EX-99.2 3 v472533_ex99-2.htm EXHIBIT 99.2

 Exhibit 99.2 

 

 

1

 

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter 2017

Supplemental Financial Information

(Unaudited)

 

 

Table of Contents

 

Second Quarter Earnings Release 3
   
Financial and Operating Highlights 15
   
Share and Dividend Information 16
   
EBITDA and Interest Information 17
   
Financial Statistics 18
   
Recent Acquisitions and Pending Investments 19
   
Recent Dispositions 20
   
Investments in Unconsolidated Real Estate Joint Ventures and Notes and Accrued Interest Receivable from Related Parties 21
   
Portfolio Information 22
   
Development Properties 23
   
Condensed Consolidated Balance Sheets 24
   
Consolidated Statements of Operations 25
   
Reconciliation of Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) 26
   
Debt Summary Information 27
   
Third Quarter 2017 Outlook 29
   
Definitions of Non-GAAP Financial Measures 30

 

This document 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, including statements relating to the Company’s operating environment, operating trends, and outlook. 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 February 22, 2017, and subsequent filings by the Company with the SEC, including our periodic reports. We claim the safe harbor protection for forward looking statements contained in the Private Securities Litigation Reform Act of 1995.

 

2

 

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

 

 

Corporate Headquarters

712 Fifth Ave., 9th Floor

New York, NY 10019

877.826.BLUE

PRESS RELEASE

For Immediate Release

 

Bluerock Residential Growth REIT Announces Second Quarter 2017 Results

 

New York, NY (August 8, 2017) – Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG) (“the Company”) announced today its financial results for the quarter ended June 30, 2017.

 

Highlights

 

Total revenues grew 47% to $27.0 million for the quarter from $18.4 million for the prior year quarter primarily as a result of significant investment activity in the past year, offset by the sales of four properties in 2017 and one in 2016.

 

Net income attributable to common stockholders for the second quarter of 2017 was $0.67 per share, as compared to net loss attributable to common shareholders of $(0.24) per share in the prior year period. Net income (loss) attributable to common stockholders included non-cash expenses of $0.66 per share in the second quarter of 2017 vs. $0.45 per share for the prior year period.

 

Adjusted funds from operations attributable to common stockholders (“AFFO”) was $3.3 million for the quarter compared to $4.4 million for the prior year quarter.

 

AFFO per share is $0.13 for the second quarter of 2017 as compared to $0.21 for the second quarter of 2016, and exceeded guidance of $0.01 - $0.02.

 

Pro forma AFFO per share of $0.36 for the second quarter exceeded pro forma guidance of $0.26 to $0.28 per share.

 

The Company paid the full amount of the second quarter’s base management fees in LTIP Units in lieu of cash payment. This favorably impacted AFFO per share and pro forma AFFO per share by $0.10 and $0.09, respectively.

 

Property Net Operating Income (NOI) grew 30% to $14.3 million for the quarter, from $11.0 million in the prior year quarter.

 

Property NOI margins were 57.3% of revenue for the quarter, compared to 59.8% of revenue in the prior year quarter. Property NOI margins were impacted by the sales of more stabilized assets with proceeds being recycled into replacement properties with higher growth opportunities, which require time to realize margin improvement.

 

Same store NOI increased 2.3% for the quarter, as compared to the prior year quarter.

 

3

 

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

 

Consolidated real estate investments, at cost, increased 10% to $1.1 billion at June 30, 2017 from $1.0 billion at December 31, 2016.

 

The Company invested in a portfolio of five operating properties totaling 1,408 units for a total purchase price of approximately $188.9 million during the second quarter.

 

The Company declared a monthly dividend for July 2017 of $0.096666 per share on the Company's Class A common stock.

 

The Company sold 50,501 shares of Series B preferred stock with associated warrants at a public offering price of $1,000 per unit, for gross proceeds of approximately $50.5 million during the second quarter, an increase in gross proceeds of 114% over the first quarter.

 

Management Commentary

 

“We are pleased to report the acquisition of a portfolio of five operating properties totaling 1,408 units for approximately $189 million, continued momentum in the Series B preferred continuous offering raise with second quarter gross proceeds of over $50 million and the recycling of capital through the disposition of interests in three properties at significant gains during the second quarter,” said Ramin Kamfar, the Company’s Chairman and CEO. “Importantly, on August 4, 2017, we also signed definitive agreements to effect the Company’s internalization of its external management function, which will be subject to a vote of our common stockholders at our upcoming annual meeting of stockholders.”

 

Second Quarter Acquisition and Disposition Activity

 

On April 26, 2017, the Company sold its interest in the Lansbrook Village apartments in Palm Harbor, Florida at a total sale price of approximately $82.4 million, recognized a pro rata gain of $16.1 million, with net proceeds of approximately $19.1 million to the Company, generating an internal rate of return of 25% on BRG’s equity investment in the project, for an equity multiple of 1.71x.

 

On May 24, 2017, the Company sold its interest in the Fox Hill apartments in Austin, Texas at a total sale price of approximately $46.5 million, recognized a pro rata gain of $10.3 million, with net proceeds of approximately $16.4 million to the Company, generating an internal rate of return of 26% on BRG’s equity investment in the project, for an equity multiple of 1.62x.

 

On June 9, 2017, the Company acquired a 90% investment in a 1,408-unit five-property portfolio of multifamily communities located in San Antonio and Tyler, Texas. The total purchase price of approximately $188.9 million includes the assumption of approximately $146.4 million of existing mortgage debt.

 

On June 30, 2017, the Company sold its interest in the MDA apartments in Chicago, Illinois at a total sale price of approximately $18.3 million, recognized a pro rata gain of $6.4 million, with net proceeds of approximately $11.0 million to the Company, generating an internal rate of return of 22% on BRG’s equity investment in the project, for an equity multiple of 2.23x.

 

Pending Investments at June 30, 2017

 

The Company has an agreement which entitles the Company to make a 80% investment in a 384-unit apartment community located in Houston, Texas, known as Villages at Cypress Creek, subject to certain conditions. The total purchase price is expected to be approximately $40.7 million.

 

The Company has an agreement which entitles the Company to make a 98% investment in a 336-unit apartment community located in Orlando, Florida, known as Citrus Tower, subject to certain conditions. The total purchase price is expected to be approximately $55.3 million.

 

4

 

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

 

Second Quarter 2017 Financial Results

 

Net income attributable to common stockholders for the second quarter of 2017 was $17.6 million, compared to a net loss of $5.0 million in the prior year period. The change was primarily driven by positive increases in property NOI of $3.3 million, interest income of $2.1 million and a gain on sale of real estate investments of $43.8 million, offset by increases in management fees of $4.7 million, depreciation and amortization expense of $2.6 million, interest expense of $3.2 million, loss on extinguishment of debt of $1.6 million, preferred stock dividends and accretion of $3.8 million and non-controlling income allocation of $10.2 million.

 

AFFO for the second quarter of 2017 was $3.3 million, or $0.13 per diluted share, compared to $4.4 million, or $0.21 per share in the prior year period. AFFO was primarily impacted by increases in property NOI of $3.3 million arising from significant investment activity offset by sales of properties, interest income of $2.1 million and offset by interest expense of $2.5 million and preferred stock dividends of $3.4 million.

 

Same Store Portfolio Performance

 

Same store NOI for the second quarter of 2017 increased by 2.3% from the same period in the prior year. There was a 2.4% increase in same store property revenues compared to the same prior year period, primarily attributable to a 3.5% increase in average rental rates offset by a 52 basis point decrease in average occupancy. Same store expenses increased 2.6% due to an increase in repair and maintenance across the portfolio.

 

Management Internalization

 

On August 4, 2017, the Company announced that it had entered into definitive agreements providing for the Company’s internalization of the external management function currently provided by the Manager and the direct employment of the Manager’s existing management team and certain other employees. The internalization consideration will be calculated pursuant to a formula established in the Management Agreement at the time of the Company’s initial public offering in April 2014 and is expected to be approximately $41-$42 million. To further align the interests of the Company’s management team with those of the Company’s stockholders, 99.9% of the consideration will be paid in equity, comprised of units of limited partnership interest (“OP Units”) in the Company’s operating partnership, and shares of Class C Common Stock, which are being issued to provide the recipients with a voting franchise commensurate with their economic interest in the OP Units. Upon closing of the internalization, which is expected to close in the fourth quarter of 2017, the Company will become a self-managed real estate investment trust. The proposed transaction was unanimously approved by the Special Committee of independent directors and the Company’s full board of directors, but remains subject to approval of the issuances of equity by a majority of disinterested stockholders voting at the Company’s annual meeting of stockholders and other customary closing conditions.

