Exhibit 99.1
Corporate Headquarters
712 Fifth Ave., 9th Floor
New York, NY 10019
877.826.BLUE
PRESS RELEASE
For Immediate Release
Bluerock Residential Growth REIT Announces Third Quarter 2016 Results
New York, NY (November 7, 2016) – Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG, BRG PrA, BRG PrC and BRG PrD) (“the Company”) announced today its financial results for the quarter ended September 30, 2016.
Highlights
| • | Total revenues grew 69% to $19.6 million for the quarter from $11.6 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 third quarter of 2016 was $2.6 million, or $(0.12) per share, as compared to a net loss of $0.6 million, or $(0.03) per share, in the prior year period. Net loss attributable to common stockholders included non-cash expenses of $8.3 million in the third quarter of 2016 vs. $4.8 million for the prior year period. |
| • | Adjusted funds from operations attributable to common stockholders (“AFFO”) was $4.3 million for the quarter compared to $4.4 million for the prior year quarter. |
| • | AFFO per diluted share is $0.21 for the third quarter of 2016 as compared to $0.22 for the third quarter of 2015, and exceeded guidance of $0.08 - $0.10. |
| • | Pro forma AFFO per share of $0.40 for the third quarter exceeded pro forma guidance of $0.28 to $0.30 per share. |
| • | The Company paid the full amount of the third quarter’s management fee of $1.9 million in LTIP Units in lieu of cash payment. This favorably impacted both AFFO per share and pro forma AFFO per share by $0.09. |
| • | Property Net Operating Income (NOI) grew 75% to $12.1 million for the quarter, from $6.9 million in the prior year quarter. |
| • | Property NOI margins improved 220 basis points to 61.6% of revenue for the quarter, from 59.4% of revenue in the prior year quarter. |
| • | Same store NOI increased 8.1% for the quarter, as compared to the prior year quarter. |
| • | Consolidated real estate investments, at cost, increased 32% to $738 million at September 30, 2016 from $557 million at December 31, 2015. |
| • | The Company invested in one operating property totaling 336 units for a total purchase price of approximately $74.5 million and one property for the development of 90 units during the third quarter. In addition, the Company invested in two operating properties totaling 800 units for a total purchase price of $106.6 million subsequent to end of the quarter. |
| • | The Company declared a quarterly cash dividend on the 8.250% Series A preferred stock of $0.515625 per share for the third quarter, which was paid in cash on October 5, 2016. |
| • | The Company declared monthly dividends for the fourth 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 September 30, 2016. |
| • | The Company sold 6,937 shares of Series B preferred stock with associated warrants at a public offering price of $1,000 per share, for gross proceeds of approximately $7.0 million during the third quarter. |
| • | The Company declared monthly dividends for the fourth quarter of 2016 of $5.00 per share on the Company’s Series B preferred stock. |
| • | 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. |
| • | On August 8, 2016, the Company entered into an At-the-Market offering for Class A common stock up to $100,000,000. |
| • | On September 14, 2016, the Company commenced an At-the-Market 7.6250% Series C preferred stock offering (“ATM”) for up to $36,000,000. The Company sold 23,750 shares of Series C preferred stock under the At-the-Market offering during the third quarter for gross proceeds of approximately $0.6 million. |
| • | On October 13, 2016, the Company completed an underwritten offering of 2,700,000 shares of 7.125% Series D perpetual preferred stock at a public offering price of $25.00 per share for gross proceeds of $67.5 million, and on November 3, 2016, the Company closed on the sale of 150,602 shares of Series D preferred stock for gross proceeds of approximately $3.8 million pursuant to the underwriters’ exercise of the overallotment option. |
Management Commentary
“We are pleased to report our portfolio continued to perform well during the third quarter with same store NOI growth of 8.1% and AFFO per share above the high end of our guidance,” said Ramin Kamfar, the Company’s Chairman and CEO. “We remain focused on reducing our cost of capital, and building a high quality portfolio in our current footprint of growth markets in the Sunbelt, from the Carolinas to Florida and Texas.”
