| Fourth Quarter 2015 |
Table of Contents
| Company Profile | 3 | ||||
| Financial Summary of the Fourth Quarter and Full Year 2015 | 4 | ||||
| 2016 Guidance | 5 | ||||
| Highlights of the Fourth Quarter and Full Year 2015 and Subsequent Events | 5 | ||||
| Consolidated Statements of Operations | 7 | ||||
| Reconciliation of Funds From Operations Attributable to Common Stockholders and Unitholders, Normalized Funds From Operations Attributable to Common Stockholders and Unitholders, and Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders to Net Loss Attributable to Common Stockholders | 9 | ||||
| Notes to Reconciliation of Funds From Operations Attributable to Common Stockholders and Unitholders, Normalized Funds From Operations Attributable to Common Stockholders and Unitholders, and Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders to Net Loss Attributable to Common Stockholders | 11 | ||||
| Consolidated Balance Sheets | 12 | ||||
| Consolidated Statements of Cash Flows | 13 | ||||
| Real Estate Loan Portfolio | 14 | ||||
| Multifamily Communities | 15 | ||||
| Capital Expenditures | 16 | ||||
| Retail Portfolio | 17 | ||||
| Multifamily Same Store Financial Data | 18 | ||||
| Definitions of Non-GAAP Measures | 19 | ||||
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Preferred Apartment Communities, Inc. Page 2
Supplemental Financial Data
| Fourth Quarter 2015 |
Preferred Apartment Communities, Inc.
Preferred Apartment Communities, Inc. (NYSE: APTS), or the Company, is a Maryland corporation formed primarily to acquire and operate multifamily properties in select targeted markets throughout the United States. As part of our business strategy, we may enter into forward purchase contracts or purchase options for to-be-built multifamily communities and we may make real estate related loans, provide deposit arrangements, or provide performance assurances, as may be necessary or appropriate, in connection with the construction of multifamily communities and other properties. As a secondary strategy, we also may acquire or originate senior mortgage loans, subordinate loans or mezzanine debt secured by interests in multifamily properties, membership or partnership interests in multifamily properties and other multifamily related assets and invest not more than 20% of our assets in other real estate related investments, such as grocery-anchored shopping centers, as determined by Preferred Apartment Advisors, LLC, or our Manager, as appropriate for us. At December 31, 2015, the Company was the approximate 98.8% owner of Preferred Apartment Communities Operating Partnership, L.P., or the Operating Partnership. We elected to be taxed as a real estate investment trust under the Internal Revenue Code of 1986, as amended, commencing with our tax year ended December 31, 2011.
Forward-Looking Statements
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Estimates of future earnings, guidance, goals and performance are, by definition, and certain other statements in this Supplemental Financial Data Report may constitute, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, achievements or transactions to be materially different from the results, guidance, goals, performance, achievements or transactions expressed or implied by the forward-looking statements. Factors that impact such forward-looking statements include, among others, our business and investment strategy; legislative or regulatory actions; the state of the U.S. economy generally or in specific geographic areas; economic trends and economic recoveries; our ability to obtain and maintain debt or equity financing; financing and advance rates for our target assets; our leverage level; changes in the values of our assets; availability of attractive investment opportunities in our target markets; our ability to maintain our qualification as a real estate investment trust, or REIT, for U.S. federal income tax purposes; our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended; availability of quality personnel; our understanding of our competition and market trends in our industry; and interest rates, real estate values, the debt securities markets and the general economy.
Except as otherwise required by the federal securities laws, we assume no liability to update the information in this Supplemental Financial Data Report.
We refer you to the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the twelve months ended December 31, 2014 that was filed with the Securities and Exchange Commission, or SEC, on March 16, 2015, which discusses various factors that could adversely affect our financial results. Such risk factors and information may have been updated or supplemented by our Form 10-Q and Form 8-K filings and other documents filed after March 16, 2015 and from time to time with the SEC.
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Preferred Apartment Communities, Inc. Page 3
Supplemental Financial Data
| Fourth Quarter 2015 |
Financial Summary of the Fourth Quarter and Full Year 2015
(See Definitions of Non-GAAP Measures on page 19)
| Three months ended: | Change inc (dec): | |||||||||||||
| 12/31/2015 | 12/31/2014 | Amount | Percentage | |||||||||||
| Revenues | $ | 33,916,477 | $ | 20,048,438 | $ | 13,868,039 | 69.2 | % | ||||||
| FFO | $ | 4,842,395 | $ | 5,179,776 | $ | (337,381 | ) | (6.5 | )% | |||||
FFO per share (1) | $ | 0.21 | $ | 0.25 | $ | (0.04 | ) | (16.0 | )% | |||||
| Acquisition costs and other adjustments | 2,877,100 | 498,582 | $ | 2,378,518 | 477.1 | % | ||||||||
| NFFO | $ | 7,719,495 | $ | 5,678,358 | $ | 2,041,137 | 35.9 | % | ||||||
NFFO per share (1) | $ | 0.34 | $ | 0.28 | $ | 0.06 | 21.4 | % | ||||||
| AFFO (plus preferred dividends) | $ | 11,659,899 | $ | 6,870,233 | $ | 4,789,666 | 69.7 | % | ||||||
| Preferred dividends | (6,374,354 | ) | (2,457,488 | ) | ||||||||||
| AFFO | $ | 5,285,545 | $ | 4,412,745 | $ | 872,800 | 19.8 | % | ||||||
AFFO per share (1) | $ | 0.23 | $ | 0.22 | $ | 0.01 | 4.5 | % | ||||||
| Dividends per share of Common Stock | $ | 0.1925 | $ | 0.175 | $ | 0.018 | 10.3 | % | ||||||
| Cash flow from operations | $ | 7,033,295 | $ | 5,438,478 | $ | 1,594,817 | 29.3 | % | ||||||
| Total assets | $ | 1,295,529,033 | $ | 691,382,907 | $ | 604,146,126 | 87.4 | % | ||||||
| Weighted average shares of Common Stock | ||||||||||||||
| and Units outstanding | 22,678,926 | 20,509,982 | ||||||||||||
| Twelve months ended: | Change inc (dec): | |||||||||||||
| 12/31/2015 | 12/31/2014 | Amount | Percentage | |||||||||||
| Revenues | $ | 109,305,512 | $ | 56,536,370 | $ | 52,769,142 | 93.3 | % | ||||||
| FFO | $ | 16,701,905 | $ | 10,967,373 | $ | 5,734,532 | 52.3 | % | ||||||
FFO per share (1) | $ | 0.74 | $ | 0.63 | $ | 0.11 | 17.5 | % | ||||||
| Acquisition costs and other adjustments | 9,250,421 | 7,406,301 | $ | 1,844,120 | 24.9 | % | ||||||||
| NFFO | $ | 25,952,326 | $ | 18,373,674 | $ | 7,578,652 | 41.2 | % | ||||||
NFFO per share (1) | $ | 1.16 | $ | 1.05 | $ | 0.11 | 10.5 | % | ||||||
| AFFO (plus preferred dividends) | 40,535,017 | 22,153,810 | $ | 18,381,207 | 83.0 | % | ||||||||
| Preferred dividends | (18,751,934 | ) | (7,382,320 | ) | ||||||||||
| AFFO | $ | 21,783,083 | $ | 14,771,490 | $ | 7,011,593 | 47.5 | % | ||||||
AFFO per share (1) | $ | 0.97 | $ | 0.84 | $ | 0.13 | 15.5 | % | ||||||
| Dividends per share of Common Stock | $ | 0.7275 | $ | 0.655 | $ | 0.073 | 11.1 | % | ||||||
| Cash flow from operations | $ | 35,221,423 | $ | 15,436,062 | $ | 19,785,361 | 128.2 | % | ||||||
| Total assets | $ | 1,295,529,033 | $ | 691,382,907 | $ | 604,146,126 | 87.4 | % | ||||||
| Weighted average shares of Common Stock | ||||||||||||||
| and Units outstanding | 22,461,716 | 17,560,091 | ||||||||||||
(1)“Per share” refers to per weighted average share of Common Stock and Class A Unit in our Operating Partnership outstanding for the periods indicated. See Reconciliation of Funds From Operations Attributable to Common Stockholders and Unitholders, Normalized Funds From Operations Attributable to Common Stockholders and Unitholders, and Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders to Net Loss Attributable to Common Stockholders and Definitions of Non-GAAP Measures on pages 9, 10 and 19.
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Preferred Apartment Communities, Inc. Page 4
Supplemental Financial Data
| Fourth Quarter 2015 |
2016 Guidance:
NFFO (1) - We currently project NFFO to be in the range of $1.23 - $1.33 per share for the full year 2016.
Revenue - We currently project total revenues to be in the range of $175 million - $200 million for the full year 2016.
