Exhibit 99.2
1 |
Bluerock Residential Growth REIT, Inc. |
Second Quarter 2016 |
Supplement Financial Information |
(Unaudited) |
Table of Contents
Second Quarter Earnings Release | 3 |
Financial and Operating Highlights | 13 |
Share and Dividend Information | 14 |
EBITDA and Interest Information | 15 |
Financial Statistics | 16 |
Recent Acquisitions and Pending Investments | 17 |
Investments in Unconsolidated Real Estate Joint Ventures | 18 |
Portfolio Information | 19 |
Development Properties | 20 |
Condensed Consolidated Balance Sheets | 21 |
Consolidated Statements of Operations | 22 |
Reconciliation of Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) | 23 |
Debt Summary Information | 24 |
Third Quarter 2016 Outlook | 26 |
Definitions of Non-GAAP Financial Measures | 27 |
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 24, 2016, 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.
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Bluerock Residential Growth REIT, Inc. |
Second Quarter Earnings |
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 2016 Results
New York, NY (August 8, 2016) – Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG, BRG PrA, and BRG PrC) (“the Company”) announced today its financial results for the quarter ended June 30, 2016.
Highlights
• | Total revenues grew 75% to $18.4 million for the quarter from $10.5 million for the prior year quarter primarily as a result of significant investment activity in the past year. |
• | Net loss attributable to common stockholders for the second quarter of 2016 was $5.0 million, or $(0.24) per share as compared to a net loss of $0.6 million, or $(0.04) per share, in the prior year period. Net loss attributable to common stockholders included non-cash expenses of $9.4 million in the second quarter of 2016 vs. $3.6 million for the prior year period. |
• | Adjusted funds from operations attributable to common stockholders (“AFFO”) grew 42% to $4.4 million for the quarter from $3.1 million for the prior year quarter. |
• | AFFO per diluted share is $0.21 for the second quarter of 2016 as compared to $0.19 for the second quarter of 2015, and exceeded guidance of $0.12 - $0.14. |
• | Pro forma AFFO per share of $0.38 for the second quarter exceeded pro forma guidance of $0.27 to $0.29 per share. |
• | The Company paid the full amount of the second quarter’s management fee of $1.4 million in LTIP Units in lieu of cash payment. This favorably impacted both AFFO per share and pro forma AFFO per share by $0.07. |
• | Property Net Operating Income (NOI) grew 80% to $11.0 million for the quarter, from $6.1 million in the prior year quarter. |
• | Property NOI margins improved 150 basis points to 59.8% of revenue for the quarter, from 58.3% of revenue in the prior year quarter. |
• | Same store NOI increased 8.7% for the quarter, as compared to the prior year quarter. |
• | Consolidated real estate investments, at cost, increased 25% to $699 million at June 30, 2016 from $557 million at December 31, 2015. |
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• | The Company invested in one operating property totaling 336 units for a total purchase price of approximately $74.5 million subsequent to end of the quarter. |
• | The Company declared a quarterly cash dividend on the 8.250% Series A Cumulative Redeemable Preferred Stock (“Series A preferred stock”) of $0.515625 per share for the second quarter, which was paid in cash on July 5, 2016. |
• | The Company declared monthly dividends for the third quarter of 2016 equal to a quarterly rate of $0.29 per share on the Company's Class A common stock. This equates to an 8.9% annualized yield based on the closing price of $13.00 for the Class A common stock as of June 30, 2016. |
• | The Company sold 1,890 Series B Units under its offering of up to 150,000 Units consisting of 150,000 shares of Series B redeemable preferred stock (“Series B Preferred Stock”) and warrants to purchase 3,000,000 shares of Class A common stock (“Series B Offering”) which commenced in February 2016. |
• | The Company declared monthly dividends for the third quarter of 2016 of $5.00 per share on the Company’s Series B preferred stock. |
• | The Company sold 146,460 Series A Preferred shares under its At-the-Market offering during the second quarter until suspension of selling activity for the following offerings. |
• | On April 25, 2016, the Company completed an underwritten offering of 2,300,000 shares of Series A preferred stock at a public offering price of $25.00 per share, including the full exercise of the underwriter’s overallotment for gross proceeds of $57.5 million. |
• | On May 26, 2016, the Company completed an add-on offering of 400,000 shares of Series A preferred stock at a public offering price of $25.00 per share, including the full exercise of the underwriter’s overallotment for gross proceeds of $10.0 million. |
• | On July 19, 2016, the Company completed an underwritten offering of 2,300,000 shares of 7.625% Series C preferred stock at a public offering price of $25.00 per share, including the full exercise of the underwriter’s allotment for gross proceeds of $57.5 million. |
Management Commentary
“We are pleased to report our operating performance for the second quarter with same store NOI growth of 8.7% and AFFO growth of 42%, which exceeded the high end of our guidance,” said Ramin Kamfar, the Company’s Chairman and CEO. “With the capital raise during the quarter, we plan to execute upon the attractive opportunities in our current footprint of growth markets in the Sunbelt, from the Carolinas to Florida and Texas. Our focus remains on building one of the highest quality Class A portfolios in these markets, while growing our AFFO and AFFO per share accretively for our investors.”
Pending Investments at June 30, 2016
• | On July 14, 2016, the Company acquired a 90% leasehold interest in a 336-unit, Class A, mixed-use apartment community located in Atlanta, Georgia, known as Tenside Apartment Homes. The property was rebranded as ARIUM Westside. The total purchase price was approximately $74.5 million, funded in part with a $52.2 million senior mortgage loan secured by the leasehold interest in the property. |
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• | The Company intends to make an acquisition of a 90% interest in a 480-unit apartment community in Atlanta, Georgia for a purchase price of approximately $69.5 million. |
• | The Company has an agreement which entitles the Company to invest in a 276-unit to-be-built Class A apartment community located in Jacksonville, Florida. This convertible mezzanine loan investment of approximately $23 million is structured to provide us with a 15% current return on investment with an option to convert into majority indirect ownership of the underlying property upon stabilization. |
• | An affiliate of the Company has a non-binding letter of intent which we expect will be assigned to us and will entitle the Company to invest in a 90-unit to-be-built Class A apartment community located in Boca Raton, Florida. Our investment will be structured as a convertible mezzanine loan investment of approximately $9 million to provide us with a 15% current return on investment together with an option to convert into a majority indirect ownership of the underlying property upon stabilization. |
Second Quarter 2016 Financial Results
Net loss attributable to common stockholders for the second quarter of 2016 was $5.0 million, as compared to a net loss of $0.6 million in the prior year period. The change in net loss was primarily driven by positive increases in property NOI of $4.9 million and income of unconsolidated real estate joint ventures of $1.5 million due to the increase in the size of our invest-to-own portfolio, as offset by related increases in general and administrative expenses of $1.0 million (of which $0.8 million was non-cash expenses), in management fees of $0.7 million, interest expense of $1.9 million, depreciation and amortization expense of $4.0 million, and the Series A preferred stock income allocation of $3.1 million.
AFFO for the second quarter of 2016 increased by 42% to $4.4 million, or $0.21 per diluted share, as compared to $3.1 million, or $0.19 per share in the prior year period. The increase in AFFO from the prior year period was driven primarily by increases in property NOI of $4.9 million arising from significant investment activity in the past year and in income of unconsolidated real estate joint ventures of $1.5 million caused by expanding the size of our invest-to-own portfolio, offset by higher interest expense of $1.9 million.
Same Store Portfolio Performance
Same store NOI for the second quarter of 2016 increased by 8.7% from the same period in the prior year. There was a 6.1% increase in same store property revenues as compared to the same prior year period, primarily attributable to a 4.7% increase in average rent per occupied unit, a 142 basis point increase in average occupancy and an additional 18 units acquired at our Lansbrook property. Same store expenses increased 2.2%.
