Exhibit 99.1 

 

 

 

For Immediate Release

Bluerock Residential Growth REIT Announces Third Quarter 2018 Results

 

-   Total Revenues Grew 59% YoY to $47.9 Million   -

-   Industry-Leading Same Store Revenue Growth of 4.8% YoY   -

 

New York, NY (November 5, 2018) – Bluerock Residential Growth REIT, Inc. (NYSE American: BRG) (“the Company”), an owner of highly amenitized multifamily apartment communities, announced today its financial results for the quarter ended September 30, 2018.

 

Third Quarter Highlights

 

•

Total revenues grew 59% to $47.9 million for the quarter from $30.2 million in the prior year period.

 

•

Net loss attributable to common stockholders for the third quarter of 2018 was ($0.44) per share, as compared to ($0.45) per share in the prior year period.

 

•

Property Net Operating Income (“NOI”) grew 52% to $24.2 million, from $16.0 million in the prior year period.

 

•

Same store revenue and NOI increased 4.8% and 4.0% respectively, as compared to the prior year period.

 

•

Core funds from operations attributable to common shares and units (“CFFO”) increased 67% to $6.4 million, from $3.8 million in the prior year period.  CFFO per share is $0.21 for the third quarter as compared to $0.14 in the prior year period.  Dividend payout on a CFFO basis improved to 77% during the third quarter.

 

•

Adjusted funds from operations attributable to common shares and units (“AFFO”) grew 67% to $5.7 million, from $3.4 million in the prior year period. AFFO per share is $0.18 for the quarter as compared to $0.13 in third quarter 2017.

 

•

Consolidated real estate investments, at cost, increased approximately $197.5 million to $1.7 billion, from December 31, 2017.

 

•

The Company invested approximately $16 million in a multifamily community totaling 400 units with a total purchase price of $40.2 million and $3 million to buy out a noncontrolling interest in one asset.

 

•

The Company completed 385 value-add unit upgrades for a year-to-date total of 847 upgrades at an average cost of $4,555 per unit. The Company expects to complete between 900 and 1,200 unit renovations in 2018.

 

•

Since inception within the existing portfolio, the Company has completed 1,327 value-add unit upgrades and achieved a $107 average monthly rental increase per unit, equating to a 26.7% ROI on all unit upgrades leased as of September 30, 2018.  The Company has identified approximately 4,600 remaining units within the existing portfolio for value-add upgrades with similar economics to the completed renovations.

 

•

The Company is increasing the low end of its full year 2018 AFFO guidance range from $0.66 to $0.68 per share and is affirming the top end of the range at $0.70 per share. This represents the second consecutive quarter with a guidance increase.

 

 

“Our third quarter results clearly demonstrate the successful execution of our strategic initiatives, including value-add investments and accretive approach to growing our portfolio,” said Ramin Kamfar, Company Chairman and CEO. “We continued to perform well in the third quarter, with property NOI up 52% and on a CFFO basis we improved our dividend payout to 77% in the third quarter. Our same store operational results are among the best in the multifamily industry, reflecting the contribution from our unit upgrades and our focus on knowledge economy growth markets. These strong results have allowed us to again raise the lower end of our 2018 AFFO guidance range. We believe we have ample runway to continue to create additional value as we focus on accretive operational improvements and completing our value-add unit upgrade programs.”

 

Financial Results

 

Net loss attributable to common stockholders for the third quarter of 2018 was $10.3 million, compared to $12.0 million in the prior year period. Net loss attributable to common stockholders included non-cash expenses of $14.2 million or $0.46 per share in the third quarter of 2018 compared to $14.8 million or $0.55 per share for the prior year period.

 

AFFO for the third quarter of 2018 was $5.7 million, or $0.18 per diluted share, compared to $3.4 million, or $0.13 per diluted share in the prior year period. AFFO was primarily driven by growth in property NOI of $8.2 million and interest income of $3.6 million arising from significant investment activity. This was primarily offset by a year-over-year increase in interest expense of $5.1 million, general and administrative expenses of $2.1 million, and preferred stock dividends of $2.1 million.

 

Core FFO for the third of 2018 was $6.4 million, or $0.21 per diluted share, compared to $3.8 million, or $0.14 per diluted share in the prior year period. Core FFO adds back non-cash, non-operating expenses such as accretion on the Company’s Series B preferred stock.