 

5

 

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

 

Dividend Details

 

On July 10, 2017, our board of directors authorized, and we declared, a monthly dividend for July 2017 of $0.096666 per share on our Class A common stock, payable to the stockholders of record as of July 25, 2017, which was paid in cash on August 4, 2017. Holders of OP and LTIP Units are entitled to receive "distribution equivalents" at the same time as dividends are paid to holders of our Class A common stock. 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 August 4, 2017, we announced that our board of directors has initiated, in conjunction with a financial advisor, a review of the appropriate Company’s dividend policy for the Company’s Class A Common stock. The board’s evaluation will consider factors including, but not limited to, achieving a sustainable dividend covered by current recurring AFFO (vs. pro forma AFFO), multifamily and small cap peer ratios, providing financial flexibility for the Company, and achieving an appropriate balance between the retention of capital to invest and grow net asset value, and the importance of current distributions. The board is expected to complete its review of the dividend policy for the Company’s Class A Common Stock in the fourth quarter of 2017.

 

On July 10, 2017, our board of directors authorized, and we declared, a monthly dividend of $5.00 per share of Series B preferred stock, payable to the stockholders of record as of July 25, 2017, which was paid in cash on August 4, 2017, and as of August 25, 2017, and September 25, 2017, which will be paid in cash on September 5, 2017 and October 5, 2017, respectively.

 

The board’s review of dividend policy will address the dividend policy for the Company’s Class A Common Stock only. The terms of each series of the Company’s issued and outstanding preferred stock provide for fixed annual dividend rates, and are not subject to adjustment at the board’s discretion.

 

Q3 2017 Outlook

 

For the third quarter of 2017, the Company anticipates AFFO in the range of ($0.03) to ($0.02) per share, and $0.25 to $0.27 per share on a pro forma basis. For assumptions underlying earnings guidance, please see page 29 of Company’s Q2 2017 Earnings Supplement available under Investor Relations on the Company’s website (www.bluerockresidential.com). Pro forma AFFO is used for illustrative purposes only, is hypothetical and does not represent historical performance or management’s estimates or projections for future performance.

 

Conference Call

 

All interested parties can listen to the live conference call at 11:00 AM ET on Tuesday, August 8, 2017 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 September 8, 2017 at http://services.choruscall.com/links/brg170808.html, as well as by dialing +1 (877) 344-7529 in the U.S., or +1 (412) 317-0088 internationally, and requesting conference number 10111174.

 

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 MKT: BRG) is a real estate investment trust that focuses on acquiring a diversified portfolio of Class A institutional-quality apartment properties in demographically attractive 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 improvements to operations and properties. BRG generally invests with strategic regional partners, including some of the best-regarded private owner-operators in the United States, making it possible to operate as a local sharpshooter in each of its markets while enhancing off-market sourcing capabilities. 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.

 

6

 

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

 

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, including, without limitation, with respect to the completion of the proposed internalization on the terms described or at all and the expected benefits of the proposed internalization. Among others, the following uncertainties and other factors could cause actual results to differ from those set forth in the forward-looking statements: the failure to receive, on a timely basis or otherwise, the required approval by the Company’s stockholders, governmental or regulatory agencies and third parties; the risk that a condition to closing of the proposed internalization may not be satisfied; and the Company’s ability to consummate the proposed internalization. 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 February 22, 2017, 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.

 

7

 

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

 

Portfolio Summary

 

The following is a summary of our operating real estate and development properties as of June 30, 2017:

 

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    95%  $1,212    95%
ARIUM Grandewood  Orlando, FL   306    2005    95%   1,246    95%
ARIUM Gulfshore  Naples, FL   368    2016    95%   1,242    94%
ARIUM Palms  Orlando, FL   252    2008    95%   1,232    96%
ARIUM Pine Lakes  Port St. Lucie, FL   320    2003    85%   1,116    95%
ARIUM Westside  Atlanta, GA   336    2008    90%   1,415    95%
Ashton Reserve  Charlotte, NC   473    2015    100%   1,045    97%
Enders Place at Baldwin Park  Orlando, FL   220    2003    90%   1,648    96%
James on South First  Austin, TX   250    2016    90%   1,189    96%
Marquis at Crown Ridge  San Antonio, TX   352    2009    90%   968    96%
Marquis at Stone Oak  San Antonio, TX   335    2007    90%   1,403    90%
Marquis at The Cascades I  Tyler, TX   328    2007    90%   1,123    97%
Marquis at The Cascades II  Tyler, TX   254    2009    90%   1,026    93%
Marquis at TPC  San Antonio, TX   139    2008    90%   1,459    91%
Nevadan  Atlanta, GA   480    1990    90%   1,090    95%
Park & Kingston  Charlotte, NC   168    2015    96%   1,174    97%
Preston View  Morrisville, NC   382    2000    92%   1,013    96%
Roswell City Walk  Roswell, GA   320    2015    98%   1,462    96%
Sorrel  Frisco, TX   352    2015    95%   1,199    92%
Sovereign  Fort Worth, TX   322    2015    95%   1,269    95%
The Brodie  Austin, TX   324    2001    93%   1,100    96%
The Preserve at Henderson Beach  Destin, FL   340    2009    100%   1,312    99%
Wesley Village  Charlotte, NC   301    2010    92%   1,270    97%
Whetstone  Durham, NC   204    2015    (4)   1,196    94%
Operating Properties Subtotal/Average   7,446             $1,208    95%
                             
Development Properties  Location   Planned
Number
of Units
              Pro Forma
Average
Rent (5)
      
Alexan CityCentre  Houston, TX   340             $2,144      
Alexan Southside Place  Houston, TX   270              2,012      
APOK Townhomes  Boca Raton, FL   90              2,549      
Crescent Perimeter  Atlanta, GA   320              1,749      
Domain Phase 1  Garland, TX   299              1,469      
Flagler Village  Fort Lauderdale, FL   384              2,481      
Helios  Atlanta, GA   282              1,486      
Lake Boone Trail  Raleigh, NC   245              1,271      
Vickers Village  Roswell, GA   79              3,176      
West Morehead  Charlotte, NC   286              1,507      
Development Properties Subtotal/Average   2,595             $1,876      
                             
Operating and Development Properties Total/Average   10,041             $1,380      

 

(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 all occupied units for the three months ended June 30, 2017.

(3) Percent occupied is calculated as (i) the number of units occupied as of June 30, 2017, divided by (ii) total number of units, expressed as a percentage.

(4) Whetstone is currently a preferred equity investment providing a stated investment return.

(5) The Company holds a preferred equity investment with an option to convert into partial ownership of the underlying asset upon stabilization, except Flagler Village. APOK Townhomes, Domain Phase 1, and West Morehead are mezzanine loan investments with an option to purchase indirect property interest upon maturity. Pro forma average rent represents the average pro forma effective monthly rent per occupied unit for all expected occupied units upon stabilization.

 

8

 

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

 

Consolidated Statement of Operations

For the Three and Six Months Ended June 30, 2017 and 2016

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

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2017   2016   2017   2016 
Revenues                    
Net rental income  $23,615   $17,513   $47,482   $33,441 
Other property revenues   1,336    886    2,608    1,592 
Interest income from related parties   2,097        3,620     
Total revenues   27,048    18,399    53,710    35,033 
Expenses                    
Property operating   10,646    7,389    20,476    13,982 
General and administrative   1,696    1,704    3,146    2,978 
Management fees   6,163    1,415    8,931    2,629 
Acquisition and pursuit costs   18    249    3,200    1,457 
Management internalization   340        820     
Depreciation and amortization   10,387    7,789    21,331    15,298 
Total expenses   29,250    18,546    57,904    36,344 
Operating loss   (2,202)   (147)   (4,194)   (1,311)
Other income (expense)                    
Other income   17        17     
Preferred returns and equity in income of unconsolidated real estate joint ventures   2,605    2,775    5,177    5,543 
Gain on sale of real estate investments   33,574        50,040     
Gain on sale of real estate joint venture interest   10,238        10,238     
Loss on early extinguishment of debt   (1,639)       (1,639)    
Interest expense, net   (7,825)   (4,589)   (14,943)   (8,817)
Total other income (expense)   36,970    (1,814)   48,890    (3,274)
                     
Net income (loss)   34,768    (1,961)   44,696    (4,585)
Preferred stock dividends   (6,381)   (2,968)   (12,233)   (4,451)
Preferred stock accretion   (647)   (168)   (984)   (293)
Net income (loss) attributable to noncontrolling interests                    
Operating partnership units   186    (75)   129    (136)
Partially-owned properties   9,985    21    18,771    (14)
Net income (loss) attributable to noncontrolling interests   10,171    (54)   18,900    (150)
Net income (loss) attributable to common stockholders  $17,569   $(5,043)  $12,579   $(9,179)
                     
Net income (loss) per common share - Basic  $0.67   $(0.24)  $0.49   $(0.45)
                     
Net income (loss) per common share – Diluted  $0.67   $(0.24)  $0.49   $(0.45)
                     
Weighted average basic common shares outstanding   26,075,911    20,686,652    25,535,178    20,604,124 
Weighted average diluted common shares outstanding   26,076,572    20,686,652    25,535,839    20,604,124 

 

9

 

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

 

Consolidated Balance Sheets

Second Quarter 2017

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

 