Highlights of the Fourth Quarter and Full Year 2015 and Subsequent Events
| • | Normalized Funds From Operations Attributable to Common Stockholders and Unitholders, or NFFO, was $7,719,495, or $0.34 per share for the fourth quarter 2015, an increase of 21.4% on a per share basis from our NFFO result of $5,678,358, or $0.28 per share for the fourth quarter 2014. For the full year 2015, NFFO was $25,952,326, or $1.16 per share, an increase of 10.5% on a per share basis from our NFFO result of $18,373,674, or $1.05 per share for the year 2014. |
| • | Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders, or AFFO, was $5,285,545, or $0.23 per share for the fourth quarter 2015, compared to our AFFO result of $4,412,745, or $0.22 per share for the fourth quarter 2014. For the full year 2015, AFFO was $21,783,083, or $0.97 per share, an increase of 15.5% on a per share basis from our AFFO result of $14,771,490, or $0.84 per share for the year 2014. AFFO is calculated after deductions for all preferred dividends. |
| • | As of December 31, 2015, our total assets were approximately $1.3 billion, an increase of approximately $604.1 million, or 87.4% compared to our total assets of approximately $691.4 million at December 31, 2014. |
| • | Total revenues for the fourth quarter 2015 were approximately $33.9 million, an increase of approximately $13.9 million, or 69.2%, compared to approximately $20.0 million for the fourth quarter 2014. Total revenues for the full year 2015 were approximately $109.3 million, an increase of approximately $52.8 million, or 93.3%, compared to approximately $56.5 million for the full year 2014. |
| • | Cash flow from operations for the fourth quarter 2015 was approximately $7.0 million, an increase of approximately $1.6 million, or 29.3%, compared to approximately $5.4 million for the fourth quarter 2014. Cash flow from operations for the full year 2015 was approximately $35.2 million, an increase of approximately $19.8 million, or 128.2%, compared to approximately $15.4 million for the full year 2014. |
| • | Our Common Stock dividend of $0.1925 per share for the fourth quarter 2015 represents a growth rate of 10.0% from our fourth quarter 2014 dividend of $0.175 per share and a growth rate of approximately 12.1% on an annualized basis since June 30, 2011, the first quarter end following our initial public offering in April 2011. |
| • | At December 31, 2015, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 55.2%. |
| • | For the fourth quarter 2015, our average occupancy was 94.7%. As of December 31, 2015, our retail portfolio was 93.9% leased. |
| • | For the fourth quarter 2015, our NFFO payout ratio to our Common Stockholders and Unitholders was approximately 56.6% and our AFFO payout ratio to Common Stockholders and Unitholders was approximately 82.6%. (2) |
| • | For the fourth quarter 2015, our NFFO payout ratio (before the deduction of preferred dividends) to our Series A Preferred Stockholders was approximately 45.2% and our AFFO payout ratio (before the deduction of preferred dividends) to our Series A Preferred Stockholders was approximately 54.7%. (2) |
| • | During the fourth quarter 2015, we converted two existing bridge loans to real estate investment loans and added a member loan having an aggregate commitment amount of up to approximately $33.6 million, to partially finance a planned multifamily community project and a retail center, both located in Atlanta, Georgia. The loans pay current monthly interest of 8.5% per annum and accrue deferred interest at 5% per annum. |
| • | During the fourth quarter 2015, we originated one real estate investment loan and a member loan of up to approximately $10.1 million to partially finance a planned multifamily community project in Tampa, Florida. The loans pay current monthly interest of 8.5% per annum and accrue deferred interest at 5% per annum. |
| • | During the fourth quarter 2015, we acquired two multifamily communities, one located in Nashville, Tennessee and one located in Houston, Texas, consisting of an aggregate of 720 multifamily units and retail suites comprising approximately 47,600 square feet of gross leasable area. We also acquired two grocery-anchored shopping centers in the Atlanta, Georgia and Chattanooga, Tennessee markets comprising approximately 325,000 aggregate square feet of gross leasable area. |
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Preferred Apartment Communities, Inc. Page 5
Supplemental Financial Data
| Fourth Quarter 2015 |
| • | With the closing of the acquisitions referenced above, we owned as of year-end 19 multifamily communities consisting of an aggregate of 6,136 units and 14 grocery-anchored shopping centers comprising an aggregate of 1,278,797 square feet of gross leasable area. Upon completion of all the projects partially financed by our real estate loan portfolio and if we were to acquire all the underlying properties, we would own 19 additional multifamily communities, comprising an aggregate of 4,708 additional units, and including six student housing communities with 4,010 beds and one additional grocery-anchored shopping center. |
| • | To date in the first quarter 2016, we have acquired three multifamily communities located in each of Orlando and Tampa, Florida, and Atlanta, Georgia, comprising an aggregate of 1,164 units and a grocery-anchored shopping center located in the Atlanta, Georgia market, comprising approximately 75,000 square feet of gross leasable area. |
(1) “Per share” refers to per weighted average share of Common Stock and Class A Unit in our Operating Partnership outstanding for the periods indicated. See Reconciliation of Funds From Operations Attributable to Common Stockholders and Unitholders, Normalized Funds From Operations Attributable to Common Stockholders and Unitholders, and Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders to Net Loss Attributable to Common Stockholders and Definitions of Non-GAAP Measures on pages 9, 10 and 19.
(2) We calculate the NFFO and AFFO payout ratios to Common Stockholders and Unitholders as the ratio of Common Stock dividends and distributions to Unitholders to NFFO or AFFO, respectively. We calculate the NFFO and AFFO payout ratios to Series A Preferred Stockholders as the ratio of Preferred Stock dividends to the sum of Preferred Stock dividends and NFFO or AFFO, respectively. See Definitions of Non-GAAP Measures on page 19.
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Preferred Apartment Communities, Inc. Page 6
Supplemental Financial Data
| Fourth Quarter 2015 |
| Preferred Apartment Communities, Inc. | ||||||||
| Consolidated Statements of Operations | ||||||||
| (Unaudited) | ||||||||
| Three months ended December 31, | ||||||||
| 2015 | 2014 | |||||||
| Revenues: | ||||||||
| Rental revenues | $ | 21,824,050 | $ | 12,301,455 | ||||
| Other property revenues | 2,809,770 | 1,740,798 | ||||||
| Interest income on loans and notes receivable | 6,839,746 | 4,874,917 | ||||||
| Interest income from related parties | 2,442,911 | 1,131,268 | ||||||
| Total revenues | 33,916,477 | 20,048,438 | ||||||
| Operating expenses: | ||||||||
| Property operating and maintenance | 3,156,855 | 1,946,520 | ||||||
| Property salary and benefits reimbursement to related party | 1,770,490 | 1,015,867 | ||||||
| Property management fees | 931,962 | 532,902 | ||||||
| Real estate taxes | 3,023,378 | 1,485,222 | ||||||
| General and administrative | 732,123 | 452,954 | ||||||
| Equity compensation to directors and executives | 601,185 | 437,242 | ||||||
| Depreciation and amortization | 11,686,571 | 7,537,670 | ||||||
| Acquisition and pursuit costs | 1,309,450 | 111,148 | ||||||
| Acquisition fees to related parties | 1,567,650 | 213,750 | ||||||
| Asset management fees to related party | 2,210,638 | 1,339,602 | ||||||
| Insurance, professional fees, and other expenses | 1,155,915 | 633,552 | ||||||
| Total operating expenses | 28,146,217 | 15,706,429 | ||||||
| Contingent asset management and general and administrative expense fees | (276,999 | ) | (332,345 | ) | ||||
| Net operating expenses | 27,869,218 | 15,374,084 | ||||||
| Operating income | 6,047,259 | 4,674,354 | ||||||
| Interest expense | 6,431,388 | 4,538,091 | ||||||
| Net (loss) income | (384,129 | ) | 136,263 | |||||
| Consolidated net loss (income) attributable | ||||||||
| to non-controlling interests | 4,609 | (967 | ) | |||||
| Net (loss) income attributable to the Company | (379,520 | ) | 135,296 | |||||
| Dividends declared to Series A preferred stockholders | (6,374,354 | ) | (2,457,488 | ) | ||||
| Earnings attributable to unvested restricted stock | (2,901 | ) | (6,863 | ) | ||||
| Net loss attributable to common stockholders | $ | (6,756,775 | ) | $ | (2,329,055 | ) | ||
| Net loss per share of Common Stock available to common stockholders, | ||||||||
| basic and diluted | $ | (0.30 | ) | $ | (0.11 | ) | ||
| Weighted average number of shares of Common Stock outstanding, | ||||||||
| basic and diluted | 22,402,366 | 20,364,971 | ||||||
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Preferred Apartment Communities, Inc. Page 7
Supplemental Financial Data
| Fourth Quarter 2015 |
| Preferred Apartment Communities, Inc. | ||||||||
| Consolidated Statements of Operations | ||||||||
| (Unaudited) | ||||||||