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Portfolio Summary
The following is a summary of our investments, operating properties and convertible preferred equity investments, as of June 30, 2016:
Operating Properties | Location | Year Built/ Renovated(1) | Ownership Interest | Units | Average Rent(2) | % Occupied | ||||||||||||||||
ARIUM at Palmer Ranch | Sarasota, FL | 2016 | 95 | % | 320 | $ | 1,114 | 92 | % | |||||||||||||
ARIUM Grandewood | Orlando, FL | 2005 | 95 | % | 306 | 1,202 | 99 | % | ||||||||||||||
ARIUM Gulfshore | Naples, FL | 2016 | 95 | % | 368 | 1,096 | 94 | % | ||||||||||||||
ARIUM Palms | Orlando, FL | 2008 | 95 | % | 252 | 1,182 | 95 | % | ||||||||||||||
Ashton Reserve | Charlotte, NC | 2015 | 100 | % | 473 | 1,085 | 94 | % | ||||||||||||||
Enders Place at Baldwin Park | Orlando, FL | 2003 | 90 | % | 220 | 1,633 | 95 | % | ||||||||||||||
Fox Hill | Austin, TX | 2010 | 95 | % | 288 | 1,169 | 97 | % | ||||||||||||||
Lansbrook Village | Palm Harbor, FL | 2004 | 90 | % | 617 | 1,206 | 91 | % | ||||||||||||||
MDA Apartments | Chicago, IL | 2006 | 35 | % | 190 | 2,266 | 93 | % | ||||||||||||||
Park & Kingston | Charlotte, NC | 2015 | 96 | % | 168 | 1,179 | 98 | % | ||||||||||||||
Sorrel | Frisco, TX | 2015 | 95 | % | 352 | 1,288 | 95 | % | ||||||||||||||
Sovereign | Fort Worth, TX | 2015 | 95 | % | 322 | 1,278 | 97 | % | ||||||||||||||
Springhouse at Newport News | Newport News, VA | 1985 | 75 | % | 432 | 842 | 97 | % | ||||||||||||||
The Preserve at Henderson Beach | Destin, FL | 2009 | 100 | % | 340 | 1,237 | 94 | % | ||||||||||||||
Village Green of Ann Arbor | Ann Arbor, MI | 2013 | 49 | % | 520 | 1,184 | 95 | % | ||||||||||||||
Operating Properties Subtotal/Average | 5,168 | $ | 1,209 | (6) | 95 | %(6) |
Convertible Preferred Equity Investments | Anticipated Ownership Interest After Conversion(3) | Pro Forma Average Rent(3) | ||||||||||||||||||||
Alexan CityCentre (5) | Houston, TX | 2017 | 17 | % | 340 | $ | 2,144 | - | ||||||||||||||
Alexan Southside Place(5) | Houston, TX | 2018 | 62 | % | 269 | 2,019 | - | |||||||||||||||
Cheshire Bridge(5) | Atlanta, GA | 2017 | 78 | % | 285 | 1,559 | - | |||||||||||||||
Domain Phase 1(5) | Garland, TX | 2018 | 90 | % | 301 | 1,425 | - | |||||||||||||||
EOS(4) | Orlando, FL | 2015 | 26 | % | 296 | 1,211 | 79 | % | ||||||||||||||
Flagler Village(5) | Fort Lauderdale, FL | 2020 | * | 326 | 2,483 | - | ||||||||||||||||
Lake Boone Trail(5) | Raleigh, NC | 2018 | 72 | % | 245 | 1,402 | - | |||||||||||||||
West Morehead(5) | Charlotte, NC | 2018 | 80 | % | 283 | 1,601 | - | |||||||||||||||
Whetstone(4) | Durham, NC | 2015 | 93 | % | 204 | 1,325 | 88 | % | ||||||||||||||
Convertible Preferred Equity Investments Subtotal/Average | 2,549 | $ | 1,719 | |||||||||||||||||||
Operating Properties and Convertible Preferred Equity Investments Total/Average | 7,717 | $ | 1,384 | (6) |
(1) Represents date of last significant renovation or year built if there were no renovations.
(2) Represents the average monthly rent per occupied unit for all occupied units for the three months ended June 30, 2016. Sorrel was in lease-up during the period ended June 30, 2016, average actual rents were $1,194, net of up-front lease-up concessions.
(3) The Company has made a convertible preferred equity investment that is convertible into a common membership interest at BRG's option upon stabilization. The preferred investment earns a preferred return of 15%. Average rent is pro forma based on underwriting.
(4) Whetstone and EOS are currently convertible preferred equity investments providing a stated investment return and both properties are in lease-up and actual average rents were $1,162 and $1,206, respectively, net of upfront lease-up concessions.
(5) Property is currently in development.
(6)Total excludes Sorrel as the property was in lease-up during the period.
* The property is currently an equity method investment with common ownership.
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Q3 2016 Outlook
For the third quarter of 2016, the Company anticipates AFFO in the range of $0.08 to $0.10 per share, and $0.28 to $0.30 per share on a pro forma basis. For assumptions underlying earnings guidance, please see page 26 of Company’s Q2 2016 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.
Dividend Details
On July 8, 2016, our board of directors authorized, and we declared, monthly dividends for the third quarter of 2016 equal to a quarterly rate of $0.29 per share on our Class A common stock, payable to the stockholders of record as of July 25, 2016, which was paid in cash on August 5, 2016, and as of August 25, 2016 and September 23, 2016, which will be paid in cash on September 5, 2016 and October 5, 2016, respectively. 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.
The declared dividends equal a monthly dividend on the Class A common stock as follows: $0.096666 per share for the dividend paid to stockholders of record as of July 25, 2016, $0.096667 per share for the dividend which will be paid to stockholders of record as of August 25, 2016, and September 23, 2016. 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 July 8, 2016, our board of directors authorized, and we declared, a monthly dividend of $5.00 per Series B preferred stock, payable to the stockholders of record as of July 25, 2016, which was paid in cash on August 5, 2016 and as of August 25, 2016 and September 23, 2016, which will be paid in cash on September 5, 2016 and October 5, 2016.
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.
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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 expenses, 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 expenses 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.
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We have acquired interests in seven additional properties and four investments accounted for on the equity method of accounting and sold two properties subsequent to June 30, 2015. 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, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net (loss) income attributable to common stockholders | $ | (5,043 | ) | $ | (582 | ) | $ | (9,179 | ) | $ | 2,731 | |||||
Common stockholders pro-rata share of: | ||||||||||||||||
Real estate depreciation and amortization(1) | 6,769 | 2,647 | 13,239 | 4,559 | ||||||||||||
Loss (gain) on sale of joint venture interests | - | 2 | - | (5,322 | ) | |||||||||||
FFO Attributable to Common Stockholders | $ | 1,726 | $ | 2,067 | $ | 4,060 | $ | 1,968 | ||||||||
Common stockholders pro-rata share of: | ||||||||||||||||
Amortization of non-cash interest expense | 65 | 72 | 148 | 95 | ||||||||||||
Acquisition and disposition costs | 227 | 210 | 1,373 | 685 | ||||||||||||
Normally recurring capital expenditures | (208 | ) | (184 | ) | (416 | ) | (298 | ) | ||||||||
Preferred stock accretion | 166 | - | 289 | - | ||||||||||||
Non-cash equity compensation | 2,400 | 927 | 4,218 | 2,292 | ||||||||||||
AFFO Attributable to Common Stockholders | $ | 4,376 | $ | 3,092 | $ | 9,672 | $ | 4,742 | ||||||||
Weighted average common shares outstanding-diluted | 20,688,631 | 16,353,209 | 20,611,802 | 14,471,856 | ||||||||||||
PER SHARE INFORMATION: | ||||||||||||||||
FFO Attributable to Common Stockholders - diluted | $ | 0.08 | $ | 0.13 | $ | 0.20 | $ | 0.14 | �� | |||||||
AFFO Attributable to Common Stockholders - diluted | $ | 0.21 | $ | 0.19 | $ | 0.47 | $ | 0.33 | ||||||||
Pro forma AFFO Attributable to Common Stockholders - diluted (2) | $ | 0.38 | 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, 2016 assumes the investment of $80 million (consisting of available cash, earnest money deposits, expected loan proceeds, and net offering proceeds) had occurred on April 1, 2016: (i) additional investment of approximately $2 million in the Lake Boone convertible preferred equity investment, (ii) investment of approximately $23 million in a convertible mezzanine loan structure in connection with a joint venture, which entitles us to invest in Jacksonville MSA; (iii) investment of approximately $15 million in convertible preferred equity in a development asset in the Dallas MSA; (iv) investment of approximately $14 million in a convertible mezzanine loan structure in connection with a joint venture, which entitles us to invest in Ft. Lauderdale, FL; and (v) investment of approximately $9 million in a convertible mezzanine loan structure in a development asset an affiliate of the Company has under binding LOI in Boca Raton MSA. Pro forma guidance also assumes that $17 million is invested 65% in stabilized properties at a nominal 5.75% cap rate with interest expense at a rate of 3.75%, and 35% invested in convertible preferred equity development assets. 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, 2016, 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.
