EX-99.1 2 tv500182_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

 

For Immediate Release

 

Bluerock Residential Growth REIT Announces Second Quarter 2018 Results

 

- Total Revenues Grew 57% YoY to $45.0 Million -

- Increases Low End of Full Year 2018 AFFO Guidance Range -

 

New York, NY (August 7, 2018) – Bluerock Residential Growth REIT, Inc. (NYSE American: BRG) (“the Company”), an owner of highly amenitized multi-family apartment communities, announced today its financial results for the quarter ended June 30, 2018.

 

Second Quarter Highlights

 

Total revenues grew 57% to $45.0 million for the quarter from $28.7 million in the prior year period.

 

Net loss attributable to common stockholders for the second quarter of 2018 was ($0.44) per share, as compared to net income attributable to common stockholders of $0.67 per share in the prior year period. The prior year period included $1.26 per share of gains on the sale of real estate investments and joint venture interests.

 

Property Net Operating Income (“NOI”) grew 49% to $22.5 million, from $15.0 million in the prior year period.

 

Same store Revenue and NOI increased 3.6% and 3.9% respectively, as compared to the prior year period.

 

Adjusted funds from operations attributable to common shares and units (“AFFO”) grew 56% to $5.3 million, from $3.4 million in the prior year period. AFFO per share is $0.17 for the quarter as compared to $0.13 in second quarter 2017.

 

Consolidated real estate investments, at cost, increased approximately $151.5 million to $1.6 billion, from year end.

 

The Company invested approximately $82 million in two multifamily communities totaling 502 units and $9 million to buyout minority ownership interests in two assets.

 

The Company completed 292 value-add unit upgrades at an average cost of $4,708 per unit, and leased 269 of them during the second quarter. Year-to-date, the Company has completed 462 upgrades at an average cost of $4,373 per unit. The Company expects to complete between 900 and 1,200 unit renovations in 2018.

 

 Since inception, the Company has completed 942 value-add upgrades and achieved a $107 average monthly rental increase per unit, equating to a 27.4% ROI on all unit upgrades leased as of June 30, 2018.

 

Repurchased 107,040 shares of stock during the second quarter at an average price of $8.96 per share, for a total cost of approximately $1.0 million.

 

The Company increased the low end of its full year 2018 AFFO guidance from $0.65 to $0.66 per share and is affirming the top end of the range at $0.70 per share.

 

 

 

 

“We continued to produce strong operating results in the second quarter with property NOI up 49%, same store NOI that increased 3.9% and AFFO which again for the second quarter in a row exceeded our dividend payment,” said Ramin Kamfar, Company Chairman and CEO. “The robust first half performance has allowed us to increase the bottom end of our 2018 AFFO guidance range. We remain focused on ongoing operational improvements and creating value through our value-add upgrade programs. Furthermore, with access to attractive capital with our Series B redeemable preferred stock issuance, we will selectively pursue opportunities to accretively grow our portfolio of highly amenitized communities in targeted growth markets.”

 

Financial Results

 

Net loss attributable to common stockholders for the second quarter of 2018 was $10.2 million, compared to a net income of $17.6 million in the prior year period. The prior year period included approximately $32.8 million of gains on sale of real estate investments and joint venture interests. Net loss attributable to common stockholders included non-cash expenses of $14.2 million or $0.46 per share in the second quarter of 2018 compared to $17.1 million or $0.66 per share for the prior year period.

 

AFFO for the second quarter of 2018 was $5.3 million, or $0.17 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 $7.4 million and interest income of $3.5 million arising from significant investment activity. This was primarily offset by a year-over-year rise in interest expense of $4.4 million, general and administrative expenses of $2.0 million, and preferred stock dividends of $2.3 million.

 

Total Portfolio Performance

 

$ In thousands, except average rental rates  2Q18   2Q17   Variance   YTD18   YTD17   Variance 
Total Revenues (1)  $44,959   $28,666    56.8%  $86,828   $56,849    52.7%
Property Operating Expenses  $16,874   $11,527    46.4%  $32,533   $22,146    46.9%
NOI  $22,450   $15,042    49.2%  $43,465   $31,083    39.8%
Operating Margin   57.1%   56.6%   50bps   57.2%   58.4%   (120)bps
Occupancy Percentage   93.9%   94.3%   (40)bps   93.7%   94.4%   (40)bps
Average Rental Rate  $1,239   $1,208    2.6%  $1,233   $1,182    4.3%

 

(1) Including interest income from related parties

 

For the second quarter of 2018, property revenues increased by 48.0% compared to the same prior year period primarily attributable to the increased size of the portfolio. Total portfolio NOI was $22.5 million, an increase of $7.4 million, or 49.2%, compared to the same period in the prior year.

