for residential units only and excludes the property's retail space.

⁽⁵⁾ Represents the average pro forma effective monthly rent per occupied unit for all expected units upon stabilization.

 

 

Bluerock Residential Growth REIT, Inc.

Development Properties

As of June 30, 2017

(Unaudited and dollars in millions)

 

This table includes forward-looking statements based on current judgments and current knowledge of management, which are subject to certain risks, trends and uncertainties that could cause results to vary from those projected. Please see the paragraph on forward-looking statements on page 2 of this document for a discussion of risks and uncertainties.

 

																						Estimated/Actual Dates for
Multifamily Community Name(1)		Planned Number of Units				Total Estimated Construction Cost (in millions)				Cost to Date (in millions)				Estimated Construction Cost Per Unit				Total Available Financing (in millions)				Construction Start		Initial Occupancy		Construction Completion		Stabilized Operations(2)
Alexan CityCentre			340			$	83.0			$	76.4			$	244,118			$	55.1			4Q14		2Q17		4Q17		4Q18
Alexan Southside Place			270			$	49.0			$	32.2			$	181,481			$	31.6			4Q15		4Q17		2Q18		4Q18
APOK Townhomes			90			$	28.9			$	7.8			$	321,111			$	18.7			2Q17		3Q18		1Q19		3Q19
Crescent Perimeter			320			$	70.0			$	25.3			$	218,750			$	44.7			4Q16		4Q18		2Q19		4Q19
Domain Phase 1			299			$	52.6			$	10.7			$	175,920			$	36.7			1Q17		4Q18		2Q19		4Q19
Flagler Village			384			$	131.8			$	27.8			$	343,229			$	92.3			1Q18		3Q19		3Q20		3Q21
Helios			282			$	50.9			$	42.7			$	180,496			$	38.1			4Q15		2Q17		4Q17		2Q18
Lake Boone Trail			245			$	40.2			$	24.2			$	164,082			$	25.2			2Q16		1Q18		3Q18		2Q19
Vickers Village			79			$	30.6			$	14.6			$	387,342			$	18.0			2Q16		2Q18		3Q18		1Q19
West Morehead			286			$	60.0			$	18.4			$	209,790			$	41.8			4Q16		4Q18		2Q19		4Q19

 

⁽¹⁾ The properties are under development. Alexan CityCentre, Alexan Southside Place, Helios, and Lake Boone Trail are preferred equity investments with an option to convert into partial ownership upon stabilization.  Domain Phase 1, West Morehead, and APOK Townhomes are mezzanine loan investments with an option to purchase indirect property interest upon maturity.  Flagler Village, Vickers Village, and Crescent Perimeter are common interests and do not have a preferred equity or mezzanine structure. 

 

⁽²⁾ We defined stabilized occupancy as the earlier of the attainment of 90% physical occupancy or one year after the completion of construction.

 

 

Bluerock Residential Growth REIT, Inc.

Condensed Consolidated Balance Sheets

Second Quarter 2017

(Unaudited and dollars in thousands except for share and per share data)

 