   June 30,
2017
   December 31,
2016
 
ASSETS          
Net Real Estate Investments          
Land  $147,562   $142,274 
Buildings and improvements   930,471    848,445 
Furniture, fixtures and equipment   29,148    27,617 
Construction in progress   24,890    10,878 
Total Gross Real Estate Investments   1,132,071    1,029,214 
Accumulated depreciation   (35,269)   (42,137)
Total Net Real Estate Investments   1,096,802    987,077 
Cash and cash equivalents   139,292    82,047 
Restricted cash   41,048    45,402 
Notes and accrued interest receivable from related parties   56,849    21,267 
Due from affiliates   1,240    948 
Accounts receivable, prepaid and other assets   6,193    8,610 
Preferred equity investments and investments in unconsolidated real estate joint ventures   94,184    91,132 
In-place lease intangible assets, net   5,175    4,839 
Total Assets  $1,440,783   $1,241,322 
           
LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY          
Mortgages payable  $775,591   $710,575 
Accounts payable   3,416    1,669 
Other accrued liabilities   19,006    13,431 
Due to affiliates   6,831    2,409 
Distributions payable   8,326    7,328 
Total Liabilities   813,170    735,412 
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 June 30, 2017 and December 31, 2016   138,605    138,316 
Series B Redeemable Preferred Stock, liquidation preference $1,000 per share, 150,000 shares authorized, 95,552 and 21,482 issued and outstanding as of June 30, 2017 and December 31, 2016, respectively   84,058    18,938 
7.6250% Series C Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares authorized, 2,323,750 issued and outstanding as of June 30, 2017 and December 31, 2016   56,202    56,095 
Equity          
Stockholders’ Equity          
Preferred stock, $0.01 par value, 230,975,000 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 June 30, 2017 and December 31, 2016   68,710    68,760 
Common stock - Class A, $0.01 par value, 747,586,185 shares authorized; 24,191,951 and 19,567,506 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively   242    196 
Additional paid-in-capital   321,948    257,403 
Distributions in excess of cumulative earnings   (87,130)   (84,631)
Total Stockholders’ Equity   303,770    241,728 
Noncontrolling Interests          
Operating partnership units   2,017    2,216 
Partially owned properties   42,961    48,617 
Total Noncontrolling Interests   44,978    50,833 
Total Equity   348,748    292,561 
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY  $1,440,783   $1,241,322 

 

10

 

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

 

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 and Adjusted Funds from Operations

 

Funds from operations attributable to common stockholders (“FFO”) 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 National Association of Real Estate Investment Trusts, or (“NAREIT's”) 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.

 

In addition to FFO, we use adjusted funds from operations attributable to common stockholders (“AFFO”). AFFO is a computation made by analysts and investors to measure a real estate company's operating performance by removing the effect of items that do not reflect ongoing property operations. To calculate AFFO, we further adjust FFO by adding back certain items that are not added to net income in NAREIT's definition of FFO, such as acquisition and pursuit costs, equity based compensation expenses, and any other non-recurring or non-cash expenses, which are costs that do not relate to the operating performance of our properties, and subtracting recurring capital expenditures (and when calculating the quarterly incentive fee payable to our Manager only, we further adjust FFO to include any realized gains or losses on our real estate investments).

 

Our calculation of AFFO differs from the methodology used for calculating AFFO by certain other REITs and, accordingly, our AFFO may not be comparable to AFFO reported by other REITs. Our management utilizes 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, AFFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we also believe that FFO and AFFO may provide us and our stockholders with an additional useful measure to compare our financial performance to certain other REITs. We also use AFFO for purposes of determining the quarterly incentive fee, if any, payable to our Manager.

 

Neither 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 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 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.

 

11

 

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

 

We have acquired interests in thirteen additional operating properties and three development investments and sold six properties subsequent to June 30, 2016. The results presented in the table below are not directly comparable and should not be considered an indication of our future operating performance.

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2017   2016   2017   2016 
Net income (loss) attributable to common stockholders  $17,569   $(5,043)  $12,579   $(9,179)
Common stockholders pro-rata share of:                    
Real estate depreciation and amortization(1)   9,326    6,769    19,129    13,239 
Gain on sale of real estate assets   (26,548)       (33,945)    
Gain on sale of joint venture interests   (6,332)       (6,332)    
FFO Attributable to Common Stockholders  $(5,985)  $1,726   $(8,569)  $4,060 
Common stockholders pro-rata share of:                    
Amortization of non-cash interest expense   773    65    1,246    148 
Acquisition and pursuit costs   18    227    3,024    1,373 
Management internalization process expense   336        811     
Loss on early extinguishment of debt   1,534        1,534     
Non-recurring income   (16)       (16)    
Non-cash preferred returns and equity in income of unconsolidated real estate joint ventures   (487)       (487)    
Normally recurring capital expenditures   (331)   (208)   (622)   (416)
Preferred stock accretion   641    166    974    289 
Non-cash equity compensation   6,846    2,400    10,011    4,218 
AFFO Attributable to Common Stockholders  $3,329   $4,376   $7,906   $9,672 
Weighted average common shares outstanding - diluted   26,076,572    20,688,631    25,535,839    20,611,802 
                     
PER SHARE INFORMATION:                    
FFO Attributable to Common Stockholders - diluted  $(0.23)  $0.08   $(0.34)  $0.20 
AFFO Attributable to Common Stockholders - diluted  $0.13   $0.21   $0.31   $0.47 
Pro forma AFFO Attributable to Common Stockholders - diluted (2)  $0.36     N/A    N/A    N/A 

 


(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, and our similar estimated share of unconsolidated depreciation and amortization, which is included in earnings of our unconsolidated real estate joint venture investments.

 

(2) Pro forma AFFO for the three months ended June 30, 2017 assumes the investment of $104 million in estimated available cash had occurred on April 1, 2017:

 

             Investment 
#  Investment  MSA  # Units   Amount ($MM's) 
1  Acquisition - Identified Assets  San Antonio & Tyler, TX   1,408   $48 
2  Mezzanine Loan - Identified Developments  Atlanta, GA   399    7 
3  Acquisition - Unidentified Assets, assumes 5.75% cap rate  -   -    17 
4  Mezzanine Loan - Unidentified  -   -    32 
   Total          $104 

 

The pro forma guidance is being presented solely for purposes of illustrating the potential impact of these pipeline transactions, as well as future investments to be made with funds we have available for investment, as if they had occurred at April 1, 2017, based on information currently available to management and assumptions management has made with respect to our future pipeline.

 

The Company is providing no assurances that any of the above transactions are probable, or that they will close or that management will identify or acquire investments consistent with our pipeline assumptions, and the failure to do so would significantly impact pro forma guidance. The actual timing of these investments, if and when made, will vary materially from the assumed timing reflected in the pro forma guidance, and actual quarterly results will differ significantly from the pro forma guidance shown above. Investors should not rely on pro forma guidance as a forecast of the actual performance of the Company.

 

12

 

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

 

Earnings Before Interest, Income Taxes, Depreciation and Amortization ("EBITDA")

 

EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, calculated on a consolidated basis. We consider EBITDA 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. Below is a reconciliation of net income (loss) attributable to common stockholders to EBITDA (unaudited and dollars in thousands).

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2017   2016   2017   2016 
                 
Net income (loss) attributable to common stockholders  $17,569   $(5,043)  $12,579   $(9,179)
Net income (loss) attributable to noncontrolling interest   10,171    (54)   18,900    (150)
Preferred stock dividends   6,381    2,968    12,233    4,451 
Preferred stock accretion   647    168    984    293 
Interest expense, net   7,825    4,589    14,943    8,817 
Depreciation and amortization   10,387    7,789    21,331    15,298 
EBITDA  $52,980   $10,417   $80,970   $19,530 
Acquisition and pursuit costs   18    249    3,200    1,457 
Management internalization process expense   340    -    820    - 
Non-cash equity compensation   6,919    2,436    10,119    4,281 
Non-recurring income   (17)   -    (17)   - 
Gain on sale of real estate investments   (33,574)   -    (50,040)   - 
Gain on sale of real estate joint venture interest   (10,238)   -    (10,238)   - 
Loss on early extinguishment of debt   1,639    -    1,639    - 
Non-cash preferred returns and equity in income of unconsolidated real estate joint ventures   (491)   -    (491)   - 
Adjusted EBITDA  $17,576   $13,102   $35,962   $25,268 

 

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 because 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 an alternative measure of our financial performance.

 

13

 

 

 

Bluerock Residential Growth REIT, Inc.

