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Preferred Apartment Communities, Inc. Reports Results For First Quarter 2014

Stocks in this article: APTS

ATLANTA, May 5, 2014 /PRNewswire/ -- Preferred Apartment Communities, Inc. (NYSE MKT: APTS) (the "Company" or "Preferred Apartment Communities") today reported results for the quarter ended March 31, 2014.  Unless otherwise indicated, all per share results are reported based on the basic weighted average shares of Common Stock and Class A Units of our operating partnership ("Class A OP Unit") outstanding.

Preferred Apartment Communities logo

"We believe we started 2014 off with a great first quarter for the Company," said John A. Williams, Preferred Apartment Communities' Chairman and Chief Executive Officer.  Williams added, "I want to thank our associates and management team for a great start to the year and we look forward to building on this momentum."

First Quarter 2014

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, for the first quarter 2014 of $3,660,322, or $0.24 per share, compared with a FFO loss of $161,454 for the first quarter 2013, or $(0.03) per share.  For the first quarter 2014, there were 15,532,914 basic weighted average shares of Common Stock and Class A OP Units outstanding, compared to 5,394,300 basic weighted average shares of Common Stock and Class A OP Units outstanding for the first quarter 2013.  At March 31, 2014, we had outstanding 15,390,839 shares of Common Stock, excluding 29,237 shares of restricted Common Stock, and 144,432 Class A OP Units.

The Company reported Normalized Funds From Operations Attributable to Common Stockholders and Unitholders, or NFFO, for the first quarter 2014 of $3,905,621, or $0.25 per share, compared with NFFO for the first quarter 2013 of $945,557, or $0.18 per share.  This represents a period over period increase of approximately 313% in NFFO and an increase of approximately 39% in NFFO per share.  NFFO is calculated by beginning with FFO and making 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.

The Company reported Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders, or AFFO, for the first quarter 2014 of $3,060,633, or $0.20 per share, compared with AFFO for the first quarter 2013 of $897,917, or $0.17 per share.  This represents a period over period increase of approximately 241% in AFFO and an increase of approximately 18% in AFFO per share.  AFFO is calculated by beginning with NFFO and adjusting for 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.  The items adjusted are discussed below in more detail.

FFO, NFFO and AFFO are all calculated after deductions for all preferred stock dividends.  A reconciliation of net income (loss) attributable to common stockholders to FFO, NFFO 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/1Q14_Supplemental_Data.

The Company reported total revenues for the first quarter 2014 of $10,182,406, compared to total revenues for the first quarter 2013 of $5,335,582, an increase of approximately $4.8 million, or approximately 91%.  These numbers exclude the revenues from our Trail Creek community, which is included in discontinued operations, of $1,057,677 and $655,377 for the first quarters of 2014 and 2013, respectively.

The Company reported net cash provided by operating activities for the first quarter 2014 of $5,108,766.  This represents an increase of approximately $4.4 million, or approximately 575% over net cash provided by operating activities for the first quarter 2013.

The Company reported net income attributable to common stockholders under U.S. generally accepted accounting principles, or GAAP, for the first quarter 2014 of $1,331,769, or approximately $0.09 per share, compared to net loss attributable to common stockholders for the first quarter 2013 of $4,179,650 or approximately $(0.79) per share.

The increases in FFO, NFFO, AFFO, revenue and net cash provided by operating activities were primarily due to a full quarter of operating results from the community we acquired in the second quarter of 2013 and the community we acquired in the fourth quarter of 2013, which included additional rental revenue and additional operational expenses, a full quarter of income from eight additional real estate loans that were originated in the last nine months of 2013 and a partial quarter of income from the acquisition of a retail shopping center in the first quarter of 2014, whereas the first quarter 2013 operating results did reflect the effects of the these investments.  In addition, AFFO and net cash provided by operating activities in the first quarter of 2014 were increased by the effect of the receipt of approximately $555,000 in deferred interest income and FFO, NFFO, AFFO and net cash provided by operating activities were helped by approximately $1.0 million less in acquisition fees paid in the first quarter of 2014, both compared to the first quarter of 2013.  However, FFO, NFFO, AFFO and net cash provided by operating activities were offset by an increase of approximately $305,000 in management fees paid in the first quarter of 2014 compared to the first quarter of 2013 because of the increased number of assets under management.