		June 30, 2017				December 31, 2016
ASSETS
Net Real Estate Investments
Land		$	147,562			$	142,274
Buildings and improvements			930,471				848,445
Furniture, fixtures and equipment			29,148				27,617
Construction in progress			24,890				10,878
Total Gross Real Estate Investments			1,132,071				1,029,214
Accumulated depreciation			(35,269	)			(42,137	)
Total Net Real Estate Investments			1,096,802				987,077
Cash and cash equivalents			139,292				82,047
Restricted cash			41,048				45,402
Notes and accrued interest receivable from related parties			56,849				21,267
Due from affiliates			1,240				948
Accounts receivable, prepaid and other assets			6,193				8,610
Preferred equity investments and investments in unconsolidated real estate joint ventures			94,184				91,132
In-place lease intangible assets, net			5,175				4,839
Total Assets		$	1,440,783			$	1,241,322
LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY
Mortgages payable		$	775,591			$	710,575
Accounts payable			3,416				1,669
Other accrued liabilities			19,006				13,431
Due to affiliates			6,831				2,409
Distributions payable			8,326				7,328
Total Liabilities			813,170				735,412
8.250% Series A Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 10,875,000 shares authorized, and 5,721,460 issued and outstanding as of June 30, 2017 and December 31, 2016			138,605				138,316
Series B Redeemable Preferred Stock, liquidation preference $1,000 per share, 150,000 shares authorized, 95,552 and 21,482 issued and outstanding as of June 30, 2017 and December 31, 2016, respectively			84,058				18,938
7.6250% Series C Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares authorized, 2,323,750 issued and outstanding as of June 30, 2017 and December 31, 2016			56,202				56,095
Equity
Stockholders’ Equity
Preferred stock, $0.01 par value, 230,975,000 shares authorized; none issued and outstanding			—				—
7.125% Series D Cumulative Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares authorized, 2,850,602 issued and outstanding as of June 30, 2017 and December 31, 2016			68,710				68,760
Common stock - Class A, $0.01 par value, 747,586,185 shares authorized; 24,191,951 and 19,567,506 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively			242				196
Additional paid-in-capital			321,948				257,403
Distributions in excess of cumulative earnings			(87,130	)			(84,631	)
Total Stockholders’ Equity			303,770				241,728
Noncontrolling Interests
Operating partnership units			2,017				2,216
Partially owned properties			42,961				48,617
Total Noncontrolling Interests			44,978				50,833
Total Equity			348,748				292,561
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY		$	1,440,783			$	1,241,322

 

 

Bluerock Residential Growth REIT, Inc.

Consolidated Statements of Operations

For the Three and Six Months Ended June 30, 2017 and 2016

(Dollars in thousands)

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2017				2016				2017				2016
Revenues
Net rental income		$	23,615			$	17,513			$	47,482			$	33,441
Other property revenues			1,336				886				2,608				1,592
Interest income from related parties			2,097				—				3,620				—
Total revenues			27,048				18,399				53,710				35,033
Expenses
Property operating			10,646				7,389				20,476				13,982
General and administrative			1,696				1,704				3,146				2,978
Management fees			6,163				1,415				8,931				2,629
Acquisition and pursuit costs			18				249				3,200				1,457
Management internalization			340				—				820				—
Depreciation and amortization			10,387				7,789				21,331				15,298
Total expenses			29,250				18,546				57,904				36,344
Operating loss			(2,202	)			(147	)			(4,194	)			(1,311	)
Other income (expense)
Other income			17				—				17				—
Preferred returns and equity in income of unconsolidated real estate joint ventures			2,605				2,775				5,177				5,543
Gain on sale of real estate investments			33,574				—				50,040				—
Gain on sale of real estate joint venture interest			10,238				—				10,238				—
Loss on early extinguishment of debt			(1,639	)			—				(1,639	)			—
Interest expense, net			(7,825	)			(4,589	)			(14,943	)			(8,817	)
Total other income (expense)			36,970				(1,814	)			48,890				(3,274	)
Net income (loss)			34,768				(1,961	)			44,696				(4,585	)
Preferred stock dividends			(6,381	)			(2,968	)			(12,233	)			(4,451	)
Preferred stock accretion			(647	)			(168	)			(984	)			(293	)
Net income (loss) attributable to noncontrolling interests
Operating partnership units			186				(75	)			129				(136	)
Partially-owned properties			9,985				21				18,771				(14	)
Net income (loss) attributable to noncontrolling interests			10,171				(54	)			18,900				(150	)
Net income (loss) attributable to common stockholders		$	17,569			$	(5,043	)		$	12,579			$	(9,179	)
Net income (loss) per common share - Basic		$	0.67			$	(0.24	)		$	0.49			$	(0.45	)
Net income (loss) per common share – Diluted		$	0.67			$	(0.24	)		$	0.49			$	(0.45	)
Weighted average basic common shares outstanding			26,075,911				20,686,652				25,535,178				20,604,124
Weighted average diluted common shares outstanding			26,076,572				20,686,652				25,535,839				20,604,124

 

 

Bluerock Residential Growth REIT, Inc.

