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TheStreet Open House

Preferred Apartment Communities, Inc. Reports Results For Third Quarter 2013

ATLANTA, Nov. 4, 2013 /PRNewswire/ -- Preferred Apartment Communities, Inc. (NYSE MKT: APTS) (the "Company" or "Preferred Apartment Communities") today reported results for the quarter ended September 30, 2013.  Unless otherwise indicated, all per share results are reported based on the weighted average shares of Common Stock outstanding on a fully-diluted basis for the period.

(Logo: http://photos.prnewswire.com/prnh/20110420/HS87275LOGO)

"We believe we had extraordinary results for the third quarter 2013," said John A. Williams, Preferred Apartment Communities' Chairman and Chief Executive Officer.  Williams added, "Our FFO, AFFO and cash flow from operations exceeded our expectations.   Our FFO, AFFO, total revenues and cash flow from operations for the third quarter 2013 each increased by more than 131% from the same period in 2012. In addition, we continued to expand our asset base by originating loans in connection with the development of student housing projects in Georgia and Mississippi and by making a new mezzanine loan investment in a multifamily project in Williamsburg, Virginia.  As we grow, we expect to continue to diversify our footprint into new markets that we believe have the strong economic fundamentals we are seeking."

Third Quarter 2013

For the third quarter 2013, the Company reported Funds From Operations Attributable to Common Stockholders and Unitholders, or FFO, as defined by the National Association of Real Estate Investment Trusts, or NAREIT, of $2,660,575, or $0.24 per weighted average share of  Common Stock and Class A Unit of our operating partnership ("Class A OP Unit") outstanding on a fully diluted basis, compared with FFO of $881,543 for the third quarter 2012, or $0.17 per weighted average share of Common Stock and Class A OP Unit outstanding for the third quarter 2012, an increase of approximately 202% in FFO and an increase of approximately 41% in FFO per weighted average share of Common Stock and Class A OP Unit outstanding.  The lower increase in FFO per weighted average share of Common Stock and Class A OP Unit outstanding is primarily due to the issuance of 5,714,274 shares of Common Stock in May 2013.  This resulted in an increase in our weighted average shares of Common Stock and Class A OP Units outstanding from 5,178,822 for the third quarter 2012 to 11,148,347 for the third quarter 2013.  At September 30, 2013, we had outstanding 11,073,731 shares of Common Stock and 106,988 Class A OP Units.

For the third quarter 2013, the Company reported Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders, or AFFO, of $2,062,981, compared with AFFO of $817,996 for the third quarter 2012, an increase of approximately 152%.  AFFO is calculated by beginning with FFO and eliminating certain items that we believe by their nature are not comparable from period to period or tend to obscure the Company's actual operating performance.  A reconciliation of net income (loss) attributable to common stockholders to FFO and AFFO is included in the Supplemental Financial Data Report attached to this press release on our website and is available using the following link: http://preferredapartmentcommunities.investorroom.com/3Q13_Supplemental_Data.

For the third quarter 2013, the Company reported net cash provided by operating activities was $2,835,304.  This represents an increase of approximately $1.6 million, or approximately 131% over net cash provided by operating activities for the third quarter 2012.

For the third quarter 2013, the Company reported a net loss attributable to common stockholders of $879,697, or approximately $0.08 per share, compared to a net loss attributable to common stockholders of $18,764, or approximately $0.00 per share, for the third quarter 2012.  Net loss attributable to common stockholders for the third quarter 2013 compared to the third quarter 2012 increased as a result of non-cash depreciation and amortization expenses of approximately $3.7 million and $0.9 million for the third quarters of 2013 and 2012, respectively.

For the third quarter 2013, the Company reported total revenues of $8,752,275, compared to total revenues of $3,243,251 for the third quarter 2012, an increase of approximately $5.5 million, or approximately 170%.

The increases in FFO, AFFO, net cash provided by operating activities and revenue were primarily due to a full quarter of income from four additional mezzanine loans and three acquisition bridge loans (one of which was converted to a full mezzanine loan in the second quarter 2013) that were originated in the second half of 2012 and the first half of 2013, and full fees and a partial quarter of income from two additional mezzanine loans and one acquisition bridge loan originated during the third quarter 2013, whereas the third quarter 2012 operating results did not reflect additions of any of these type of investments.  The Company also recorded a full quarter of operating results from the three communities acquired in January 2013, which included additional rental revenue and additional operational expenses.

Interest expense increased by approximately $923,000 in the third quarter 2013 compared to the third quarter 2012, due mainly to additional interest and amortization of deferred loan costs on the mortgage loans on the three communities acquired in January 2013 and on our $30.0 million revolving credit facility.

Other than with regard to our $30.0 million revolving credit facility, we continue to hold no debt at the Company or operating partnership levels, have no cross-collateralization of our real estate assets, and have no contingent liabilities at the Company or operating partnership levels with regard to our secured mortgage debt on our communities.

Same Store Financial Data

For our same store communities, total revenues increased 3.8% during the third quarter 2013 compared to the third quarter 2012, resulting in a 0.2% increase in same store net operating income ("NOI").  Same store NOI results for the third quarter 2013 were adversely affected primarily by a revision of an estimate of approximately $74,000 to reflect an increase in annual property tax expense for our Summit Crossing community for the nine months ended September 30, 2013.  Excluding the portion of this revision that pertained to the six months ended June 30, 2013, our same store NOI for the third quarter 2013 would have increased approximately 4.3% compared to the third quarter 2012.  Same store NOI is a supplemental non-GAAP financial measure.  A reconciliation of same store NOI to net income (loss) is included in the Supplemental Financial Data Report, which is attached to this press release on our website and is available using the following link: http://preferredapartmentcommunities.investorroom.com/3Q13_Supplemental_Data.

