PREFERRED APARTMENT COMMUNITIES INC - FORM 8-K - EX-99.2 - 3Q15 - SUPPLEMENTAL FINANCIAL DATA - November 2, 2015

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Third Quarter 2015
                    


Table of Contents

Company Profile
 
 
 
3

Financial Summary of the Third Quarter 2015
4

2015 Guidance
 
 
 
4

Highlights of the Third Quarter 2015 and Subsequent Events
 
4

Consolidated Statements of Operations
6

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
7

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
8

Consolidated Balance Sheets
9

Consolidated Statements of Cash Flows
10

Real Estate Loan Portfolio
11

Multifamily Communities
12

Capital Expenditures
13

Retail Portfolio, Multifamily Same Store Financial Data
14

Definitions of Non-GAAP Measures
16





















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Preferred Apartment Communities, Inc.                                  Page 2
Supplemental Financial Data
Third 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 mezzanine 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 September 30, 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
Third Quarter 2015
                    


Financial Summary of the Third Quarter 2015

(See Definitions of Non-GAAP Measures on page 16)
 
Three months ended:
 
Change inc (dec):
 
9/30/2015
 
9/30/2014
 
Amount
 
Percentage
 
 
 
 
 
 
 
 
Revenues
$
29,955,693

 
$
13,182,660

 
$
16,773,033

 
127.2
 %
 
 
 
 
 
 
 
 
FFO
$
3,677,872

 
$
(1,964,044
)
 
$
5,641,916

 
—
 %
 
 
 
 
 
 
 
 
FFO per share (1)
$
0.16

 
$
(0.11
)
 
$
0.27

 
—
 %
 
 
 
 
 
 
 
 
Acquisition costs and other adjustments
3,454,237

 
6,500,056

 
$
(3,045,819
)
 
(46.9
)%
 
 
 
 
 
 
 
 
NFFO
$
7,132,109

 
$
4,536,012

 
$
2,596,097

 
57.2
 %
 
 
 
 
 
 
 
 
NFFO per share (1)
$
0.32

 
$
0.26

 
$
0.06

 
23.1
 %
 
 
 
 
 
 
 
 
AFFO (plus preferred dividends)
$
10,147,659

 
$
5,790,299

 
$
4,357,360

 
75.3
 %
Preferred dividends
(5,114,126
)
 
(1,903,517
)
 
 
 
 
AFFO
$
5,033,533

 
$
3,886,782

 
$
1,146,751

 
29.5
 %
 
 
 
 
 
 
 
 
AFFO per share (1)
$
0.22

 
$
0.22

 
$
—

 
—
 %
 
 
 
 
 
 
 
 
Dividends per share of Common Stock
$
0.18

 
$
0.16

 
$
0.02

 
12.5
 %
 
 
 
 
 
 
 
 
Cash flow from operations
$
9,889,885

 
$
(575,275
)
 
$
10,465,160

 
—
 %
 
 
 
 
 
 
 
 
Total assets
$
1,104,840,196

 
$
688,340,520

 
$
416,499,676

 
60.5
 %
Weighted average shares of Common Stock
 
 
 
 
 
 
 
and Units outstanding
22,570,223

 
17,709,102

 
 
 
 

(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 7 and 16.

2015 Guidance: (1)  

NFFO Guidance - We currently project NFFO to be in the range of $1.14 - $1.16 per share for the full year 2015.

Highlights of the Third Quarter 2015 and Subsequent Events

•
Normalized Funds From Operations Attributable to Common Stockholders and Unitholders, or NFFO, was $7,132,109, or $0.32 per share for the third quarter 2015, an increase of 23% on a per share basis from our NFFO result of $4,536,012, or $0.26 per share for the third quarter 2014.

•
Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders, or AFFO, was $5,033,533, or $0.22 per share for the third quarter 2015, compared to our AFFO result of $3,886,782, or $0.22 per share for the third quarter 2014. AFFO is calculated after deductions for all preferred dividends.

•
As of September 30, 2015, our total assets were approximately $1.1 billion, an increase of approximately $416.5 million, or 61% compared to our total assets of approximately $688.3 million at September 30, 2014.

•
Total revenues for the third quarter 2015 were approximately $30.0 million, an increase of approximately $16.8 million, or 127%, compared to approximately $13.2 million for the third quarter 2014.


————————————————
Preferred Apartment Communities, Inc.                                  Page 4
Supplemental Financial Data
Third Quarter 2015
                    


•
Cash flow from operations for the third quarter 2015 was approximately $9.9 million, an increase of approximately $10.5 million, compared to approximately $(0.6) million for the third quarter 2014.

•
Our Common Stock dividend of $0.18 per share for the third quarter 2015 represents a growth rate of 12.5% from our third quarter 2014 dividend of $0.16 per share and a growth rate of approximately 9.9% on an annualized basis since June 30, 2011, the first quarter end following our initial public offering in April 2011.

