BERKSHIRE INCOME REALTY ANNOUNCES YEAR END FFO OF $6,532,120
BOSTON, MASSACHUSETTS - - April 14, 2005 - - Berkshire Income Realty, Inc. (AMEX: "BIR_pa", "BIRPRA", “BIR-A” "BIR.PR.A") ("Berkshire" or the "Company") reported its results for the year ended December 31, 2004. Financial highlights for the year ended December 31, 2004 include:
-The Company's Funds From Operations (“FFO”) for the year ended December 31, 2004 were $6,532,120.
- For the year ended December 31, 2004, Berkshire reported net income, before depreciation, of $3,816,621 as compared to net income, before depreciation, of $11,539,883 for the comparable prior year ended December 31, 2003. The decrease in net income, before depreciation, was due primarily to two factors, a reduction in the income from the Company’s investment in mortgage funds and the charge to earnings related to the distribution of proceeds to the minority interest partners on the refinancing of certain mortgage debt. The reduction in equity in income of the mortgage funds is a function of the declining investment value brought about by the liquidation of 5 of the Company’s original 6 investments in those mortgage funds. Also contributing to the decrease was an increase in the charge against earnings from minority interest in properties. The bulk of this charge was related to the distribution of proceeds from the refinancing of properties made to the minority owners of those properties as the Company continued to take advantage of the historically low interest rates available on mortgage financings. As the Company did not have operations prior to the quarter ended June 30, 2003, the discussion of operations or activities prior to April 1, 2003 presented in this press release refer to the operations and activities of the Berkshire Income Realty Predecessor Group, the Company's predecessor entity for accounting purposes. As described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 filed with the Securities and Exchange Commission, the Berkshire Income Realty Predecessor Group contributed to the Company the five properties that comprised the Company's initial operations. As of December 31, 2004, the Company owned interests in 19 multifamily apartment communities.
- Subsequent to December 31, 2004, the Company has continued to expand its portfolio. On February 15, 2005, the Company consummated the acquisition of the outstanding limited and general partner interests of BRI Westchester Limited Partnership, the fee simple owner of Westchester West Apartments, a 345 unit multifamily apartment community located in Silver Spring, Maryland, from an affiliate of the Company. On March 1, 2005, the Company consummated the acquisition of 100% of the fee simple interest of Waters on Brompton, a 362 unit multifamily apartment community located in Houston, Texas, from an unaffiliated third party. On March 30, 2005, the Company completed the acquisition of 100% of the fee simple interest of Antilles Apartment Homes, a 324 unit multifamily apartment community located in Houston, Texas, from an unaffiliated third party. The Company will operate the Antilles property under the name Berkshires at Westchase Apartments.
President and CFO, David Quade comments, “We are pleased with the 2004 operating results of Berkshire. Funds From Operations continued to be positive in 2004 and properties acquired over the past year contributed to the improved breadth and quality of our portfolio. The earnings decline related largely to the anticipated decline in income from our shrinking investments in the mortgage funds and a charge against earnings for distributions to minority property owners of refinancing proceeds, which we consider to be a non-recurring charge. ”
Funds From Operations
The Company has adopted the revised definition of FFO adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). Management considers FFO to be an appropriate measure of performance of an equity Real Estate Investment Trust (“REIT”). We calculate FFO by adjusting net income (loss) (computed in accordance with Generally Accepted Accounting Principles (“GAAP”), including non-recurring items), for gains (or losses) from sales of properties, real estate related depreciation and amortization, and adjustment for unconsolidated partnerships and ventures. Management believes that in order to facilitate a clear understanding of the historical operating results of the Company, FFO should be considered in conjunction with net income as presented in the financial statements included elsewhere herein. Management considers FFO to be a useful measure for reviewing the comparative operating and financial performance of the Company because, by excluding gains and losses related to sales of previously depreciated operating real estate assets and excluding real estate asset depreciation and amortization (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help one compare the operating performance of a company’s real estate between periods or as compared to different companies.