Other than with regard to our $40.0 million revolving credit facility (our "Credit Facility") and the guaranty of the office lease for Preferred Apartment Advisors, LLC, 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

We present same store operating results for our multifamily communities where all phases have been owned for at least 15 full months, enabling comparisons of the current reporting period to the prior year comparative period. For the three month period ended March 31, 2014, only our Stone Rise community met the definition of same store for disclosure purposes.  Our Trail Creek and Summit Crossing communities' results are excluded from the same store presentation because they now reflect our acquisition during the same store period of the second phases of those communities subsequent to the acquisition dates of June 25, 2013 and December 31, 2013, respectively. Because this measure would only reflect one of our six communities, we are not presenting same store operating results in this report.  Beginning with the three month period ended June 30, 2014, we intend to resume presentation of this measure, adding our Lake Cameron, McNeil Ranch and Ashford Park communities to Stone Rise, which we believe will comprise a more meaningful measure.

Total Assets and Leverage

As of March 31, 2014, our total assets were approximately $355 million compared to approximately $222 million as of March 31, 2013, an increase of approximately $133 million, or approximately 60%.  Please see the description of increased revenue above for the primary reasons for the increase in total assets. 

At March 31, 2014, our leverage as measured by the ratio of our debt to undepreciated book value of our total assets was approximately 46.6%.

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 the Company'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.  The Follow-On Offering commenced sales on January 1, 2014, immediately following the December 31, 2013 expiration of our earlier registration statement on Form S-11, as amended (File No. 333-176604), related to our offering of up to 150,000 Units (the "Primary Series A Offering").  The Follow-On Offering will terminate on October 11, 2015, subject to a one-year extension option at our sole discretion, unless earlier terminated by us. 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.

On February 28, 2014, we filed a prospectus supplement to our Shelf Registration Statement to issue and sell up to $100 million of our Common Stock from time to time in an "at the market" offering (the "ATM Offering") through MLV & Co. LLC as our sales agent.  We intend to use any proceeds from the ATM Offering to repay outstanding amounts under our Credit Facility and for other general corporate purposes, including making investments in accordance with our investment objectives.  During April 2014, 756,910 shares of Common Stock were issued and sold at an average price of $8.10 per share pursuant to the ATM Offering, resulting in net proceeds of $5.94 million, after deducting commissions.

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

On February 6, 2014, the Company declared a quarterly dividend on its Common Stock of $0.16 per share for the first quarter 2014, which was paid on April 15, 2014 to all stockholders of record on March 14, 2014.  In conjunction with the Common Stock dividend, our operating partnership declared a distribution on its Class A OP Units of $0.16 per unit for the first quarter 2014, which was paid on April 22, 2014 to all Class A OP Unit holders of record as of March 14, 2014.

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 $1,420,536 for the three-month period ended March 31, 2014 and represents a 6% annual yield.

Physical and Average Economic Occupancy

On March 31, 2014, our aggregate physical occupancy (excluding the Trail Creek community) was 95.2%. For the three-month period ended March 31, 2014, our average monthly economic occupancy excluding the Trail Creek community was 93.1% and our average physical occupancy was 95.3%. 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.

First Quarter 2014 Normalized FFO guidance:

We currently project Normalized FFO to be in the range of $0.21 - $0.25 per share for the second quarter of 2014.

First Quarter 2014 Adjusted FFO guidance:           

We currently project Adjusted FFO to be in the range of $0.16 - $0.22 per share for the second quarter of 2014.

Note, guidance on projected NFFO and AFFO for the second quarter of 2014 excludes any proceeds from any additional shares of our Series A Redeemable Preferred Stock, common stock in the ATM Offering or other securities that we may issue and potential dividends to be paid on those securities.

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