•
At September 30, 2015, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was 55.6%.

•
For the third quarter 2015, our average occupancy was 96.0%. As of September 30, 2015, our retail portfolio was 94.1% leased.

•
For the third quarter 2015, our NFFO payout ratio to our Common Stockholders and Unitholders was approximately 57.0% and our AFFO payout ratio to Common Stockholders and Unitholders was approximately 80.8%. (2) 

•
For the third quarter 2015, our NFFO payout ratio (before the deduction of preferred dividends) to our Series A Preferred Stockholders was approximately 41.8% and our AFFO payout ratio (before the deduction of preferred dividends) to our Series A Preferred Stockholders was approximately 50.4%. (2) 

•
Our same store net operating income grew approximately 6.3% for the third quarter 2015 from the third quarter 2014.

•
During July 2015, we converted two existing bridge loans to real estate loans aggregating up to approximately $66.0 million, to partially finance planned multifamily community projects located in Tampa, Florida and Irvine, California. The loans pay current monthly interest of 8.5% per annum and accrue deferred interest at 6% and 7.5% per annum, respectively.

•
On August 14, 2015, we originated a real estate loan of up to approximately $6.6 million to partially finance a planned approximate 200,000 square foot retail center in the Atlanta, Georgia market. The loan pays current monthly interest of 12.0% per annum. On October 7, 2015, the commitment amount was increased to $11,571,307.

•
During the third quarter 2015, we acquired two multifamily communities comprising an aggregate of 741 units, located in San Antonio, Texas and Orlando, Florida, and two grocery-anchored shopping centers comprising an aggregate of approximately 260,000 square feet of gross leasable area in the Dallas, Texas and Atlanta, Georgia markets.

•
With the closing of the acquisitions referenced above, we own 17 multifamily communities comprising an aggregate of 5,416 units and 12 grocery-anchored shopping centers comprising an aggregate of 953,732 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 18 additional multifamily communities, including six student housing communities, comprising an aggregate of 4,408 additional units.

•
On July 17, 2015, we transferred the listing of our Common Stock from the NYSE MKT to the New York Stock Exchange, or NYSE, under the same ticker symbol, "APTS".

•
As of September 8, 2015, the investment committee of our Manager authorized us to market for sale our Trail Creek multifamily community located in Hampton, Virginia.

•
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. We anticipate that a third party investor will participate in a portion of this financing.

•
On October 30, 2015, we acquired a grocery-anchored shopping center comprised of approximately 112,000 square feet of gross leasable area in the Atlanta, Georgia market. The anchor tenant is a Publix grocery store.

(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 7 and 16.

(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 16.

————————————————
Preferred Apartment Communities, Inc.                                  Page 5
Supplemental Financial Data
Third Quarter 2015
                    


Preferred Apartment Communities, Inc.
Consolidated Statements of Operations
(Unaudited)
 
 
Three months ended September 30,
 
 
2015
 
2014
Revenues:
 
 
 
 
Rental revenues (See note 1)
 
$
19,442,628

 
$
6,546,945

Other property revenues
 
2,558,185

 
799,716

Interest income on loans and notes receivable
 
5,909,907

 
4,871,387

Interest income from related party
 
2,044,973

 
964,612

Total revenues
 
29,955,693

 
13,182,660

 
 
 
 
 
Operating expenses:
 
 
 
 
Property operating and maintenance
 
3,097,080

 
1,067,849

Property salary and benefits reimbursement to related party
1,688,347

 
632,051

Property management fees
857,294

 
283,805

Real estate taxes
 
2,506,885

 
712,752

General and administrative
 
632,164

 
177,291

Equity compensation to directors and executives
593,417

 
456,961

Depreciation and amortization
 
10,536,486

 
3,185,739

Acquisition and pursuit costs
1,783,708

 
3,056,997

Acquisition fees to related parties
 
1,541,250

 
3,443,059

Asset management fees to related party
 
1,908,742

 
787,115

Insurance, professional fees, and other expenses
 
1,062,687

 
458,367

 
 
 
 
 
Total operating expenses
 
26,208,060

 
14,261,986

Asset and property management fees deferred
 
(373,360
)
 
—

 
 
 
 
 
Net operating expenses
 
25,834,700

 
14,261,986

Operating income (loss)
 
4,120,993

 
(1,079,326
)
Interest expense
 
5,818,760

 
2,150,047

 
 
 
 
 
Net loss
 
(1,697,767
)
 
(3,229,373
)
Consolidated net loss attributable
 
 
 
 
to non-controlling interests (See note 2)
 
15,289

 
26,481

 
 
 
 
 
Net loss attributable to the Company
 
(1,682,478
)
 