Reconciliation of Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) Attributable to Common Stockholders

For the Three and Six Months Ended June 30, 2017 and 2016

(Unaudited and dollars in thousands except for share and per share data)

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2017				2016				2017				2016
Net income (loss) attributable to common stockholders		$	17,569			$	(5,043	)		$	12,579			$	(9,179	)
Common stockholders pro-rata share of:
Real estate depreciation and amortization(1)			9,326				6,769				19,129				13,239
Gain on sale of real estate assets			(26,548	)			—				(33,945	)			—
Gain on sale of joint venture interests			(6,332	)			—				(6,332	)			—
FFO Attributable to Common Stockholders		$	(5,985	)		$	1,726			$	(8,569	)		$	4,060
Common stockholders pro-rata share of:
Amortization of non-cash interest expense			773				65				1,246				148
Acquisition and pursuit costs			18				227				3,024				1,373
Management internalization process expense			336				—				811				—
Loss on early extinguishment of debt			1,534				—				1,534				—
Non-recurring income			(16	)			—				(16	)			—
Non-cash preferred returns and equity in income of unconsolidated real estate joint ventures			(487	)			—				(487	)			—
Normally recurring capital expenditures(2)			(331	)			(208	)			(622	)			(416	)
Preferred stock accretion			641				166				974				289
Non-cash equity compensation			6,846				2,400				10,011				4,218
AFFO Attributable to Common Stockholders		$	3,329			$	4,376			$	7,906			$	9,672
Weighted average common shares outstanding - diluted(3)			26,076,572				20,688,631				25,535,839				20,611,802
PER SHARE INFORMATION:
FFO Attributable to Common Stockholders - diluted		$	(0.23	)		$	0.08			$	(0.34	)		$	0.20
AFFO Attributable to Common Stockholders - diluted		$	0.13			$	0.21			$	0.31			$	0.47
Pro forma AFFO Attributable to Common Stockholders - diluted (4)		$	0.37				N/A				N/A				N/A

 

⁽¹⁾    The real estate depreciation and amortization amount includes our share of consolidated real estate-related depreciation and amortization of intangibles, less amounts attributable to noncontrolling interests, and our similar estimated share of unconsolidated depreciation and amortization, which is included in earnings of our unconsolidated real estate joint venture investments.

⁽²⁾    See page 30 for the Company's definitions of these non-GAAP measurements. Individual line items included in FFO and AFFO calculations include results from discontinued operations where applicable.

⁽³⁾    Total weighted average shares for the quarter, including OP units of 275,494 was 26,352,066. AFFO related to the OP units is excluded from the calculation above. When including both, AFFO attributable to OP units and 275,494 of OP units in the weighted average share count, in the above calculation, AFFO is $0.13 per share.

⁽⁴⁾ Pro forma AFFO for the three months ended June 30, 2017 assumes the investment of $104 million in estimated available cash had occurred on April 1, 2017:

 

												Investment
#		Investment		MSA				# Units				Amount ($MM's)
1		Acquisition - Identified Assets			San Antonio & Tyler, TX				1,408			$	48
2		Mezzanine Loan - Identified Developments			Atlanta, GA				399				7
3		Acquisition - Unidentified Assets, assumes 5.75% cap rate			-				-				17
4		Mezzanine Loan - Unidentified			-				-				32
		Total										$	104

 

The pro forma guidance is being presented solely for purposes of illustrating the potential impact of these pipeline transactions, as well as future investments to be made with funds we have available for investment, as if they had occurred at April 1, 2017, based on information currently available to management and assumptions management has made with respect to our future pipeline.

 

The Company is providing no assurances that any of the above transactions are probable, or that they will close or that management will identify or acquire investments consistent with our pipeline assumptions, and the failure to do so would significantly impact pro forma guidance. The actual timing of these investments, if and when made, will vary materially from the assumed timing reflected in the pro forma guidance, and actual quarterly results will differ significantly from the pro forma guidance shown above. Investors should not rely on pro forma guidance as a forecast of the actual performance of the Company.

 

 

Bluerock Residential Growth REIT, Inc.