 

Property NOI margins were 57.1% of revenue for the quarter, compared to 56.6% of revenue in the prior year quarter. Property operating expenses were up primarily due to the increased size of the portfolio.

 

Same Store Portfolio Performance

 

$ In thousands, except average rental rates  2Q18   2Q17   Variance   YTD18   YTD17   Variance 
Revenues  $23,413   $22,591    3.6%  $41,707   $39,910    4.5%
Property Operating Expenses  $9,933   $9,617    3.3%  $17,629   $16,669    5.8%
NOI  $13,480   $12,974    3.9%  $24,078   $23,241    3.6%
Operating Margin   57.6%   57.4%   20bps   57.7%   58.2%   (50)bps
Occupancy Percentage   94.3%   94.8%   (50)bps   94.0%   94.4%   (40)bps
Average Rental Rate  $1,271   $1,220    4.2%  $1,284   $1,228    4.6%

 

The Company’s same store portfolio for the quarter ended June 30, 2018 included 18 properties. For the second quarter of 2018, same store NOI was $13.5 million, an increase of $0.5 million, or 3.9%, compared to the same period in the prior year. Same store property revenues increased by 3.6% compared to the same prior year period, primarily attributable to a 4.2% increase in average rental rates, offset by average occupancy decreasing 50 basis points to 94.3%. In addition, the implementation of trash valet services at eleven properties and a general increase in resident fees increased revenues by $0.2 million. Same store expenses increased $0.3 million due implementation of trash valet services and the timing of seasonal maintenance.

 

 

 

 

Second Quarter Acquisition Activity

 

On April 26, 2018, invested approximately $9 million to increase our ownership stake to 100% in each of our ARIUM Gulfshore and ARIUM at Palmer Ranch properties.

 

On May 1, 2018, acquired a 100% interest in a 264-unit apartment community located in Daytona Beach, Florida, known as Sands Parc. The total purchase price was approximately $46.2 million, funded in part by the Company’s Senior Credit Facility.

 

On June 14, 2018, acquired an 80% indirect interest in a 238-unit apartment community located in Lake Jackson, Texas, known as Plantation Park. The total purchase price was approximately $35.6 million, funded in part by a $26.6 million mortgage loan secured by the Plantation Park property.

 

Balance Sheet

 

During the second quarter, the Company raised gross proceeds of approximately $31.6 million through the issuance of 31,576 shares of Series B preferred stock with associated warrants at $1,000 per unit.

 

As of June 30, 2018, the Company had $25.4 million of unrestricted cash on its balance sheet, approximately $51.5 million available among its revolving credit facilities, and $1.1 billion of debt outstanding.

 

Dividend Details

 

The Board of Directors authorized, and the Company declared, a quarterly dividend for the second 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 June 25, 2018, which was paid in cash on July 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, which was paid in cash on August 3, 2018, and as of August 24, 2018, and September 25, 2018, which will be paid in cash on 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 bottom end of the 2018 AFFO guidance from $0.65 to $0.66 per share and is reaffirming the top end of the range at $0.70 per share. For additional guidance details, please see page 30 of Company’s Second 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 Tuesday, August 7, 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 September 7, 2018 at http://services.choruscall.com/links/brg180807.html, as well as by dialing +1 (877) 344-7529 in the U.S., or +1 (412) 317-0088 internationally, and requesting conference number 10122487.

 

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 June 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%  $1,291    96%
ARIUM Glenridge  Atlanta, GA   480    1990    90%   1,150    93%
ARIUM Grandewood  Orlando, FL   306    2005    100%   1,346    95%
ARIUM Gulfshore  Naples, FL   368    2016    100%   1,296    92%
ARIUM Hunter’s Creek  Orlando, FL   532    1999    100%   1,353    93%
ARIUM Metrowest  Orlando, FL   510    2001    100%   1,328    93%
ARIUM Palms  Orlando, FL   252    2008    95%   1,307    94%
ARIUM Pine Lakes  Port St. Lucie, FL   320    2003    85%   1,229    94%
ARIUM Westside  Atlanta, GA   336    2008    90%   1,490    93%
Ashton Reserve  Charlotte, NC   473    2015    100%   1,073    91%
Citrus Tower  Orlando, FL   336    2006    97%   1,257    95%
Enders Place at Baldwin Park  Orlando, FL   220    2003    92%   1,734    95%
James on South First  Austin, TX   250    2016    90%   1,160    98%
Marquis at Crown Ridge  San Antonio, TX   352    2009    90%   935    93%
Marquis at Stone Oak  San Antonio, TX   335    2007    90%   1,385    93%
Marquis at The Cascades  Tyler, TX   582    2009    90%   1,069    95%
Marquis at TPC  San Antonio, TX   139    2008    90%   1,461    96%
Outlook at Greystone  Birmingham, AL   300    2007    100%   936    88%
Park & Kingston  Charlotte, NC   168    2015    100%   1,218    96%
Plantation Park  Lake Jackson, TX   238    2016    80%   1,428    92%
Preston View  Morrisville, NC   382    2000    100%   1,072    97%
Roswell City Walk  Roswell, GA   320    2015    98%   1,513    97%
Sands Parc  Daytona Beach, FL   264    2017    100%   1,267    94%
Sorrel  Frisco, TX   352    2015    95%   1,252    91%
Sovereign  Fort Worth, TX   322    2015    95%   1,320    94%
The Brodie  Austin, TX   324    2001    93%   1,105    98%
The Links at Plum Creek  Castle Rock, CO   264    2000    88%   1,362    94%
The Mills  Greenville, SC   304    2013    100%   999    97%
The Preserve at Henderson Beach  Destin, FL   340    2009    100%   1,306    97%
Villages at Cypress Creek  Houston, TX   384    2001    80%   1,079    97%
Wesley Village  Charlotte, NC   301    2010    100%   1,296    95%
Consolidated Operating Properties Subtotal/Average   10,374             $1,239    94%
                          