(3,202,892
)
 
 
 
 
 
Dividends declared to Series A preferred stockholders
 
(5,114,126
)
 
(1,903,517
)
Earnings attributable to unvested restricted stock
 
(4,068
)
 
(6,275
)
 
 
 
 
 
Net loss attributable to common stockholders
 
$
(6,800,672
)
 
$
(5,112,684
)
 
 
 
 
 
Net loss per share of Common Stock available to Common Stockholders,
 
 
 
basic and diluted
 
$
(0.31
)
 
$
(0.29
)
 
 
 
 
 
Dividends per share declared on Common Stock
 
$
0.18

 
$
0.16

Weighted average number of shares of Common Stock outstanding,
 
 
 
basic and diluted
 
22,292,217

 
17,564,091



————————————————
Preferred Apartment Communities, Inc.                                  Page 6
Supplemental Financial Data
Third 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:
 
 
 
 
 
9/30/2015
 
9/30/2014
 
 
 
 
 
 
 
 
Net loss attributable to common stockholders
$
(6,800,672
)
 
$
(5,112,684
)
 
 
 
 
 
 
 
 
Add:
Loss attributable to non-controlling interests (See note 2)
(15,289
)
 
(26,481
)
 
Depreciation of real estate assets
 
7,510,851

 
2,707,738

 
Amortization of acquired real estate intangible assets and deferred leasing costs
2,982,982

 
467,383

 
 
 
 
 
 
 
 
Funds from operations attributable to common stockholders and Unitholders
3,677,872

 
(1,964,044
)
 
 
 
 
 
 
 
 
Add:
Acquisition and pursuit costs
 
 
3,324,958

 
6,500,056

 
Costs incurred from extension of management agreement with advisor (See Note 3)
129,279

 
—

 
 
 
 
 
 
 
 
Normalized funds from operations attributable to common stockholders and Unitholders
7,132,109

 
4,536,012

 
 
 
 
 
 
 
 
 
Non-cash equity compensation to directors and executives
593,417

 
456,961

 
Amortization of loan closing costs (See note 4)
 
369,128

 
290,548

 
Depreciation/amortization of non-real estate assets
 
42,653

 
10,618

 
Net loan fees received (See note 5)
 
494,100

 
54,601

 
Deferred interest income received (See note 6)
 
282,620

 
470,839

Less:
Non-cash loan interest income (See note 5)
 
(2,640,396
)
 
(1,591,839
)
 
Abandoned pursuit costs
 
 
(39,657
)
 
(3,611
)
 
Cash paid for loan closing costs
(433,195
)
 
(67,257
)
 
Amortization of acquired real estate intangible liabilities (See note 7)
(304,608
)
 
(63,833
)
 
Normally recurring capital expenditures and leasing costs (See note 8)
(462,638
)
 
(206,257
)
 
 
 
 
 
 
 
 
Adjusted funds from operations attributable to common stockholders and Unitholders
$
5,033,533

 
$
3,886,782

 
 
 
 
 
 
 
 
Common Stock dividends and distributions to Unitholders declared:
 
 
 
 
Common Stock dividends
 
 
$
4,018,249

 
$
2,937,911

 
Distributions to Unitholders (See note 2)
 
49,781

 
23,202

 
Total
 
 
 
$
4,068,030

 
$
2,961,113

 
 
 
 
 
 
 
 
Common Stock dividends and Unitholder distributions per share
 
$
0.18

 
$
0.16

 
 
 
 
 
 
 
 
FFO per weighted average basic share of Common Stock and Unit
$
0.16

 
$
(0.11
)
NFFO per weighted average basic share of Common Stock and Unit
$
0.32

 
$
0.26

AFFO per weighted average basic share of Common Stock and Unit
$
0.22

 
$
0.22

Weighted average shares of Common Stock and Units outstanding: (A)
 
 
 
 
Basic:
 
 
 
 
 
 
 
Common Stock
 
 
22,292,217

 
17,564,091

 
Class A Units
 
 
 
278,006

 
145,011

 
Common Stock and Class A Units
 
22,570,223

 
17,709,102

 
 
 
 
 
 
 
 
 
Diluted Common Stock and Class A Units (B)
 
22,953,854

 
17,899,473

 
 
 
 
 
 
 
 
Actual shares of Common Stock outstanding, including 22,602 and 39,216 unvested shares
 
 
 
 of restricted Common Stock at September 30, 2015 and 2014, respectively
22,323,804

 
19,902,179

Actual Class A Units outstanding
 
 
276,560

 
145,011

 
Total
 
 
 
22,600,364

 
20,047,190

 
 
 
 
 
 
 
 
(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 1.23% weighted average non-controlling interest in the Operating Partnership for the three-month period ended September 30, 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, 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.
See 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 on page 8.