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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 unclouded by non-cash items such as depreciation, amortization, the cost of debt or non-recurring items. Below is a reconciliation of net (loss) income attributable to common stockholders to EBITDA (unaudited and dollars in thousands).
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net (loss) income attributable to common stockholders | $ | (5,043 | ) | $ | (582 | ) | $ | (9,179 | ) | $ | 2,731 | |||||
Net (loss) income attributable to noncontrolling interest | (54 | ) | (122 | ) | (150 | ) | 5,912 | |||||||||
Interest expense | 4,589 | 2,726 | 8,817 | 5,018 | ||||||||||||
Depreciation and amortization | 7,789 | 3,741 | 15,298 | 6,506 | ||||||||||||
Preferred stock accretion | 168 | - | 293 | - | ||||||||||||
Non-cash equity compensation | 2,436 | 936 | 4,281 | 2,331 | ||||||||||||
Acquisition costs | 249 | 221 | 1,457 | 670 | ||||||||||||
Gain on sale of unconsolidated real estate joint venture interest | - | 15 | - | (11,292 | ) | |||||||||||
EBITDA | $ | 10,134 | $ | 6,935 | $ | 20,817 | $ | 11,876 |
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.
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The following table reflects same store and non-same store contributions to consolidated NOI together with a reconciliation of NOI to net (loss) income attributable to common stockholders 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, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net operating income | ||||||||||||||||
Same store | $ | 6,242 | $ | 5,740 | 10,496 | 9,651 | ||||||||||
Non-same store | 4,768 | 357 | 10,555 | 1,755 | ||||||||||||
Total net operating income | 11,010 | 6,097 | 21,051 | 11,406 | ||||||||||||
Less: | ||||||||||||||||
Interest expense | 4,510 | 2,676 | 8,651 | 5,041 | ||||||||||||
Total property income | 6,500 | 3,421 | 12,400 | 6,365 | ||||||||||||
Less: | ||||||||||||||||
Noncontrolling interest pro-rata share of property income | 1,065 | 941 | 2,081 | 1,877 | ||||||||||||
Other (income) loss related to JV/MM entities | - | 36 | - | 53 | ||||||||||||
Pro-rata share of properties’ income | 5,435 | 2,444 | 10,319 | 4,435 | ||||||||||||
Less pro-rata share of: | ||||||||||||||||
Depreciation and amortization | 6,769 | 2,647 | 13,239 | 4,559 | ||||||||||||
Amortization of non-cash interest expense | 65 | 71 | 148 | 96 | ||||||||||||
Management fees | 1,394 | 701 | 2,591 | - | ||||||||||||
Acquisition and disposition costs | 227 | 210 | 1,373 | 2,120 | ||||||||||||
Corporate operating expenses | 1,666 | 732 | 2,935 | 685 | ||||||||||||
Preferred dividends | 2,924 | - | 4,385 | 1,639 | ||||||||||||
Preferred stock accretion | 166 | - | 289 | |||||||||||||
Add pro-rata share of: | ||||||||||||||||
Other income | - | 51 | - | 68 | ||||||||||||
Preferred returns and equity in income of unconsolidated real estate joint ventures | 2,733 | 1,286 | 5,462 | 2,005 | ||||||||||||
Gain on sale of joint venture interest, net of fees | - | (2 | ) | - | 5,322 | |||||||||||
Net (loss) income attributable to common stockholders | $ | (5,043 | ) | $ | (582 | ) | $ | (9,179 | ) | $ | 2,731 |
(1) Same Store sales for the three months ended June 30, 2016 related to the following properties: Springhouse at Newport News, Enders Place at Baldwin Park, MDA Apartments, Village Green of Ann Arbor, Lansbrook Village, ARIUM Grandewood, Fox Hill, and Park & Kingston.
(2) Same Store sales for the six months ended June 30, 2016 related to the following properties: Springhouse at Newport News, Enders Place at Baldwin Park, MDA Apartments,Village Green of Ann Arbor, Lansbrook Village, and ARIUM Grandewood.
Conference Call
All interested parties can listen to the live conference call webcast at 11:00 AM ET on Monday, August 8, 2016 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 webcast will be available for replay on the Company’s website two hours after the call concludes, and will remain available until October 8, 2016 athttp://services.choruscall.com/links/blue160808, as well as by dialing +1 (877) 344-7529 in the U.S., or +1 (412) 317-0088 internationally, and requesting conference number 10090743.
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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 atwww.bluerockresidential.com.
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. 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 24, 2016, 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.
Contact
(Media)
Josh Hoffman
(208) 475.2380
jhoffman@bluerockre.com
##
12 |
Bluerock Residential Growth REIT, Inc. |
Financial and Operating Highlights |
For the Three and Six Months Ended June 30, 2016 |
(Unaudited and dollars in thousands except for share and per share data) |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||
OPERATING INFORMATION | 2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||||
Total revenue | $ | 18,399 | 10,469 | 75.7 | % | $ | 35,033 | 19,505 | 79.6 | % | ||||||||||||||
Property NOI margins | 59.8 | % | 58.3 | % | 2.6 | % | 60.1 | % | 57.8 | % | 4.0 | % | ||||||||||||
Property NOI | $ | 11,010 | 6,107 | 80.3 | % | $ | 21,051 | 11,279 | 86.6 | % | ||||||||||||||
General and administrative expenses as a percentage of revenue(1) | 3.7 | % | 4.9 | % | -24.5 | % | 3.8 | % | 5.0 | % | -24.0 | % | ||||||||||||
Net (loss) income per common share - Diluted | $ | (0.24 | ) | (0.04 | ) | - | $ | (0.45 | ) | 0.19 | - | |||||||||||||
AFFO attributable to common shareholders per share(2) | $ | 0.21 | 0.19 | 10.5 | % | $ | 0.47 | 0.33 | 42.4 | % | ||||||||||||||
Pro forma AFFO attributable to common shareholders per share(3) | $ | 0.38 | 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 27 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, 2016 assumes the investment of $80 million (consisting of available cash, earnest money deposits, expected loan proceeds, and net offering proceeds) had occurred on April 1, 2016: (i) additional investment of approximately $2 million in the Lake Boone convertible preferred equity investment, (ii) investment of approximately $23 million in a convertible mezzanine loan structure in connection with a joint venture, which entitles us to invest in Jacksonville MSA; (iii) investment of approximately $15 million in convertible preferred equity in a development asset in the Dallas MSA; (iv) investment of approximately $14 million in a convertible mezzanine loan structure in connection with a joint venture, which entitles us to invest in Ft. Lauderdale, FL; and (v) investment of approximately $9 million in a convertible mezzanine loan structure in a development asset an affiliate of the Company has under binding LOI in Boca Raton MSA. Pro forma guidance also assumes that $17 million is invested 65% in stabilized properties at a nominal 5.75% cap rate with interest expense at a rate of 3.75%, and 35% invested in convertible preferred equity development assets. 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, 2016, 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.
13 |
Bluerock Residential Growth REIT, Inc. |
Share and Dividend Information |
Second Quarter 2016 |
(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, 2016 | ||||
Class A common stock | 19,565,055 | |||
LTIP Units | 1,123,576 | |||
OP Units | 305,568 | |||
Weighted Average Common Stock and Units Outstanding, Diluted | 20,994,199 | |||
Outstanding Common Stock and Units at June 30, 2016 | 21,040,917 | |||
Outstanding 8.250% Series A Cumulative Redeemable Preferred Stock at June 30, 2016 | 5,721,460 | |||
Outstanding Series B Redeemable Preferred Stock at June 30, 2016 | 1,890 | |||
Common Stock Dividend Yield | ||||
Annualized common stock dividend rate(2) | $ | 1.16 | ||
Price per common share(3) | $ | 13.00 | ||
Annualized common stock dividend yield | 8.92 | % |
(1)Annualized rate based on $0.29 per common share quarterly dividend for the quarter ending June 30, 2016, paid monthly. Actual dividend amounts will be determined by the Board of Directors.
(2) Closing common stock price of $13.00 as of June 30, 2016.