 

Total Portfolio Performance

$ In thousands, except average rental rates	3Q18		3Q17		Variance		YTD18		YTD17		Variance
Total Revenues (1)	$ 47,877		$ 30,154		58.8%		$134,705		$ 87,004		54.8%
Property Operating Expenses	$ 17,971		$ 12,060		49.0%		$ 50,504		$ 34,205		47.7%
NOI	$ 24,204		$ 15,974		51.5%		$ 67,669		$ 47,058		43.8%
Operating Margin	57.4%		57.0%		40	bps	57.3%		57.9%		(60)	bps
Occupancy Percentage	94.5%		94.2%		30	bps	94.0%		94.4%		(40)	bps
Average Rental Rate	$    1,253		$    1,214		3.2%		$    1,239		$    1,240		-0.1%
(1) Including interest income from related parties

 

For the third quarter of 2018, property revenues increased by 50.4% compared to the same prior year period primarily attributable to the increased size of the portfolio. Total portfolio NOI was $24.2 million, an increase of $8.2 million, or 51.5%, compared to the same period in the prior year. Property operating expenses were up primarily due to the increased size of the portfolio.

 

Property NOI margins were 57.4% of revenue for the quarter, compared to 57.0% of revenue in the prior year quarter.

 

 

 

Same Store Portfolio Performance

$ In thousands, except average rental rates	3Q18		3Q17		Variance		YTD18		YTD17		Variance	0
Revenues	$   29,004		$   27,682		4.8%		$   63,075		$   60,210		4.8%
Property Operating Expenses	$   12,553		$   11,864		5.8%		$   26,741		$   25,189		6.2%
NOI	$   16,451		$   15,818		4.0%		$   36,334		$   35,021		3.7%
Operating Margin	56.7%		57.1%		(40)	bps	57.6%		58.2%		(60)	bps
Occupancy Percentage	94.5%		94.4%		10	bps	94.1%		94.5%		(40)	bps
Average Rental Rate	$     1,273		$     1,220		4.3%		$     1,292		$     1,234		4.7%

 

The Company’s same store portfolio for the quarter ended September 30, 2018 included 22 properties. For the third quarter of 2018, same store NOI was $16.5 million, an increase of $0.6 million, or 4.0%, compared to the same period in the prior year. Same store property revenues increased by 4.8% compared to the same prior year period, primarily attributable to a 4.3% increase in average rental rates, as well as average occupancy increasing 10 basis points to 94.5%. Same store expenses increased $0.69 million, primarily due to $0.40 million of additional real estate taxes due to higher valuations by municipalities, $0.17 million due to recurring annual maintenance incurred in the current year on certain properties which was not required in the prior year as the properties were undergoing renovations, and $0.11 million related to payroll increase.

 

Acquisition Activity

 

On July 26, 2018, the Company acquired a 93% interest in a 400-unit apartment community located in Houston, Texas, known as Veranda at Centerfield. The total purchase price was approximately $40.2 million, funded in part by a $26.1 million mortgage loan secured by the Veranda at Centerfield property.

 

On August 29, 2018, the Company invested approximately $3 million to increase our ownership stake to 100% in our ARIUM Palms property.

 

Balance Sheet

 

During the third quarter, the Company raised gross proceeds of approximately $29.8 million through the issuance of 29,829 shares of Series B preferred stock with associated warrants at $1,000 per unit.

 

As of September 30, 2018, the Company had $26.4 million of unrestricted cash on its balance sheet, approximately $56.1 million available among its revolving credit facilities, and $1.2 billion of debt outstanding.

 

Dividend

 

The Board of Directors authorized, and the Company declared, a quarterly dividend for the third quarter of 2018 equal to a quarterly rate of $0.1625 per share on its Class A common stock, payable to the stockholders of record as of September 25, 2018, which was paid in cash on October 5, 2018. A portion of each dividend may constitute a return of capital for tax purposes. There is no assurance that we will continue to declare dividends or at this rate.

 

On July 10, 2018, the Board of Directors authorized, and the Company declared, a monthly dividend of $5.00 per share of Series B preferred stock, payable to the stockholders of record as of July 25, 2018, August 24, 2018, and September 25, 2018 which was paid in cash on August 3, 2018, September 5, 2018, and October 5, 2018, respectively.

 

 

 

2018 Guidance

 

Based on the Company’s current outlook and market conditions, the Company is increasing the low end of the 2018 AFFO guidance from $0.66 to $0.68 per share and is reaffirming the top end of the range at $0.70 per share.