Second Quarter Earnings Release

 

 

The following table reflects net income (loss) 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)   Six Months Ended (2) 
   June 30,   June 30, 
   2017   2016   2017   2016 
Net income (loss) attributable to common stockholders  $17,569   $(5,043)  $12,579   $(9,179)
Add pro-rata share:                    
Depreciation and amortization   9,326    6,769    19,129    13,239 
Amortization of non-cash interest expense   773    65    1,246    148 
Management fees   6,099    1,394    8,836    2,591 
Acquisition and pursuit costs   18    227    3,024    1,373 
Loss on early extinguishment of debt   1,534    -    1,534    - 
Corporate operating expenses   1,679    1,666    3,112    2,935 
Management internalization process expense   336    -    811    - 
Preferred dividends   6,314    2,924    12,101    4,385 
Preferred stock accretion   641    166    974    289 
Less pro-rata share:                    
Other income   16    -    16    - 
Preferred returns and equity in income of unconsolidated real estate joint ventures   2,577    2,733    5,121    5,462 
Interest income from related parties   2,075    -    3,581    - 
Gain on sale of joint venture interest   6,332    -    6,332    - 
Gain on sale of real estate assets   26,548    -    33,945    - 
Pro-rata share of properties' income   6,741    5,435    14,351    10,319 
Add:                    
Noncontrolling interest pro-rata share of property income   856    1,065    2,103    2,081 
Total property income   7,597    6,500    16,454    12,400 
Add:                    
Interest expense, net   6,708    4,510    13,160    8,651 
Net operating income   14,305    11,010    29,614    21,051 
Less:                    
Non-same store net operating income   8,112    4,955    18,806    10,941 
Same store net operating income  $6,193   $6,055   $10,808   $10,110 
                     

 

(1) Same Store sales for the three months ended June 30, 2017 related to the following properties: Enders Place at Baldwin Park, ARIUM Grandewood, Park & Kingston, ARIUM Palms, Ashton Reserve, Sovereign, ARIUM at Palmer Ranch, ARIUM Gulfshore, and The Preserve at Henderson Beach.

 

(2) Same Store sales for the six months ended June 30, 2017 related to the following properties: Enders Place at Baldwin Park, ARIUM Grandewood, Park & Kingston, ARIUM Palms, Ashton Reserve, Sovereign, ARIUM at Palmer Ranch, and ARIUM Gulfshore.

 

Contact

(Media)

Josh Hoffman

(208) 475.2380

jhoffman@bluerockre.com

##

 

14

 

 

 

Bluerock Residential Growth REIT, Inc.

Financial and Operating Highlights

For the Three and Six Months Ended June 30, 2017

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

 

 

   Three Months Ended       Six Months Ended     
   June 30,       June 30,     
OPERATING INFORMATION  2017   2016   %
Change
   2017   2016   %
Change
 
                         
Total revenue  $27,048   $18,399    47.0%  $53,710   $35,033    53.3%
                               
Property NOI margins   57.3%   59.8%   -4.2%   59.1%   60.1%   -1.7%
                               
Property NOI  $14,305   $11,010    29.9%  $29,614   $21,051    40.7%
                               
General and administrative expenses as a percentage of revenue(1)   3.5%   3.7%   -5.4%   3.6%   3.8%   -5.3%
                               
Net income (loss) per common share - Diluted  $0.67   $(0.24)   -   $0.49   $(0.45)   - 
                               
AFFO attributable to common shareholders per share(2)  $0.13   $0.21    -38.1%  $0.31   $0.47    -34.0%
                               
Pro forma AFFO attributable to common shareholders per share(3)  $0.36     N/A     -    N/A    N/A    - 
                               
Dividend per share  $0.29   $0.29    -   $0.58   $0.58    - 

 

 

 

(1) General and administrative expenses exclude non-cash expense, such as non-cash equity compensation.

 

(2) See page 30 for the Company's definition of this non-GAAP measurement and reasons for using it.

 

(3) Pro forma AFFO for the three months ended June 30, 2017 assumes the investment of $104 million in estimated available cash had occurred on April 1, 2017:

 

              Investment 
#  Investment  MSA   # Units   Amount ($MM's) 
1  Acquisition - Identified Assets   San Antonio & Tyler, TX    1,408   $48 
2  Mezzanine Loan - Identified Developments   Atlanta, GA    399    7 
3  Acquisition - Unidentified Assets, assumes 5.75% cap rate   -    -    17 
4  Mezzanine Loan - Unidentified   -    -    32 
   Total            $104 

 

The pro forma guidance is being presented solely for purposes of illustrating the potential impact of these pipeline transactions, as well as future investments to be made with funds we have available for investment, as if they had occurred at April 1, 2017, based on information currently available to management and assumptions management has made with respect to our future pipeline.

 

The Company is providing no assurances that any of the above transactions are probable, or that they will close or that management will identify or acquire investments consistent with our pipeline assumptions, and the failure to do so would significantly impact pro forma guidance. The actual timing of these investments, if and when made, will vary materially from the assumed timing reflected in the pro forma guidance, and actual quarterly results will differ significantly from the pro forma guidance shown above. Investors should not rely on pro forma guidance as a forecast of the actual performance of the Company.

 

15

 

 

 

Bluerock Residential Growth REIT, Inc.

Share and Dividend Information

Second Quarter 2017

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

 

 

Weighted Average Common Stock and Units Outstanding for the quarter ended June 30, 2017     
Class A Common Stock   24,191,577 
LTIP Units   1,884,995 
Weighted Average Common Stock and LTIP Units Outstanding, Diluted   26,076,572 
OP Units   275,494 
Weighted Average Common Stock and Total Units Outstanding, Diluted   26,352,066 
      
Outstanding Common Stock and Units at June 30, 2017   26,449,308 
      
Outstanding 8.250% Series A Cumulative Redeemable Preferred Stock at June 30, 2017   5,721,460 
      
Outstanding Series B Redeemable Preferred Stock at June 30, 2017   95,552 
      
Outstanding 7.625% Series C Cumulative Redeemable Preferred Stock at June 30, 2017   2,323,750 
      
Outstanding 7.125% Series D Cumulative Preferred Stock at June 30, 2017   2,850,602 
      
Common Stock Dividend Yield     
Annualized common stock dividend rate (1)  $1.16 
Price per common share (2)  $12.89 
Annualized common stock dividend yield   9.00%

 

(1) Annualized rate based on $0.29 per common share quarterly dividend for the quarter ending June 30, 2017, paid monthly. Actual dividend amounts will be determined by the Board of Directors.

 

(2) Closing common stock price of $12.89 as of June 30, 2017.

 

16

 

 

 

Bluerock Residential Growth REIT, Inc.

EBITDA and Interest Information

Second Quarter 2017

(Unaudited and dollars in thousands)

 

 

   Consolidated 
   Three Months Ended 
   June 30, 2017 
Q2 EBITDA CALCULATION     
Net (loss) income attributable to common stockholders  $17,569 
Net (loss) income attributable to noncontrolling interest   10,171 
Preferred stock dividends   6,381 
Preferred stock accretion   647 
Interest expense, net   7,825 
Depreciation and amortization   10,387 
EBITDA (1)  $52,980 
Acquisition and pursuit costs   18 
Management internalization process expense   340 
Non-cash equity compensation   6,919 
Non-recurring income   (17)
Gain on sale of real estate investments   (33,574)
Gain on sale of real estate joint venture interest   (10,238)
Loss on early extinguishment of debt   1,639 
Non-cash equity in earnings of unconsolidated joint ventures   (491)
Adjusted EBITDA  $17,576 
      
Modified Q2 EBITDA calculation (2)     
Adjusted EBITDA  $17,576 
Adjustment   264 
Modified Q2 EBITDA  $17,840 
Modified Q2 EBITDA annualized  $71,360 
      
Modified Q2 interest calculation (2)(3)     
Interest Expense  $6,816 
Adjustment   1 
Modified Q2 interest expense  $6,817 
Modified Q2 interest expense annualized  $27,268 

 

(1) See page 31 for a reconciliation of net income attributable to common stockholders to EBITDA and the Company's definition of EBITDA and reasons for using it.

 

(2) Adjustment to EBITDA and interest expense represents the estimated impact over the full period of the following investment activity assuming the transactions had occurred on April 1, 2017: (i) sales of Fox Hill, Lansbrook Village, and MDA Apartments; (ii) acquisitions of Marquis at Crown Ridge, Marquis at Stone Oak, Marquis at The Cascades I, Marquis at The Cascades II, and Marquis at TPC; and (iii) additional investment in Alexan CityCentre. Actual results may differ significantly from the presented, adjusted amounts including annualized amounts.

 

(3) Interest expense excludes fair market value adjustments and amortization of deferred financing costs.

 

17

 

 

 

Bluerock Residential Growth REIT, Inc.

Financial Statistics

Second Quarter 2017

(Unaudited and dollars in thousands)

 

 

   Consolidated 
   Three Months Ended 
   June 30, 2017 
     
Interest Coverage Ratio     
Modified Q2 EBITDA *  $17,840 
Modified Q2 interest expense (4) *  $6,817 
Interest Coverage Ratio   2.62x
      
Quarterly Fixed Charge Coverage Ratio     
Modified Q2 interest expense (4) *  $6,817 
Preferred stock dividends  $6,381 
Total fixed charges  $13,198 
Modified Q2 EBITDA *  $17,840 
Modified Q2 EBITDA fixed charge coverage ratio   1.35x
      
Net Debt / Modified EBITDA Ratio     
Total debt (1)  $781,602 
Less: cash (3)  $(180,340)
Net debt (less cash)  $601,262 
Modified Q2 EBITDA (annualized)*  $71,360 
Net Debt / Modified EBITDA Ratio   8.43x
      
Leverage as a Percentage of assets     
Total debt (1)  $781,602 
Total undepreciated assets (2)  $1,476,052 
Total Debt / Total Undepreciated Assets   53.0%
Net Debt / Net Undepreciated Assets   46.4%
      
Leverage as a Percentage of Enterprise Value     
Total market cap (5)  $717,642 
Total debt (1)  $781,602 
Total Enterprise Value  $1,499,244 
Total Debt / Total Enterprise Value   52.1%
Net Debt / Total Enterprise Value   40.1%

 

(1) Total debt excludes amortization of fair market value adjustments of $2.1 million and deferred financing costs of $8.1 million.