Third Quarter Acquisition, Development and Disposition Activity
| • | 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. |
| • | On August 10, 2016, the Company disposed of Springhouse at Newport News for a sales price of approximately $38.0 million, generating net proceeds to the Company of $9.0 million, an IRR of 17% and a return on equity of 1.8x. |
| • | On September 1, 2016, the Company made an investment in a 90-unit to-be-built Class A apartment community located in Boca Raton, Florida. This investment is for approximately $9.1 million, of which approximately $1.1 million was funded as of September 30, 2016. |
Pending Investments at September 30, 2016
| • | On October 13, 2016, the Company acquired a 90% interest in a 480-unit apartment community located in Atlanta, Georgia, known as Nevadan Apartments. The total purchase price was approximately $68.3 million, funded in part with a $48.4 million senior mortgage secured by the property. |
| • | On October 31, 2016, the Company acquired an 85% interest in a 320-unit, garden-style apartment community in Port St. Lucie, Florida, known as Apex Prima Vista Apartments. The total purchase price was $38.3 million, funded in part with a senior mortgage loan secured by the property of approximately $27.0 million. |
| • | The Company has an agreement to acquire a 92.5% interest in a 324-unit, garden-style apartment community located in Austin, Texas, known as Deerfield Apartments. The total purchase price is expected to be approximately $48.9 million, to be funded in part with a mortgage loan of approximately $34.2 million. |
| • | The Company has an agreement which entitles the Company to invest in a 266-unit to-be-built Class A apartment community located in Jacksonville, Florida. The investment of approximately $24.4 million is expected to be structured as a convertible mezzanine loan with an option to convert into majority indirect ownership of the underlying property upon stabilization. |
| • | The Company has an agreement to acquire a 90% interest in a 250-unit apartment community located in Austin, Texas, known as Legacy at Southpark. The total purchase price is expected to be approximately $36.8 million, to be funded in part with a mortgage loan of approximately $26.5 million. |
| • | The Company has an agreement to acquire a 98% interest in a 320-unit apartment community in the Roswell submarket of Atlanta, Georgia, known as Roswell City Walk. The total purchase price is expected to be approximately $76.0 million, to be funded in part with a mortgage loan of approximately $50.9 million. |
Third Quarter 2016 Financial Results
Net loss attributable to common stockholders for the third quarter of 2016 was $2.6 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 $5.2 million and income of unconsolidated real estate joint ventures of $0.7 million due to the increase in the size of our invest-to-own portfolio, a gain on sale of real estate investments of $4.9 million offset by related increases in management fees of $1.0 million, interest expense of $2.3 million, depreciation and amortization expense of $3.2 million, loss on early extinguishment of debt of $2.4 million, and the preferred stock income and accretion allocation of $4.2 million.
AFFO for the third quarter of 2016 was $4.3 million, or $0.21 per diluted share, as compared to $4.4 million, or $0.22 per share in the prior year period. AFFO was impacted by increases in property NOI of $5.2 million arising from significant investment activity in the past year and in income of unconsolidated real estate joint ventures of $0.7 million caused by expanding the size of our invest-to-own portfolio, offset by higher interest expense of $2.0 million and the preferred stock income allocation of $3.9 million.
Same Store Portfolio Performance
Same store NOI for the third quarter of 2016 increased by 8.1% from the same period in the prior year. There was a 7.5% 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 39 basis point increase in average occupancy and an additional 17 units acquired at our Lansbrook property and 15 additional units at Park & Kingston. Same store expenses increased 6.5%.
Dividend Details
On October 4, 2016, our board of directors authorized, and we declared, monthly dividends for the fourth 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 October 25, 2016, which was paid in cash on November 4, 2016, and as of November 25, 2016 and December 23, 2016, which will be paid in cash on December 5, 2016 and January 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 October 25, 2016, $0.096667 per share for the dividend which will be paid to stockholders of record as of November 25, 2016, and December 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 October 4, 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 October 25, 2016, which was paid in cash on November 4, 2016 and as of November 25, 2016 and December 23, 2016, which will be paid in cash on December 5, 2016 and January 5, 2017.
Q4 2016 Outlook
For the fourth quarter of 2016, the Company anticipates AFFO in the range of $0.05 to $0.07 per share, and $0.31 to $0.33 per share on a pro forma basis. For assumptions underlying earnings guidance, please see page 29 of Company’s Q3 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.