 

For additional guidance details, please see page 31 of Company’s Third Quarter 2018 Earnings Supplement available under Investor Relations on the Company’s website (www.bluerockresidential.com). Subsequent to issuing 2018 guidance in February 2018, the Company revised its presentation of AFFO attributable to common stockholders to reflect AFFO attributable to common shares and units. The estimated weighted average diluted shares and units outstanding used to calculate AFFO per share now includes noncontrolling interests – operating partnership units. As the Company’s presentation now also includes the impact of AFFO attributable to operating partnership units, and as shares and units are treated on a one-for-one basis, there is no change to projected AFFO per share for purposes of 2018 AFFO guidance.

 

Conference Call

 

All interested parties can listen to the live conference call at 11:00 AM ET on Monday, November 5, 2018 by dialing +1 (866) 843-0890 within the U.S., or +1 (412) 317-6597, and requesting the "Bluerock Residential Conference."

 

For those who are not available to listen to the live call, the conference call will be available for replay on the Company’s website two hours after the call concludes, and will remain available until December 6, 2018 at http://services.choruscall.com/links/brg181106.html, as well as by dialing +1 (877) 344-7529 in the U.S., or +1 (412) 317-0088 internationally, and requesting conference number 10125116.

 

The full text of this Earnings Release and additional Supplemental Information is available in the Investor Relations section on the Company’s website at http://www.bluerockresidential.com.

 

About Bluerock Residential Growth REIT, Inc.

 

Bluerock Residential Growth REIT, Inc. (NYSE American: BRG) is a real estate investment trust that focuses on developing and acquiring a diversified portfolio of institutional-quality highly amenitized live/work/play apartment communities in demographically attractive knowledge economy growth markets to appeal to the renter by choice. The Company’s objective is to generate value through off-market/relationship-based transactions and, at the asset level, through value add improvements to properties and operations. The Company is included in the Russell 2000 and Russell 3000 Indexes. BRG has elected to be taxed as a real estate investment trust (REIT) for U.S. federal income tax purposes.

 

For more information, please visit the Company’s website at www.bluerockresidential.com.

 

Forward Looking Statements

 

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are based upon the Company’s present expectations, but these statements are not guaranteed to occur. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Investors should not place undue reliance upon forward-looking statements. For further discussion of the factors that could affect outcomes, please refer to the risk factors set forth in Item 1A of the Company’s Annual Report on Form 10-K filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on March 13, 2018, and subsequent filings by the Company with the SEC. We claim the safe harbor protection for forward looking statements contained in the Private Securities Litigation Reform Act of 1995.

 

 

Portfolio Summary

 

The following is a summary of our operating real estate and mezzanine/preferred investments as of September 30, 2018:

Consolidated Operating Properties		Location		Number of Units				Year Built/ Renovated (1)				Ownership Interest				Average Rent (2)				% Occupied (3)
ARIUM at Palmer Ranch		Sarasota, FL			320				2016				100	%		$	1,283				94	%
ARIUM Glenridge		Atlanta, GA			480				1990				90	%			1,163				92	%
ARIUM Grandewood		Orlando, FL			306				2005				100	%			1,363				96	%
ARIUM Gulfshore		Naples, FL			368				2016				100	%			1,249				93	%
ARIUM Hunter’s Creek		Orlando, FL			532				1999				100	%			1,349				94	%
ARIUM Metrowest		Orlando, FL			510				2001				100	%			1,326				95	%
ARIUM Palms		Orlando, FL			252				2008				100	%			1,332				94	%
ARIUM Pine Lakes		Port St. Lucie, FL			320				2003				85	%			1,241				93	%
ARIUM Westside		Atlanta, GA			336				2008				90	%			1,532				98	%
Ashton Reserve		Charlotte, NC			473				2015				100	%			1,079				93	%
Citrus Tower		Orlando, FL			336				2006				97	%			1,273				94	%
Enders Place at Baldwin Park		Orlando, FL			220				2003				92	%			1,749				95	%
James on South First		Austin, TX			250				2016				90	%			1,248				98	%
Marquis at Crown Ridge		San Antonio, TX			352				2009				90	%			971				93	%
Marquis at Stone Oak		San Antonio, TX			335				2007				90	%			1,410				95	%
Marquis at The Cascades		Tyler, TX			582				2009				90	%			1,091				97	%
Marquis at TPC		San Antonio, TX			139				2008				90	%			1,468				96	%
Outlook at Greystone		Birmingham, AL			300				2007				100	%			917				96	%
Park & Kingston		Charlotte, NC			168				2015				100	%			1,244				98	%
Plantation Park		Lake Jackson, TX			238				2016				80	%			1,390				97	%
Preston View		Morrisville, NC			382				2000				100	%			1,074				96	%
Roswell City Walk		Roswell, GA			320				2015				98	%			1,528				94	%
Sands Parc		Daytona Beach, FL			264				2017				100	%			1,306				96	%
Sorrel		Frisco, TX			352				2015				95	%			1,284				93	%
Sovereign		Fort Worth, TX			322				2015				95	%			1,329				95	%
The Brodie		Austin, TX			324				2001				93	%			1,250				99	%
The Links at Plum Creek		Castle Rock, CO			264				2000				88	%			1,417				94	%
The Mills		Greenville, SC			304				2013				100	%			1,027				93	%
The Preserve at Henderson Beach		Destin, FL			340				2009				100	%			1,358				96	%
Veranda at Centerfield		Houston, TX			400				1999				93	%			916				94	%
Villages of Cypress Creek		Houston, TX			384				2001				80	%			1,090				96	%
Wesley Village		Charlotte, NC			301				2010				100	%			1,352				95	%
Consolidated Operating Properties Subtotal/Average					10,774											$	1,253				95	%