————————————————
Preferred Apartment Communities, Inc.                                  Page 7
Supplemental Financial Data
Third 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 three-month period ended September 30, 2015 include a full period of activity for the ten grocery-anchored shopping centers and the four multifamily communities acquired during 2014. Rental and other property revenues and expenses for the three-month period ended September 30, 2015 also include a full period of activity for the CityPark View, Aster at Lely and Lakewood multifamily communities, as well as partial periods of results for the Creekside and Citi Lakes multifamily communities and the Independence Square and Royal Lakes Marketplace grocery-anchored shopping centers from their respective dates of acquisition during 2015. Rental and other property revenues and expenses for the three-month period ended September 30, 2014 do not include results for these properties as they were acquired subsequent to September 30, 2014.

2)
Non-controlling interests in our Operating Partnership consisted of a total of 276,560 Class A Units as of September 30, 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 1.23% and 0.82% for the three-month periods ended September 30, 2015 and 2014, respectively.

3)
We incurred legal costs pertaining to the current negotiation of an extension of our management agreement with our Manager. Such costs are an additive adjustment to FFO in our 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 September 30, 2015, aggregate unamortized loan costs were approximately $7.7 million, which will be amortized over a weighted average remaining loan life of approximately 5.4 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 in the three month periods ended September 30, 2015 and 2014 of interest income earned and accrued prior to the 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. The adjustment for the three-month period ended September 30, 2015 pertains to the acquisition of our twelve grocery-anchored shopping centers. The adjustment for the three-month period ended September 30, 2014 pertains to the acquisition of the Woodstock Crossing, Nashville Portfolio, and Sunbelt Portfolio retail assets. At September 30, 2015, the balance of unamortized below-market lease intangibles was approximately $7.3 million, which will be recognized over a weighted average remaining lease period of approximately 8.6 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 $1,480,968 and $435,880 for the three-month periods ended September 30, 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.


See Definitions of Non-GAAP Measures beginning on page 15.


————————————————
Preferred Apartment Communities, Inc.                                  Page 8
Supplemental Financial Data
Third Quarter 2015
                    


Preferred Apartment Communities, Inc.
Consolidated Balance Sheets
(Unaudited)
 
 
 
September 30, 2015
 
December 31, 2014
 
 
 
 
 
Assets
 
 
 
 
Real estate
 
 
 
Land
 
$
121,990,344

 
$
79,272,457

Building and improvements
646,526,008

 
377,030,987

Tenant improvements
4,312,964

 
3,240,784

Furniture, fixtures, and equipment
81,754,519

 
36,864,668

Construction in progress
679,216

 
66,647

Gross real estate
855,263,051

 
496,475,543

Less: accumulated depreciation
(45,416,437
)
 
(26,388,066
)
Net real estate
809,846,614

 
470,087,477

Real estate loans, net
154,187,851

 
128,306,697

Real estate loans to related party, net
53,609,059

 
24,924,976

Total real estate and real estate loans, net
1,017,643,524

 
623,319,150

 
 
 
 
 
Cash and cash equivalents
8,046,824

 
3,113,270

Restricted cash
12,020,327

 
4,707,865

Notes receivable
10,449,914

 
14,543,638

Note receivable and revolving line of credit due from related party
17,845,319

 
14,153,922

Accrued interest receivable on real estate loans
11,227,275

 
8,038,447

Acquired intangible assets, net of amortization
14,948,140

 
12,702,980

Deferred loan costs
487,079

 
79,563

Deferred offering costs
6,413,474

 
6,333,763

Tenant receivables and other assets
5,758,320

 
4,390,309

 
 
 
 
 
Total assets
$
1,104,840,196

 
$
691,382,907

 
 
 
 
 
Liabilities and equity
 
 
 
Liabilities
 
 
 
Mortgage notes payable, principal amount
$
598,045,978

 
$
354,418,668

Less: deferred loan costs, net of amortization
(7,241,722
)
 
(5,027,505
)
Mortgage notes payable, net of deferred loan costs
590,804,256

 
349,391,163

Revolving line of credit
28,700,000

 
24,500,000

Real estate loan participation obligation
12,525,823

 
7,990,798

Accounts payable and accrued expenses
12,144,470

 
4,941,703

Accrued interest payable
1,544,500

 
1,116,750

Dividends and partnership distributions payable
5,892,424

 
4,623,246

Acquired below market lease intangibles, net of amortization
7,332,327

 
5,935,931

Security deposits and other liabilities
2,349,802

 
1,301,442

Total liabilities
661,293,602

 
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; 386,912 and 193,334 shares issued; 384,112 and 192,846
 
 
 
shares outstanding at September 30, 2015 and December 31, 2014, respectively
3,841

 
1,928

Common Stock, $0.01 par value per share; 400,066,666 shares authorized;
 