Conference Call
All interested parties can listen to the live conference call at 11:00 AM ET on Monday, November 7, 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 conference call will be available for replay on the Company’s website two hours after the call concludes, and will remain available until December 7, 2016 athttp://services.choruscall.com/links/brg161107.html, as well as by dialing +1 (877) 344-7529 in the U.S., or +1 (412) 317-0088 internationally, and requesting conference number 10095582.
The full text of this Earnings Release and additional Supplemental Information is available in the Investor Relations section on the Company’s website athttp://www.bluerockresidential.com.
About Bluerock Residential Growth REIT, Inc.
Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG) is a real estate investment trust that focuses on acquiring a diversified portfolio of Class A institutional-quality apartment properties in demographically attractive growth markets to appeal to the renter by choice. The Company’s objective is to generate value through off-market/relationship-based transactions and, at the asset level, through improvements to operations and properties. BRG generally invests with strategic regional partners, including some of the best-regarded private owner-operators in the United States, making it possible to operate as a local sharpshooter in each of its markets while enhancing off-market sourcing capabilities. The Company is included in the Russell 2000 and Russell 3000 Indexes. BRG has elected to be taxed as a real estate investment trust (REIT) for U.S. federal income tax purposes.
For more information, please visit the Company’s website 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.
Portfolio Summary
The following is a summary of our investments, operating properties and convertible preferred equity investments, as of September 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 | | | $ | 1,144 | | | | 93 | % |
| ARIUM Grandewood | | Orlando, FL | | | 2005 | | | | 95 | % | | | 306 | | | | 1,220 | | | | 96 | % |
| ARIUM Gulfshore | | Naples, FL | | | 2016 | | | | 95 | % | | | 368 | | | | 1,121 | | | | 94 | % |
| ARIUM Palms | | Orlando, FL | | | 2008 | | | | 95 | % | | | 252 | | | | 1,211 | | | | 95 | % |
| ARIUM Westside | | Atlanta, GA | | | 2008 | | | | 90 | % | | | 336 | | | | 1,453 | | | | 96 | % |
| Ashton Reserve | | Charlotte, NC | | | 2015 | | | | 100 | % | | | 473 | | | | 1,063 | | | | 94 | % |
| Enders Place at Baldwin Park | | Orlando, FL | | | 2003 | | | | 90 | % | | | 220 | | | | 1,651 | | | | 95 | % |
| Fox Hill | | Austin, TX | | | 2010 | | | | 95 | % | | | 288 | | | | 1,196 | | | | 95 | % |
| Lansbrook Village | | Palm Harbor, FL | | | 2004 | | | | 90 | % | | | 618 | | | | 1,241 | | | | 91 | % |
| MDA Apartments | | Chicago, IL | | | 2006 | | | | 35 | % | | | 190 | | | | 2,283 | | | | 98 | % |
| Park & Kingston | | Charlotte, NC | | | 2015 | | | | 96 | % | | | 168 | | | | 1,196 | | | | 95 | % |
| Sorrel | | Frisco, TX | | | 2015 | | | | 95 | % | | | 352 | | | | 1,286 | | | | 90 | % |
| Sovereign | | Fort Worth, TX | | | 2015 | | | | 95 | % | | | 322 | | | | 1,296 | | | | 97 | % |
| The Preserve at Henderson Beach | | Destin, FL | | | 2009 | | | | 100 | % | | | 340 | | | | 1,293 | | | | 91 | % |
| Village Green of Ann Arbor | | Ann Arbor, MI | | | 2013 | | | | 49 | % | | | 520 | | | | 1,205 | | | | 98 | % |
| Operating Properties Subtotal/Average | | | | | | | | | | | | | 5,073 | | | $ | 1,281 | | | | 94 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
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 | % | | | 270 | | | | 2,019 | | | | - | |
| APOK Townhomes(5) | | Boca Raton, FL | | | 2018 | | | | * | | | | 90 | | | | 2,316 | | | | - | |
| 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 | | | | 92 | % |
| Flagler Village(5) | | Fort Lauderdale, FL | | | 2020 | | | | * | | | | 400 | | | | 2,483 | | | | - | |
| Lake Boone Trail(5) | | Raleigh, NC | | | 2018 | | | | 72 | % | | | 245 | | | | 1,402 | | | | - | |
| West Morehead(5) | | Charlotte, NC | | | 2018 | | | | 80 | % | | | 286 | | | | 1,601 | | | | - | |
| Whetstone | | Durham, NC | | | 2015 | | | | 93 | % | | | 204 | | | | 1,252 | | | | 85 | % |
| Convertible Preferred Equity Investments Subtotal/Average | | | | 2,717 | | | $ | 1,754 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Operating Properties and Convertible Preferred Equity Investments Total/Average | | | 7,790 | | | $ | 1,454 | | | | | |
(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 September 30, 2016.