Debt Summary Information

As of June 30, 2017

(Unaudited and dollars in thousands)

 

Debt Outstanding

 

Property		Outstanding Principal				Interest Rate				Fixed/ Floating		Maturity Date
ARIUM at Palmer Ranch		$	26,925				3.23	%		LIBOR + 2.17% (1)		February 1, 2023
ARIUM Grandewood			34,294				2.88	%		Floating (2)		December 1, 2024
ARIUM Gulfshore			32,626				3.23	%		LIBOR + 2.17% (1)		February 1, 2023
ARIUM Palms			24,999				3.28	%		LIBOR + 2.22% (1)		September 1, 2022
ARIUM Pine Lakes			26,950				3.95	%		Fixed		November 1, 2023
ARIUM Westside			52,150				3.68	%		Fixed		August 1, 2023
Ashton Reserve I			31,653				4.67	%		Fixed		December 1, 2025
Ashton Reserve II			15,270				3.68	%		LIBOR + 2.62% (1)		January 1, 2026
Crescent Perimeter (3)			—				—			LIBOR + 3.00%		December 12, 2020
Enders Place at Baldwin Park (4)			24,511				4.30	%		Fixed		November 1, 2022
James on South First			26,500				4.35	%		Fixed		January 1, 2024
Marquis at Crown Ridge			29,508				2.67	%		LIBOR + 1.61% (1)		June 1, 2024
Marquis at Stone Oak			43,125				2.67	%		LIBOR + 1.61% (1)		June 1, 2024
Marquis at The Cascades I			33,207				2.67	%		LIBOR + 1.61% (1)		June 1, 2024
Marquis at The Cascades II			23,175				2.67	%		LIBOR + 1.61% (1)		June 1, 2024
Marquis at TPC			17,362				2.67	%		LIBOR + 1.61% (1)		June 1, 2024
Nevadan			48,431				3.54	%		LIBOR + 2.48% (1)		November 1, 2023
Park & Kingston (5)			18,432				3.41	%		Fixed		April 1, 2020
Preston View			41,066				3.13	%		LIBOR + 2.07% (1)		March 1, 2024
Roswell City Walk			51,000				3.63	%		Fixed		December 1, 2026
Sorrel			38,684				3.35	%		LIBOR + 2.29% (1)		May 1, 2023
Sovereign			28,880				3.46	%		Fixed		November 10, 2022
The Brodie			34,825				3.71	%		Fixed		December 1, 2023
The Preserve at Henderson Beach			36,655				4.65	%		Fixed		January 5, 2023
Vickers Village (6)			829				4.22	%		LIBOR + 3.00% (6)		December 1, 2020
Wesley Village			40,545				4.25	%		Fixed		April 1, 2024
Total			781,602
Fair value adjustments			2,139
Deferred financing costs, net			(8,150	)
Total		$	775,591
Weighted Average Interest Rate			3.51	%

 

⁽¹⁾ One month LIBOR as of June 30, 2017 was 1.06%.

⁽²⁾ ARIUM Grandewood principal balance includes the initial advance of $29.44 million at a floating rate of 1.67% plus one month LIBOR and a $4.85 million supplemental loan at a floating rate of 2.74% plus one month LIBOR. At June 30, 2017, the interest rates on the initial advance and supplemental loan were 2.46% and 3.53%, respectively.

⁽³⁾ Construction loan of up to $44.7 million. The loan has a one-year extension option subject to certain conditions.

⁽⁴⁾ The Enders Place at Baldwin Park principal balance includes a $16.7 million loan at a fixed rate of 3.97% and a $7.8 million supplemental loan at a fixed rate of 5.01%.

⁽⁵⁾ The Park & Kingston principal balance includes a $15.3 million loan at a fixed rate of 3.21% and a $3.2 million supplemental loan at a fixed rate of 4.34%.

⁽⁶⁾ Construction loan of up to $18.0 million with interest at a floating rate of 3.00% plus one month LIBOR.

 

 

Bluerock Residential Growth REIT, Inc.