| Twelve months ended December 31, | ||||||||
| 2015 | 2014 | |||||||
| Revenues: | ||||||||
| Rental revenues | $ | 69,128,280 | $ | 30,762,423 | ||||
| Other property revenues | 9,495,522 | 3,946,222 | ||||||
| Interest income on loans and notes receivable | 23,207,610 | 18,531,899 | ||||||
| Interest income from related parties | 7,474,100 | 3,295,826 | ||||||
| Total revenues | 109,305,512 | 56,536,370 | ||||||
| Operating expenses: | ||||||||
| Property operating and maintenance | 10,878,872 | 4,887,903 | ||||||
| Property salary and benefits reimbursement to related party | 5,885,242 | 2,882,283 | ||||||
| Property management fees | 3,014,801 | 1,347,502 | ||||||
| Real estate taxes | 9,934,412 | 3,587,287 | ||||||
| General and administrative | 2,285,789 | 1,051,849 | ||||||
| Equity compensation to directors and executives | 2,362,453 | 1,784,349 | ||||||
| Depreciation and amortization | 38,096,334 | 16,328,715 | ||||||
| Acquisition and pursuit costs | 4,186,092 | 3,518,540 | ||||||
| Acquisition fees to related parties | 4,967,671 | 3,714,077 | ||||||
| Asset management fees to related party | 7,041,226 | 3,546,987 | ||||||
| Insurance, professional fees, and other expenses | 3,568,356 | 1,903,833 | ||||||
| Total operating expenses | 92,221,248 | 44,553,325 | ||||||
| Contingent asset management and general and administrative expense fees | (1,805,478 | ) | (332,345 | ) | ||||
| Net operating expenses | 90,415,770 | 44,220,980 | ||||||
| Operating income | 18,889,742 | 12,315,390 | ||||||
| Interest expense | 21,315,731 | 10,188,187 | ||||||
| Net (loss) income | (2,425,989 | ) | 2,127,203 | |||||
| Consolidated net loss (income) attributable | ||||||||
| to non-controlling interests | 25,321 | (33,714 | ) | |||||
| Net (loss) income attributable to the Company | (2,400,668 | ) | 2,093,489 | |||||
| Dividends declared to Series A preferred stockholders | (18,751,934 | ) | (7,382,320 | ) | ||||
| Earnings attributable to unvested restricted stock | (19,256 | ) | (24,090 | ) | ||||
| Net loss attributable to common stockholders | $ | (21,171,858 | ) | $ | (5,312,921 | ) | ||
| Net loss per share of Common Stock available to common stockholders, | ||||||||
| basic and diluted | $ | (0.95 | ) | $ | (0.31 | ) | ||
| Weighted average number of shares of Common Stock outstanding, | ||||||||
| basic and diluted | 22,182,971 | 17,399,147 | ||||||
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Preferred Apartment Communities, Inc. Page 8
Supplemental Financial Data
| Fourth Quarter 2015 |
| Reconciliation of Funds From Operations Attributable to Common Stockholders and Unitholders, | |||||||||||
| Normalized Funds From Operations Attributable to Common Stockholders and Unitholders, and | |||||||||||
| Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders | |||||||||||
to Net Loss Attributable to Common Stockholders (A) | |||||||||||
| Three months ended: | |||||||||||
| 12/31/2015 | 12/31/2014 | ||||||||||
Net loss attributable to common stockholders (See note 1) | $ | (6,756,775 | ) | $ | (2,329,055 | ) | |||||
| Add: | Loss attributable to non-controlling interests (See note 2) | (4,609 | ) | 967 | |||||||
| Depreciation of real estate assets | 8,545,481 | 4,874,763 | |||||||||
| Amortization of acquired real estate intangible assets and deferred leasing costs | 3,058,298 | 2,633,101 | |||||||||
| Funds from operations attributable to common stockholders and Unitholders | 4,842,395 | 5,179,776 | |||||||||
| Add: | Acquisition and pursuit costs | 2,877,100 | 324,898 | ||||||||
| Loan cost amortization on acquisition term note (See note 3) | — | 173,684 | |||||||||
| Normalized funds from operations attributable to common stockholders and Unitholders | 7,719,495 | 5,678,358 | |||||||||
| Non-cash equity compensation to directors and executives | 601,185 | 437,242 | |||||||||
| Amortization of loan closing costs (See note 4) | 404,315 | 276,526 | |||||||||
| Depreciation/amortization of non-real estate assets | 82,792 | 29,806 | |||||||||
| Net loan fees received (See note 5) | 348,317 | 86,383 | |||||||||
| Deferred interest income received (See note 6) | 130,072 | 241,192 | |||||||||
| Less: | Non-cash loan interest income (See note 5) | (3,328,607 | ) | (1,940,194 | ) | ||||||
| Abandoned pursuit costs | — | (519 | ) | ||||||||
| Cash paid for loan closing costs | (42,023 | ) | — | ||||||||
| Amortization of acquired real estate intangible liabilities (See note 7) | (379,025 | ) | (173,188 | ) | |||||||
| Normally recurring capital expenditures and leasing costs (See note 8) | (250,976 | ) | (222,861 | ) | |||||||
| Adjusted funds from operations attributable to common stockholders and Unitholders | $ | 5,285,545 | $ | 4,412,745 | |||||||
| Common Stock dividends and distributions to Unitholders declared: | |||||||||||
| Common Stock dividends | $ | 4,314,999 | $ | 3,697,436 | |||||||
| Distributions to Unitholders | 53,238 | 25,377 | |||||||||
| Total | $ | 4,368,237 | $ | 3,722,813 | |||||||
| Common Stock dividends and Unitholder distributions per share | $ | 0.1925 | $ | 0.175 | |||||||
| FFO per weighted average basic share of Common Stock and Unit outstanding | $ | 0.21 | $ | 0.25 | |||||||
| NFFO per weighted average basic share of Common Stock and Unit outstanding | $ | 0.34 | $ | 0.28 | |||||||
| AFFO per weighted average basic share of Common Stock and Unit outstanding | $ | 0.23 | $ | 0.22 | |||||||
Weighted average shares of Common Stock and Units outstanding: (A) | |||||||||||
| Basic: | |||||||||||
| Common Stock | 22,402,366 | 20,364,971 | |||||||||
| Class A Units | 276,560 | 145,011 | |||||||||
| Common Stock and Class A Units | 22,678,926 | 20,509,982 | |||||||||
Diluted Common Stock and Class A Units (B) | 23,443,082 | 20,750,050 | |||||||||
| Actual shares of Common Stock outstanding, including 15,067 and 39,216 unvested shares | |||||||||||
| of restricted Common Stock at December 31, 2015 and 2014, respectively | 22,776,618 | 21,443,203 | |||||||||
| Actual Class A Units outstanding | 276,560 | 145,011 | |||||||||
| Total | 23,053,178 | 21,588,214 | |||||||||
(A) Units and Unitholders refer to Class A Units in our Operating Partnership, or Class A Units, and holders of Class A Units, respectively. The Unitholders were granted awards of Class B Units in our Operating Partnership, or Class B Units, for annual service which became vested and earned and automatically converted to Class A Units. The Class A Units collectively represent an approximate 1.22% weighted average non-controlling interest in the Operating Partnership for the three-month period ended December 31, 2015. | |||||||||||
(B) Since our NFFO and AFFO results are positive for the periods reflected above, we are presenting recalculated diluted weighted average shares of Common Stock and Class A Units for these periods for purposes of this table, which includes the dilutive effect of common stock equivalents from grants of the Class B Units, warrants included in units of Series A Preferred Stock issued, as well as annual grants of restricted Common Stock. The weighted average shares of Common Stock outstanding presented on the Consolidated Statements of Operations are the same for basic and diluted for any period for which we recorded a net loss available to common stockholders. | |||||||||||
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Preferred Apartment Communities, Inc. Page 9
Supplemental Financial Data
| Fourth Quarter 2015 |
| Reconciliation of Funds From Operations Attributable to Common Stockholders and Unitholders, | |||||||||||
| Normalized Funds From Operations Attributable to Common Stockholders and Unitholders, and | |||||||||||
| Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders | |||||||||||
to Net Loss Attributable to Common Stockholders (A) | |||||||||||
| Twelve months ended: | |||||||||||
| 12/31/2015 | 12/31/2014 | ||||||||||
Net loss attributable to common stockholders (See note 1) | $ | (21,171,858 | ) | $ | (5,312,921 | ) | |||||
| Add: | Loss attributable to non-controlling interests (See note 2) | (25,321 | ) | 33,714 | |||||||
| Depreciation of real estate assets | 27,497,386 | 12,181,439 | |||||||||
| Amortization of acquired real estate intangible assets and deferred leasing costs | 10,401,698 | 4,065,141 | |||||||||
| Funds from operations attributable to common stockholders and Unitholders | 16,701,905 | 10,967,373 | |||||||||
| Add: | Acquisition and pursuit costs | 9,153,763 | 7,232,617 | ||||||||
| Loan cost amortization on acquisition term notes (See note 3) | 96,658 | 173,684 | |||||||||
| Normalized funds from operations attributable to common stockholders and Unitholders (See note 9) | 25,952,326 | 18,373,674 | |||||||||
| Non-cash equity compensation to directors and executives | 2,362,453 | 1,784,349 | |||||||||
| Amortization of loan closing costs (See note 4) | 1,377,618 | 831,375 | |||||||||
| Depreciation/amortization of non-real estate assets | 197,250 | 82,135 | |||||||||
| Net loan fees received (See note 5) | 1,387,109 | 484,674 | |||||||||
| Deferred interest income received (See note 6) | 3,380,451 | 1,555,710 | |||||||||
| Less: | Non-cash loan interest income (See note 5) | (9,924,973 | ) | (7,202,831 | ) | ||||||
| Abandoned pursuit costs | (39,657 | ) | (127,326 | ) | |||||||
| Cash paid for loan closing costs | (571,876 | ) | (67,257 | ) | |||||||