 

Mezzanine/Preferred Investments		Location		Planned Number of Units				Pro Forma Average Rent (4)
Alexan CityCentre		Houston, TX			340			$	2,144
Alexan Southside Place		Houston, TX			270				2,012
Arlo, formerly West Morehead		Charlotte, NC			286				1,507
Cade Boca Raton, formerly APOK Townhomes		Boca Raton, FL			90				2,549
Domain at The One Forty, formerly Domain		Garland, TX			299				1,469
Flagler Village		Fort Lauderdale, FL			385				2,352
Helios		Atlanta, GA			282				1,486
Leigh House, formerly Lake Boone Trail		Raleigh, NC			245				1,271
Novel Perimeter, formerly Crescent Perimeter		Atlanta, GA			320				1,749
Vickers Historic Roswell, formerly Vickers Village		Roswell, GA			79				3,176
Whetstone		Durham, NC			204				1,311	(2)
Mezzanine and Preferred Investments Subtotal/Average					2,800			$	1,817
Portfolio Properties Total/Average					13,574			$	1,370

 

⁽¹⁾ Represents date of last significant renovation or year built if there were no renovations.

⁽²⁾ Represents the average effective monthly rent per occupied unit for the three months ended September 30, 2018.

⁽³⁾ Percent occupied is calculated as (i) the number of units occupied as of September 30, 2018, divided by (ii) total number of units, expressed as a percentage.

⁽⁴⁾ Alexan CityCentre, Alexan Southside Place, Helios, Leigh House, and Whetstone are preferred equity investments. The Alexan Southside Place, Helios, and Leigh House investments have the option to convert to indirect common interest in the property once the property reaches 70% occupancy. Arlo, Cade Boca Raton, Domain at The One Forty, Flagler Village, Novel Perimeter, and Vickers Historic Roswell are mezzanine loan investments. Additionally, Arlo, Cade Boca Raton, Domain at The One Forty, and Vickers Historic Roswell have an option to purchase indirect property interest upon maturity.

 

 

Consolidated Statement of Operations

For the Three and Nine Months Ended September 30, 2018 and 2017

(Unaudited and dollars in thousands except for share and per share data)

 

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2018				2017				2018				2017
Revenues
Net rental income		$	37,408			$	24,827			$	104,791			$	72,239
Other property revenues			4,767				3,207				13,382				9,024
Interest income from related parties			5,702				2,120				16,532				5,741
Total revenues			47,877				30,154				134,705				87,004
Expenses
Property operating			17,971				12,060				50,504				34,205
Property management fees			1,141				781				3,208				2,250
General and administrative			4,732				1,103				13,929				4,249
Management fees to related parties			—				2,802				—				11,733
Acquisition and pursuit costs			7				15				78				3,215
Management internalization			—				826				—				1,647
Weather-related losses, net			13				678				181				678
Depreciation and amortization			15,384				11,763				45,844				33,094
Total expenses			39,248				30,028				113,744				91,071
Operating income (loss)			8,629				126				20,961				(4,067	)
Other income (expense)
Other income			—				—				—				17
Preferred returns and equity in income of unconsolidated real estate joint ventures			2,789				2,688				7,877				7,865
Gain on sale of real estate investments			—				—				—				50,040
Gain on sale of real estate joint venture interest			—				—				—				10,238
Loss on extinguishment of debt and modification costs			(1,624	)			—				(2,277	)			(1,639	)
Interest expense, net			(12,905	)			(7,395	)			(36,063	)			(22,339	)
Total other (expense) income			(11,740	)			(4,707	)			(30,463	)			44,182
Net (loss) income			(3,111	)			(4,581	)			(9,502	)			40,115
Preferred stock dividends			(9,105	)			(7,038	)			(25,995	)			(19,271	)
Preferred stock accretion			(1,631	)			(905	)			(4,141	)			(1,889	)
Net (loss) income attributable to noncontrolling interests
Operating partnership units			(3,157	)			(125	)			(8,841	)			4
Partially owned properties			(356	)			(382	)			(824	)			18,388
Net (loss) income attributable to noncontrolling interests			(3,513	)			(507	)			(9,665	)			18,392
Net (loss) income attributable to common stockholders		$	(10,334	)		$	(12,017	)		$	(29,973	)		$	563
Net (loss) income per common share - Basic		$	(0.44	)		$	(0.45	)		$	(1.28	)		$	0.02
Net (loss) income per common share – Diluted		$	(0.44	)		$	(0.45	)		$	(1.28	)		$	0.02
Weighted average basic common shares outstanding			23,742,129				26,474,093				23,893,957				25,851,536
Weighted average diluted common shares outstanding			23,742,129				26,474,093				23,893,957				25,852,059