14 |
Bluerock Residential Growth REIT, Inc. |
EBITDA and Interest Information |
Second Quarter 2016 |
(Unaudited and dollars in thousands) |
Consolidated | Noncontrolling Interests' Share | BRG's Share | ||||||||||
Three Months Ended | Three Months Ended | Three Months Ended | ||||||||||
June 30, 2016 | June 30, 2016 | June 30, 2016 | ||||||||||
Q2 EBITDA CALCULATION | ||||||||||||
Net (loss) income attributable to common stockholders | $ | (5,043 | ) | $ | - | $ | (5,043 | ) | ||||
Net (loss) income attributable to noncontrolling interest | (54 | ) | 54 | - | ||||||||
Interest expense | 4,589 | (792 | ) | 3,797 | ||||||||
Acquisition costs | 249 | (22 | ) | 227 | ||||||||
Depreciation and amortization | 7,789 | (1,020 | ) | 6,769 | ||||||||
Preferred stock accretion | 168 | (2 | ) | 166 | ||||||||
Non-cash equity compensation | 2,436 | (36 | ) | 2,400 | ||||||||
EBITDA(1) | $ | 10,134 | $ | (1,818 | ) | $ | 8,316 | |||||
Adjusted Q2 EBITDA calculation(2) | ||||||||||||
EBITDA | $ | 10,134 | $ | (1,818 | ) | $ | 8,316 | |||||
Adjustment | 35 | - | 35 | |||||||||
Adjusted Q2 EBITDA | $ | 10,169 | $ | (1,818 | ) | $ | 8,351 | |||||
Adjusted Q2 EBITDA annualized | $ | 40,676 | $ | (7,272 | ) | $ | 33,404 | |||||
Adjusted Q2 interest calculation(2)(3) | ||||||||||||
Interest Expense | $ | 4,536 | $ | (830 | ) | $ | 3,706 | |||||
Adjustment | - | - | - | |||||||||
Adjusted Q2 interest expense | $ | 4,536 | $ | (830 | ) | $ | 3,706 | |||||
Adjusted Q2 interest expense annualized | $ | 18,144 | $ | (3,320 | ) | $ | 14,824 |
(1) See page 28 for a reconciliation of net income applicable to common shares 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, 2016: (i) additional investment in Alexan CityCentre and (ii) additional investment in Flagler Village. 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.
15 |
Bluerock Residential Growth REIT, Inc. |
Financial Statistics |
Second Quarter 2016 |
(Unaudited and dollars in thousands except for share and per share data) |
Noncontrolling | ||||||||||||
Consolidated | Interests' Share | BRG's Share | ||||||||||
Three Months Ended | Three Months Ended | Three Months Ended | ||||||||||
June 30, 2016 | June 30, 2016 | June 30, 2016 | ||||||||||
Interest Coverage Ratio | ||||||||||||
Adjusted Q2 EBITDA * | $ | 10,169 | $ | (1,818 | ) | $ | 8,351 | |||||
Adjusted Q2 interest expense (4) * | $ | 4,536 | $ | (830 | ) | $ | 3,706 | |||||
Interest Coverage Ratio | 2.24 | x | 2.25 | x | ||||||||
Quarterly Fixed Charge Coverage Ratio | ||||||||||||
Adjusted Q2 interest expense (4) * | $ | 4,536 | $ | (830 | ) | $ | 3,706 | |||||
Secured debt principal amortization | $ | 669 | $ | (215 | ) | $ | 454 | |||||
Total fixed charges | $ | 5,205 | $ | (1,045 | ) | $ | 4,160 | |||||
Adjusted Q2 EBITDA * | $ | 10,169 | $ | (1,818 | ) | $ | 8,351 | |||||
Adjusted Q2 EBITDA fixed charge coverage ratio | 1.95 | x | 2.01 | x | ||||||||
Net Debt / Adjusted EBITDA Ratio | ||||||||||||
Total debt(1) | $ | 481,861 | $ | (75,576 | ) | $ | 406,285 | |||||
Less: cash(3) | $ | (101,087 | ) | $ | 3,693 | $ | (97,394 | ) | ||||
Net debt (less cash) | $ | 380,774 | $ | (71,883 | ) | $ | 308,891 | |||||
Adjusted Q2 EBITDA (annualized)* | $ | 40,676 | $ | (7,272 | ) | $ | 33,404 | |||||
Net Debt / Adjusted EBITDA Ratio | 9.36 | x | 9.25 | x | ||||||||
Leverage as a Percentage of assets | ||||||||||||
Total debt(1) | $ | 481,861 | $ | (75,576 | ) | $ | 406,285 | |||||
Total undepreciated assets(2) | $ | 893,315 | $ | (118,266 | ) | $ | 775,049 | |||||
Total Debt / Total Undepreciated Assets | 53.9 | % | 52.4 | % | ||||||||
Net Debt / Total Undepreciated Assets | 42.6 | % | 39.9 | % | ||||||||
Leverage as a Percentage of Enterprise Value | ||||||||||||
Total market cap (5) | $ | 423,125 | $ | - | $ | 423,125 | ||||||
Total debt(1) | $ | 481,861 | $ | (75,576 | ) | $ | 406,285 | |||||
Total Enterprise Value | $ | 904,986 | $ | (75,576 | ) | $ | 829,410 | |||||
Total Debt / Total Enterprise Value | 53.2 | % | 49.0 | % | ||||||||
Net Debt / Total Enterprise Value | 42.1 | % | 37.2 | % |
(1)Total debt excludes amortization of fair market value adjustments of $3.0 million and deferred financing costs of $4.9 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, 2016 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, 2016: (i) additional investment in Alexan CityCentre and (ii) additional investment in Flagler Village. Actual results may differ significantly from the presented, adjusted amounts including annualized amounts. See prior page for calculations.
16 |
Bluerock Residential Growth REIT, Inc. |
Recent Acquisitions and Pending Investments |
(Unaudited and dollars in millions, except unit and per unit data) |
Summary of Recent Acquisitions and Pending Investments
Property | Location | Date of Investment | Year Built/ Renovated(4) | Number of Units | Ownership Interest in Property | Purchase Price | Average Rent(3) | |||||||||||||||
Recent Acquisitions | ||||||||||||||||||||||
ARIUM at Palmer Ranch | Sarasota, FL | 1/5/2016 | 2016 | 320 | 95.0 | % | $ | 39.3 | $ | 1,114 | ||||||||||||
ARIUM Gulfshore | Naples, FL | 1/5/2016 | 2016 | 368 | 95.0 | % | 47.0 | 1,096 | ||||||||||||||
West Morehead(1) | Charlotte, NC | 1/6/2016 | 2018 | 283 | * | 20.2 | (2) | 1,601 | ||||||||||||||
The Preserve at Henderson Beach | Destin, FL | 3/15/2016 | 2009 | 340 | 100.0 | % | 53.7 | 1,237 | ||||||||||||||
Total/Average for recent acquisitions | 1,311 | $ | 160.2 | $ | 1,243 | |||||||||||||||||
Pending Investments at June 30, 2016 | ||||||||||||||||||||||
Boca Townhomes(1) | Boca Raton, FL | 2017 | 90 | * | 9.1 | (2) | 2,316 | |||||||||||||||
East San Marco(1) | Jacksonville, FL | 2018 | 276 | * | 23.0 | (2) | 1,826 | |||||||||||||||
Tenside Apartment Homes(5) | Atlanta, GA | 2008 | 336 | 90.0 | % | 74.5 | 1,444 | |||||||||||||||
Atlanta Asset | Atlanta, GA | 1990 | 480 | 90.0 | % | 69.5 | 1,037 | |||||||||||||||
Total/Average for pending investments | 1,182 | $ | 176.1 | $ | 1,436 | |||||||||||||||||
Total recent acquisitions and pending investments | 2,493 | $ | 336.3 | $ | 1,333 |
(1) Property is currently under development.
(2) Represents estimated convertible preferred equity investment.
(3) Represents the average effective monthly rent per occupied unit for all occupied units for the three months ended June 30, 2016. The average rent for West Morehead, Boca Townhomes, East San Marco, Tenside Apartment Homes, and Atlanta Asset is pro forma based on underwriting.
(4) All dates are for the year construction was completed or expects to be completed, or the date that a significant renovation has or will be completed.
(5) Tenside Apartment Homes was acquired on July 14, 2016.
* The Company has made or plans to make a convertible preferred equity investment or a convertible mezzanine loan structure that is convertible into a common membership interest at BRG's option upon stabilization. The preferred investment earns or will earn a preferred return of 15%.