The Company’s calculation of FFO may not be directly comparable to FFO reported by other REITs or similar real estate companies that have not adopted the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance. FFO does not represent cash generated from operating activities determined in accordance with GAAP and is not a measure of liquidity or an indicator of our ability to make cash distributions. We believe that to further understand our performance, FFO should be compared with our reported net income and considered in addition to cash flows in accordance with GAAP, as presented in our financial statements. The Company did not have common shares or Operating Partnership units and shares outstanding for the year ended December 31, 2002.
The following is a reconciliation of GAAP net income (loss) to FFO for the years ended December 31, 2004, 2003 and 2002:
| December 31, | ||||
| 2004 |
| 2003 |
| 2002 |
GAAP net income (loss) | $ (7,811,651) |
| $ 3,642,260 |
| $ 37,596 |
Add: |
|
|
|
|
|
Depreciation of real property | 8,964,346 |
| 6,288,282 |
| 4,680,391 |
Minority interest in Operating Partnership | 976,100 |
| 732,075 |
| - |
Minority interest in properties | 2,932,572 |
| 143,518 |
| 1,520,000 |
Amortization of acquired in-place leases and tenant |
|
|
|
|
|
Relationships | 1,603,612 |
| 212,200 |
| - |
Equity in loss of Multifamily Venture | 276,085 |
| - |
| - |
|
|
|
|
|
|
Less: |
|
|
|
|
|
Funds from operations of Multifamily Venture | (1,260) |
| - |
| - |
Minority interest in properties share of funds from |
|
|
|
|
|
Operations | (174,980) |
| (394,672) |
| (334,555) |
Gain on transfer of property to Multifamily Venture | (232,704) |
| - |
| - |
|
|
|
|
|
|
Funds From Operations | $ 6,532,120 |
| $10,623,663 |
| $5,903,432 |
The net loss in 2004 and net income in 2003, includes certain items of a variable nature. The most significant is the Company’s equity in income of the six mortgage funds, interests in which the Company acquired in exchange for shares of its 9% Series A Cumulative Redeemable Preferred Stock (the “Mortgage Funds”), which include certain components that may be expected to vary from period to period. During the years ended December 31, 2004 and 2003, equity in the income of Mortgage Funds included the allocation of profits and the amortization of discounts associated with the Company’s ownership interests in the Mortgage Funds. During the year ended December 31, 2004, allocation of profits from the Mortgage Funds was approximately $1,300,000 as compared to approximately $3,400,000 in the year ended December 31, 2003. Additionally, during the year ended December 31, 2004 amortization of discounts associated with the Company’s interests in the Mortgage Funds was approximately $2,100,000 as compared to approximately $3,300,000 in the year ended December 31, 2003. The pace at which profits are allocated and amortization is recognized is generally tied to the level of payoffs and the remaining balance of underlying assets in the Mortgage Funds and as such, may be reduced in future periods. As a result of the substantial pay down of the underlying mortgages held by the Mortgage Funds during 2004 and 2003, the Company’s investments in the Mortgage Funds, as well as the earnings associated with those investments, has dropped between 2004 and 2003. Thus, past FFO results should not be considered indicative of future FFO results.
Additional information regarding the Company’s investments in the Mortgage Funds and the operating results of Berkshire for the years ended December 31, 2004, 2003 and 2002 can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2004, which was filed with the Securities and Exchange Commission on March 31, 2005. The document is available on the Commission's website at www.sec.gov.
The Company
The Company is a REIT whose objective is to acquire, operate, and rehabilitate multifamily apartment communities. The Company currently owns interests in twenty-two such multifamily apartment communities, of which eight are located in the Baltimore/Washington, D.C. metropolitan area, four are located in Virginia, three are located in Houston, Texas, two are located in Dallas, Texas, one is located in Austin, Texas, two are located in the Chicago, Illinois area and two are located in the Ft. Lauderdale, Florida area.