 

 

 

Consolidated Balance Sheets

Third Quarter 2018

(Unaudited and dollars in thousands except for share and per share amounts)

 

		September 30, 2018				December 31, 2017
ASSETS
Net Real Estate Investments
Land		$	181,985			$	169,135
Buildings and improvements			1,419,423				1,244,193
Furniture, fixtures and equipment			48,618				38,446
Construction in progress			241				985
Total Gross Real Estate Investments			1,650,267				1,452,759
Accumulated depreciation			(93,751	)			(55,177	)
Total Net Real Estate Investments			1,556,516				1,397,582
Cash and cash equivalents			26,356				35,015
Restricted cash			32,132				29,575
Notes and accrued interest receivable from related parties			163,241				140,903
Due from affiliates			2,782				2,003
Accounts receivable, prepaid and other assets			19,883				9,689
Preferred equity investments and investments in unconsolidated real estate joint ventures			77,466				71,145
In-place lease intangible assets, net			1,212				4,635
Total Assets		$	1,879,588			$	1,690,547
LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY
Mortgages payable		$	1,107,081			$	939,494
Revolving credit facilities			62,959				67,670
Accounts payable			1,505				1,652
Other accrued liabilities			34,268				22,952
Due to affiliates			537				1,575
Distributions payable			11,848				14,287
Total Liabilities			1,218,198				1,047,630
8.250% Series A Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 10,875,000 shares authorized; and 5,721,460 issued and outstanding as of September 30, 2018 and December 31, 2017			139,355				138,801
6.000% Series B Redeemable Preferred Stock, liquidation preference $1,000 per share, 725,000 shares authorized; 263,095 and 184,130 issued and outstanding as of September 30, 2018 and December 31, 2017, respectively			234,086				161,742
7.625% Series C Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares authorized; and 2,323,750 issued and outstanding as of September 30, 2018 and December 31, 2017			56,408				56,196
Equity
Stockholders’ Equity
Preferred stock, $0.01 par value, 230,400,000 shares authorized; none issued and outstanding			—				—
7.125% Series D Cumulative Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares authorized; 2,850,602 issued and outstanding as of September 30, 2018 and December 31, 2017			68,705				68,705
Common stock - Class A, $0.01 par value, 747,509,582 shares authorized; 23,672,080 and 24,218,359 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively			237				242
Common stock - Class C, $0.01 par value, 76,603 shares authorized; 76,603 shares issued and outstanding as of September 30, 2018 and December 31, 2017			1				1
Additional paid-in-capital			309,883				318,170
Distributions in excess of cumulative earnings			(201,914	)			(164,286	)
Total Stockholders’ Equity			176,912				222,832
Noncontrolling Interests
Operating partnership units			31,911				42,999
Partially owned properties			22,718				20,347
Total Noncontrolling Interests			54,629				63,346
Total Equity			231,541				286,178
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY		$	1,879,588			$	1,690,547

 

  

Non-GAAP Financial Measures

 

The foregoing supplemental financial data includes certain non-GAAP financial measures that we believe are helpful in understanding our business and performance, as further described below. Our definition and calculation of these non-GAAP financial measures may differ from those of other REITs, and may, therefore, not be comparable.

 

Funds from Operations, Core Funds from Operations, and Adjusted Funds from Operations

 

We believe that funds from operations (“FFO”), as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), core funds from operations (“Core FFO”), and adjusted funds from operations (“AFFO”) are important non-GAAP supplemental measures of operating performance for a REIT.