| Amortization of acquired real estate intangible liabilities (See note 7) | (1,074,202 | ) | (254,802 | ) | |||||||
| Normally recurring capital expenditures and leasing costs (See note 8) | (1,263,416 | ) | (688,211 | ) | |||||||
| Adjusted funds from operations attributable to common stockholders and Unitholders | $ | 21,783,083 | $ | 14,771,490 | |||||||
| Common Stock dividends and distributions to Unitholders declared: | |||||||||||
| Common Stock dividends | $ | 16,196,324 | $ | 11,747,328 | |||||||
| Distributions to Unitholders | 202,545 | 106,640 | |||||||||
| Total | $ | 16,398,869 | $ | 11,853,968 | |||||||
| Common Stock dividends and Unitholder distributions per share | $ | 0.7275 | $ | 0.655 | |||||||
| FFO per weighted average basic share of Common Stock and Unit outstanding | $ | 0.74 | $ | 0.63 | |||||||
| NFFO per weighted average basic share of Common Stock and Unit outstanding | $ | 1.16 | $ | 1.05 | |||||||
| AFFO per weighted average basic share of Common Stock and Unit outstanding | $ | 0.97 | $ | 0.84 | |||||||
Weighted average shares of Common Stock and Units outstanding: (A) | |||||||||||
| Basic: | |||||||||||
| Common Stock | 22,182,971 | 17,399,147 | |||||||||
| Class A Units | 278,745 | 160,944 | |||||||||
| Common Stock and Class A Units | 22,461,716 | 17,560,091 | |||||||||
Diluted Common Stock and Class A Units (B) | 22,982,002 | 17,736,588 | |||||||||
| Actual shares of Common Stock outstanding, including 15,067 and 39,216 unvested shares | |||||||||||
| of restricted Common Stock at December 31, 2015 and 2014, respectively | 22,776,618 | 21,443,203 | |||||||||
| Actual Class A Units outstanding | 276,560 | 145,011 | |||||||||
| Total | 23,053,178 | 21,588,214 | |||||||||
(A) Units and Unitholders refer to Class A Units in our Operating Partnership, or Class A Units, and holders of Class A Units, respectively. The Unitholders were granted awards of Class B Units in our Operating Partnership, or Class B Units, for annual service which became vested and earned and automatically converted to Class A Units. The Class A Units collectively represent an approximate 1.24% weighted average non-controlling interest in the Operating Partnership for the twelve-month period ended December 31, 2015. | |||||||||||
(B) Since our NFFO and AFFO results are positive for the periods reflected above, we are presenting recalculated diluted weighted average shares of Common Stock and Class A Units for these periods for purposes of this table, which includes the dilutive effect of common stock equivalents from grants of the Class B Units, warrants included in units of Series A Preferred Stock issued, as well as annual grants of restricted Common Stock. The weighted average shares of Common Stock outstanding presented on the Consolidated Statements of Operations are the same for basic and diluted for any period for which we recorded a net loss available to common stockholders. | |||||||||||
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Preferred Apartment Communities, Inc. Page 10
Supplemental Financial Data
| Fourth Quarter 2015 |
Notes to Reconciliation of Funds From Operations Attributable to Common Stockholders and Unitholders, Normalized Funds From Operations Attributable to Common Stockholders and Unitholders, and Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders to Net Loss Attributable to Common Stockholders
| 1) | Rental and other property revenues and expenses for the twelve-month period ended December 31, 2015 include activity for the nine multifamily communities and four grocery-anchored shopping centers acquired during 2015 only from their respective dates of acquisition. Similarly, rental and other property revenues and expenses for the twelve-month period ended December 31, 2014 include activity for the four multifamily communities and ten grocery-anchored shopping centers acquired during 2014 only from their respective dates of acquisition. |
| 2) | Non-controlling interests in our Operating Partnership consisted of a total of 276,560 Class A Units as of December 31, 2015, which were awarded primarily to our key executive officers. The Class A Units are apportioned a percentage of our financial results as non-controlling interests. The weighted average ownership percentage of these holders of Class A Units was calculated to be 1.22% and 0.71% for the three-month periods ended December 31, 2015 and 2014, respectively and 1.24% and 0.92% for the twelve-month periods ended December 31, 2015 and 2014, respectively. |
| 3) | We incurred loan closing costs for the acquisition of the Avenues at Northpointe and Avenues at Cypress multifamily communities in 2015 on our $32 million acquisition term loan facility with Key Bank National Association, or Term Loan. These costs were deferred and were being amortized over the life of the loan until it was repaid in full on May 12, 2015. Similarly, we incurred loan closing costs in 2014 on a $45 million Term Loan to partially finance the acquisitions of the Sunbelt and Dunbar portfolios in the third quarter 2014; this term loan was repaid in full on December 23, 2014. Since the amortization expense of these deferred costs is similar in character to acquisition costs, they are therefore an additive adjustment in the calculation of NFFO. |
| 4) | We incurred loan closing costs on our existing mortgage loans, which are secured on a property-by-property basis by each of our acquired multifamily communities and retail assets, and also for occasional amendments to our $70 million revolving line of credit with Key Bank National Association, or our Revolving Line of Credit. These loan closing costs are being amortized over the lives of the respective mortgage loans and the Revolving Line of Credit, and the non-cash amortization expense is an addition to NFFO in the calculation of AFFO. Neither we nor the Operating Partnership have any recourse liability in connection with any of the mortgage loans, nor do we have any cross-collateralization arrangements with respect to the assets securing the mortgage loans, other than security interests in 49% of the equity interests of the subsidiaries owning such assets, granted in connection with our Revolving Line of Credit, which provides for full recourse liability. At December 31, 2015, aggregate unamortized loan costs were approximately $8.6 million, which will be amortized over a weighted average remaining loan life of approximately 5.7 years. |
| 5) | We receive loan fees in conjunction with the origination of certain real estate loans. These fees are then recognized as revenue over the lives of the applicable loans as adjustments of yield using the effective interest method. The total fees received in excess of amortization income, after the payment of acquisition fees to Preferred Apartment Advisors, LLC, our Manager, are additive adjustments in the calculation of AFFO. Correspondingly, the non-cash income recognized under the effective interest method is a deduction in the calculation of AFFO. We also accrue over the lives of certain loans additional interest amounts that become due to us at the time of repayment of the loan or refinancing of the property, or when the property is sold to a third party. This non-cash income is deducted from NFFO in the calculation of AFFO. |
| 6) | The Company records deferred interest revenue on certain of its real estate loans. These adjustments reflect the receipt during the periods presented of interest income which was earned and accrued prior to those periods presented on various real estate loans. |
| 7) | This adjustment reflects straight-line rent adjustments and the reversal of the non-cash amortization of below-market and above-market lease intangibles, which were recognized in conjunction with the Company’s acquisitions and which are amortized over the estimated average remaining lease terms from the acquisition date for multifamily communities and over the remaining lease terms for retail assets. At December 31, 2015, the balance of unamortized below-market lease intangibles was approximately $9.3 million, which will be recognized over a weighted average remaining lease period of approximately 8.4 years. |
| 8) | We deduct from NFFO normally recurring capital expenditures that are necessary to maintain our assets’ revenue streams in the calculation of AFFO. No adjustment is made in the calculation of AFFO for nonrecurring capital expenditures, which totaled $730,821 and $575,883 for the three-month periods ended December 31, 2015 and 2014, respectively and $2,871,202 and $1,391,570 for the twelve-month periods ended December 31, 2015 and 2014, respectively. This adjustment also deducts from NFFO capitalized amounts for third party costs during the period to originate or renew leases in our grocery-anchored shopping centers. |
| 9) | We incurred legal costs pertaining to the negotiation of an extension of our management agreement with our Manager and reported these costs as an additive adjustment to FFO in our calculation of NFFO for the three-month period ended September 30, 2015. This adjustment was reversed for the twelve-month period ended December 31, 2015 as we have not yet completed an extension to our management agreement. |
See Definitions of Non-GAAP Measures beginning on page 19.