 
 
  22,301,202 and 21,403,987 shares issued and outstanding at September 30, 2015
 
 
 
and December 31, 2014, respectively
223,012

 
214,039

Additional paid-in capital
454,470,254

 
300,576,349

Accumulated deficit
(13,319,000
)
 
(11,297,852
)
      Total stockholders' equity
441,378,107

 
289,494,464

Non-controlling interest
2,168,487

 
2,087,410

Total equity
443,546,594

 
291,581,874

 
 
 
 
 
Total liabilities and equity
$
1,104,840,196

 
$
691,382,907


————————————————
Preferred Apartment Communities, Inc.                                  Page 9
Supplemental Financial Data
Third Quarter 2015
                    


Preferred Apartment Communities, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
 
 
 
Nine months ended September 30,
 
 
2015
 
2014
Operating activities:
 
 
 
 
Net (loss) income
 
$
(2,041,860
)
 
$
1,990,940

Reconciliation of net (loss) income to net cash provided by operating activities:
 
 
 
Depreciation expense
 
19,052,639

 
7,348,550

Amortization expense
 
7,357,124

 
1,442,495

Amortization of above and below market leases
(566,260
)
 
(96,056
)
Deferred fee income amortization
(580,996
)
 
(805,360
)
Deferred loan cost amortization
1,069,961

 
433,609

(Increase) in accrued interest income on real estate loans
(3,188,828
)
 
(3,219,158
)
Equity compensation to executives and directors
1,761,268

 
1,347,107

Deferred cable income amortization
(14,807
)
 
(14,073
)
Loss on asset disposal
 
—

 
2,804

Changes in operating assets and liabilities:
 
 
 
(Increase) decrease in tenant receivables and other assets
(539,565
)
 
279,345

Increase in accounts payable and accrued expenses
5,069,158

 
1,146,507

Increase in accrued interest payable
427,750

 
89,745

Increase in prepaid rents
237,613

 
19,033

Increase in security deposits and other liabilities
144,931

 
32,096

Net cash provided by operating activities
28,188,128

 
9,997,584

 
 
 
 
 
Investing activities:
 
 
 
 
Investment in real estate loans
 
(83,800,145
)
 
(39,513,149
)
Repayments of real estate loans
 
18,772,024

 
3,125,202

Notes receivable issued
 
(5,805,972
)
 
(9,111,133
)
Notes receivable repaid
 
9,897,319

 
3,810,504

Note receivable issued to and draws on line of credit by related party
(12,869,093
)
 
(9,312,953
)
Repayments of line of credit by related party
8,514,582

 
5,359,560

Acquisition fees received on real estate loans
2,126,913

 
836,755

Acquisition fees paid on real estate loans
(1,063,456
)
 
(438,465
)
Acquisition fees paid to real estate loan participants
(24,665
)
 
—

Acquisition of properties
 
(311,936,810
)
 
(285,302,277
)
Additions to real estate assets - improvements
(3,007,537
)
 
(1,661,807
)
Increase in deposits on acquisitions
(1,519,269
)
 
4,773

Decrease in restricted cash
(4,998,076
)
 
(648,950
)
Net cash used in investing activities
(385,714,185
)
 
(332,851,940
)
 
 
 
 
 
Financing activities:
 
 
 
 
Proceeds from mortgage notes payable
204,555,500

 
217,956,000

Payment for mortgage extinguishment
(2,553,190
)
 
(13,098,170
)
Payments for deposits and other mortgage loan costs
(3,240,080
)
 
(4,903,701
)
Proceeds from real estate loan participants
4,134,882

 
3,338,204

Proceeds from lines of credit
 
165,900,000

 
73,683,305

Payments on lines of credit
 
(161,700,000
)
 
(67,073,306
)
Proceeds from term loan
 
32,000,000

 
44,250,000

Repayment of the term loan
 
(32,000,000
)
 
—

Proceeds from sales of units, net of offering costs and redemptions
174,702,572

 
51,479,498

Proceeds from sales of common stock
5,381,848

 
36,058,950

Common stock dividends paid
 
(11,560,512
)
 
(7,563,679
)
Preferred stock dividends paid
 
(11,453,618
)
 
(4,663,139
)
Distributions to non-controlling interests
(124,905
)
 
(75,179
)
Payments for deferred offering costs
(1,582,886
)
 
(2,127,153
)
Net cash provided by financing activities
362,459,611

 
327,261,630

 
 
 
 
 
Net increase in cash and cash equivalents
4,933,554

 
4,407,274

Cash and cash equivalents, beginning of period
3,113,270

 
9,180,431

Cash and cash equivalents, end of period
$
8,046,824

 
$
13,587,705




————————————————
Preferred Apartment Communities, Inc.                                  Page 10
Supplemental Financial Data
Third Quarter 2015
                    