 

FFO attributable to common shares and units is a non-GAAP financial measure that is widely recognized as a measure of REIT operating performance. We consider FFO to be an appropriate supplemental measure of our operating performance as it is based on a net income analysis of property portfolio performance that excludes non-cash items such as depreciation. The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time. Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT, using historical accounting for depreciation, could be less informative. We define FFO, consistent with the NAREIT definition, as net income, computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus depreciation and amortization of real estate assets, plus impairment write-downs of depreciable real estate, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis.

 

Core FFO makes certain adjustments to FFO, removing the effect of items that do not reflect ongoing property operations such as stock compensation expense, acquisition expenses, unrealized gains and losses on derivatives, losses on extinguishment of debt and modification costs (includes prepayment penalties incurred and the write-off of unamortized deferred financing costs and fair market value adjustments of assumed debt), non-cash interest, one-time weather-related costs, and preferred stock accretion. We believe that Core FFO is helpful to investors as a supplemental performance measure because it excludes the effects of certain items which can create significant earnings volatility, but which do not directly relate to our core recurring property operations. As a result, we believe that Core FFO can help facilitate comparisons of operating performance between periods and provides a more meaningful predictor of future earnings potential.

 

AFFO makes certain adjustments to Core FFO in order to arrive at a more refined measure of the operating performance of our portfolio. There is no industry standard definition of AFFO and practice is divergent across the industry. AFFO adjusts Core FFO for items that impact our ongoing operations, such as subtracting recurring capital expenditures (and while we were externally managed, when calculating the quarterly incentive fee paid to our former Manager only, we further adjusted FFO to include any realized gains or losses on our real estate investments).  We believe that AFFO is helpful to investors as a meaningful supplemental indicator of our operational performance. 

 

Our calculation of Core FFO and AFFO differs from the methodology used for calculating Core FFO and AFFO by certain other REITs and, accordingly, our Core FFO and AFFO may not be comparable to Core FFO and AFFO reported by other REITs. Our management utilizes FFO, Core FFO, and AFFO as measures of our operating performance after adjustment for certain non-cash items, such as depreciation and amortization expenses, and acquisition and pursuit costs that are required by GAAP to be expensed but may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods. Furthermore, although FFO, Core FFO, AFFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we also believe that FFO, Core FFO, and AFFO may provide us and our stockholders with an additional useful measure to compare our financial performance to certain other REITs. While we were externally managed, we also used AFFO for purposes of determining the quarterly incentive fee paid to our former Manager in prior periods.

 

  

Neither FFO, Core FFO, nor AFFO is equivalent to net income, including net income attributable to common stockholders, or cash generated from operating activities determined in accordance with GAAP. Furthermore, FFO, Core FFO, and AFFO do not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO, Core FFO, nor AFFO should be considered as an alternative to net income, including net income attributable to common stockholders, as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity.

 

We have acquired interests in eight additional operating properties subsequent to September 30, 2017. Therefore, the results presented in the table below are not directly comparable and should not be considered an indication of our future operating performance.

 

 

The table below reconciles our calculations of FFO, Core FFO and AFFO to net (loss) income, the most directly comparable GAAP financial measure, for the three and nine months ended September 30, 2018 and 2017 (in thousands, except per share amounts):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2018				2017				2018				2017
Net (loss) income attributable to common shares		$	(10,334	)		$	(12,017	)		$	(29,973	)		$	563
Add back: Net (loss) income attributable to operating partnership units			(3,157	)			(125	)			(8,841	)			4
Net (loss) income attributable to common shares and units			(13,491	)			(12,142	)			(38,814	)			567
Common stockholders and operating partnership units pro-rata share of:
Real estate depreciation and amortization (1)			14,497				10,883				43,318				30,221
Gain on sale of real estate investments			—				—				—				(6,399	)
Gain on sale of joint venture interests, net			—				—				—				(34,313	)
FFO Attributable to Common Shares and Units			1,006				(1,259	)			4,504				(9,924	)
Common stockholders and operating partnership units pro-rata share of:
Acquisition and pursuit costs			7				15				78				3,072
Non-cash interest expense			915				249				2,977				1,510
Unrealized gain on derivatives			(225	)			—				(225	)			—
Loss on extinguishment of debt and modification costs			1,573				—				2,226				1,551
Weather-related losses, net			13				642				178				642
Non-real estate depreciation and amortization (1)			77				—				216				—
Non-recurring income			—				—				—				(16	)
Non-cash preferred returns and equity in income of unconsolidated real estate joint ventures			(236	)			(498	)			(700	)			(990	)
Management internalization			—				826				—				1,647
Non-cash equity compensation			1,621				2,931				5,039				13,050
Preferred stock accretion			1,631				905				4,141				1,889
Core FFO Attributable to Common Shares and Units		$	6,382			$	3,811			$	18,434			$	12,431
Common stockholders and operating partnership units pro-rata share of:
Normally recurring capital expenditures			(685	)			(392	)			(1,834	)			(1,021	)
AFFO Attributable to Common Shares and Units		$	5,697			$	3,419			$	16,600			$	11,410
Per Share and Unit Information:
FFO Attributable to Common Shares and Units - diluted		$	0.03			$	(0.05	)		$	0.15			$	(0.38	)
Core FFO Attributable to Common Shares and Units - diluted		$	0.21			$	0.14			$	0.60			$	0.48
AFFO Attributable to Common Shares and Units - diluted		$	0.18			$	0.13			$	0.54			$	0.44
Weighted average common shares and units outstanding - diluted			30,994,530				26,749,092				30,896,740				26,129,840