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Preferred Apartment Communities, Inc. Page 11
Supplemental Financial Data
| Fourth Quarter 2015 |
| Preferred Apartment Communities, Inc. | ||||||||
| Consolidated Balance Sheets | ||||||||
| (Unaudited) | ||||||||
| December 31, 2015 | December 31, 2014 | |||||||
| Assets | ||||||||
| Real estate | ||||||||
| Land | $ | 145,929,264 | $ | 79,272,457 | ||||
| Building and improvements | 764,298,467 | 377,030,987 | ||||||
| Tenant improvements | 5,781,199 | 3,240,784 | ||||||
| Furniture, fixtures, and equipment | 90,667,257 | 36,864,668 | ||||||
| Construction in progress | 609,399 | 66,647 | ||||||
| Gross real estate | 1,007,285,586 | 496,475,543 | ||||||
| Less: accumulated depreciation | (53,994,666 | ) | (26,388,066 | ) | ||||
| Net real estate | 953,290,920 | 470,087,477 | ||||||
| Real estate loans, net | 180,688,293 | 128,306,697 | ||||||
| Real estate loans to related party, net | 57,313,465 | 24,924,976 | ||||||
| Total real estate and real estate loans, net | 1,191,292,678 | 623,319,150 | ||||||
| Cash and cash equivalents | 2,439,605 | 3,113,270 | ||||||
| Restricted cash | 12,539,440 | 4,707,865 | ||||||
| Notes receivable | 18,489,247 | 14,543,638 | ||||||
| Note receivable and revolving line of credit due from related party | 19,454,486 | 14,153,922 | ||||||
| Accrued interest receivable on real estate loans | 14,294,648 | 8,038,447 | ||||||
| Acquired intangible assets, net of amortization | 19,381,473 | 12,702,980 | ||||||
| Deferred loan costs, net of amortization | 488,770 | 79,563 | ||||||
| Deferred offering costs | 5,834,304 | 6,333,763 | ||||||
| Tenant receivables and other assets | 11,314,382 | 4,390,309 | ||||||
| Total assets | $ | 1,295,529,033 | $ | 691,382,907 | ||||
| Liabilities and equity | ||||||||
| Liabilities | ||||||||
| Mortgage notes payable, principal amount | $ | 696,945,291 | $ | 354,418,668 | ||||
| Less: deferred loan costs, net of amortization | (8,099,517 | ) | (5,027,505 | ) | ||||
| Mortgage notes payable, net of deferred loan costs | 688,845,774 | 349,391,163 | ||||||
| Revolving line of credit | 34,500,000 | 24,500,000 | ||||||
| Real estate loan participation obligation | 13,544,160 | 7,990,798 | ||||||
| Accounts payable and accrued expenses | 12,644,818 | 4,941,703 | ||||||
| Accrued interest payable | 1,803,389 | 1,116,750 | ||||||
| Dividends and partnership distributions payable | 6,647,507 | 4,623,246 | ||||||
| Acquired below market lease intangibles, net of amortization | 9,253,450 | 5,935,931 | ||||||
| Security deposits and other liabilities | 2,836,145 | 1,301,442 | ||||||
| Total liabilities | 770,075,243 | 399,801,033 | ||||||
| Commitments and contingencies | ||||||||
| Equity | ||||||||
| Stockholder's equity | ||||||||
| Series A Redeemable Preferred Stock, $0.01 par value per share; 1,050,000 | ||||||||
| shares authorized; 486,182 and 193,334 shares issued; 482,964 and 192,846 | ||||||||
| shares outstanding at December 31, 2015 and 2014, respectively | 4,830 | 1,928 | ||||||
| Common Stock, $0.01 par value per share; 400,066,666 shares authorized; | ||||||||
| 22,761,551 and 21,403,987 shares issued and outstanding at | ||||||||
| December 31, 2015 and 2014, respectively | 227,616 | 214,039 | ||||||
| Additional paid-in capital | 536,450,877 | 300,576,349 | ||||||
| Accumulated deficit | (13,698,520 | ) | (11,297,852 | ) | ||||
| Total stockholders' equity | 522,984,803 | 289,494,464 | ||||||
| Non-controlling interest | 2,468,987 | 2,087,410 | ||||||
| Total equity | 525,453,790 | 291,581,874 | ||||||
| Total liabilities and equity | $ | 1,295,529,033 | $ | 691,382,907 | ||||
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Preferred Apartment Communities, Inc. Page 12
Supplemental Financial Data
| Fourth Quarter 2015 |
| Preferred Apartment Communities, Inc. | ||||||||
| Consolidated Statements of Cash Flows | ||||||||
| (Unaudited) | ||||||||
| Year ended December 31, | ||||||||
| 2015 | 2014 | |||||||
| Operating activities: | ||||||||
| Net (loss) income | $ | (2,425,989 | ) | $ | 2,127,203 | |||
| Reconciliation of net (loss) income to net cash provided by operating activities: | ||||||||
| Depreciation expense | 27,672,387 | 12,258,812 | ||||||
| Amortization expense | 10,423,947 | 4,069,903 | ||||||
| Amortization of above and below market leases | (816,509 | ) | (242,893 | ) | ||||
| Deferred fee income amortization | (868,615 | ) | (904,144 | ) | ||||
| Deferred loan cost amortization | 1,474,276 | 887,216 | ||||||
| (Increase) in accrued interest income on real estate loans | (6,256,200 | ) | (4,751,788 | ) | ||||
| Equity compensation to executives and directors | 2,362,453 | 1,784,349 | ||||||
| Deferred cable income amortization | (19,743 | ) | (19,009 | ) | ||||
| Loss on asset disposal | — | 2,804 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) in tenant receivables and other assets | (2,341,649 | ) | (1,723,648 | ) | ||||
| Increase in accounts payable and accrued expenses | 4,866,996 | 1,124,078 | ||||||
| Increase in accrued interest payable | 616,681 | 673,651 | ||||||
| Increase in prepaid rents | 362,625 | 120,236 | ||||||
| Increase in security deposits and other liabilities | 170,763 | 29,292 | ||||||
| Net cash provided by operating activities | 35,221,423 | 15,436,062 | ||||||
| Investing activities: | ||||||||
| Investment in real estate loans | (114,026,945 | ) | (54,939,135 | ) | ||||
| Repayments of real estate loans | 18,772,024 | 13,857,393 | ||||||
| Notes receivable issued | (19,339,695 | ) | (11,704,662 | ) | ||||
| Notes receivable repaid | 15,350,624 | 6,327,396 | ||||||
| Note receivable issued to and draws on line of credit by related party | (18,634,237 | ) | (14,981,065 | ) | ||||
| Repayments of line of credit by related party | 12,502,579 | 6,680,951 | ||||||
| Acquisition fees received on real estate loans | 2,761,047 | 1,111,131 | ||||||
| Acquisition fees paid on real estate loans | (1,349,273 | ) | (555,583 | ) | ||||
| Acquisition fees paid to real estate loan participants | (24,665 | ) | (107,398 | ) | ||||
| Acquisition of properties | (420,700,550 | ) | (299,506,416 | ) | ||||
| Additions to real estate assets - improvements | (4,239,725 | ) | (2,118,349 | ) | ||||
| Increase in deposits on acquisitions | — | 4,773 | ||||||
| Deposits paid on acquisitions | (660,400 | ) | — | |||||
| Decrease in restricted cash | (3,920,995 | ) | (492,778 | ) | ||||
| Net cash used in investing activities | (533,510,211 | ) | (356,423,742 | ) | ||||
| Financing activities: | ||||||||
| Proceeds from mortgage notes payable | 256,865,500 | 227,556,000 | ||||||
| Payment for mortgage debt | (4,175,271 | ) | (13,653,331 | ) | ||||
| Payments for deposits and other mortgage loan costs | (4,481,004 | ) | (5,291,302 | ) | ||||
| Proceeds from real estate loan participants | 4,996,680 | 7,908,835 | ||||||
| Proceeds from lines of credit | 295,800,000 | 96,433,305 | ||||||
| Payments on lines of credit | (285,800,000 | ) | (101,323,306 | ) | ||||
| Proceeds from term loan | 32,000,000 | 44,250,000 | ||||||
| Repayment of the term loan | (32,000,000 | ) | (44,250,000 | ) | ||||
| Proceeds from sales of Units, net of offering costs and redemptions | 264,454,768 | 93,651,581 | ||||||
| Proceeds from sales of Common Stock | 5,381,848 | 48,995,741 | ||||||
| Common stock dividends paid | (15,578,760 | ) | (10,501,589 | ) | ||||
| Preferred stock dividends paid | (17,373,097 | ) | (6,913,550 | ) | ||||
| Distributions to non-controlling interests | (174,686 | ) | (98,380 | ) | ||||
| Payments for deferred offering costs | (2,300,855 | ) | (1,843,485 | ) | ||||
| Net cash provided by financing activities | 497,615,123 | 334,920,519 | ||||||
| Net decrease in cash and cash equivalents | (673,665 | ) | (6,067,161 | ) | ||||
| Cash and cash equivalents, beginning of period | 3,113,270 | 9,180,431 | ||||||
| Cash and cash equivalents, end of period | $ | 2,439,605 | $ | 3,113,270 | ||||
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Preferred Apartment Communities, Inc. Page 13
Supplemental Financial Data
| Fourth Quarter 2015 |
Real Estate Loans
| Total units upon | Loan balance at December 31, | Total loan | Purchase option window | Purchase option price | |||||||||||||||||