Real Estate Loans
 
 
 
 
Total units upon
 
Loan balance at September 30,
 
Total loan
 
Purchase option window
 
Purchase option price
Project/Property
(1) 
Location
 
completion
 
2015 (2)
 
 commitments
 
Begin
 
End
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Crosstown Walk
 
Tampa, FL
 
342

 
$
10,946,120

 
$
10,962,000

 
7/1/2016
 
12/31/2016
 
$
39,654,273

City Vista
 
Pittsburgh, PA
 
272

 
15,973,290

 
16,107,735

 
2/1/2016
 
5/31/2016
 
43,560,271

Overton Rise
 
Atlanta, GA
 
294

 
16,562,802

 
16,600,000

 
7/8/2016
 
12/8/2016
 
51,500,000

Haven West
(3) 
Atlanta, GA
 
160

 
6,770,607

 
6,940,795

 
8/1/2016
 
1/31/2017
 
26,138,466

Haven 12
(4) 
Starkville, MS
 
152

 
5,811,446

 
6,116,384

 
9/1/2016
 
11/30/2016
 
(5) 
Founders' Village
(6) 
Williamsburg, VA
 
247

 
9,839,011

 
10,346,000

 
2/1/2016
 
9/15/2016
 
44,266,000

Encore
(7) 
Atlanta, GA
 
340

 
20,026,525

 
20,026,525

 
N/A
 
N/A
 
N/A
Palisades
(6) 
Northern VA
 
304

 
16,062,965

 
17,270,000

 
3/1/2017
 
7/31/2017
 
(5) 
Fusion
 
Irvine, CA
 
280

 
28,325,212

 
59,052,583

 
1/1/2018
 
4/1/2018
 
(5) 
Green Park
(6) 
Atlanta, GA
 
310

 
8,879,226

 
13,464,372

 
11/1/2017
 
2/28/2018
 
(5) 
Stadium Village
 (6,8) 
Atlanta, GA
 
198

 
13,319,670

 
13,424,995

 
9/1/2016
 
11/30/2016
 
(5) 
Summit Crossing III
 
Atlanta, GA
 
172

 
6,388,358

 
7,246,400

 
8/1/2017
 
11/30/2017
 
(5) 
Overture
 
Tampa, FL
 
180

 
2,363,278

 
6,920,000

 
1/1/2018
 
5/1/2018
 
(5) 
Aldridge at Town Village
 
Atlanta, GA
 
300

 
9,485,391

 
10,975,000

 
11/1/2017
 
2/28/2018
 
(5) 
18 Nineteen
(9) 
Lubbock, TX
 
217

 
14,075,483

 
15,598,352

 
10/1/2017
 
12/31/2017
 
(5) 
Haven South
(10) 
Waco, TX
 
250

 
10,747,764

 
15,445,668

 
10/1/2017
 
12/31/2017
 
(5) 
Haven Tampa
(11) 
Tampa, FL
 
158

 
2,884,089

 
2,900,000

 
N/A
 
N/A
 
N/A
Bishop Street
(12) 
Atlanta, GA
 
232

 
3,078,711

 
3,107,012

 
N/A
 
N/A
 
N/A
Dawsonville
(13) 
Atlanta, GA
 
—

 
6,256,962

 
6,553,500

 
N/A
 
N/A
 
N/A
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,408

 
$
207,796,910

 
$
259,057,321

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) 
All loans pertain to developments of multifamily communities, except as otherwise indicated.
 
(2) 
Loan balances are presented net of any associated deferred revenue related to loan fees.
 
(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) 
Bridge loan in support of a planned approximate 200,000 square foot retail center in the Atlanta, Georgia market. On October 7, 2015, the commitment amount was increased to $11,571,307.



————————————————
Preferred Apartment Communities, Inc.                                  Page 11
Supplemental Financial Data
Third Quarter 2015
                    


Multifamily Communities
 
 
 
 
 
 
 
 
Three months ended September 30, 2015
Property
 
Location
 
Number of units
 
Average unit size (sq. ft.)
 
Average occupancy
 
Average rent per unit
 
 
 
 
 
 
 
 
 
 
 
Ashford Park
 
Atlanta, GA
 
408

 
1,008

 
95.1
%
 
$
1,131

Lake Cameron
 
Raleigh, NC
 
328

 
940

 
96.9
%
 
$
900

McNeil Ranch
 
Austin, TX
 
192

 
1,071

 
94.6
%
 
$
1,200

Stone Rise
 
Philadelphia, PA
 
216

 
1,079

 
95.7
%
 
$
1,426

Same-store properties
 
 
 
1,144

 

 
95.6
%
 

 
 
 
 
 
 
 
 
 
 