 

⁽¹⁾    The real estate depreciation and amortization amount includes our share of consolidated real estate-related depreciation and amortization of intangibles, less amounts attributable to noncontrolling interests – partially owned properties, and our similar estimated share of unconsolidated depreciation and amortization, which is included in earnings of our unconsolidated real estate joint venture investments. 

 

 

Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate ("EBITDAre")

 

NAREIT defines earnings before interest, taxes, depreciation and amortization for real estate ("EBITDAre") (September 2017 White Paper) as net income, computed in accordance with GAAP, before interest expense, income taxes, depreciation and amortization expense, and further adjusted for gains and losses from sales of depreciated operating properties, and impairment write-downs of depreciated operating properties.

 

We consider EBITDAre to be an appropriate supplemental measure of our performance because it eliminates depreciation, income taxes, interest and non-recurring items, which permits investors to view income from operations unobscured by non-cash items such as depreciation, amortization, the cost of debt or non-recurring items.

 

Adjusted EBITDAre represents EBITDAre further adjusted for non-comparable items and it is not intended to be a measure of free cash flow for our management’s discretionary use, as it does not consider certain cash requirements such as income tax payments, debt service requirements, capital expenditures and other fixed charges.

 

EBITDAre and Adjusted EBITDAre are not recognized measurements under GAAP. Because not all companies use identical calculations, our presentation of EBITDAre and Adjusted EBITDAre may not be comparable to similarly titled measures of other companies.

 

Below is a reconciliation of net (loss) income attributable to common stockholders to EBITDAre (unaudited and dollars in thousands).

 

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2018				2017				2018				2017
Net (loss) income attributable to common stockholders		$	(10,334	)		$	(12,017	)		$	(29,973	)		$	563
Net (loss) income attributable to noncontrolling interests			(3,513	)			(507	)			(9,665	)			18,392
Preferred stock dividends			9,105				7,038				25,995				19,271
Preferred stock accretion			1,631				905				4,141				1,889
Interest expense, net			12,905				7,395				36,063				22,339
Depreciation and amortization			15,307				11,763				45,628				33,094
Gain on sale of real estate investments			-				-				-				(50,040	)
Gain on sale of real estate joint venture interest, net			-				-				-				(10,238	)
Loss on extinguishment of debt and modification costs			1,624				-				2,277				1,639
EBITDAre		$	26,725			$	14,577			$	74,466			$	36,909
Acquisition and pursuit costs			7				15				78				3,215
Management internalization			-				826				-				1,647
Non-real estate depreciation and amortization			77				-				216				-
Weather-related losses, net			13				678				181				678
Non-cash equity compensation			1,621				2,931				5,039				13,050
Non-recurring income			-				-				-				(17	)
Non-cash preferred returns and equity in income of unconsolidated real estate joint ventures			(236	)			(498	)			(700	)			(990	)
Adjusted EBITDAre		$	28,207			$	18,529			$	79,280			$	54,492

  

 

Recurring Capital Expenditures

 

We define recurring capital expenditures as expenditures that are incurred at every property and exclude development, investment, revenue enhancing and non-recurring capital expenditures.

 

Non-Recurring Capital Expenditures

 

We define non-recurring capital expenditures as expenditures for significant projects that upgrade units or common areas and projects that are revenue enhancing.

 

Same Store Properties

 

Same store properties are conventional multifamily residential apartments which were owned and operational for the entire periods presented, including each comparative period.