| Project/Property | (1) | Location | completion | 2015 (2) | commitments | Begin | End | ||||||||||||||
| Crosstown Walk | Tampa, FL | 342 | $ | 10,962,000 | $ | 10,962,000 | 7/1/2016 | 12/31/2016 | $ | 39,654,273 | |||||||||||
| City Vista | Pittsburgh, PA | 272 | 16,107,735 | 16,107,735 | 2/1/2017 | 5/31/2017 | 43,560,271 | ||||||||||||||
| Overton Rise | Atlanta, GA | 294 | 16,603,935 | 16,600,000 | 7/8/2016 | 12/8/2016 | 51,500,000 | ||||||||||||||
| Haven West | (3) | Atlanta, GA | 160 | 6,784,167 | 6,940,795 | 8/1/2016 | 1/31/2017 | 26,138,466 | |||||||||||||
| Haven 12 | (4) | Starkville, MS | 152 | 5,815,849 | 6,116,384 | 9/1/2016 | 11/30/2016 | (5) | |||||||||||||
| Founders' Village | (6) | Williamsburg, VA | 247 | 9,866,000 | 10,346,000 | 2/1/2017 | 5/31/2017 | 44,266,000 | |||||||||||||
| Encore | (7) | Atlanta, GA | 340 | 10,958,200 | 10,958,200 | 1/8/2018 | 5/8/2018 | (5) | |||||||||||||
| Encore Capital | (7) | Atlanta, GA | — | 6,036,465 | 9,758,200 | N/A | N/A | N/A | |||||||||||||
| Palisades | (6) | Northern VA | 304 | 16,070,000 | 17,270,000 | 3/1/2017 | 7/31/2017 | (5) | |||||||||||||
| Fusion | Irvine, CA | 280 | 37,332,837 | 59,052,583 | 1/1/2018 | 4/1/2018 | (5) | ||||||||||||||
| Green Park | (6) | Atlanta, GA | 310 | 12,356,189 | 13,464,372 | 11/1/2017 | 2/28/2018 | (5) | |||||||||||||
| Stadium Village | (6,8) | Atlanta, GA | 198 | 13,329,868 | 13,424,995 | 9/1/2016 | 11/30/2016 | (5) | |||||||||||||
| Summit Crossing III | Atlanta, GA | 172 | 7,246,400 | 7,246,400 | 8/1/2017 | 11/30/2017 | (5) | ||||||||||||||
| Overture | Tampa, FL | 180 | 4,519,495 | 6,920,000 | 1/1/2018 | 5/1/2018 | (5) | ||||||||||||||
| Aldridge at Town Village | Atlanta, GA | 300 | 9,776,455 | 10,975,000 | 11/1/2017 | 2/28/2018 | (5) | ||||||||||||||
| 18 Nineteen | (9) | Lubbock, TX | 217 | 14,496,563 | 15,598,352 | 10/1/2017 | 12/31/2017 | (5) | |||||||||||||
| Haven South | (10) | Waco, TX | 250 | 14,200,703 | 15,455,668 | 10/1/2017 | 12/31/2017 | (5) | |||||||||||||
| Haven Tampa | (11) | Tampa, FL | 158 | 2,900,000 | 2,900,000 | N/A | N/A | N/A | |||||||||||||
| Bishop Street | (12) | Atlanta, GA | 232 | 3,107,012 | 3,107,012 | N/A | N/A | N/A | |||||||||||||
| Dawson Marketplace | (13) | Atlanta, GA | — | 11,573,432 | 12,857,005 | 12/16/2017 | 12/15/2018 | (14) | |||||||||||||
| Wade Green | (15) | Atlanta, GA | — | 6,250,000 | 6,250,000 | N/A | N/A | N/A | |||||||||||||
| Hidden River | Tampa, FL | — | — | 4,734,960 | 9/1/2018 | 12/31/2018 | (5) | ||||||||||||||
| Hidden River Capital | Tampa, FL | 300 | 2,671,870 | 5,380,000 | N/A | N/A | N/A | ||||||||||||||
| 4,708 | 238,965,175 | $ | 282,425,661 | ||||||||||||||||||
| Unamortized loan origination fees | (963,417 | ) | |||||||||||||||||||
| Carrying amount | $ | 238,001,758 | |||||||||||||||||||
(1) | All loans pertain to developments of multifamily communities, except as otherwise indicated. | ||||||||||||||||||||
(2) | Loan balances presented are principal amounts due. | ||||||||||||||||||||
(3) | Real estate loan in support of a completed 160-unit, 568-bed student housing community adjacent to the campus of the University of West Georgia. | ||||||||||||||||||||
(4) | Real estate loan in support of a completed 152-unit, 536-bed student housing community adjacent to the campus of Mississippi State University. | ||||||||||||||||||||
(5) | The purchase price is to be calculated based upon market cap rates at the time of exercise of the purchase option, with discounts ranging from between 20 and 60 basis points, depending on the loan. | ||||||||||||||||||||
(6) | Loan balance includes 25% loan participation by an unrelated third party syndicate of lenders. | ||||||||||||||||||||
(7) | Bridge loan to partially finance the acquisition of land and predevelopment costs for a multifamily community in Atlanta, Georgia. On October 9, 2015, our Encore bridge loan was recapitalized into an amount up to approximately $20.7 million to partially finance a planned multifamily community project in Atlanta, Georgia. | ||||||||||||||||||||
(8) | Real estate loan in support of a completed 198-unit, 792-bed student housing community adjacent to the campus of Kennesaw State University in Atlanta, Georgia. | ||||||||||||||||||||
(9) | Real estate loan of up to approximately $15.6 million in support of a planned 217-unit, 732-bed student housing community adjacent to the campus of Texas Tech University. | ||||||||||||||||||||
(10) | Real estate loan in support of a planned 250-unit, 840-bed student housing community adjacent to the campus of Baylor University in Waco, Texas. | ||||||||||||||||||||
(11) | Bridge loan in support of a planned 158-unit, 542-bed student housing community adjacent to the campus of the University of South Florida in Tampa, Florida. | ||||||||||||||||||||
(12) | Bridge loan to partially finance the acquisition of land and predevelopment costs for a multifamily community in Atlanta, Georgia. | ||||||||||||||||||||
(13) | Real estate loan in support of a planned approximate 200,000 square foot retail center in the Atlanta, Georgia market. | ||||||||||||||||||||
(14) | The Dawsonville loan includes ten separate purchase options to acquire a shopping center tract and 14 outlots, with the purchase prices to be calculated based upon market cap rates at the time of exercise of the purchase option, less a discount of 20 basis points. | ||||||||||||||||||||
(15) | First position loan secured by a grocery-anchored shopping center in the Atlanta, Georgia market. | ||||||||||||||||||||
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Preferred Apartment Communities, Inc. Page 14
Supplemental Financial Data
| Fourth Quarter 2015 |
Multifamily Communities
| Three months ended December 31, 2015 | |||||||||||||||
| Property | Location | Number of units | Average unit size (sq. ft.) | Average occupancy | Average rent per unit | ||||||||||
| Stone Rise | Philadelphia, PA | 216 | 1,079 | 93.0 | % | $ | 1,429 | ||||||||
| Ashford Park | Atlanta, GA | 408 | 1,008 | 95.2 | % | $ | 1,135 | ||||||||
| Lake Cameron | Raleigh, NC | 328 | 940 | 94.8 | % | $ | 897 | ||||||||
| McNeil Ranch | Austin, TX | 192 | 1,071 | 96.4 | % | $ | 1,230 | ||||||||
| Same-store properties | 1,144 | 94.9 | % | ||||||||||||
| Trail Creek | Hampton, VA | 300 | 1,084 | 92.5 | % | $ | 1,179 | ||||||||
| Summit Crossing | Atlanta, GA | 485 | 1,053 | — | % | $ | 1,210 | ||||||||
| Enclave at Vista Ridge | Dallas, TX | 300 | 1,079 | 96.2 | % | $ | 1,111 | ||||||||
| Sandstone Creek | Kansas City, KS | 364 | 1,135 | 91.1 | % | $ | 1,054 | ||||||||
| Stoneridge Farms | Nashville, TN | 364 | 1,153 | 93.4 | % | $ | 991 | ||||||||
| Vineyards | Houston, TX | 369 | 1,122 | 91.5 | % | $ | 1,189 | ||||||||
| Aster at Lely Resort | Naples, FL | 308 | 979 | 98.5 | % | $ | 1,292 | ||||||||
| CityPark View | Charlotte, NC | 284 | 948 | 94.0 | % | $ | 1,050 | ||||||||
| Avenues at Cypress | Houston, TX | 240 | 1,166 | 94.9 | % | $ | 1,375 | ||||||||
| Venue at Lakewood Ranch | Sarasota, FL | 237 | 1,001 | 97.9 | % | $ | 1,572 | ||||||||
| Avenues at Creekside | San Antonio, TX | 395 | 974 | 94.0 | % | $ | 1,207 | ||||||||
| Citi Lakes | Orlando, FL | 346 | 984 | — | % | $ | 1,369 | ||||||||
| Avenues at Northpointe | Houston, TX | 280 | 1,154 | 95.1 | % | $ | 1,365 | ||||||||
| Lenox Portfolio | Nashville, TN | 474 | 886 | — | % | $ | — | ||||||||
| Stone Creek | Houston, TX | 246 | 852 | — | % | $ | — | ||||||||
| Non same-store properties | 4,992 | ||||||||||||||
| Total | 6,136 | 94.7 | % | ||||||||||||
For the three-month period ended December 31, 2015, our average occupancy was 94.7%. We define average occupancy as market rent reduced by vacancy losses. All of our multifamily properties are included in this calculation except for properties which are not yet stabilized, which we define as properties having first achieved 93% physical occupancy (Citi Lakes was not yet stabilized at the beginning of the fourth quarter), properties which are owned for less than the entire reporting period (Lenox Village III, Lenox Village Town Center, Lenox Regent and Stone Creek), and properties which are undergoing significant capital projects or are adding additional phases (Summit Crossing).