 

(2) Total undepreciated assets is calculated as total assets plus accumulated depreciation on real estate assets.

 

(3) Cash includes cash, cash equivalents, and restricted cash.

 

(4) Interest expense excludes fair market value adjustments and amortization of deferred financing costs.

 

(5) Total market cap is calculated by using common shares, preferred shares, and equivalents (LTIP Units) times the June 30, 2017 closing share prices.

 

* Adjustment to EBITDA and interest expense represents the estimated impact over the full period of the following investment activity assuming the transactions had occurred on April 1, 2017: (i) sales of Fox Hill, Lansbrook Village, and MDA Apartments; (ii) acquisitions of Marquis at Crown Ridge, Marquis at Stone Oak, Marquis at The Cascades I, Marquis at The Cascades II, and Marquis at TPC; and (iii) additional investment in Alexan CityCentre. Actual results may differ significantly from the presented, adjusted amounts including annualized amounts. See prior page for calculations.

 

18

 

 

 

Bluerock Residential Growth REIT, Inc.

Recent Acquisitions and Pending Investments

(Unaudited and dollars in millions)

 

 

Summary of Recent Acquisitions and Pending Investments

 

Property  Location  Date of
Investment
  Year Built/
Renovated(1)
   Number of
Units
   Ownership
Interest in
Property
   Purchase
Price
   Average
Rent(2)
 
Recent Acquisitions                               
Preston View  Morrisville, NC  2/17/2017   2000    382    91.8%  $59.5   $1,013 
Wesley Village  Charlotte, NC  3/9/2017   2010    301    91.8%   57.2    1,270 
Marquis at Crown Ridge  San Antonio, TX  6/9/2017   2009    352    90.0%   39.5    968 
Marquis at Stone Oak  San Antonio, TX  6/9/2017   2007    335    90.0%   55.4    1,403 
Marquis at The Cascades I  Tyler, TX  6/9/2017   2007    328    90.0%   44.7    1,123 
Marquis at The Cascades II  Tyler, TX  6/9/2017   2009    254    90.0%   28.5    1,026 
Marquis at TPC  San Antonio, TX  6/9/2017   2008    139    90.0%   20.9    1,459 
                                
Total/Average for recent acquisitions           2,091        $305.7   $1,151 
Pending Investments at June 30, 2017                            
Citrus Tower  Orlando, FL      2006    336    97.6%  $55.3   $1,235 
Villages at Cypress Creek  Houston, TX      2001    384    80.0%   40.7    1,069 
                                
Total/Average for pending investments           720        $96.0   $1,146 
Total recent acquisitions and pending investments           2,811        $401.7   $1,150 

 

(1) All dates are for the year construction was completed.

 

(2) Represents the average effective monthly rent per occupied unit for all occupied units for the three months ended June 30, 2017. The average rent for the development projects and the pending investments is pro forma based on underwriting.

 

19

 

 

 

Bluerock Residential Growth REIT, Inc.

Recent Dispositions

(Unaudited and dollars in millions)

 

 

Summary of Recent Dispositions

 

Property  Location  Date Sold  Number
of Units
   Ownership
Interest in
Property
   Sale
Price
   BRG Net
Proceeds
   IRR   Equity
Multiple
 
Village Green of Ann Arbor  Ann Arbor, MI  2/22/2017   520    48.6%  $71.4   $13.6    38%   2.32 
Lansbrook Village  Palm Harbor, FL  4/26/2017   621    90.0%  $82.4   $19.1    25%   1.71 
Fox Hill  Austin, TX  5/24/2017   288    94.6%  $46.5   $16.4    26%   1.62 
MDA Apartments (1)  Chicago, IL  6/30/2017   190    35.3%  $18.3   $11.0    22%   2.23 
Total/Weighted Average      1,619        $218.6   $60.1    27%   1.86 

 

(1) Represents sale of the Company's 35% joint venture interest in MDA Apartments.

 

20

 

 

 

Bluerock Residential Growth REIT, Inc.

Investments in Unconsolidated Real Estate Joint Ventures and Notes and Accrued Interest Receivable from Related Parties

For the Three and Six Months Ended June 30, 2017

(Unaudited and dollars in thousands)

 

 

Investments in Unconsolidated Real Estate Joint Ventures

 

Multifamily
Community Name
  Investment
as of April
1, 2017
   Additional
Investments
(Dispositions)
during the
quarter
   Investment
as of June
30, 2017
   Preferred
Return
   Income Earned
for the Three
Months Ended
June 30, 2017
   Income Earned
for the Six
Months Ended
June 30, 2017
 
                         
Alexan CityCentre  $7,733   $1,525   $9,258    15%  $325   $626 
Alexan Southside   19,015    -    19,015    15%   733    1,373 
APOK Townhomes   7    -    7     *   -    - 
Domain Phase 1   12    -    12     *   -    141 
EOS   -    -    -    15%   -    (22)
Flagler Village   24,184    472    24,656     *   (2)   (4)
Helios   16,360    -    16,360    15%   612    1,217 
Lake Boone Trail   11,929    1    11,930    15%   446    867 
West Morehead   14    -    14     *   -    - 
Whetstone **   12,932    -    12,932    15%   491    979 
   $92,186   $1,998   $94,184        $2,605   $5,177 

 

* The property is currently an equity method investment with common ownership.

** Commencing April 1, 2017, the Whetstone preferred income is being accrued and not paid currently. 

 

Notes and Accrued Interest Receivable from Related Parties

 

Multifamily
Community Name
  Note
Receivable
as of April
1, 2017
   Change   Note
Receivable as
of June 30,
2017
   Note
Receivable
Interest
   Interest Income
Earned for the
Three Months
Ended
June 30, 2017
   Interest Income
Earned for the
Six Months
Ended
June 30, 2017
 
                         
APOK Townhomes  $11,365   $(5)  $11,360    15%  $420   $807 
Domain Phase 1   20,511    17    20,528    15%   758    992 
West Morehead   24,971    (10)   24,961    15%   919    1,821 
   $56,847   $2   $56,849        $2,097   $3,620 

 

21

 

 

 

Bluerock Residential Growth REIT, Inc.

Portfolio Information

Second Quarter 2017

(Unaudited)

 

 

Multifamily Community Name  Location  Number of
Units
   Year Built/
Renovated(1)
   Average Rent(2)   Revenue per
Occupied Unit(3)
   Average
Occupancy
 
Operating Properties:                            
ARIUM at Palmer Ranch  Sarasota, FL   320    2016   $1,212   $1,238    94.2%
ARIUM Grandewood  Orlando, FL   306    2005    1,246    1,291    94.9%
ARIUM Gulfshore  Naples, FL   368    2016    1,242    1,254    94.3%
ARIUM Palms  Orlando, FL   252    2008    1,232    1,262    93.0%
ARIUM Pine Lakes  Port St. Lucie, FL   320    2003    1,116    1,219    95.4%
ARIUM Westside  Atlanta, GA   336    2008    1,415(4)   1,444(4)   94.1%
Ashton Reserve  Charlotte, NC   473    2015    1,045    1,050    96.9%
Enders Place at Baldwin Park  Orlando, FL   220    2003    1,648    1,723    94.7%
James on South First  Austin, TX   250    2016    1,189    1,267    94.7%
Marquis at Crown Ridge  San Antonio, TX   352    2009    968    1,012    95.8%
Marquis at Stone Oak  San Antonio, TX   335    2007    1,403    1,441    89.5%
Marquis at The Cascades I  Tyler, TX   328    2007    1,123    1,197    93.1%
Marquis at The Cascades II  Tyler, TX   254    2009    1,026    1,078    92.1%
Marquis at TPC  San Antonio, TX   139    2008    1,459    1,504    89.4%
Nevadan  Atlanta, GA   480    1990    1,090    1,130    95.2%
Park & Kingston  Charlotte, NC   168    2015    1,174    1,226    96.5%
Preston View  Morrisville, NC   382    2000    1,013    1,069    93.2%
Roswell City Walk  Roswell, GA   320    2015    1,462    1,504    94.8%
Sorrel  Frisco, TX   352    2015    1,199    1,243    92.2%
Sovereign  Fort Worth, TX   322    2015    1,269    1,344    95.4%
The Brodie  Austin, TX   324    2001    1,100    1,181    94.4%
The Preserve at Henderson Beach  Destin, FL   340    2009    1,312    1,362    96.5%
Wesley Village  Charlotte, NC   301    2010    1,270    1,298    96.8%
Whetstone  Durham, NC   204    2015    1,196    1,288    91.4%
                             
Total Operating Properties   7,446        $1,208   $1,257    94.2%
                             
Development Properties:                            
Alexan CityCentre  Houston, TX   340        $2,144(5)    N/A     N/A 
Alexan Southside Place  Houston, TX   270         2,012(5)    N/A     N/A 
APOK Townhomes  Boca Raton, FL   90         2,549(5)    N/A     N/A 
Crescent Perimeter  Atlanta, GA   320         1,749(5)    N/A     N/A 
Domain Phase 1  Garland, TX   299         1,469(5)    N/A     N/A 
Flagler Village  Fort Lauderdale, FL   384         2,481(5)    N/A     N/A 
Helios  Atlanta, GA   282         1,486(5)    N/A     N/A 
Lake Boone Trail  Raleigh, NC   245         1,271(5)    N/A     N/A 
Vickers Village  Roswell, GA   79         3,176(5)    N/A     N/A 
West Morehead  Charlotte, NC   286         1,507(5)    N/A     N/A 
                             
Total Development Properties   2,595        $1,876     N/A     N/A 
                             
Total Operating and Development Properties   10,041        $1,380   $1,257    94.2%
                             
Pending Properties:                            
Citrus Tower  Orlando, FL   336    2006   $1,235     N/A     N/A 
Villages at Cypress Creek  Houston, TX   384    2001    1,069     N/A     N/A 
Total Pending Properties   720        $1,146     N/A     N/A 
                             
Total Portfolio Including Pending Properties   10,761        $1,365   $1,257    94.2%

 

(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 all occupied units for the three months ended June 30, 2017.