(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) EOS is currently a preferred equity investment providing a stated investment return and was in lease-up during the three months ended September 30, 2016. Actual average rent was $1,244 net of upfront lease-up concessions.
(5) Property is currently in development.
* The property is currently an equity method investment with common ownership.
Consolidated Statement of Operations
For the Three Months and Nine Months Ended September 30, 2016 and 2015
(Unaudited and dollars in thousands except for share and per share data)
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2016 | | | 2015 | | | 2016 | | | 2015 | |
| | | (Unaudited) | | | (Unaudited) | | | (Unaudited) | | | (Unaudited) | |
| Revenues | | | | | | | | | | | | | | | | |
| Net rental income | | $ | 18,572 | | | $ | 11,049 | | | $ | 52,013 | | | $ | 29,611 | |
| Other property revenues | | | 1,052 | | | | 511 | | | | 2,644 | | | | 1,454 | |
| Total revenues | | | 19,624 | | | | 11,560 | | | | 54,657 | | | | 31,065 | |
| Expenses | | | | | | | | | | | | | | | | |
| Property operating | | | 7,538 | | | | 4,698 | �� | | | 21,519 | | | | 12,924 | |
| General and administrative | | | 1,177 | | | | 1,246 | | | | 4,155 | | | | 2,912 | |
| Management fees | | | 1,866 | | | | 896 | | | | 4,495 | | | | 3,051 | |
| Acquisition costs | | | 689 | | | | 739 | | | | 2,143 | | | | 1,409 | |
| Depreciation and amortization | | | 7,166 | | | | 3,993 | | | | 22,465 | | | | 10,499 | |
| Total expenses | | | 18,436 | | | | 11,572 | | | | 54,777 | | | | 30,795 | |
| Operating income (loss) | | | 1,188 | | | | (12 | ) | | | (120 | ) | | | 270 | |
| Other income (expense) | | | | | | | | | | | | | | | | |
| Other income | | | 26 | | | | - | | | | 26 | | | | 62 | |
| Preferred returns and equity in income of unconsolidated real estate joint ventures | | | 3,074 | | | | 2,366 | | | | 8,617 | | | | 4,391 | |
| Equity in gain on sale of unconsolidated real estate joint venture interests | | | - | | | | 11 | | | | - | | | | 11,303 | |
| Gain on sale of real estate investments | | | 4,947 | | | | - | | | | 4,947 | | | | - | |
| Loss on early extinguishment of debt | | | (2,393 | ) | | | - | | | | (2,393 | ) | | | - | |
| Interest expense, net | | | (5,274 | ) | | | (2,967 | ) | | | (14,091 | ) | | | (7,985 | ) |
| Total other income (expense) | | | 380 | | | | (590 | ) | | | (2,894 | ) | | | 7,771 | |
| | | | | | | | | | | | | | | | | |
| Net income (loss) | | | 1,568 | | | | (602 | ) | | | (3,014 | ) | | | 8,041 | |
| | | | | | | | | | | | | | | | | |
| Preferred stock dividends | | | (3,940 | ) | | | - | | | | (8,391 | ) | | | - | |
| Preferred stock accretion | | | (275 | ) | | | - | | | | (568 | ) | | | - | |
| | | | | | | | | | | | | | | | | |
| Net (loss) income attributable to noncontrolling interests | | | | | | | | | | | | | | | | |
| Operating partnership units | | | (37 | ) | | | (8 | ) | | | (173 | ) | | | 57 | |
| Partially-owned properties | | | (59 | ) | | | (20 | ) | | | (73 | ) | | | 5,827 | |
| Net (loss) income attributable to noncontrolling interests | | | (96 | ) | | | (28 | ) | | | (246 | ) | | | 5,884 | |
| Net (loss) income attributable to common stockholders | | $ | (2,551 | ) | | $ | (574 | ) | | $ | (11,727 | ) | | $ | 2,157 | |
Consolidated Balance Sheets
Third Quarter 2016
(Unaudited and dollars in thousands except for share and per share amounts)
| | | September 30, | | | December 31, | |
| | | 2016 | | | 2015 | |
| | | (Unaudited) | | | | |
| ASSETS | | | | | | | | |
| Net Real Estate Investments | | | | | | | | |
| Land | | $ | 89,330 | | | $ | 65,057 | |
| Building and improvements | | | 626,854 | | | | 474,608 | |
| Furniture, fixtures and equipment | | | 21,615 | | | | 17,155 | |
| Total Gross Real Estate Investments | | | 737,799 | | | | 556,820 | |
| Accumulated depreciation | | | (35,266 | ) | | | (23,437 | ) |