17 |
Bluerock Residential Growth REIT, Inc. |
Investments in Unconsolidated Real Estate Joint Ventures |
(Unaudited and dollars in millions, except unit and per unit data) |
For the Three Months Ended June 30, 2016
Multifamily Community Name | Location | Number of Units | Investment as of April 1, 2016 | Additional Investments (Dispositions) during the quarter | Investment as of June 30, 2016 | Preferred Return | Income Earned during the quarter | |||||||||||||||||||
Alexan CityCentre | Houston, TX | 340 | $ | 6,505 | $ | 890 | $ | 7,395 | 15 | % | $ | 253 | ||||||||||||||
Alexan Southside | Houston, TX | 269 | 17,322 | - | 17,322 | 15 | % | 648 | ||||||||||||||||||
Cheshire Bridge | Atlanta, GA | 285 | 16,360 | - | 16,360 | 15 | % | 612 | ||||||||||||||||||
Domain Phase 1 | Garland, TX | 301 | 3,733 | - | 3,733 | 15 | % | 140 | ||||||||||||||||||
EOS | Orlando, FL | 296 | 3,629 | - | 3,629 | 15 | % | 134 | ||||||||||||||||||
Flagler Village | Fort Lauderdale, FL | 326 | 8,189 | 592 | 8,781 | * | 2 | |||||||||||||||||||
Lake Boone Trail | Raleigh, NC | 245 | 9,919 | - | 9,919 | 15 | % | 371 | ||||||||||||||||||
West Morehead | Charlotte, NC | 283 | 3,493 | - | 3,493 | 15 | % | 131 | ||||||||||||||||||
Whetstone | Durham, NC | 204 | 12,932 | - | 12,932 | 15 | % | 484 | ||||||||||||||||||
2,549 | $ | 82,082 | $ | 1,482 | $ | 83,564 | $ | 2,775 |
For the Six Months Ended June 30, 2016
Multifamily Community Name | Location | Number of Units | Investment as of January 1, 2016 | Additional Investments (Dispositions) during the year | Investment as of June 30, 2016 | Preferred Return | Income Earned during the year | |||||||||||||||||||
Alexan CityCentre | Houston, TX | 340 | $ | 6,505 | $ | 890 | $ | 7,395 | 15 | % | 496 | |||||||||||||||
Alexan Southside | Houston, TX | 269 | 17,322 | - | 17,322 | 15 | % | 1,296 | ||||||||||||||||||
Cheshire Bridge | Atlanta, GA | 285 | 16,360 | - | 16,360 | 15 | % | 1,224 | ||||||||||||||||||
Domain Phase 1 | Garland, TX | 301 | 3,806 | (73 | ) | 3,733 | 15 | % | 277 | |||||||||||||||||
EOS | Orlando, FL | 296 | 3,629 | - | 3,629 | 15 | % | 272 | ||||||||||||||||||
Flagler Village | Fort Lauderdale, FL | 326 | 5,451 | 3,330 | 8,781 | * | (1 | ) | ||||||||||||||||||
Lake Boone Trail | Raleigh, NC | 245 | 9,919 | - | 9,919 | 15 | % | 742 | ||||||||||||||||||
West Morehead | Charlotte, NC | 283 | - | 3,493 | 3,493 | 15 | % | 294 | ||||||||||||||||||
Whetstone | Durham, NC | 204 | 12,231 | 701 | 12,932 | 15 | % | 943 | ||||||||||||||||||
2,549 | $ | 75,223 | $ | 8,341 | $ | 83,564 | $ | 5,543 |
* The property is currently an equity method investment with common ownership.
18 |
Bluerock Residential Growth REIT, Inc. |
Portfolio Information |
Second Quarter 2016 |
(Unaudited) |
Properties | 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 | $ | 1,114 | $ | 1,136 | 97.4 | % | |||||||||||
ARIUM Grandewood | Orlando, FL | 306 | 2005 | 1,202 | 1,259 | 97.4 | % | |||||||||||||
ARIUM Gulfshore | Naples, FL | 368 | 2016 | 1,096 | 1,114 | 96.4 | % | |||||||||||||
ARIUM Palms | Orlando, FL | 252 | 2008 | 1,182 | 1,223 | 93.9 | % | |||||||||||||
Ashton Reserve | Charlotte, NC | 473 | 2015 | 1,085 | 1,099 | 93.1 | % | |||||||||||||
Enders Place at Baldwin Park | Orlando, FL | 220 | 2003 | 1,633 | 1,696 | 96.1 | % | |||||||||||||
EOS(4) | Orlando, FL | 296 | 2015 | 1,211 | N/A | N/A | ||||||||||||||
Fox Hill | Austin, TX | 288 | 2010 | 1,169 | 1,239 | 97.9 | % | |||||||||||||
Lansbrook Village | Palm Harbor, FL | 617 | 2004 | 1,206 | 1,278 | 92.1 | % | |||||||||||||
MDA Apartments | Chicago, IL | 190 | 2006 | 2,266 | 2,290 | 97.1 | % | |||||||||||||
Park & Kingston | Charlotte, NC | 168 | 2015 | 1,179 | 1,221 | 94.9 | % | |||||||||||||
Sorrel(5) | Frisco, TX | 352 | 2015 | 1,288 | N/A | N/A | ||||||||||||||
Sovereign | Fort Worth, TX | 322 | 2015 | 1,278 | 1,363 | 95.2 | % | |||||||||||||
Springhouse at Newport News | Newport News, VA | 432 | 1985 | 842 | 867 | 96.7 | % | |||||||||||||
The Preserve at Henderson Beach | Destin, FL | 340 | 2009 | 1,237 | 1,303 | 96.9 | % | |||||||||||||
Village Green of Ann Arbor | Ann Arbor, MI | 520 | 2013 | 1,184 | 1,218 | 94.8 | % | |||||||||||||
Whetstone(4) | Durham, NC | 204 | 2015 | 1,325 | N/A | N/A | ||||||||||||||
Total Operating Properties | 5,668 | 1,209 | (6) | 1,254 | 94.0 | % | ||||||||||||||
Development Properties: | ||||||||||||||||||||
Alexan CityCentre | Houston, TX | 340 | 2017 | 2,144 | (7) | N/A | N/A | |||||||||||||
Alexan Southside Place | Houston, TX | 269 | 2018 | 2,019 | (7) | N/A | N/A | |||||||||||||
Cheshire Bridge | Atlanta, GA | 285 | 2017 | 1,559 | (7) | N/A | N/A | |||||||||||||
Domain Phase 1 | Garland, TX | 301 | 2018 | 1,425 | (7) | N/A | N/A | |||||||||||||
Flagler Village | Fort Lauderdale, FL | 326 | 2020 | 2,483 | (7) | N/A | N/A | |||||||||||||
Lake Boone Trail | Raleigh, NC | 245 | 2018 | 1,402 | (7) | N/A | N/A | |||||||||||||
West Morehead | Charlotte, NC | 283 | 2018 | 1,601 | (7) | N/A | N/A | |||||||||||||
Total Development Properties | 2,049 | 1,832 | N/A | N/A | ||||||||||||||||
Total Operating and Development Properties | 7,717 | $ | 1,393 | (6) | $ | 1,254 | 94.0 | % | ||||||||||||
Pending Properties: | ||||||||||||||||||||
Boca Townhomes | 90 | 2017 | 2,316 | N/A | N/A | |||||||||||||||
East San Marco | 276 | 2018 | 1,826 | N/A | N/A | |||||||||||||||
Tenside Apartment Homes(8) | 336 | 2008 | 1,444 | N/A | N/A | |||||||||||||||
Atlanta Asset | 480 | 1990 | 1,037 | N/A | N/A | |||||||||||||||
Total Pending Properties | 1,182 | $ | 1,436 | N/A | N/A | |||||||||||||||
Total Portfolio Including Pending Properties | 8,899 | $ | 1,399 | (6) | $ | 1,254 | 94.0 | % |
(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, 2016. The average rent for Whetstone, Sorrel, and EOS, which are still in lease-up, is pro forma based on underwriting. |
(3) | Revenue per occupied unit is total revenue divided by average number of occupied units for the three months ended June 30, 2016. |
(4) | Whetstone and EOS are currently preferred equity investments providing a stated investment return and both properties are in lease-up and actual average rents were $1,162 and $1,206, respectively, net of upfront lease-up concessions. |
(5) | Sorrel was in lease-up during the period ended June 30, 2016, average actual rents were $1,194, net of up-front lease-up concessions. |
(6) | Total excludes Whetstone, EOS, and Sorrel as the properties were in lease-up during the period. |
(7) | Represents pro forma rent upon stabilization based on current underwriting. |
(8) | Tenside Apartment Homes was acquired on July 14, 2016. |
19 |
Bluerock Residential Growth REIT, Inc. |
Development Properties |
As of June 30, 2016 |
(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 12 of this document for a discussion of risks and uncertainties.