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Preferred Apartment Communities, Inc. Page 15
Supplemental Financial Data
| Fourth Quarter 2015 |
Capital Expenditures
We regularly incur capital expenditures related to our owned properties. Capital expenditures may be nonrecurring and discretionary, as part of a strategic plan intended to increase a property’s value and corresponding revenue-generating ability, or may be normally recurring and necessary to maintain the income streams and present value of a property. Certain capital expenditures may be budgeted and reserved for upon acquiring a property as initial expenditures necessary to bring a property up to our standards or to add features or amenities that we believe make the property a compelling value to prospective residents or retail tenants in its individual market. These budgeted nonrecurring capital expenditures in connection with an acquisition are funded from the capital source(s) for the acquisition and are not dependent upon subsequent property operating cash flows for funding.
For the three-month period ended December 31, 2015, our capital expenditures were as follows:
| Nonrecurring capital expenditures | Recurring capital expenditures | |||||||||||||||||||
| Budgeted at acquisition | Other | Total | Total | |||||||||||||||||
| Multifamily communities: | ||||||||||||||||||||
| Summit Crossing | $ | — | $ | — | $ | — | $ | 28,746 | $ | 28,746 | ||||||||||
| Trail Creek | — | 9,161 | 9,161 | 20,665 | 29,826 | |||||||||||||||
| Stone Rise | — | 2,582 | 2,582 | 7,413 | 9,995 | |||||||||||||||
| Ashford Park | — | 3,476 | 3,476 | 27,686 | 31,162 | |||||||||||||||
| McNeil Ranch | — | 900 | 900 | 16,350 | 17,250 | |||||||||||||||
| Lake Cameron | — | 2,335 | 2,335 | 17,564 | 19,899 | |||||||||||||||
| Stoneridge | 15,000 | 7,386 | 22,386 | 12,502 | 34,888 | |||||||||||||||
| Vineyards | 35,724 | — | 35,724 | 20,718 | 56,442 | |||||||||||||||
| Enclave | 39,685 | — | 39,685 | 2,650 | 42,335 | |||||||||||||||
| Sandstone | 444,453 | 1,617 | 446,070 | 21,844 | 467,914 | |||||||||||||||
| Cypress | 15,000 | 8,041 | 23,041 | 4,612 | 27,653 | |||||||||||||||
| Northpointe | 33,948 | 8,837 | 42,785 | 3,244 | 46,029 | |||||||||||||||
| Lakewood Ranch | — | 1,995 | 1,995 | 1,516 | 3,511 | |||||||||||||||
| Aster at Lely | — | 6,150 | 6,150 | 10,893 | 17,043 | |||||||||||||||
| CityPark View | — | — | — | 7,060 | 7,060 | |||||||||||||||
| Avenues at Creekside | — | — | — | 18,282 | 18,282 | |||||||||||||||
| Citi Lakes | 3,150 | 733 | 3,883 | — | 3,883 | |||||||||||||||
| Stone Creek | 70,186 | — | 70,186 | 4,890 | 75,076 | |||||||||||||||
| 657,146 | 53,213 | 710,359 | 226,635 | 936,994 | ||||||||||||||||
| Retail: | ||||||||||||||||||||
| Woodstock Crossing | — | 13,155 | 13,155 | — | 13,155 | |||||||||||||||
| Parkway Town Centre | — | — | — | — | — | |||||||||||||||
| Spring Hill Plaza | — | — | — | — | — | |||||||||||||||
| Deltona Landings | — | — | — | — | — | |||||||||||||||
| Salem Cove | — | — | — | — | — | |||||||||||||||
| Kingwood Glen | — | — | — | 8,820 | 8,820 | |||||||||||||||
| Powder Springs | — | — | — | 8,000 | 8,000 | |||||||||||||||
| Sweetgrass Corner | — | — | — | — | — | |||||||||||||||
| Independence Square | — | 7,307 | 7,307 | — | 7,307 | |||||||||||||||
| Royal Lakes Marketplace | — | — | — | 7,521 | 7,521 | |||||||||||||||
| — | 20,462 | 20,462 | 24,341 | 44,803 | ||||||||||||||||
| Total | $ | 657,146 | $ | 73,675 | $ | 730,821 | $ | 250,976 | $ | 981,797 | ||||||||||
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Preferred Apartment Communities, Inc. Page 16
Supplemental Financial Data
| Fourth Quarter 2015 |
Retail Portfolio
Our retail portfolio consists of the following properties:
| Property name | Location | Year built | GLA (1) | Percent leased | Anchor tenant | |||||||
| Woodstock Crossing | Atlanta, GA | 1994 | 66,122 | 92.6 | % | Kroger | ||||||
| Parkway Town Centre | Nashville, TN | 2005 | 65,587 | 89.7 | % | Publix | ||||||
| Spring Hill Plaza | Nashville, TN | 2005 | 61,570 | 100.0 | % | Publix | ||||||
| Barclay Crossing | Tampa, FL | 1998 | 54,958 | 100.0 | % | Publix | ||||||
| Deltona Landings | Orlando, FL | 1999 | 59,966 | 95.5 | % | Publix | ||||||
| Kingwood Glen | Houston, TX | 1998 | 103,397 | 100.0 | % | Kroger | ||||||
| Parkway Centre | Columbus, GA | 1999 | 53,088 | 86.8 | % | Publix | ||||||
| Powder Springs | Atlanta, GA | 1999 | 77,853 | 92.8 | % | Publix | ||||||
| Sweetgrass Corner | Charleston, SC | 1999 | 89,124 | 96.2 | % | Bi-Lo | ||||||
| Salem Cove | Nashville, TN | 2010 | 62,356 | 97.8 | % | Publix | ||||||
| Independence Square | Dallas, TX | 1977 | 140,218 | 94.6 | % | Tom Thumb | ||||||
| Royal Lakes Marketplace | Atlanta, GA | 2008 | 119,493 | 84.4 | % | Kroger | ||||||
| Summit Point | Atlanta, GA | 2004 | 111,970 | 84.4 | % | Publix | ||||||
| The Overlook at Hamilton Place | Chattanooga, TN | 1992 | 213,095 | 98.6 | % | The Fresh Market | ||||||
| 1,278,797 | ||||||||||||
(1) Gross leasable area, or GLA, represents the total amount of property square footage that can be leased to tenants.
As of December 31, 2015, our retail portfolio was 93.9% leased. We define percent leased as the percentage of gross leasable area that is leased, including lease agreements that have been fully executed which have not yet commenced.
Details regarding lease expirations (assuming no exercise of tenant renewal options) within our retail assets as of December 31, 2015 were:
| Total retail portfolio | ||||||||
| Number of leases | Leased GLA | Percent of leased GLA | ||||||
| Month to month | 4 | 6,714 | 0.6 | % | ||||
| 2016 | 32 | 69,714 | 5.8 | % | ||||
| 2017 | 48 | 92,522 | 7.7 | % | ||||
| 2018 | 34 | 63,741 | 5.3 | % | ||||
| 2019 | 24 | 249,523 | 20.8 | % | ||||
| 2020 | 30 | 127,408 | 10.6 | % | ||||
| 2021 | 10 | 22,960 | 1.9 | % | ||||
| 2022 | 2 | 3,239 | 0.3 | % | ||||
| 2023 | 2 | 12,300 | 1.0 | % | ||||
| 2024+ | 21 | 552,313 | 46.0 | % | ||||
| 207 | 1,200,434 | |||||||
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Preferred Apartment Communities, Inc. Page 17
Supplemental Financial Data
| Fourth Quarter 2015 |
Multifamily Same Store Financial Data
The following chart presents same store operating results for the Company’s multifamily communities that have been owned for at least 24 full months, enabling comparisons of the current reporting period to the prior year comparative period. Multifamily communities approved for disposition by the investment committee of our Manager (both phases of Trail Creek) are excluded from these results. Additionally, the Company excludes the same store operating results of properties for which construction of adjacent phases have commenced (the Company holds a real estate loan partially supporting a third phase of the Summit Crossing multifamily community, which is excluded as well). For the periods presented, same store operating results consist of the operating results of our Stone Rise, Lake Cameron, Ashford Park, and McNeil Ranch communities. Same store net operating income is a non-GAAP measure that is most directly comparable to net income, with a reconciliation following below.