(3) Revenue per occupied unit is total revenue divided by average number of occupied units for the three months ended June 30, 2017.

(4) Represents average rent and revenue per occupied unit for residential units only and excludes the property's retail space.

(5) Represents the average pro forma effective monthly rent per occupied unit for all expected units upon stabilization.

 

22

 

 

 

Bluerock Residential Growth REIT, Inc.

Development Properties

As of June 30, 2017

(Unaudited and dollars in millions)

 

 

This table includes forward-looking statements based on current judgments and current knowledge of management, which are subject to certain risks, trends and uncertainties that could cause results to vary from those projected. Please see the paragraph on forward-looking statements on page 2 of this document for a discussion of risks and uncertainties.

 

                       Estimated/Actual Dates for
Multifamily Community Name(1)  Planned
Number of
Units
   Total Estimated
Construction
Cost (in millions)
   Cost to Date
(in millions)
   Estimated
Construction
Cost Per Unit
   Total Available
Financing
(in millions)
   Construction
Start
  Initial
Occupancy
  Construction
Completion
  Stabilized
Operations(2)
Alexan CityCentre   340   $83.0   $76.4   $244,118   $55.1   4Q14  2Q17  4Q17  4Q18
Alexan Southside Place   270   $49.0   $32.2   $181,481   $31.6   4Q15  4Q17  2Q18  4Q18
APOK Townhomes   90   $28.9   $7.8   $321,111   $18.7   2Q17  3Q18  1Q19  3Q19
Crescent Perimeter   320   $70.0   $25.3   $218,750   $44.7   4Q16  4Q18  2Q19  4Q19
Domain Phase 1   299   $52.6   $10.7   $175,920   $36.7   1Q17  4Q18  2Q19  4Q19
Flagler Village   384   $131.8   $27.8   $343,229   $92.3   1Q18  3Q19  3Q20  3Q21
Helios   282   $50.9   $42.7   $180,496   $38.1   4Q15  2Q17  4Q17  2Q18
Lake Boone Trail   245   $40.2   $24.2   $164,082   $25.2   2Q16  1Q18  3Q18  2Q19
Vickers Village   79   $30.6   $14.6   $387,342   $18.0   2Q16  2Q18  3Q18  1Q19
West Morehead   286   $60.0   $18.4   $209,790   $41.8   4Q16  4Q18  2Q19  4Q19

 

(1) The properties are under development. Alexan CityCentre, Alexan Southside Place, Helios, and Lake Boone Trail are preferred equity investments with an option to convert into partial ownership upon stabilization.  Domain Phase 1, West Morehead, and APOK Townhomes are mezzanine loan investments with an option to purchase indirect property interest upon maturity.  Flagler Village, Vickers Village, and Crescent Perimeter are common interests and do not have a preferred equity or mezzanine structure. 

 

(2) We defined stabilized occupancy as the earlier of the attainment of 90% physical occupancy or one year after the completion of construction.

 

23

 

 

 

Bluerock Residential Growth REIT, Inc.

Condensed Consolidated Balance Sheets

Second Quarter 2017

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

 

 

   June 30,
2017
   December 31,
2016
 
ASSETS          
Net Real Estate Investments          
Land  $147,562   $142,274 
Buildings and improvements   930,471    848,445 
Furniture, fixtures and equipment   29,148    27,617 
Construction in progress   24,890    10,878 
Total Gross Real Estate Investments   1,132,071    1,029,214 
Accumulated depreciation   (35,269)   (42,137)
Total Net Real Estate Investments   1,096,802    987,077 
Cash and cash equivalents   139,292    82,047 
Restricted cash   41,048    45,402 
Notes and accrued interest receivable from related parties   56,849    21,267 
Due from affiliates   1,240    948 
Accounts receivable, prepaid and other assets   6,193    8,610 
Preferred equity investments and investments in unconsolidated real estate joint ventures   94,184    91,132 
In-place lease intangible assets, net   5,175    4,839 
Total Assets  $1,440,783   $1,241,322 
           
LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY          
Mortgages payable  $775,591   $710,575 
Accounts payable   3,416    1,669 
Other accrued liabilities   19,006    13,431 
Due to affiliates   6,831    2,409 
Distributions payable   8,326    7,328 
Total Liabilities   813,170    735,412 
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 June 30, 2017 and December 31, 2016   138,605    138,316 
Series B Redeemable Preferred Stock, liquidation preference $1,000 per share, 150,000 shares authorized, 95,552 and 21,482 issued and outstanding as of June 30, 2017 and December 31, 2016, respectively   84,058    18,938 
7.6250% Series C Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares authorized, 2,323,750 issued and outstanding as of June 30, 2017 and December 31, 2016   56,202    56,095 
Equity          
Stockholders’ Equity          
Preferred stock, $0.01 par value, 230,975,000 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 June 30, 2017 and December 31, 2016   68,710    68,760 
Common stock - Class A, $0.01 par value, 747,586,185 shares authorized; 24,191,951 and 19,567,506 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively   242    196 
Additional paid-in-capital   321,948    257,403 
Distributions in excess of cumulative earnings   (87,130)   (84,631)
Total Stockholders’ Equity   303,770    241,728 
Noncontrolling Interests          
Operating partnership units   2,017    2,216 
Partially owned properties   42,961    48,617 
Total Noncontrolling Interests   44,978    50,833 
Total Equity   348,748    292,561 
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY  $1,440,783   $1,241,322 

 

24

 

 

 

Bluerock Residential Growth REIT, Inc.

Consolidated Statements of Operations

For the Three and Six Months Ended June 30, 2017 and 2016

(Dollars in thousands)

 

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2017   2016   2017   2016 
Revenues                    
Net rental income  $23,615   $17,513   $47,482   $33,441 
Other property revenues   1,336    886    2,608    1,592 
Interest income from related parties   2,097        3,620     
Total revenues   27,048    18,399    53,710    35,033 
Expenses                    
Property operating   10,646    7,389    20,476    13,982 
General and administrative   1,696    1,704    3,146    2,978 
Management fees   6,163    1,415    8,931    2,629 
Acquisition and pursuit costs   18    249    3,200    1,457 
Management internalization   340        820     
Depreciation and amortization   10,387    7,789    21,331    15,298 
Total expenses   29,250    18,546    57,904    36,344 
Operating loss   (2,202)   (147)   (4,194)   (1,311)
Other income (expense)                    
Other income   17        17     
Preferred returns and equity in income of unconsolidated real estate joint ventures   2,605    2,775    5,177    5,543 
Gain on sale of real estate investments   33,574        50,040     
Gain on sale of real estate joint venture interest   10,238        10,238     
Loss on early extinguishment of debt   (1,639)       (1,639)    
Interest expense, net   (7,825)   (4,589)   (14,943)   (8,817)
Total other income (expense)   36,970    (1,814)   48,890    (3,274)
Net income (loss)   34,768    (1,961)   44,696    (4,585)
Preferred stock dividends   (6,381)   (2,968)   (12,233)   (4,451)
Preferred stock accretion   (647)   (168)   (984)   (293)
Net income (loss) attributable to noncontrolling interests                    
Operating partnership units   186    (75)   129    (136)
Partially-owned properties   9,985    21    18,771    (14)
Net income (loss) attributable to noncontrolling interests   10,171    (54)   18,900    (150)
Net income (loss) attributable to common stockholders  $17,569   $(5,043)  $12,579   $(9,179)
                     
Net income (loss) per common share - Basic  $0.67   $(0.24)  $0.49   $(0.45)
                     
Net income (loss) per common share – Diluted  $0.67   $(0.24)  $0.49   $(0.45)
                     
Weighted average basic common shares outstanding   26,075,911    20,686,652    25,535,178    20,604,124 
Weighted average diluted common shares outstanding   26,076,572    20,686,652    25,535,839    20,604,124 

 

25

 

 

 

Bluerock Residential Growth REIT, Inc.