Estimated/Actual Dates for | ||||||||||||||||||||||||
Under Construction(1) | Total Units | Total Estimated Construction Cost | Cost to Date | Total Available Financing | Construction Start | Initial Occupancy | Construction Completion | Stabilized Operations(2) | ||||||||||||||||
Alexan CityCentre | 340 | $ | 81.8 | $ | 40.6 | $ | 57.0 | 4Q14 | 2Q17 | 4Q17 | 2Q18 | |||||||||||||
Alexan Southside Place | 269 | $ | 48.6 | $ | 6.3 | $ | 31.6 | 4Q15 | 4Q17 | 2Q18 | 4Q18 | |||||||||||||
Cheshire Bridge | 285 | $ | 48.7 | $ | 16.2 | $ | 36.5 | 4Q15 | 1Q17 | 3Q17 | 4Q17 | |||||||||||||
Domain Phase 1 | 301 | $ | 50.7 | $ | 5.1 | $ | 33.1 | 4Q16 | 2Q18 | 3Q18 | 1Q19 | |||||||||||||
Flagler Village | 326 | $ | 107.8 | $ | 15.8 | $ | 75.5 | 4Q17 | 2Q19 | 2Q20 | 2Q21 | |||||||||||||
Lake Boone Trail | 245 | $ | 40.2 | $ | 9.9 | $ | 25.8 | 2Q16 | 1Q18 | 3Q18 | 2Q19 | |||||||||||||
West Morehead | 283 | $ | 57.9 | $ | 7.5 | $ | 40.0 | 4Q16 | 2Q18 | 4Q18 | 2Q19 |
(1)Properties are under development and the Company holds a preferred equity investment with an option to convert into partial ownership of the underlying asset upon stabilization, except Flagler Village.
(2)We defined stabilized occupancy as the earlier of the attainment of 90% physical occupancy or one year after the completion of construction.
20 |
Bluerock Residential Growth REIT, Inc. |
Condensed Consolidated Balance Sheets |
Second Quarter 2016 |
(Unaudited and dollars in thousands except for share and per share data) |
June 30, | December 31, | |||||||
2016 | 2015 | |||||||
ASSETS | ||||||||
Net Real Estate Investments | ||||||||
Land | $ | 80,637 | $ | 65,057 | ||||
Building and improvements | 562,769 | 474,608 | ||||||
Furniture, fixtures and equipment | 19,846 | 17,155 | ||||||
Total Gross Real Estate Investments | 663,252 | 556,820 | ||||||
Accumulated depreciation | (29,403 | ) | (23,437 | ) | ||||
Total Net Operating Real Estate Investments | 633,849 | 533,383 | ||||||
Operating real estate held for sale, net | 30,931 | - | ||||||
Total Net Real Estate Investments | 664,780 | 533,383 | ||||||
Cash and cash equivalents | 91,110 | 68,960 | ||||||
Restricted cash | 9,642 | 11,669 | ||||||
Due from affiliates | 951 | 861 | ||||||
Accounts receivable, prepaid and other assets | 7,787 | 6,742 | ||||||
Preferred equity investments and investments in unconsolidated real estate joint ventures | 83,564 | 75,223 | ||||||
In-place lease intangible assets, net | 851 | 2,389 | ||||||
Non-real estate assets associated with operating real estate held for sale | 346 | - | ||||||
Total Assets | $ | 859,031 | $ | 699,227 | ||||
LIABILITIES AND EQUITY | ||||||||
Mortgages payable | $ | 456,451 | $ | 380,102 | ||||
Mortgage payable associated with operating real estate held for sale | 23,505 | - | ||||||
Accounts payable | 691 | 587 | ||||||
Other accrued liabilities | 10,719 | 7,013 | ||||||
Due to affiliates | 1,680 | 1,485 | ||||||
Distributions payable | 4,994 | 3,163 | ||||||
Liabilities associated with operating real estate held for sale | 406 | - | ||||||
Total Liabilities | 498,446 | 392,350 | ||||||
8.250% Series A Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 10,875,000 and 2,875,000 shares authorized and 5,721,460 and 2,875,000 issued and outstanding, as of June 30, 2016 and December 31, 2015, respectively | 138,024 | 69,165 | ||||||
Series B Redeemable Preferred Stock, liquidation preference $1,000 per share, 150,000 shares authorized, 1,890 and none issued and outstanding, as of June 30, 2016 and December 31, 2015, respectively | 1,658 | - | ||||||
Stockholders' Equity | ||||||||
Preferred stock, $0.01 par value, 238,975,000 shares authorized; none issued and outstanding | - | - | ||||||
Common stock - Class A, $0.01 par value, 747,586,185 shares authorized; 19,565,468 and 19,202,112 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively | 196 | 192 | ||||||
Common stock - Class B-3, $0.01 par value, 804,605 shares authorized; none and 353,629 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively | - | 4 | ||||||
Additional paid-in-capital | 252,648 | 248,484 | ||||||
Distributions in excess of cumulative earnings | (62,633 | ) | (41,496 | ) | ||||
Total Stockholders' Equity | 190,211 | 207,184 | ||||||
Noncontrolling Interests | ||||||||
Operating partnership units | 2,595 | 2,908 | ||||||
Partially owned properties | 28,097 | 27,620 | ||||||
Total Noncontrolling Interests | 30,692 | 30,528 | ||||||
Total Equity | 220,903 | 237,712 | ||||||
TOTAL LIABILITIES AND EQUITY | $ | 859,031 | $ | 699,227 |
21 |
Bluerock Residential Growth REIT, Inc. |
Consolidated Statements of Operations |
For the Three Months Ended June 30, 2016 and 2015 |
(Dollars in thousands except for share and per share data) |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Revenues | ||||||||||||||||
Net rental income | $ | 17,513 | $ | 9,918 | $ | 33,441 | $ | 18,562 | ||||||||
Other property revenues | 886 | 551 | 1,592 | 943 | ||||||||||||
Total revenues | 18,399 | 10,469 | 35,033 | 19,505 | ||||||||||||
Expenses | ||||||||||||||||
Property operating | 7,389 | 4,362 | 13,982 | 8,226 | ||||||||||||
General and administrative | 1,704 | 738 | 2,978 | 1,666 | ||||||||||||
Management fees | 1,415 | 706 | 2,629 | 2,155 | ||||||||||||
Acquisition costs | 249 | 221 | 1,457 | 670 | ||||||||||||
Depreciation and amortization | 7,789 | 3,741 | 15,298 | 6,506 | ||||||||||||
Total expenses | 18,546 | 9,768 | 36,344 | 19,223 | ||||||||||||
Operating (loss) income | (147 | ) | 701 | (1,311 | ) | 282 | ||||||||||
Other income (expense) | ||||||||||||||||
Other income | - | 41 | - | 62 | ||||||||||||
Preferred returns and equity in income of unconsolidated real estate joint ventures | 2,775 | 1,295 | 5,543 | 2,025 | ||||||||||||
Equity in gain on sale of unconsolidated real estate joint venture interests | - | (15 | ) | - | 11,292 | |||||||||||
Interest expense, net | (4,589 | ) | (2,726 | ) | (8,817 | ) | (5,018 | ) | ||||||||
Total other (expense) income | (1,814 | ) | (1,405 | ) | (3,274 | ) | 8,361 | |||||||||
Net (loss) income | (1,961 | ) | (704 | ) | (4,585 | ) | 8,643 | |||||||||
Preferred stock dividends | (2,968 | ) | - | (4,451 | ) | - | ||||||||||
Preferred stock accretion | (168 | ) | - | (293 | ) | - | ||||||||||
Net (loss) income attributable to noncontrolling interests | ||||||||||||||||
Operating partnership units | (75 | ) | (10 | ) | (136 | ) | 65 | |||||||||
Partially-owned properties | 21 | (112 | ) | (14 | ) | 5,847 | ||||||||||
Net (loss) income attributable to noncontrolling interest | (54 | ) | (122 | ) | (150 | ) | 5,912 | |||||||||
Net (loss) income attributable to common stockholders | $ | (5,043 | ) | $ | (582 | ) | $ | (9,179 | ) | $ | 2,731 |
22 |
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, 2016 and 2015 |
(Unaudited and dollars in thousands except for share and per share data) |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net (loss) income attributable to common stockholders | $ | (5,043 | ) | $ | (582 | ) | $ | (9,179 | ) | $ | 2,731 | |||||
Common stockholders pro-rata share of: | ||||||||||||||||
Real estate depreciation and amortization(1) | 6,769 | 2,647 | 13,239 | 4,559 | ||||||||||||
Loss (gain) on sale of joint venture interests | - | 2 | - | (5,322 | ) | |||||||||||
FFO Attributable to Common Stockholders(2) | $ | 1,726 | $ | 2,067 | $ | 4,060 | $ | 1,968 | ||||||||
Common stockholders pro-rata share of: | ||||||||||||||||
Amortization of non-cash interest expense | 65 | 72 | 148 | 95 | ||||||||||||
Acquisition and disposition costs | 227 | 210 | 1,373 | 685 | ||||||||||||
Normally recurring capital expenditures | (208 | ) | (184 | ) | (416 | ) | (298 | ) | ||||||||
Preferred stock accretion | 166 | - | 289 | - | ||||||||||||
Non-cash equity compensation | 2,400 | 927 | 4,218 | 2,292 | ||||||||||||
AFFO Attributable to Common Stockholders(2) | $ | 4,376 | $ | 3,092 | $ | 9,672 | $ | 4,742 | ||||||||
Weighted average common shares outstanding - diluted(3) | 20,688,631 | 16,353,209 | 20,611,802 | 14,471,856 | ||||||||||||
PER SHARE INFORMATION: | ||||||||||||||||
FFO Attributable to Common Stockholders - diluted | $ | 0.08 | $ | 0.13 | $ | 0.20 | $ | 0.14 | ||||||||
AFFO Attributable to Common Stockholders - diluted | $ | 0.21 | $ | 0.19 | $ | 0.47 | $ | 0.33 | ||||||||
Pro forma AFFO Attributable to Common Stockholders - diluted (4) | $ | 0.38 | 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 27 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 305,568 was 20,994,199. AFFO related to the OP units is excluded from the calculation above. When including both, AFFO attributable to OP units and 305,568 of OP units in the weighted average share count, in the above calculation, AFFO is $0.21 per share.