| Total Net Real Estate Investments | | | 702,533 | | | | 533,383 | |
| Cash and cash equivalents | | | 130,521 | | | | 68,960 | |
| Restricted cash | | | 24,751 | | | | 11,669 | |
| Due from affiliates | | | 961 | | | | 861 | |
| Accounts receivable, prepaid and other assets | | | 10,313 | | | | 6,742 | |
| Preferred equity investments and investments in unconsolidated real estate joint ventures | | | 92,558 | | | | 75,223 | |
| In-place lease intangible assets, net | | | 1,269 | | | | 2,389 | |
| Total Assets | | $ | 962,906 | | | $ | 699,227 | |
| | | | | | | | | |
| LIABILITIES AND EQUITY | | | | | | | | |
| Mortgages payable | | $ | 525,036 | | | $ | 380,102 | |
| Accounts payable | | | 514 | | | | 587 | |
| Other accrued liabilities | | | 14,350 | | | | 7,013 | |
| Due to affiliates | | | 2,152 | | | | 1,485 | |
| Distributions payable | | | 5,973 | | | | 3,163 | |
| Total Liabilities | | | 548,025 | | | | 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 September 30, 2016 and December 31, 2015, respectively | | | 138,130 | | | | 69,165 | |
| Series B Redeemable Preferred Stock, liquidation preference $1,000 per share, 150,000 shares authorized, 8,827 and none issued and outstanding, as of September 30, 2016 and December 31, 2015, respectively | | | 7,698 | | | | - | |
| 7.6250% Series C Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 4,000,000 and none shares authorized; and 2,323,750 and none issued and outstanding as of September 30, 2016 and December 31, 2015, respectively | | | 56,076 | | | | - | |
| | | | | | | | | |
| Stockholders' Equity | | | | | | | | |
| Preferred stock, $0.01 par value, 234,975,000 shares authorized; none issued and outstanding | | | - | | | | - | |
| Common stock - Class A, $0.01 par value, 747,586,185 shares authorized; 19,566,437 and 19,202,112 shares issued and outstanding as of September 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 September 30, 2016 and December 31, 2015, respectively | | | - | | | | 4 | |
| Additional paid-in-capital | | | 254,770 | | | | 248,484 | |
| Distributions in excess of cumulative earnings | | | (71,249 | ) | | | (41,496 | ) |
| Total Stockholders' Equity | | | 183,717 | | | | 207,184 | |
| | | | | | | | | |
| Noncontrolling Interests | | | | | | | | |
| Operating partnership units | | | 2,432 | | | | 2,908 | |
| Partially owned properties | | | 26,828 | | | | 27,620 | |
| Total Noncontrolling Interests | | | 29,260 | | | | 30,528 | |
| Total Equity | | | 212,977 | | | | 237,712 | |
| TOTAL LIABILITIES AND EQUITY | | $ | 962,906 | | | $ | 699,227 | |
Non-GAAP Financial Measures
The foregoing supplemental financial data includes certain non-GAAP financial measures that we believe are helpful in understanding our business and performance, as further described below. Our definition and calculation of these non-GAAP financial measures may differ from those of other REITs, and may, therefore, not be comparable.
Funds from Operations and Adjusted Funds from Operations
Funds from operations attributable to common stockholders (“FFO”) is a non-GAAP financial measure that is widely recognized as a measure of REIT operating performance. We consider FFO to be an appropriate supplemental measure of our operating performance as it is based on a net income analysis of property portfolio performance that excludes non-cash items such as depreciation. The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time. Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT, using historical accounting for depreciation, could be less informative. We define FFO, consistent with the National Association of Real Estate Investment Trusts, or (“NAREIT's”) definition, as net income, computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus depreciation and amortization of real estate assets, plus impairment write-downs of depreciable real estate, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis.