Forward Looking Statements
With the exception of the historical information contained in this release, the matters described herein may contain forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve a number of risks, uncertainties or other factors beyond the Company's control, which may cause material differences in actual results, performance or other expectations. These factors include, but are not limited to, changes in economic conditions generally and the real estate and bond markets specifically, legislative/regulatory changes (including changes to laws governing the taxation of REITs, availability of capital, interest rates and interest rate spreads, changes in generally accepted accounting policies and guidelines applicable to REITs, those set forth in Part I, "Risk Factors" of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2004 and other risks and uncertainties as may be detailed from time to time in the Company's public announcements and Securities and Exchange Commission filings. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company assumes no obligation to update such information.
Contact Information:
Berkshire Income Realty, Inc. |
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One Beacon Street, Suite 1500 | ||
Boston, Massachusetts 02108 |
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Attention:
Phil Darby |
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Telephone: | 1-617-574-8374 | ||||||
E-mail: | phil.darby@berkshire-group.com |
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Facsimile: | 1-617-423-8919 |
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-- tables to follow--
BERKSHIRE INCOME REALTY, INC.
(FORMERLY BERKSHIRE INCOME REALTY PREDECESSOR GROUP)
BALANCE SHEETS
| December 31, | ||
| 2004 Company Consolidated |
| 2003 Company Consolidated |
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
Multifamily apartment communities, net of accumulated depreciation of $113,953,842 and $102,609,721, respectively |
$ 260,554,434 |
|
$ 145,222,916 |
Cash and cash equivalents | 31,913,045 |
| 42,145,947 |
Available for sale securities, at fair value | - |
| 18,488,414 |
Cash restricted for tenant security deposits | 1,217,517 |
| 856,498 |
Replacement reserve escrow | 2,157,952 |
| 318,708 |
Prepaid expenses and other assets | 8,190,739 |
| 5,113,200 |
Investment in Mortgage Funds | 10,167,693 |
| 24,046,908 |
Investment in Multifamily Venture | 2,274,500 |
| - |
Acquired in place leases and tenant relationships, net of accumulated amortization of $1,722,428 and $212,200, respectively |
2,152,840 |
|
1,061,004 |
Deferred expenses, net of accumulated amortization of $325,338 and $323,067, respectively. |
2,476,779 |
|
1,621,498 |
|
|
|
|
Total assets | $ 321,105,499 |
| $ 238,875,093 |
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
Liabilities: |
|
|
|
Mortgage notes payable | $ 268,716,955 |
| $ 184,471,204 |
Due to affiliates | 1,862,822 |
| 1,318,755 |
Dividend and distributions payable | 1,087,607 |
| 1,087,593 |
Accrued expenses and other liabilities | 7,312,054 |
| 3,268,859 |
Tenant security deposits | 1,468,397 |
| 971,363 |
|
|
|
|
Total liabilities | 280,447,835 |
| 191,117,774 |
|
|
|
|
Commitments and Contingencies | - |
| - |
|
|
|
|
Minority interest in properties | 7,422,481 |
| - |
|
|
|
|
Minority interest in Operating Partnership | - |
| - |
|
|
|
|
Stockholders’ equity: |
|
|
|
Series A 9% Cumulative Redeemable Preferred Stock, no par value, |
|
|
|
$25 stated value, 5,000,000 shares authorized, 2,978,110 shares |
|
|
|
issued and outstanding at December 31, 2004 and 2003, respectively | 70,210,830 |
| 70,210,830 |
Class A common stock, $.01 par value, 5,000,000 shares authorized; 0 |
|
|
|
shares issued and outstanding at December 31, 2004 and 2003, respectively | - |
| - |
Class B common stock, $.01 par value, 5,000,000 shares authorized; |
|
|
|
1,283,313 issued and outstanding at December 31, 2004 and 2003, respectively | 12,833 |
| 12,833 |
Excess stock, $.01 par value, 15,000,000 shares authorized, 0 shares |
|
|
|
issued and outstanding at December 31, 2004 and 2003, respectively | - |
| - |
Accumulated deficit | (36,988,480) |
| (22,452,115) |
Accumulated other comprehensive loss | - |
| (14,229) |
|
|
|
|
Total stockholders’ equity | 33,235,183 |
| 47,757,319 |
|
|
|
|
Total liabilities and stockholders’ equity | $ 321,105,499 |
| $ 238,875,093 |
BERKSHIRE INCOME REALTY, INC.