Debt Summary Information Continued

As of June 30, 2017

(Unaudited and dollars in thousands)

 

Debt Maturity Schedules

 

Year		Fixed Rate				Floating Rate				Total				% of Total
2017		$	907			$	471			$	1,378				0.18	%
2018			2,223				1,863				4,086				0.52	%
2019			3,770				3,797				7,567				0.97	%
2020			23,530				6,270				29,800				3.81	%
2021			5,648				5,551				11,199				1.43	%
Thereafter			336,022				391,550				727,572				93.09	%
		$	372,100			$	409,502			$	781,602				100.00	%
Fair Value Adjustments			2,139				-				2,139
Total		$	374,239			$	409,502			$	783,741

 

		Amounts				% of Total				Weighted Average Rates				Weighted Average Maturities (years)
Secured Fixed Rate Debt		$	374,239				47.8	%			4.00	%			6.6
Secured Floating Rate Debt			409,502				52.2	%			3.06	%			6.5
Total		$	783,741				100.0	%			3.51	%			6.5

 

 

Bluerock Residential Growth REIT, Inc.

2017 Third Quarter Outlook

(Unaudited and dollars in thousands except for per share data)

 

		2017 Third Quarter Outlook
		($ in thousands except per share amounts)
		Q3 - Projected (8)				Q3 - Proforma (7) (8)
Earnings
Adjusted Funds From Operations Attributable to Common Stockholders per share			($0.03) - ($0.02	)			$0.25 - $0.27
Operations
Revenue (1)			$25,540 - $25,620				$31,870 - $31,950
Property Operating Margin			55.1% - 55.4	%			56.9% - 57.1	%
Interest expense		$	7,570			$	8,840
General and administrative expenses as percentage of revenue (2)			4.1% - 4.0	%			3.3% - 3.2	%
Management fees		$	2,890			$	2,810
Depreciation and amortization expense		$	11,850					*
Depreciation and amortization recapture (3)			91.6	%				*
Equity in operating earnings in unconsolidated subsidiaries (4)		$	2,180			$	2,220
Interest income from related parties		$	2,120			$	6,340
Noncontrolling interest (5)			4.7% - 4.6	%			6.6% - 6.7	%
Recurring capex (6)			$460 - $440				$510 - $490

 

* Amount is indeterminable.

⁽¹⁾ Revenue includes only property level revenues and excludes income from preferred investments and mezzanine loans, which flow through the "Equity in operating earnings of unconsolidated subsidiaries" and "interest income from related parties" line items, respectively.

⁽²⁾ General and administrative expenses exclude non-cash expenses, such as non-cash equity compensation.

⁽³⁾ Represents estimated recapture of the Company's pro-rata share of depreciation for AFFO purposes and excludes depreciation and amortization on forecasted acquisitions.

⁽⁴⁾ Represents the Company's share of income from unconsolidated subsidiaries including preferred investment income.

⁽⁵⁾ Represents estimated net income/loss (excluding non-cash equity compensation, gain on sale of real estate assets, acquisition costs and depreciation on forecasted acquisitions) attributable to non-controlling interest of OP unit holders and joint venture partner interests.

⁽⁶⁾ Estimate of the Company's pro-rata share of recurring capital expenditures for AFFO purposes.

⁽⁷⁾ Pro forma guidance assumes the investment of $138 million in estimated available cash had occurred on July 1, 2017:

 

										Investment
#		Investment		MSA		# Units				Amount (in millions)
1		Acquisition - Identified Assets		Orlando, FL & Houston, TX			720			$	33
2		Mezzanine Loan - Identified Developments		Atlanta, GA & FT. Lauderdale, FL			783				40
3		Acquisition - Unidentified Assets, assumes 5.75% cap rate		-			-				42
4		Mezzanine Loan - Unidentified		-			-				23
		Total								$	138

 

The pro forma guidance is being presented solely for purposes of illustrating the potential impact of these pipeline transactions, as well as future investments to be made with funds we have available for investment, as if they had occurred at July 1, 2017, based on information currently available to management and assumptions management has made with respect to our future pipeline.

 

The Company is providing no assurances that any of the above transactions are probable, or that they will close or that management will identify or acquire investments consistent with our pipeline assumptions, and the failure to do so would significantly impact pro forma guidance. The actual timing of these investments, if and when made, will vary materially from the assumed timing reflected in the pro forma guidance, and actual quarterly results will differ significantly from the pro forma guidance shown above. Investors should not rely on pro forma guidance as a forecast of the actual performance of the Company.