In addition to FFO, we use adjusted funds from operations attributable to common stockholders (“AFFO”). AFFO is a computation made by analysts and investors to measure a real estate company's operating performance by removing the effect of items that do not reflect ongoing property operations. To calculate AFFO, we further adjust FFO by adding back certain items that are not added to net income in NAREIT's definition of FFO, such as acquisition 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.
We have acquired interests in six additional properties and five investments accounted for on the equity method of accounting and sold two properties subsequent to September 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 | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2016 | | | 2015 | | | 2016 | | | 2015 | |
| Net (loss) income attributable to common stockholders | | $ | (2,551 | ) | | $ | (574 | ) | | $ | (11,727 | ) | | $ | 2,157 | |
| | | | | | | | | | | | | | | | | |
| Common stockholders pro-rata share of: | | | | | | | | | | | | | | | | |
| Real estate depreciation and amortization(1) | | | 6,197 | | | | 3,082 | | | | 19,436 | | | | 7,641 | |
| Loss (gain) on sale of joint venture interests | | | - | | | | 2 | | | | - | | | | (5,320 | ) |
| Gain on sale of real estate assets | | | (4,876 | ) | | | - | | | | (4,876 | ) | | | - | |
| FFO Attributable to Common Stockholders | | $ | (1,230 | ) | | $ | 2,510 | | | $ | 2,833 | | | $ | 4,478 | |
| | | | | | | | | | | | | | | | | |
| Common stockholders pro-rata share of: | | | | | | | | | | | | | | | | |
| Amortization of non-cash interest expense | | | 472 | | | | 148 | | | | 620 | | | | 243 | |
| Acquisition and disposition costs | | | 619 | | | | 682 | | | | 1,993 | | | | 1,367 | |
| Loss on early extinguishment of debt | | | 2,269 | | | | - | | | | 2,269 | | | | - | |
| Normally recurring capital expenditures | | | (239 | ) | | | (215 | ) | | | (656 | ) | | | (513 | ) |
| Preferred stock accretion | | | 271 | | | | - | | | | 560 | | | | - | |
| Non-cash equity compensation | | | 2,382 | | | | 1,529 | | | | 6,600 | | | | 3,821 | |
| Non-recurring equity in earnings of unconsolidated joint ventures | | | (231 | ) | | | (289 | ) | | | (231 | ) | | | (289 | ) |
| AFFO Attributable to Common Stockholders | | $ | 4,313 | | | $ | 4,365 | | | $ | 13,988 | | | $ | 9,107 | |
| | | | | | | | | | | | | | | | | |
| Weighted average common shares outstanding-diluted | | | 20,909,727 | | | | 20,181,656 | | | | 20,711,836 | | | | 16,396,038 | |
| | | | | | | | | | | | | | | | | |
| PER SHARE INFORMATION: | | | | | | | | | | | | | | | | |
| FFO Attributable to Common Stockholders - diluted | | $ | (0.06 | ) | | $ | 0.12 | | | $ | 0.14 | | | $ | 0.27 | |
| AFFO Attributable to Common Stockholders - diluted | | $ | 0.21 | | | $ | 0.22 | | | $ | 0.68 | | | $ | 0.56 | |
| Pro forma AFFO Attributable to Common Stockholders - diluted (2) | | $ | 0.40 | | | | 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 September 30, 2016 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.