Reconciliation of Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) Attributable to Common Stockholders

For the Three and Six Months Ended June 30, 2017 and 2016

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

 

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2017   2016   2017   2016 
Net income (loss) attributable to common stockholders  $17,569   $(5,043)  $12,579   $(9,179)
Common stockholders pro-rata share of:                    
Real estate depreciation and amortization(1)   9,326    6,769    19,129    13,239 
Gain on sale of real estate assets   (26,548)       (33,945)    
Gain on sale of joint venture interests   (6,332)       (6,332)    
FFO Attributable to Common Stockholders  $(5,985)  $1,726   $(8,569)  $4,060 
Common stockholders pro-rata share of:                    
 Amortization of non-cash interest expense   773    65    1,246    148 
Acquisition and pursuit costs   18    227    3,024    1,373 
Management internalization process expense   336        811     
Loss on early extinguishment of debt   1,534        1,534     
Non-recurring income   (16)       (16)    
Non-cash preferred returns and equity in income of unconsolidated real estate joint ventures   (487)       (487)    
Normally recurring capital expenditures(2)   (331)   (208)   (622)   (416)
Preferred stock accretion   641    166    974    289 
Non-cash equity compensation   6,846    2,400    10,011    4,218 
AFFO Attributable to Common Stockholders  $3,329   $4,376   $7,906   $9,672 
Weighted average common shares outstanding - diluted(3)   26,076,572    20,688,631    25,535,839    20,611,802 
                     
PER SHARE INFORMATION:                    
FFO Attributable to Common Stockholders - diluted  $(0.23)  $0.08   $(0.34)  $0.20 
AFFO Attributable to Common Stockholders - diluted  $0.13   $0.21   $0.31   $0.47 
Pro forma AFFO Attributable to Common Stockholders - diluted (4)  $0.37     N/A    N/A    N/A 

 

 

(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, and our similar estimated share of unconsolidated depreciation and amortization, which is included in earnings of our unconsolidated real estate joint venture investments.

(2)    See page 30 for the Company's definitions of these non-GAAP measurements. Individual line items included in FFO and AFFO calculations include results from discontinued operations where applicable.

(3)    Total weighted average shares for the quarter, including OP units of 275,494 was 26,352,066. AFFO related to the OP units is excluded from the calculation above. When including both, AFFO attributable to OP units and 275,494 of OP units in the weighted average share count, in the above calculation, AFFO is $0.13 per share.

(4) Pro forma AFFO for the three months ended June 30, 2017 assumes the investment of $104 million in estimated available cash had occurred on April 1, 2017:

 

              Investment 
#  Investment  MSA   # Units   Amount ($MM's) 
1  Acquisition - Identified Assets   San Antonio & Tyler, TX    1,408   $48 
2  Mezzanine Loan - Identified Developments   Atlanta, GA    399    7 
3  Acquisition - Unidentified Assets, assumes 5.75% cap rate   -    -    17 
4  Mezzanine Loan - Unidentified   -    -    32 
   Total            $104 

 

The pro forma guidance is being presented solely for purposes of illustrating the potential impact of these pipeline transactions, as well as future investments to be made with funds we have available for investment, as if they had occurred at April 1, 2017, based on information currently available to management and assumptions management has made with respect to our future pipeline.

 

The Company is providing no assurances that any of the above transactions are probable, or that they will close or that management will identify or acquire investments consistent with our pipeline assumptions, and the failure to do so would significantly impact pro forma guidance. The actual timing of these investments, if and when made, will vary materially from the assumed timing reflected in the pro forma guidance, and actual quarterly results will differ significantly from the pro forma guidance shown above. Investors should not rely on pro forma guidance as a forecast of the actual performance of the Company.

 

26

 

 

 

Bluerock Residential Growth REIT, Inc.

Debt Summary Information

As of June 30, 2017

(Unaudited and dollars in thousands)

 

 

Debt Outstanding

 

Property  Outstanding
Principal
   Interest Rate   Fixed/ Floating  Maturity Date
ARIUM at Palmer Ranch  $26,925    3.23%  LIBOR + 2.17% (1)  February 1, 2023
ARIUM Grandewood   34,294    2.88%  Floating (2)  December 1, 2024
ARIUM Gulfshore   32,626    3.23%  LIBOR + 2.17% (1)  February 1, 2023
ARIUM Palms   24,999    3.28%  LIBOR + 2.22% (1)  September 1, 2022
ARIUM Pine Lakes   26,950    3.95%  Fixed  November 1, 2023
ARIUM Westside   52,150    3.68%  Fixed  August 1, 2023
Ashton Reserve I   31,653    4.67%  Fixed  December 1, 2025
Ashton Reserve II   15,270    3.68%  LIBOR + 2.62% (1)  January 1, 2026
Crescent Perimeter (3)          LIBOR + 3.00%  December 12, 2020
Enders Place at Baldwin Park (4)   24,511    4.30%  Fixed  November 1, 2022
James on South First   26,500    4.35%  Fixed  January 1, 2024
Marquis at Crown Ridge   29,508    2.67%  LIBOR + 1.61% (1)  June 1, 2024
Marquis at Stone Oak   43,125    2.67%  LIBOR + 1.61% (1)  June 1, 2024
Marquis at The Cascades I   33,207    2.67%  LIBOR + 1.61% (1)  June 1, 2024
Marquis at The Cascades II   23,175    2.67%  LIBOR + 1.61% (1)  June 1, 2024
Marquis at TPC   17,362    2.67%  LIBOR + 1.61% (1)  June 1, 2024
Nevadan   48,431    3.54%  LIBOR + 2.48% (1)  November 1, 2023
Park & Kingston (5)   18,432    3.41%  Fixed  April 1, 2020
Preston View   41,066    3.13%  LIBOR + 2.07% (1)  March 1, 2024
Roswell City Walk   51,000    3.63%  Fixed  December 1, 2026
Sorrel   38,684    3.35%  LIBOR + 2.29% (1)  May 1, 2023
Sovereign   28,880    3.46%  Fixed  November 10, 2022
The Brodie   34,825    3.71%  Fixed  December 1, 2023
The Preserve at Henderson Beach   36,655    4.65%  Fixed  January 5, 2023
Vickers Village (6)   829    4.22%  LIBOR + 3.00% (6)  December 1, 2020
Wesley Village   40,545    4.25%  Fixed  April 1, 2024
Total   781,602            
Fair value adjustments   2,139            
Deferred financing costs, net   (8,150)           
Total  $775,591            
Weighted Average Interest Rate   3.51%           

 

(1) One month LIBOR as of June 30, 2017 was 1.06%.

(2) ARIUM Grandewood principal balance includes the initial advance of $29.44 million at a floating rate of 1.67% plus one month LIBOR and a $4.85 million supplemental loan at a floating rate of 2.74% plus one month LIBOR. At June 30, 2017, the interest rates on the initial advance and supplemental loan were 2.46% and 3.53%, respectively.

(3) Construction loan of up to $44.7 million. The loan has a one-year extension option subject to certain conditions.

(4) The Enders Place at Baldwin Park principal balance includes a $16.7 million loan at a fixed rate of 3.97% and a $7.8 million supplemental loan at a fixed rate of 5.01%.

(5) The Park & Kingston principal balance includes a $15.3 million loan at a fixed rate of 3.21% and a $3.2 million supplemental loan at a fixed rate of 4.34%.

(6) Construction loan of up to $18.0 million with interest at a floating rate of 3.00% plus one month LIBOR.

 

27

 

 

 

Bluerock Residential Growth REIT, Inc.

Debt Summary Information Continued

As of June 30, 2017

(Unaudited and dollars in thousands)

 

 

Debt Maturity Schedules

 

Year  Fixed Rate   Floating Rate   Total   % of Total 
2017  $907   $471   $1,378    0.18%
2018   2,223    1,863    4,086    0.52%
2019   3,770    3,797    7,567    0.97%
2020   23,530    6,270    29,800    3.81%
2021   5,648    5,551    11,199    1.43%
Thereafter   336,022    391,550    727,572    93.09%
   $372,100   $409,502   $781,602    100.00%
Fair Value Adjustments   2,139    -    2,139      
Total  $374,239   $409,502   $783,741      

 

   Amounts   % of Total   Weighted
Average Rates
   Weighted
Average
Maturities
(years)
 
Secured Fixed Rate Debt  $374,239    47.8%   4.00%   6.6 
Secured Floating Rate Debt   409,502    52.2%   3.06%   6.5 
Total  $783,741    100.0%   3.51%   6.5 

 

28

 

 

 

Bluerock Residential Growth REIT, Inc.

2017 Third Quarter Outlook

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

 

 

   2017 Third Quarter Outlook 
   ($ in thousands except per share amounts) 
   Q3 - Projected (8)   Q3 - Proforma (7) (8) 
Earnings          
Adjusted Funds From Operations Attributable to Common Stockholders per share ($0.03) - ($0.02)  $0.25 - $0.27 
           
Operations          
Revenue (1)  $25,540 - $25,620   $31,870 - $31,950 
Property Operating Margin   55.1% - 55.4%   56.9% - 57.1%
Interest expense  $7,570   $8,840 
General and administrative expenses as percentage of revenue (2)   4.1% - 4.0%   3.3% - 3.2%
Management fees  $2,890   $2,810 
Depreciation and amortization expense  $11,850     *
Depreciation and amortization recapture (3)   91.6%   *
Equity in operating earnings in unconsolidated subsidiaries (4)  $2,180   $2,220 
Interest income from related parties  $2,120   $6,340 
Noncontrolling interest (5)   4.7% - 4.6%   6.6% - 6.7%
Recurring capex (6)  $460 - $440   $510 - $490 

 

 

* Amount is indeterminable.