 
Trail Creek
 
Hampton, VA
 
300

 
1,138

 
91.8
%
 
$
1,140

Summit Crossing
 
Atlanta, GA
 
485

 
1,050

 
97.1
%
 
$
1,051

Enclave at Vista Ridge
 
Dallas, TX
 
300

 
1,079

 
95.7
%
 
$
1,097

Sandstone Creek
 
Kansas City, KS
 
364

 
1,135

 
95.1
%
 
$
1,043

Stoneridge Farms
 
Nashville, TN
 
364

 
1,153

 
95.7
%
 
$
1,000

Vineyards
 
Houston, TX
 
369

 
1,122

 
96.3
%
 
$
1,178

Aster at Lely Resort
 
Naples, FL
 
308

 
979

 
96.9
%
 
$
1,256

CityPark View
 
Charlotte, NC
 
284

 
948

 
95.4
%
 
$
1,041

Avenues at Cypress
 
Houston, TX
 
240

 
1,166

 
95.7
%
 
$
1,362

Venue at Lakewood Ranch
 
Sarasota, FL
 
237

 
1,001

 
—
%
 
$
1,480

Avenues at Creekside
 
San Antonio, TX
 
395

 
974

 
—
%
 
$
1,255

Citi Lakes
 
Orlando, FL
 
346

 
984

 
—
%
 
$
1,298

Avenues at Northpointe
 
Houston, TX
 
280

 
1,154

 
96.9
%
 
$
1,367

Non same-store properties
 
 
 
4,272

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
5,416

 
 
 
96.0
%
 
 

For the three-month period ended September 30, 2015, our average occupancy was 96.0%. 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 (Venue at Lakewood Ranch was not yet stabilized at the beginning of the third quarter), properties which are owned for less than the entire reporting period (Avenues at Creekside and Citi Lakes), and properties which are undergoing significant capital projects or are adding additional phases (Summit Crossing).












————————————————
Preferred Apartment Communities, Inc.                                  Page 12
Supplemental Financial Data
Third 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 September 30, 2015, our capital expenditures were as follows:
 
 
Nonrecurring capital expenditures
 
Recurring capital expenditures
 
 
 
 
Budgeted at acquisition
 
Other
 
Total
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
Multifamily communities:
 
 
 
 
 
 
 
 
 
 
Summit Crossing
 
$
—

 
$
30,898

 
$
30,898

 
$
27,792

 
$
58,690

Trail Creek
 
—

 
8,402

 
8,402

 
34,645

 
43,047

Stone Rise
 
—

 
14,198

 
14,198

 
49,079

 
63,277

Ashford Park
 
—

 
176,470

 
176,470

 
51,976

 
228,446

McNeil Ranch
 
—

 
—

 
—

 
18,387

 
18,387

Lake Cameron
 
—

 
34,137

 
34,137

 
41,925

 
76,062

Stoneridge
 
—

 
10,916

 
10,916

 
57,232

 
68,148

Vineyards
 
28,264

 
8,230

 
36,494

 
24,652

 
61,146

Enclave
 
—

 
6,561

 
6,561

 
49,078

 
55,639

Sandstone
 
113,590

 
4,323

 
117,913

 
37,433

 
155,346

Cypress
 
—

 
2,920

 
2,920

 
6,381

 
9,301

Northpointe
 
—

 
—

 
—

 
6,515

 
6,515

Lakewood Ranch
 
118,916

 
—

 
118,916

 
—

 
118,916

Aster at Lely
 
—

 
—

 
—

 
12,229

 
12,229

CityPark View
 
—

 
—

 
—

 
2,794

 
2,794

Avenues at Creekside
 
19,576

 
—

 
19,576

 
21,109

 
40,685

Citi Lakes
 
19,197

 
—

 
19,197

 
—

 
19,197

 
 
 
 
 
 
 
 
 
 
 
 
 
299,543

 
297,055

 
596,598

 
441,227

 
1,037,825

 
 
 
 
 
 
 
 
 
 
 
Retail:
 
 
 
 
 
 
 
 
 
 
Woodstock Crossing
 
264,930

 
452

 
265,382

 
735

 
266,117

Parkway Town Centre
 
292,031

 
—

 
292,031

 
4,704

 
296,735

Spring Hill Plaza
 
750

 
—

 
750

 
—

 
750

Deltona Landings
 
—

 
—

 
—

 
1,409

 
1,409

Salem Cove
 
—

 
—

 
—

 
—

 
—

Kingwood Glen
 
326,207

 
—

 
326,207

 
9,079

 
335,286

Powder Springs
 
—

 
—

 
—

 
371

 
371

Sweetgrass Corner
 
—

 
—

 
—

 
98

 
98

Independence Square
 
—

 
—

 
—

 
5,015

 
5,015

 
 
 
 
 
 
 
 
 
 
 
 
 
883,918

 
452

 
884,370

 
21,411

 
905,781

 
 
 
 
 
 
 
 
 
 
 
Total
 
$
1,183,461

 
$
297,507

 
$
1,480,968

 
$
462,638

 
$
1,943,606








————————————————
Preferred Apartment Communities, Inc.                                  Page 13
Supplemental Financial Data
Third 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

 
98.0
%
 
 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

 
100.0
%
 
 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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
953,732

 
 
 
 
(1) Gross leasable area, or GLA, represents the total amount of property square footage that can be leased to tenants.