 

⁽⁸⁾ The Company has not reconciled projected and pro forma Adjusted Funds From Operations Attributable to Common Shareholders per share (“AFFO”) guidance to the corresponding GAAP financial measure because it does not provide guidance for various reconciling items. The Company is unable to provide guidance for these reconciling items since certain items that impact net income are outside of its control and cannot be reasonably predicted. Accordingly, reconciliations to the corresponding GAAP financial measures are not available.

 

 

Bluerock Residential Growth REIT, Inc.

Definitions of Non-GAAP Financial Measures

 

The foregoing supplemental financial data includes certain non-GAAP financial measures that we believe are helpful in understanding our business, as further described below. Our definition and calculation of these non-GAAP financial measures may differ from those of other REITs, and may, therefore, not be comparable.

 

Funds from Operations and Adjusted Funds from Operations, Attributable to Common Shareholders

Funds from operations attributable to common stockholders (“FFO”), is a non-GAAP financial measure that is widely recognized as a measure of REIT operating performance. We consider FFO to be an appropriate supplemental measure of our operating performance as it is based on a net income analysis of property portfolio performance that excludes non-cash items such as depreciation. The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time. Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT, using historical accounting for depreciation, could be less informative. We define FFO, consistent with the National Association of Real Estate Investment Trusts, or (“NAREIT's”), definition, as net income, computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus depreciation and amortization of real estate assets, plus impairment write-downs of depreciable real estate, 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.

 

In addition to FFO, we use adjusted funds from operations attributable to common stockholders (“AFFO”). AFFO is a computation made by analysts and investors to measure a real estate company's operating performance by removing the effect of items that do not reflect ongoing property operations. To calculate AFFO, we further adjust FFO by adding back certain items that are not added to net income in NAREIT's definition of FFO, such as acquisition and pursuit costs, equity based compensation expenses, and any other non-recurring or non-cash expenses, which are costs that do not relate to the operating performance of our properties, and subtracting recurring capital expenditures (and when calculating the quarterly incentive fee payable to our Manager only, we further adjust FFO to include any realized gains or losses on our real estate investments).

 

Our calculation of AFFO differs from the methodology used for calculating AFFO by certain other REITs and, accordingly, our AFFO may not be comparable to AFFO reported by other REITs. Our management utilizes FFO and AFFO as measures of our operating performance after adjustment for certain non-cash items, such as depreciation and amortization expenses, and acquisition and pursuit costs that are required by GAAP to be expensed but may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods. Furthermore, although FFO, AFFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we also believe that FFO and AFFO may provide us and our stockholders with an additional useful measure to compare our financial performance to certain other REITs. We also use AFFO for purposes of determining the quarterly incentive fee, if any, payable to our Manager.

 

Neither FFO nor AFFO is equivalent to net income or cash generated from operating activities determined in accordance with GAAP. Furthermore, FFO and AFFO do not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO nor AFFO should be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity.

 

We have acquired interests in thirteen additional operating properties and three development investments, and sold six properties subsequent to June 30, 2016. The results presented in the table below are not directly comparable and should not be considered an indication of our future operating performance (unaudited and dollars in thousands, except share and per share data).

 

Recurring Capital Expenditures

We define recurring capital expenditures as expenditures that are incurred at every property and exclude development, investment, revenue enhancing and non-recurring capital expenditures.

 

Non-Recurring Capital Expenditures

We define non-recurring capital expenditures as expenditures for significant projects that upgrade units or common areas and projects that are revenue enhancing.

 

Same Store Properties

Same store properties are conventional multifamily residential apartments which were owned and operational for the entire periods presented.

 

 

Bluerock Residential Growth REIT, Inc.

Definitions of Non-GAAP Financial Measures

(Unaudited and dollars in thousands)

 

Earnings Before Interest, Income Taxes, Depreciation and Amortization ("EBITDA")

 

EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, calculated on a consolidated basis. We consider EBITDA to be an appropriate supplemental measure of our performance because it eliminates depreciation, income taxes, interest and non-recurring items, which permits investors to view income from operations unobscured by non-cash items such as depreciation, amortization, the cost of debt or non-recurring items. Below is a reconciliation of net income (loss) applicable to common shares to EBITDA.