(1) Revenue includes only property level revenues and excludes income from preferred investments and mezzanine loans, which flow through the "Equity in operating earnings of unconsolidated subsidiaries" and "interest income from related parties" line items, respectively.

(2) General and administrative expenses exclude non-cash expenses, such as non-cash equity compensation.

(3) Represents estimated recapture of the Company's pro-rata share of depreciation for AFFO purposes and excludes depreciation and amortization on forecasted acquisitions.

(4) Represents the Company's share of income from unconsolidated subsidiaries including preferred investment income.

(5) Represents estimated net income/loss (excluding non-cash equity compensation, gain on sale of real estate assets, acquisition costs and depreciation on forecasted acquisitions) attributable to non-controlling interest of OP unit holders and joint venture partner interests.

(6) Estimate of the Company's pro-rata share of recurring capital expenditures for AFFO purposes.

(7) Pro forma guidance assumes the investment of $138 million in estimated available cash had occurred on July 1, 2017:

 

             Investment 
#  Investment  MSA  # Units   Amount
(in millions)
 
1  Acquisition - Identified Assets  Orlando, FL & Houston, TX   720   $33 
2  Mezzanine Loan - Identified Developments  Atlanta, GA & FT. Lauderdale, FL   783    40 
3  Acquisition - Unidentified Assets, assumes 5.75% cap rate  -   -    42 
4  Mezzanine Loan - Unidentified  -   -    23 
   Total          $138 

 

The pro forma guidance is being presented solely for purposes of illustrating the potential impact of these pipeline transactions, as well as future investments to be made with funds we have available for investment, as if they had occurred at July 1, 2017, based on information currently available to management and assumptions management has made with respect to our future pipeline.

 

The Company is providing no assurances that any of the above transactions are probable, or that they will close or that management will identify or acquire investments consistent with our pipeline assumptions, and the failure to do so would significantly impact pro forma guidance. The actual timing of these investments, if and when made, will vary materially from the assumed timing reflected in the pro forma guidance, and actual quarterly results will differ significantly from the pro forma guidance shown above. Investors should not rely on pro forma guidance as a forecast of the actual performance of the Company.

 

(8) The Company has not reconciled projected and pro forma Adjusted Funds From Operations Attributable to Common Shareholders per share (“AFFO”) guidance to the corresponding GAAP financial measure because it does not provide guidance for various reconciling items. The Company is unable to provide guidance for these reconciling items since certain items that impact net income are outside of its control and cannot be reasonably predicted. Accordingly, reconciliations to the corresponding GAAP financial measures are not available.

 

29

 

 

 

Bluerock Residential Growth REIT, Inc.

Definitions of Non-GAAP Financial Measures

 

 

The foregoing supplemental financial data includes certain non-GAAP financial measures that we believe are helpful in understanding our business, 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 and Adjusted Funds from Operations, Attributable to Common Shareholders

Funds from operations attributable to common stockholders (“FFO”), 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 National Association of Real Estate Investment Trusts, or (“NAREIT's”), 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.

 

In addition to FFO, we use adjusted funds from operations attributable to common stockholders (“AFFO”). AFFO is a computation made by analysts and investors to measure a real estate company's operating performance by removing the effect of items that do not reflect ongoing property operations. To calculate AFFO, we further adjust FFO by adding back certain items that are not added to net income in NAREIT's definition of FFO, such as acquisition and pursuit costs, equity based compensation expenses, and any other non-recurring or non-cash expenses, which are costs that do not relate to the operating performance of our properties, and subtracting recurring capital expenditures (and when calculating the quarterly incentive fee payable to our Manager only, we further adjust FFO to include any realized gains or losses on our real estate investments).

 

Our calculation of AFFO differs from the methodology used for calculating AFFO by certain other REITs and, accordingly, our AFFO may not be comparable to AFFO reported by other REITs. Our management utilizes 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, AFFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we also believe that FFO and AFFO may provide us and our stockholders with an additional useful measure to compare our financial performance to certain other REITs. We also use AFFO for purposes of determining the quarterly incentive fee, if any, payable to our Manager.

 

Neither FFO nor AFFO is equivalent to net income or cash generated from operating activities determined in accordance with GAAP. Furthermore, 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 nor AFFO should be considered as an alternative to net income 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 thirteen additional operating properties and three development investments, and sold six properties subsequent to June 30, 2016. The results presented in the table below are not directly comparable and should not be considered an indication of our future operating performance (unaudited and dollars in thousands, except share and per share data).

 

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.

 

30

 

 

 

Bluerock Residential Growth REIT, Inc.

Definitions of Non-GAAP Financial Measures

(Unaudited and dollars in thousands)

 

 

Earnings Before Interest, Income Taxes, Depreciation and Amortization ("EBITDA")

 

EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, calculated on a consolidated basis. We consider EBITDA 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. Below is a reconciliation of net income (loss) applicable to common shares to EBITDA.

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2017   2016   2017   2016 
                 
Net income (loss) attributable to common stockholders  $17,569   $(5,043)  $12,579   $(9,179)
Net income (loss) attributable to noncontrolling interest   10,171    (54)   18,900    (150)
Preferred stock dividends   6,381    2,968    12,233    4,451 
Preferred stock accretion   647    168    984    293 
Interest expense, net   7,825    4,589    14,943    8,817 
Depreciation and amortization   10,387    7,789    21,331    15,298 
EBITDA  $52,980   $10,417   $80,970   $19,530 
Acquisition and pursuit costs   18    249    3,200    1,457 
Management internalization process expense   340    -    820    - 
Non-cash equity compensation   6,919    2,436    10,119    4,281 
Non-recurring income   (17)   -    (17)   - 
Gain on sale of real estate investments   (33,574)   -    (50,040)   - 
Gain on sale of real estate joint venture interest   (10,238)   -    (10,238)   - 
Loss on early extinguishment of debt   1,639    -    1,639    - 
Non-cash preferred returns and equity in income of unconsolidated real estate joint ventures   (491)   -    (491)   - 
Adjusted EBITDA  $17,576   $13,102   $35,962   $25,268 

 

31

 

 

 

Bluerock Residential Growth REIT, Inc.

Definitions of Non-GAAP Financial Measures

(Unaudited and dollars in thousands)

 

 

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 because 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 an alternative measure of our financial performance.

 

The following table reflects net income (loss) 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:

 

   Three Months Ended (1)   Six Months Ended (2) 
   June 30,   June 30, 
   2017   2016   2017   2016 
Net income (loss) attributable to common stockholders  $17,569   $(5,043)  $12,579   $(9,179)
Add pro-rata share:                    
Depreciation and amortization   9,326    6,769    19,129    13,239 
Amortization of non-cash interest expense   773    65    1,246    148 
Management fees   6,099    1,394    8,836    2,591 
Acquisition and pursuit costs   18    227    3,024    1,373 
Loss on early extinguishment of debt   1,534    -    1,534    - 
Corporate operating expenses   1,679    1,666    3,112    2,935 
Management internalization process expense   336    -    811    - 
Preferred stock dividends   6,314    2,924    12,101    4,385 
Preferred stock accretion   641    166    974    289 
Less pro-rata share:                    
Other income   16    -    16    - 
Preferred returns and equity in income of unconsolidated real estate joint ventures   2,577    2,733    5,121    5,462 
Interest income from related parties   2,075    -    3,581    - 
Gain on sale of joint venture interest   6,332    -    6,332    - 
Gain on sale of real estate assets   26,548    -    33,945    - 
Pro-rata share of properties' income   6,741    5,435    14,351    10,319 
Add:                    
Noncontrolling interest pro-rata share of property income   856    1,065    2,103    2,081 
Total property income   7,597    6,500    16,454    12,400 
Add:                    
Interest expense, net   6,708    4,510    13,160    8,651 
Net operating income   14,305    11,010    29,614    21,051 
Less:                    
Non-same store net operating income   8,112    4,955    18,806    10,941 
Same store net operating income  $6,193   $6,055   $10,808   $10,110 
                     

 

(1) Same Store sales for the three months ended June 30, 2017 related to the following properties: Enders Place at Baldwin Park, ARIUM Grandewood, Park & Kingston, ARIUM Palms, Ashton Reserve, Sovereign, ARIUM at Palmer Ranch, ARIUM Gulfshore, and The Preserve at Henderson Beach.

 

(2) Same Store sales for the six months ended June 30, 2017 related to the following properties: Enders Place at Baldwin Park, ARIUM Grandewood, Park & Kingston, ARIUM Palms, Ashton Reserve, Sovereign, ARIUM at Palmer Ranch, and ARIUM Gulfshore.

 

32