As of September 30, 2015, our retail portfolio was 94.1% 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 September 30, 2015 were:
 
Total retail portfolio
 
Number of leases
 
Leased GLA
 
Percent of leased GLA
 
 
 
 
 
 
 
 
 
 
 
 
Month to month
3

 
5,514

 
0.6
%
2015
7

 
11,647

 
1.3
%
2016
29

 
51,611

 
5.8
%
2017
39

 
77,539

 
8.6
%
2018
27

 
49,800

 
5.6
%
2019
13

 
142,744

 
15.9
%
2020
22

 
107,149

 
11.9
%
2021
7

 
15,480

 
1.7
%
2022
1

 
1,082

 
0.1
%
2023
1

 
1,300

 
0.1
%
2024+
16

 
433,303

 
48.4
%
 
 
 
 
 
 
 
165

 
897,169

 
 

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 15 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

————————————————
Preferred Apartment Communities, Inc.                                  Page 14
Supplemental Financial Data
Third Quarter 2015
                    


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, Lake Cameron Multifamily Communities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended:
 
$ inc
 
% inc
 
 
9/30/2015
 
9/30/14
 
 (dec)
 
 (dec)
Revenues:
 
 
 
 
 
 
 
 
Rental revenues
 
$
3,701,998

 
$
3,553,656

 
$
148,342

 
4.2
%
Other property revenues
 
508,285

 
489,358

 
$
18,927

 
3.9
%
Total revenues
 
4,210,283

 
4,043,014

 
$
167,269

 
4.1
%
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Property operating and maintenance
 
727,716

 
723,611

 
$
4,105

 
0.6
%
Payroll
 
415,265

 
408,959

 
$
6,306

 
1.5
%
Property management fees
 
166,224

 
164,276

 
$
1,948

 
1.2
%
Real estate taxes
 
461,932

 
447,633

 
$
14,299

 
3.2
%
Other
 
154,036

 
149,390

 
$
4,646

 
3.1
%
Total operating expenses
 
1,925,173

 
1,893,869

 
$
31,304

 
1.7
%
 
 
 
 
 
 
 
 
 
Same store net operating income
 
$
2,285,110

 
$
2,149,145

 
$
135,965

 
6.3
%

Reconciliation of Same Store Net Operating Income (NOI) to Net (Loss) Income
 
 
 
 
 
 
 
Three months ended:
 
 
9/30/2015
 
9/30/14
 
 
 
 
 
Same store net operating income
 
$
2,285,110

 
$
2,149,145

 
 
 
 
 
Add:
 
 
 
 
Non-same-store property revenues
 
17,790,530

 
3,303,647

Same-store below market lease amortization
—

 
—

Less:
 
 
 
 
Non-same-store property operating expenses
7,077,912

 
1,054,880

Non-same-store deferred management fees
 
8,042

 
—

Property net operating income
 
12,989,686

 
4,397,912

 
 
 
 
 
Add:
 
 
 
 
Interest revenues on notes receivable
 
5,909,907

 
4,871,387

Interest revenues on related party notes receivable
 
2,044,973

 
964,612

Less:
 
 
 
 
Equity stock compensation
 
593,417

 
456,961

Depreciation and amortization
 
10,536,486

 
3,185,739

Interest expense
 
5,818,760

 
2,150,047

Acquisition costs
 
1,783,708

 
3,056,997

Acquisition costs to related party
 
1,541,250

 
3,443,059

Management fees
 
1,908,742

 
787,115

Other corporate expenses
 
833,330

 
383,366

 
 
 
 
 
Asset and property management fees deferred
 
(373,360
)
 
—

 
 
 
 
 
Net income
 
$
(1,697,767
)
 
$
(3,229,373
)




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Preferred Apartment Communities, Inc.                                  Page 15
Supplemental Financial Data
Third 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, and costs incurred related to the negotiations of extensions of our management agreement with our Manager. 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:
 
NFFO, plus:

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Preferred Apartment Communities, Inc.                                  Page 16
Supplemental Financial Data
Third Quarter 2015
                    


• 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 15 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 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.

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Supplemental Financial Data
Third Quarter 2015
                    



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 18
Supplemental Financial Data

PREFERRED APARTMENT COMMUNITIES INC Reports