(4) Pro forma AFFO for the three months ended June 30, 2016 assumes the investment of $80 million (consisting of available cash, earnest money deposits, expected loan proceeds, and net offering proceeds) had occurred on April 1, 2016: (i) additional investment of approximately $2 million in the Lake Boone convertible preferred equity investment, (ii) investment of approximately $23 million in a convertible mezzanine loan structure in connection with a joint venture, which entitles us to invest in Jacksonville MSA; (iii) investment of approximately $15 million in convertible preferred equity in a development asset in the Dallas MSA; (iv) investment of approximately $14 million in a convertible mezzanine loan structure in connection with a joint venture, which entitles us to invest in Ft. Lauderdale, FL; and (v) investment of approximately $9 million in a convertible mezzanine loan structure in a development asset an affiliate of the Company has under binding LOI in Boca Raton MSA. Pro forma guidance also assumes that $17 million is invested 65% in stabilized properties at a nominal 5.75% cap rate with interest expense at a rate of 3.75%, and 35% invested in convertible preferred equity development assets. 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, 2016, 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.
23 |
Bluerock Residential Growth REIT, Inc. |
Debt Summary Information |
As of June 30, 2016 |
(Unaudited and dollars in thousands except for share and per share data) |
Debt Outstanding
Outstanding Principal | Interest Rate | Fixed/ Floating | Maturity Date | |||||||||
ARIUM Grandewood | $ | 29,444 | 2.14 | % | Floating(1) | December 1, 2024 | ||||||
ARIUM Gulf Shore | 32,626 | 2.64 | % | Floating(2) | February 1, 2023 | |||||||
ARIUM Palmer Ranch | 26,925 | 2.64 | % | Floating(3) | February 1, 2023 | |||||||
ARIUM Palms | 24,999 | 2.69 | % | Floating(4) | September 1, 2022 | |||||||
Ashton Reserve I | 31,900 | 4.67 | % | Fixed | December 1, 2025 | |||||||
Ashton Reserve II | 15,270 | 3.09 | % | Floating(5) | January 1, 2026 | |||||||
Enders Place at Baldwin Park(6) | 24,946 | 4.30 | % | Fixed | November 1, 2022 | |||||||
Fox Hill | 26,705 | 3.57 | % | Fixed | April 1, 2022 | |||||||
Lansbrook Village | 44,405 | 4.41 | % | Blended(7) | March 31, 2018 | |||||||
MDA Apartments | 37,386 | 5.35 | % | Fixed | January 1, 2023 | |||||||
Park & Kingston(8) | 18,432 | 3.41 | % | Fixed | April 1, 2020 | |||||||
Sorrel | 38,684 | 2.76 | % | Floating(9) | May 1, 2023 | |||||||
Sovereign | 28,880 | 3.46 | % | Fixed | November 10, 2022 | |||||||
The Preserve at Henderson Beach | 37,318 | 4.65 | % | Fixed | January 5, 2023 | |||||||
Village Green of Ann Arbor | 41,940 | 3.92 | % | Fixed | October 1, 2022 | |||||||
Total | 459,860 | |||||||||||
Fair value adjustments | 1,451 | |||||||||||
Deferred financing costs, net | (4,860 | ) | ||||||||||
Total continuing operations | $ | 456,451 | ||||||||||
Held for sale | ||||||||||||
Springhouse at Newport News | $ | 22,001 | 5.66 | % | Fixed | January 1, 2020 | ||||||
Fair value adjustments | 1,507 | |||||||||||
Deferred financing costs, net | (3 | ) | ||||||||||
Total held for sale | $ | 23,505 | ||||||||||
Total | $ | 479,956 | ||||||||||
Weighted Average Interest Rate | 3.76 | % |
(1) ARIUM Grandewood loan bears interest at a floating rate of 1.67% plus one month LIBOR. At June 30, 2016, the interest rate was 2.14%.
(2) ARIUM Gulf Shore loan bears interest at a floating rate of 2.17% plus one month LIBOR. At June 30, 2016, the interest rate was 2.64%.
(3) ARIUM at Palmer Ranch loan bears interest at a floating rate of 2.17% plus one month LIBOR. At June 30, 2016, the interest rate was 2.64%.
(4) ARIUM Palms loan bears interest at a floating rate of 2.22% plus one month LIBOR. At June 30, 2016, the interest rate was 2.69%.
(5) Ashton II loan bears interest at a floating rate of 2.62% plus one month LIBOR. At June 30, 2016, the interest rate was 3.09%.
(6) The principal includes a $17.0 million loan at a 3.97% interest rate and a $7.9 million supplemental loan at a 5.01% interest rate.
(7) The principal balance includes the initial advance of $42.0 million at a fixed rate of 4.45% and an additional advance of $2.4 million that bears interest at a floating rate of three month LIBOR plus 3.00%. At June 30, 2016, the additional advance had an interest rate of 3.69%.
(8) The principal includes a $15.3 million loan at a 3.21% interest rate and a $3.1 million supplemental loan at a 4.34% interest rate.
(9) Sorrel loan bears interest at a floating rate of 2.29% plus one month LIBOR. At June 30, 2016, the interest rate was 2.76%.