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 | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2016 | | | 2015 | | | 2016 | | | 2015 | |
| | | | | | | | | | | | | |
| Net (loss) income attributable to common stockholders | | $ | (2,551 | ) | | $ | (574 | ) | | $ | (11,727 | ) | | $ | 2,157 | |
| Net (loss) income attributable to noncontrolling interest | | | (96 | ) | | | (28 | ) | | | (246 | ) | | | 5,884 | |
| Interest expense | | | 5,274 | | | | 2,967 | | | | 14,091 | | | | 7,985 | |
| Depreciation and amortization | | | 7,166 | | | | 3,993 | | | | 22,465 | | | | 10,499 | |
| Preferred stock accretion | | | 275 | | | | - | | | | 568 | | | | - | |
| Non-cash equity compensation | | | 2,417 | | | | 1,543 | | | | 6,698 | | | | 3,875 | |
| Non-recurring equity in earnings of unconsolidated joint ventures | | | (234 | ) | | | (289 | ) | | | (234 | ) | | | (289 | ) |
| Acquisition costs | | | 689 | | | | 739 | | | | 2,143 | | | | 1,409 | |
| Loss on early extinguishment of debt | | | 2,393 | | | | - | | | | 2,393 | | | | - | |
| Gain on sale of unconsolidated real estate joint venture interest | | | - | | | | (11 | ) | | | - | | | | (11,303 | ) |
| Gain on sale of real estate assets | | | (4,947 | ) | | | - | | | | (4,947 | ) | | | - | |
| EBITDA | | $ | 10,386 | | | $ | 8,340 | | | $ | 31,204 | | | $ | 20,217 | |
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.
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) | | | Nine Months Ended(2) | |
| | | September 30, | | | September 30, | |
| | | 2016 | | | 2015 | | | 2016 | | | 2015 | |
| Net income (loss) attributable to common stockholders | | $ | (2,551 | ) | | $ | (574 | ) | | $ | (11,727 | ) | | $ | 2,157 | |
| Add pro-rata share: | | | | | | | | | | | | | | | | |
| Depreciation and amortization | | | 6,197 | | | | 3,082 | | | | 19,436 | | | | 7,641 | |
| Amortization of non-cash interest expense | | | 472 | | | | 148 | | | | 620 | | | | 243 | |
| Management fees | | | 1,839 | | | | 890 | | | | 4,430 | | | | 3,011 | |
| Acquisition and disposition costs | | | 619 | | | | 682 | | | | 1,993 | | | | 1,367 | |
| Loss on early extinguishment of debt | | | 2,269 | | | | - | | | | 2,269 | | | | - | |
| Corporate operating expenses | | | 1,169 | | | | 1,245 | | | | 4,101 | | | | 2,886 | |
| Preferred dividends | | | 3,883 | | | | - | | | | 8,268 | | | | - | |
| Preferred stock accretion | | | 271 | | | | - | | | | 560 | | | | - | |
| Less pro-rata share: | | | | | | | | | | | | | | | | |
| Other income | | | 26 | | | | 23 | | | | 26 | | | | 91 | |
| Preferred returns and equity in income of unconsolidated real estate joint ventures | | | 3,030 | | | | 2,327 | | | | 8,491 | | | | 4,331 | |
| (Loss) gain on sale of joint venture interest, net of fees | | | - | | | | (2 | ) | | | - | | | | 5,320 | |
| Gain on sale of real estate assets | | | 4,876 | | | | - | | | | 4,876 | | | | - | |
| Pro-rata share of properties' income (loss) | | | 6,236 | | | | 3,125 | | | | 16,557 | | | | 7,563 | |
| Add: | | | | | | | | | | | | | | | | |
| Noncontrolling interest pro-rata share of property income | | | 1,120 | | | | 752 | | | | 3,200 | | | | 2,673 | |
| Other (income) loss related to JV/MM entities | | | - | | | | 14 | | | | - | | | | 66 | |
| Total property income (loss) | | | 7,356 | | | | 3,891 | | | | 19,757 | | | | 10,302 | |
| Add: | | | | | | | | | | | | | | | | |
| Interest expense | | | 4,730 | | | | 2,942 | | | | 13,381 | | | | 7,980 | |
| Net operating income | | | 12,086 | | | | 6,833 | | | | 33,138 | | | | 18,282 | |
| Less: | | | | | | | | | | | | | | | | |
| Non-same store net operating income | | | 6,338 | | | | 1,516 | | | | 19,228 | | | | 5,330 | |
| Same store net operating income | | $ | 5,748 | | | $ | 5,317 | | | $ | 13,910 | | | $ | 12,952 | |
(1) Same Store sales for the three months ended September 30, 2016 related to the following properties: 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 nine months ended September 30, 2016 related to the following properties: Enders Place at Baldwin Park, MDA Apartments,Village Green of Ann Arbor, Lansbrook Village, and ARIUM Grandewood.
Contact
(Media)
Josh Hoffman
(208) 475.2380
jhoffman@bluerockre.com
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