Total Assets

As of September 30, 2013, our total assets were approximately $280 million compared to approximately $117 million as of September 30, 2012, an increase of approximately 139%.  Please see the description of the increased revenue above for the primary reasons for the increase in total assets.

Planned Investment Activity

Columbus, Ohio

We signed a purchase agreement to acquire a 276-unit multifamily community in Columbus, Ohio on November 4, 2013.  Currently, we are in the due diligence inspection period during which we have the right to terminate the purchase agreement in our sole discretion.  If we do not terminate the purchase agreement during the due diligence period and subject to the conditions to closing being satisfied, we anticipate completing this acquisition by year end.

Summit II

In May 2012, we made a mezzanine loan investment of approximately $6.1 million in connection with the construction of a 140-unit multifamily community in Atlanta, Georgia ("Summit II").  As part of our investment, we received a purchase option to acquire Summit II, which option is exercisable commencing October 1, 2014.  Summit II is located adjacent to our 345-unit multifamily community called Summit Crossing Apartments.  We are currently in negotiations to exercise our purchase option prior to the beginning of the option period.  Subject to Summit II meeting its operating income targets and successfully negotiating the right to exercise our purchase option early and subject to the conditions to closing being satisfied, we anticipate completing this acquisition by year end.

Northern Virginia

On November 4, 2013, we entered into a non-binding commitment letter with Oxford Properties, LLC pursuant to which we have offered to provide an approximately $16.9 million mezzanine loan in connection with the construction of a 304-unit multifamily community in Northern Virginia.  Subject to negotiating definitive mezzanine loan documents and Oxford Properties receiving a commitment for a senior construction loan and subject to the conditions to closing being satisfied, we anticipate originating this mezzanine loan by year end.

Capital Markets Activities

Our registration statement on Form S-3, as amended (Registration No. 333-183355),was declared effective by the Securities and Exchange Commission (the "SEC") on October 11, 2013.  This registration statement allows us to offer 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 (the "Follow-On Offering").  The price per Unit is $1,000.  The Series A Redeemable Preferred Stock ranks senior to PAC's Common Stock with respect to payment of dividends and distribution of amounts upon liquidation, dissolution and winding up.   The Units are being offered by International Assets Advisory, LLC, the dealer manager for the Follow-On Offering, on a "reasonable best efforts" basis.

We expect the Follow-On Offering to provide us with the ability to continue to offer our Series A Redeemable Preferred Stock and Warrants as originally offered pursuant our registration statement on Form S-11, as amended (File No. 333-176604), for up to 150,000 Units (the "Primary Series A Offering"). We expect the Primary Series A Offering will terminate on December 31, 2013, at which time we intend to commence sales pursuant to the Follow-On Offering. International Assets Advisory, LLC also is the dealer manager for the Primary Series A Offering.  We intend to invest substantially all the net proceeds of the Follow-On Offering in connection with the acquisition of multifamily communities, other real estate-related investments and general working capital purposes.

Dividends

Quarterly Dividends on Common Stock and Class A Operating Partnership Units

On August 8, 2013, the Company declared a quarterly dividend on its Common Stock of $0.15 per share for the third quarter 2013, which was paid on October 15, 2013 to all stockholders of record on September 16, 2013.  In conjunction with the Common Stock dividend, our operating partnership declared a distribution on its Class A OP Units of $0.15 per unit for the third quarter 2013, which was paid on October 15, 2013 to all Class A OP Unit holders of record as of September 16, 2013.

Monthly Dividends on Series A Redeemable Preferred Stock

The Company declared and paid monthly dividends of $5.00 per share on our Series A Redeemable Preferred Stock, which totaled $973,069 for the three-month period ended September 30, 2013 and represents a 6% annual yield.  Our net cash from operating activities was sufficient to fund our third quarter cash dividends declared on our Common Stock, Class A OP Units, and Series A Redeemable Preferred Stock.

Additionally, on October 22, 2013, the Company declared monthly dividends of $5.00 per share on its Series A Redeemable Preferred Stock (plus a prorated amount for September 2013 with respect to certain shares that were issued in September 2013), which totaled $364,308 for October 2013 and that will be paid on November 20, 2013 to applicable holders of Series A Redeemable Preferred Stock of record as of October 31, 2013.

Physical and Average Economic Occupancy

On September 30, 2013, our aggregate physical occupancy was 95.4%.  For the three-month period ended September 30, 2013, our average monthly economic occupancy was 93.7% and our average physical occupancy was 95.9%.  We define physical occupancy as the number of units occupied divided by total apartment units. We calculate average economic occupancy by dividing gross potential rent less vacancy losses, model expenses, bad debt expenses and concessions by gross potential rent.

Fourth Quarter 2013 AFFO Guidance

We currently project our AFFO to be in the range of $2,100,000 to $2,500,000 for the fourth quarter 2013.

Note, our guidance on projected AFFO for the fourth quarter 2013 excludes any proceeds from any additional shares of our Series A Redeemable Preferred Stock or other securities that we may issue and potential dividends to be paid on those securities.

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