24 |
Bluerock Residential Growth REIT, Inc. |
Debt Summary Information Continued |
As of June 30, 2016 |
(Unaudited and dollars in thousands except for share and per share data) |
Debt Maturity Schedules
Year | Fixed Rate | Floating Rate | Total | % of Total | ||||||||||||
2016 (July 1 - December 31) | $ | 1,699 | $ | 21 | $ | 1,720 | 0.36 | % | ||||||||
2017 | 4,103 | 44 | 4,147 | 0.86 | % | |||||||||||
2018 | 45,055 | 2,339 | 47,394 | 9.84 | % | |||||||||||
2019 | 4,561 | 437 | 4,998 | 1.04 | % | |||||||||||
2020 | 43,512 | 1,538 | 45,050 | 9.35 | % | |||||||||||
Thereafter | 212,578 | 165,974 | 378,552 | 78.56 | % | |||||||||||
$ | 311,508 | $ | 170,353 | $ | 481,861 | 100.00 | % | |||||||||
Fair Value Adjustments | 2,958 | - | 2,958 | |||||||||||||
Total | $ | 314,466 | $ | 170,353 | $ | 484,819 |
Amounts | % of Total | Weighted Average Rates | Weighted Average Maturities (years) | |||||||||||||
Continuing Operations | ||||||||||||||||
Secured Fixed Rate Debt | $ | 290,958 | 63.1 | % | 4.28 | % | 5.8 | |||||||||
Secured Floating Rate Debt | 170,353 | 36.9 | % | 2.64 | % | 7.1 | ||||||||||
Total Secured Continuing Operations | $ | 461,311 | 100.0 | % | 3.68 | % | 6.3 | |||||||||
Held for Sale | ||||||||||||||||
Secured Fixed Rate Debt: | $ | 23,508 | 100.0 | % | 5.66 | % | 3.5 | |||||||||
Secured Floating Rate Debt: | - | - | - | - | ||||||||||||
Total Secured Held for Sale | $ | 23,508 | 100.0 | % | 5.66 | % | 3.5 | |||||||||
Total | $ | 484,819 | 100.0 | % | 3.76 | % | 6.2 |
25 |
Bluerock Residential Growth REIT, Inc. |
2016 Third Quarter Outlook |
(Unaudited and dollars in thousands except for per share data) |
2016 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 | $ | 0.08 - $0.10 | $ | 0.28 - $0.30 | ||||
Operations | ||||||||
Revenue(1) | $ | 18,530 - $18,740 | $ | 22,210 - $22,420 | ||||
Property Operating Margin | 58.0% - 60.4 | % | 58.4% - 60.4 | % | ||||
Interest expense | $ | 4,790 | $ | 5,720 | ||||
General and administrative expenses as percentage of revenue (2) | 3.6% - 3.5 | % | 2.9% - 2.8 | % | ||||
Management fees | $ | 1,690 | $ | 1,725 | ||||
Depreciation and amortization expense | $ | 6,260 | * | |||||
Depreciation and amortization recapture (3) | 85.8 | % | * | |||||
Equity in operating earnings in unconsolidated subsidiaries (4) | $ | 2,830 | $ | 6,350 | ||||
Noncontrolling interest(5) | 3.6% - (2.2) | % | 0.3% - 14.3 | % | ||||
Recurring capex(6) | $ | 290 - $260 | $ | 350 - $320 |
* Amount is indeterminable.
(1)Revenue includes only property level revenues and excludes income from preferred investments, which flow through the "Equity in operating earnings of unconsolidated subsidiaries" line item.
(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 $155 million (consisting of available cash, earnest money deposits, expected loan proceeds, and net offering proceeds) had occurred on July 1, 2016: (i) additional investment of approximately $2 million in the Lake Boone convertible preferred equity investment; (ii) additional investment of approximately $17 million in the West Morehead convertible preferred equity investment; (iii) investment of approximately $23 million in a convertible mezzanine loan structure in connection with a joint venture, which entitles us to invest in Jacksonville MSA; (iv) investment of approximately $17 million in convertible preferred equity in the development asset in the Dallas MSA; (v) investment of approximately $3 million in a convertible mezzanine loan structure in connection with a joint venture, which entitles us to invest in Ft. Lauderdale FL; (vi) investment of approximately $9 million in a convertible mezzanine loan structure in a development asset the Company has under binding LOI in Boca Raton MSA; (vii) investment of approximately $22 million in Tenside Apartments in Georgia which closed on July 14, 2016; and (viii) investment of approximately $24 million in an operating asset located in the Atlanta MSA. Proforma guidance also assumes that $38 million is invested 65% in stabilized properties at a nominal 5.75% cap rate with interest expense at a rate of 3.75%, and 35% invested in convertible preferred equity development assets. 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, 2016, 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.
26 |
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
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 expenses, 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 expenses 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 seven additional properties and four investments accounted for on the equity method of accounting and sold two properties subsequent to June 30, 2015. 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.
27 |
Bluerock Residential Growth REIT, Inc. |
Definitions of Non-GAAP Financial Measures |
(Unaudited and dollars in thousands except for share and per share data) |
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 unclouded by non-cash items such as depreciation, amortization, the cost of debt or non-recurring items. Below is a reconciliation of net (loss) income applicable to common shares to EBITDA.
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net (loss) income attributable to common stockholders | $ | (5,043 | ) | $ | (582 | ) | $ | (9,179 | ) | $ | 2,731 | |||||
Net (loss) income attributable to noncontrolling interest | (54 | ) | (122 | ) | (150 | ) | 5,912 | |||||||||
Interest expense | 4,589 | 2,726 | 8,817 | 5,018 | ||||||||||||
Depreciation and amortization | 7,789 | 3,741 | 15,298 | 6,506 | ||||||||||||
Preferred stock accretion | 168 | - | 293 | - | ||||||||||||
Non-cash equity compensation | 2,436 | 936 | 4,281 | 2,331 | ||||||||||||
Acquisition costs | 249 | 221 | 1,457 | 670 | ||||||||||||
Equity in gain on sale of real estate assets of unconsolidated joint ventures | - | 15 | - | (11,292 | ) | |||||||||||
EBITDA | $ | 10,134 | $ | 6,935 | $ | 20,817 | $ | 11,876 |
28 |
Bluerock Residential Growth REIT, Inc. |
Definitions of Non-GAAP Financial Measures |
(Unaudited and dollars in thousands except for share and per share data) |
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 same store and non-same store contributions to consolidated NOI together with a reconciliation of NOI to net (loss) income attributable to common stockholders as computed in accordance with GAAP for the periods presented:
Three Months Ended (1) | Six Months Ended(2) | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net operating income | ||||||||||||||||
Same store | $ | 6,242 | $ | 5,740 | 10,496 | 9,651 | ||||||||||
Non-same store | 4,768 | 357 | 10,555 | 1,755 | ||||||||||||
Total net operating income | 11,010 | 6,097 | 21,051 | 11,406 | ||||||||||||
Less: | ||||||||||||||||
Interest expense | 4,510 | 2,676 | 8,651 | 5,041 | ||||||||||||
Total property income | 6,500 | 3,421 | 12,400 | 6,365 | ||||||||||||
Less: | ||||||||||||||||
Noncontrolling interest pro-rata share of property income | 1,065 | 941 | 2,081 | 1,877 | ||||||||||||
Other (income) loss related to JV/MM entities | - | 36 | - | 53 | ||||||||||||
Pro-rata share of properties’ income | 5,435 | 2,444 | 10,319 | 4,435 | ||||||||||||
Less pro-rata share of: | ||||||||||||||||
Depreciation and amortization | 6,769 | 2,647 | 13,239 | 4,559 | ||||||||||||
Amortization of non-cash interest expense | 65 | 71 | 148 | 96 | ||||||||||||
Management fees | 1,394 | 701 | 2,591 | - | ||||||||||||
Acquisition and disposition costs | 227 | 210 | 1,373 | 2,120 | ||||||||||||
Corporate operating expenses | 1,666 | 732 | 2,935 | 685 | ||||||||||||
Preferred dividends | 2,924 | - | 4,385 | 1,639 | ||||||||||||
Preferred stock accretion | 166 | - | 289 | |||||||||||||
Add pro-rata share of: | ||||||||||||||||
Other income | - | 51 | - | 68 | ||||||||||||
Preferred returns and equity in income of unconsolidated real estate joint ventures | 2,733 | 1,286 | 5,462 | 2,005 | ||||||||||||
Gain on sale of joint venture interest, net of fees | - | (2 | ) | - | 5,322 | |||||||||||
Net (loss) income attributable to common stockholders | $ | (5,043 | ) | $ | (582 | ) | $ | (9,179 | ) | $ | 2,731 |
(1) Same Store sales for the three months ended June 30, 2016 related to the following properties: Springhouse at Newport News, Enders Place at Baldwin Park, MDA Apartments, Village Green of Ann Arbor, Lansbrook Village, ARIUM Grandewood, Fox Hill, and Park & Kingston.
(2) Same Store sales for the six months ended June 30, 2016 related to the following properties: Springhouse at Newport News, Enders Place at Baldwin Park, MDA Apartments,Village Green of Ann Arbor, Lansbrook Village, and ARIUM Grandewood.
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