(FORMERLY BERKSHIRE INCOME REALTY PREDECESSOR GROUP)
STATEMENTS OF OPERATIONS
| For the year ended December 31, | ||||
| 2004 Company Consolidated |
| 2003 Company Consolidated |
| 2002 Predecessor Combined |
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
Rental | $ 37,611,830 |
| $ 28,464,951 |
| $ 26,347,828 |
Interest | 832,414 |
| 128,522 |
| 375,004 |
Utility reimbursement | 527,782 |
| 449,820 |
| 539,797 |
Other | 1,547,636 |
| 1,197,901 |
| 1,097,127 |
|
|
|
|
|
|
Total revenue | 40,519,662 |
| 30,241,194 |
| 28,359,756 |
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
Operating | 10,121,750 |
| 7,240,455 |
| 6,320,218 |
Maintenance | 2,970,566 |
| 2,387,846 |
| 2,086,346 |
Real estate taxes | 4,616,759 |
| 2,631,511 |
| 2,213,966 |
General and administrative | 1,671,982 |
| 1,514,389 |
| 726,357 |
Organizational costs | - |
| 213,000 |
| - |
Management fees | 2,733,767 |
| 2,113,869 |
| 1,788,936 |
Depreciation | 11,628,272 |
| 7,897,623 |
| 5,877,594 |
Interest | 11,202,364 |
| 7,880,150 |
| 6,445,891 |
Loss on extinguishment of debt | 1,059,143 |
| 353,044 |
| 1,167,852 |
Participation interest | - |
| - |
| 175,000 |
Loss on sale of securities | 163,630 |
| - |
| - |
Amortization of acquired in-place leases and tenant relationships | 1,603,612 |
| 212,200 |
| - |
|
|
|
|
|
|
Total expenses | 47,771,845 |
| 32,444,087 |
| 26,802,160 |
|
|
|
|
|
|
Income (loss) before minority interest in properties, equity in loss of Multifamily Venture, equity in income of Mortgage Funds, minority common interest in Operating Partnership, and gain on transfer of property to Multifamily Venture |
(7,252,183) |
|
(2,202,893) |
|
1,557,596 |
|
|
|
|
|
|
Minority interest in properties | (2,932,572) |
| (143,518) |
| (1,520,000) |
|
|
|
|
|
|
Equity in loss of Multifamily Venture | (276,085) |
| - |
| - |
|
|
|
|
|
|
Equity in income of Mortgage Funds | 3,392,585 |
| 6,720,746 |
| - |
|
|
|
|
|
|
Minority common interest in Operating Partnership | (976,100) |
| (732,075) |
| - |
|
|
|
|
|
|
Income (loss) before gain on transfer of property to Multifamily Venture | (8,044,355) |
| 3,642,260 |
| 37,596 |
|
|
|
|
|
|
Gain on transfer of property to Multifamily Venture | 232,704 |
| - |
| - |
|
|
|
|
|
|
Net income (loss) | $ (7,811,651) |
| $ 3,642,260 |
| $ 37,596 |
|
|
|
|
|
|
Preferred dividend | (6,700,814) |
| (4,951,258) |
|
|
|
|
|
|
|
|
Net loss available to common shareholders | $ (14,512,465) |
| $ (1,308,998) |
|
|
|
|
|
|
|
|
Loss per common share, basic and diluted | $ (11.31) |
| $ (1.38) |
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding | 1,283,313 |
| 948,733 |
|
|
|
|
|
|
|
|