| Same Store Net Operating Income | |||||||||||||||
| Stone Rise, Ashford Park, McNeil Ranch and Lake Cameron Multifamily Communities | |||||||||||||||
| Twelve months ended: | |||||||||||||||
| 12/31/2015 | 12/31/14 | $ inc | % inc | ||||||||||||
| Revenues: | |||||||||||||||
| Rental revenues | $ | 14,618,942 | $ | 14,125,546 | $ | 493,396 | 3.5 | % | |||||||
| Other property revenues | 1,839,489 | 1,774,905 | $ | 64,584 | 3.6 | % | |||||||||
| Total revenues | 16,458,431 | 15,900,451 | $ | 557,980 | 3.5 | % | |||||||||
| Operating expenses: | |||||||||||||||
| Property operating and maintenance | 2,692,710 | 2,558,936 | $ | 133,774 | 5.2 | % | |||||||||
| Payroll | 1,574,145 | 1,547,003 | $ | 27,142 | 1.8 | % | |||||||||
| Property management fees | 657,534 | 635,813 | $ | 21,721 | 3.4 | % | |||||||||
| Real estate taxes | 1,859,941 | 1,762,741 | $ | 97,200 | 5.5 | % | |||||||||
| Other | 620,254 | 566,868 | $ | 53,386 | 9.4 | % | |||||||||
| Total operating expenses | 7,404,584 | 7,071,361 | $ | 333,223 | 4.7 | % | |||||||||
| Same store net operating income | $ | 9,053,847 | $ | 8,829,090 | $ | 224,757 | 2.5 | % | |||||||
| Reconciliation of Same Store Net Operating Income (NOI) to Net (Loss) Income | ||||||||
| Twelve months ended: | ||||||||
| 12/31/2015 | 12/31/2014 | |||||||
| Same store net operating income | $ | 9,053,847 | $ | 8,829,090 | ||||
| Add: | ||||||||
| Non-same-store property revenues | 62,165,980 | 18,808,195 | ||||||
| Less: | ||||||||
| Non-same-store property operating expenses | 25,229,352 | 6,901,518 | ||||||
| Non-same-store deferred management fees | 151,396 | — | ||||||
| Property net operating income | 45,839,079 | 20,735,767 | ||||||
| Add: | ||||||||
| Interest revenues on notes receivable | 23,207,610 | 18,531,899 | ||||||
| Interest revenues on related party notes receivable | 7,474,100 | 3,295,826 | ||||||
| Less: | ||||||||
| Equity stock compensation | 2,362,453 | 1,784,349 | ||||||
| Depreciation and amortization | 38,096,334 | 16,328,715 | ||||||
| Interest expense | 21,315,731 | 10,188,187 | ||||||
| Acquisition costs | 4,186,092 | 3,714,077 | ||||||
| Acquisition costs to related party | 4,967,671 | 3,518,540 | ||||||
| Management fees | 7,041,226 | 3,546,987 | ||||||
| Other corporate expenses | 2,782,749 | 1,687,779 | ||||||
| Contingent asset management and general and administrative expense fees | (1,805,478 | ) | (332,345 | ) | ||||
| Net (loss) income | $ | (2,425,989 | ) | $ | 2,127,203 | |||
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Preferred Apartment Communities, Inc. Page 18
Supplemental Financial Data
| Fourth Quarter 2015 |
Definitions of Non-GAAP Measures
Funds From Operations Attributable to Common Stockholders and Unitholders (FFO)
Analysts, managers and investors have, since the first real estate investment trusts were created, made certain adjustments to reported net income amounts under U.S. GAAP in order to better assess these vehicles’ liquidity and cash flows. FFO is one of the most commonly utilized Non-GAAP measures currently in practice. In its 2002 White Paper on Funds From Operations, which was most recently revised in 2012, the National Association of Real Estate Investment Trusts, or NAREIT, standardized the definition of how Net income/loss should be adjusted to arrive at FFO, in the interests of uniformity and comparability. The NAREIT definition of FFO (and the one reported by the Company) is:
Net income/loss:
• excluding impairment charges on and gains/losses from sales of depreciable property;
• plus depreciation and amortization of real estate assets and deferred leasing costs; and
• after adjustments for unconsolidated partnerships and joint ventures.
Not all companies necessarily utilize the standardized NAREIT definition of FFO, so caution should be taken in comparing the Company’s reported FFO results to those of other companies. The Company’s FFO results are comparable to the FFO results of other companies that follow the NAREIT definition of FFO and report these figures on that basis. The Company believes FFO is useful to investors as a supplemental gauge of our operating and cash-generating results. FFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders.
Normalized Funds From Operations Attributable to Common Stockholders and Unitholders (NFFO)
Normalized FFO makes certain adjustments to FFO, which are either not likely to occur on a regular basis or are otherwise not representative of the Company’s ongoing operating performance. For example, since the Company is acquiring properties on a regular basis, it incurs substantial costs related to such acquisitions, which are required under GAAP to be recognized as expenses when they are incurred. The Company adds back any such acquisition and pursuit costs, including costs incurred in connection with obtaining short term debt financing for acquisitions to FFO in its calculation of NFFO since such costs are not representative of our fund generating results on an ongoing basis. The Company also adds back any realized losses on debt extinguishment and any non-cash dividends in this calculation. NFFO figures reported by us may not be comparable to those NFFO figures reported by other companies.
We utilize NFFO as a measure of the operating performance of our portfolio of real estate assets. We believe NFFO is useful to investors as a supplemental gauge of our operating performance and is useful in comparing our operating performance with other real estate companies that are not as involved in ongoing acquisition activities. NFFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders.
Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders (AFFO)
AFFO makes further adjustments to NFFO results in order to arrive at a more refined measure of operating and financial performance. There is no industry standard definition of AFFO and practice is divergent across the industry. The Company calculates AFFO as:
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Preferred Apartment Communities, Inc. Page 19
Supplemental Financial Data
| Fourth Quarter 2015 |
NFFO, plus:
• non-cash equity compensation to directors and executives;
• amortization of loan closing costs, excluding costs incurred in connection with obtaining short term financing related to acquisitions;
• depreciation and amortization of non-real estate assets;
• net loan fees received; and
• deferred interest income received;
less:
• non-cash loan interest income;
• cash paid for pursuit costs on abandoned acquisitions;
• cash paid for loan closing costs;
• amortization of acquired real estate intangible liabilities; and
• normally-recurring capital expenditures and capitalized retail direct leasing costs.
AFFO figures reported by us may not be comparable to those AFFO figures reported by other companies. We utilize AFFO as another measure of the operating performance of our portfolio of real estate assets. We believe AFFO is useful to investors as a supplemental gauge of our operating performance and is useful in comparing our operating performance with other real estate companies. AFFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders.
Same Store Net Operating Income (NOI)
The Company uses same store net operating income as an operational metric for properties the Company has owned for at least 24 full months, enabling comparisons of those properties’ operating results between the current reporting period and the prior year comparative period. The Company defines net operating income as rental and other property revenues, less total property and maintenance expenses, property management fees, real estate taxes, general and administrative expenses, and property insurance. The Company believes that net operating income is an important supplemental measure of operating performance for a REIT’s operating real estate because it provides a measure of the core operations, rather than factoring in depreciation and amortization, financing costs, acquisition costs, and other corporate expenses. Net operating income is a widely utilized measure of comparative operating performance in the REIT industry, but is not a substitute for its closest GAAP-compliant measure, net income/loss.
Additional Information
The SEC has declared effective the registration statement (including prospectus) filed by the Company for each of the offerings to which this communication may relate. Before you invest, you should read the final prospectus, and any prospectus supplements, forming a part of the registration statement and other documents the Company has filed with the SEC for more complete information about the Company and the offering to which this communication may relate. In particular, you should carefully read the risk factors described in the final prospectus and in any related prospectus supplement and in the documents incorporated by reference in the final prospectus and any related prospectus supplement to which this communication may relate. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively the Company or its dealer manager, International Assets Advisory, LLC (with respect to the offering of up to a maximum of 900,000 Units, with each Unit consisting of one share of Series A Redeemable Preferred Stock and one Warrant to purchase up to 20 shares of our Common Stock, or the Follow-On Offering), or its sales agent, MLV & Co. LLC (with respect to the issuance and offering of up to $100 million of its Common Stock from time to time in an "at the market" offering, or the ATM Offering), will arrange to send you
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Preferred Apartment Communities, Inc. Page 20
Supplemental Financial Data
| Fourth Quarter 2015 |
the prospectus if you request it by calling Leonard A. Silverstein at (770) 818-4100, or writing to 3284 Northside Parkway NW, Suite 150, Atlanta, Georgia 30327.
The final prospectus for the Follow-On Offering, dated October 11, 2013, can be accessed through the following link: http://www.sec.gov/Archives/edgar/data/1481832/000148183213000128/a424b3prospectus900m.htm
The final prospectus and prospectus supplement for the ATM Offering, dated July 19, 2013 and February 28, 2014, respectively, can be accessed through the following link:
http://www.sec.gov/Archives/edgar/data/1481832/000148183214000015/prospectussupplementatm-20.htm
For further information:
Leonard A. Silverstein, President and Chief Operating Officer
Preferred Apartment Communities, Inc.
lsilverstein@pacapts.com
+1-770-818-4147
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Preferred Apartment Communities, Inc. Page 21
Supplemental Financial Data