 

Property Net Operating Income ("Property NOI")

 

We believe that net operating income, or NOI, is a useful measure of our operating performance. We define NOI as total property revenues less total property operating expenses, excluding depreciation and amortization and interest. Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REITs. We believe that this measure provides an operating perspective not immediately apparent from GAAP operating income or net income. We use NOI to evaluate our performance on a same store and non-same store basis; NOI measures the core operations of property performance by excluding corporate level expenses and other items not related to property operating performance and captures trends in rental housing and property operating expenses. However, NOI should only be used as a supplemental measure of our financial performance.

 

Certain amounts in prior periods, related to tenant reimbursements for utility expenses amounting to zero and $3.0 million for the three and nine months ended September 30, 2017, have been reclassified to other property revenues from property operating expenses, to conform to the current period.  In addition, property management fees have been reclassified from property operating expenses.

 

 

The following table reflects net (loss) income attributable to common stockholders together with a reconciliation to NOI and to same store and non-same store contributions to consolidated NOI, as computed in accordance with GAAP for the periods presented (unaudited and amounts in thousands):

 

		Three Months Ended (1)								Nine Months Ended (2)
		September 30,								September 30,
		2018				2017				2018				2017
Net (loss) income attributable to common shares		$	(10,334	)		$	(12,017	)		$	(29,973	)		$	563
Add back: Net (loss) income attributable to operating partnership units			(3,157	)			(125	)			(8,841	)			4
Net (loss) income attributable to common shares and units			(13,491	)			(12,142	)			(38,814	)			567
Add common stockholders and operating partnership units pro-rata share of:
Depreciation and amortization			14,497				10,883				43,318				30,221
Non-real estate depreciation and amortization			77				-				216				-
Non-cash interest expense			915				249				2,977				1,510
Unrealized gain on derivatives			(225	)			-				(225	)			-
Property management fees			1,077				725				3,033				2,042
Management fees			-				2,802				-				11,733
Acquisition and pursuit costs			7				15				78				3,072
Loss on extinguishment of debt and modification costs			1,573				-				2,226				1,551
Corporate operating expenses			4,667				1,103				13,864				4,249
Management internalization			-				826				-				1,647
Weather-related losses, net			13				642				178				642
Preferred dividends			9,105				7,038				25,995				19,271
Preferred stock accretion			1,631				905				4,141				1,889
Less common stockholders and operating partnership units pro-rata share of:
Other income			-				-				-				16
Preferred returns and equity in income of unconsolidated real estate joint ventures			2,789				2,688				7,877				7,865
Interest income from related parties			5,702				2,120				16,532				5,741
Gain on sale of joint venture interests, net of fees			-				-				-				6,399
Gain on sale of real estate investments			-				-				-				34,313
Pro-rata share of properties' income			11,355				8,238				32,578				24,060
Add:
Noncontrolling interest pro-rata share of partially owned property income			660				616				1,855				2,405
Total property income			12,015				8,854				34,433				26,465
Add:
Interest expense			12,189				7,120				33,236				20,593
Net operating income			24,204				15,974				67,669				47,058
Less:
Non-same store net operating income			7,753				156				31,335				12,037
Same store net operating income		$	16,451			$	15,818			$	36,334			$	35,021

 

⁽¹⁾ Same Store sales for the three months ended September 30, 2018 related to the following properties: Enders Place at Baldwin Park, ARIUM Grandewood, Park & Kingston, ARIUM Palms, Ashton Reserve, Sovereign, Sorrel, ARIUM at Palmer Ranch, ARIUM Gulfshore, The Preserve at Henderson Beach, ARIUM Westside, ARIUM Pine Lakes, James on South First, ARIUM Glenridge, Roswell City Walk, The Brodie, Preston View, Wesley Village, Marquis at Crown Ridge, Marquis at Stone Oak, Marquis at The Cascades, and Marquis at TPC.

 

⁽²⁾ Same Store sales for the nine months ended September 30, 2018 related to the following properties: Enders Place at Baldwin Park, ARIUM Grandewood, Park & Kingston, ARIUM Palms, Ashton Reserve, Sovereign, Sorrel, ARIUM at Palmer Ranch, ARIUM Gulfshore, The Preserve at Henderson Beach, ARIUM Westside, ARIUM Pine Lakes, James on South First, ARIUM Glenridge, Roswell City Walk, and The Brodie

 

 

 

 

Contact

Investors:

(888) 558.1031
investor.relations@bluerockre.com

 

Media:

Josh Hoffman

(208) 475.2380

jhoffman@bluerockre.com

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