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2017				2016				2017				2016
Net income (loss) attributable to common stockholders		$	17,569			$	(5,043	)		$	12,579			$	(9,179	)
Net income (loss) attributable to noncontrolling interest			10,171				(54	)			18,900				(150	)
Preferred stock dividends			6,381				2,968				12,233				4,451
Preferred stock accretion			647				168				984				293
Interest expense, net			7,825				4,589				14,943				8,817
Depreciation and amortization			10,387				7,789				21,331				15,298
EBITDA		$	52,980			$	10,417			$	80,970			$	19,530
Acquisition and pursuit costs			18				249				3,200				1,457
Management internalization process expense			340				-				820				-
Non-cash equity compensation			6,919				2,436				10,119				4,281
Non-recurring income			(17	)			-				(17	)			-
Gain on sale of real estate investments			(33,574	)			-				(50,040	)			-
Gain on sale of real estate joint venture interest			(10,238	)			-				(10,238	)			-
Loss on early extinguishment of debt			1,639				-				1,639				-
Non-cash preferred returns and equity in income of unconsolidated real estate joint ventures			(491	)			-				(491	)			-
Adjusted EBITDA		$	17,576			$	13,102			$	35,962			$	25,268

 

 

Bluerock Residential Growth REIT, Inc.

Definitions of Non-GAAP Financial Measures

(Unaudited and dollars in thousands)

 

Property Net Operating Income ("Property NOI")

 

We believe that net operating income, or 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 and interest. 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 because NOI 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. However, NOI should only be used as an alternative measure of our financial performance.

 

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

 

		Three Months Ended (1)								Six Months Ended (2)
		June 30,								June 30,
		2017				2016				2017				2016
Net income (loss) attributable to common stockholders		$	17,569			$	(5,043	)		$	12,579			$	(9,179	)
Add pro-rata share:
Depreciation and amortization			9,326				6,769				19,129				13,239
Amortization of non-cash interest expense			773				65				1,246				148
Management fees			6,099				1,394				8,836				2,591
Acquisition and pursuit costs			18				227				3,024				1,373
Loss on early extinguishment of debt			1,534				-				1,534				-
Corporate operating expenses			1,679				1,666				3,112				2,935
Management internalization process expense			336				-				811				-
Preferred stock dividends			6,314				2,924				12,101				4,385
Preferred stock accretion			641				166				974				289
Less pro-rata share:
Other income			16				-				16				-
Preferred returns and equity in income of unconsolidated real estate joint ventures			2,577				2,733				5,121				5,462
Interest income from related parties			2,075				-				3,581				-
Gain on sale of joint venture interest			6,332				-				6,332				-
Gain on sale of real estate assets			26,548				-				33,945				-
Pro-rata share of properties' income			6,741				5,435				14,351				10,319
Add:
Noncontrolling interest pro-rata share of property income			856				1,065				2,103				2,081
Total property income			7,597				6,500				16,454				12,400
Add:
Interest expense, net			6,708				4,510				13,160				8,651
Net operating income			14,305				11,010				29,614				21,051
Less:
Non-same store net operating income			8,112				4,955				18,806				10,941
Same store net operating income		$	6,193			$	6,055			$	10,808			$	10,110

 

⁽¹⁾ Same Store sales for the three months ended June 30, 2017 related to the following properties: Enders Place at Baldwin Park, ARIUM Grandewood, Park & Kingston, ARIUM Palms, Ashton Reserve, Sovereign, ARIUM at Palmer Ranch, ARIUM Gulfshore, and The Preserve at Henderson Beach.

 

⁽²⁾ Same Store sales for the six months ended June 30, 2017 related to the following properties: Enders Place at Baldwin Park, ARIUM Grandewood, Park & Kingston, ARIUM Palms, Ashton Reserve, Sovereign, ARIUM at Palmer Ranch, and ARIUM Gulfshore.