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              1,300(2)     
Mezzanine and Preferred Investments Subtotal/Average   2,800             $1,816      
                             
Portfolio Properties Total/Average   13,174             $1,365      

 

(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 June 30, 2018.

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

(4) Alexan CityCentre, Alexan Southside Place, Helios, and Leigh House are preferred equity investments with an option to convert into partial ownership upon stabilization. Cade Boca Raton, Novel Perimeter, Domain at The One Forty, Flagler Village, Vickers Historic Roswell, and Arlo are mezzanine loan investments. Additionally, Cade Boca Raton, Domain at The One Forty, and Arlo have an option to purchase an indirect property interest upon maturity. Whetstone is currently a preferred equity investment providing a stated investment return. Pro forma average rent represents the average pro forma effective monthly rent per occupied unit for all expected occupied units upon stabilization.

 

 

 

 

Consolidated Statement of Operations

For the Three and Six Months Ended June 30, 2018 and 2017

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

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2018   2017   2018   2017 
Revenues                    
Net rental income  $34,719   $23,570   $67,383   $47,412 
Other property revenues   4,605    2,999    8,615    5,817 
Interest income from related parties   5,635    2,097    10,830    3,620 
Total revenues   44,959    28,666    86,828    56,849 
Expenses                    
Property operating   16,874    11,527    32,533    22,146 
Property management fees   1,074    737    2,067    1,469 
General and administrative   4,528    1,696    9,197    3,146 
Management fees       6,163        8,931 
Acquisition and pursuit costs   28    18    71    3,200 
Management internalization       340        820 
Weather-related losses, net           168     
Depreciation and amortization   14,819    10,387    30,460    21,331 
Total expenses   37,323    30,868    74,496    61,043 
Operating loss   7,636    (2,202)   12,332    (4,194)
Other income (expense)                    
Other income       17        17 
Preferred returns and equity in income of unconsolidated real estate joint ventures   2,626    2,605    5,088    5,177 
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   (653)   (1,639)   (653)   (1,639)
Interest expense, net   (13,041)   (7,825)   (23,158)   (14,943)
Total other (expense) income    (11,068)   36,970    (18,723)   48,890 
Net (loss) income   (3,432)   34,768    (6,391)   44,696 
Preferred stock dividends   (8,643)   (6,381)   (16,890)   (12,233)
Preferred stock accretion   (1,400)   (647)   (2,510)   (984)
Net (loss) income attributable to noncontrolling interests                    
Operating partnership units   (3,010)   186    (5,685)   129 
Partially-owned properties   (253)   9,985    (468)   18,771 
Net (loss) income attributable to noncontrolling interests   (3,263)   10,171    (6,153)   18,900 
Net (loss) income attributable to common stockholders  $(10,212)  $17,569   $(19,638)  $12,579 
                     
Net (loss) income per common share - Basic  $(0.44)  $0.67   $(0.83)  $0.49 
                     
Net (loss) income per common share – Diluted  $(0.44)  $0.67   $(0.83)  $0.49 
                     
Weighted average basic common shares outstanding   23,800,770    26,075,911    23,971,129    25,535,178 
Weighted average diluted common shares outstanding   23,800,770    26,076,572    23,971,129    25,535,839 

 

 

 

 

Consolidated Balance Sheets

Second Quarter 2018

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

 

   June 30,
2018
   December 31,
2017
 
ASSETS          
Net Real Estate Investments          
Land  $176,865   $169,135 
Buildings and improvements   1,382,353    1,244,193 
Furniture, fixtures and equipment   44,802    38,446 
Construction in progress   261    985 
Total Gross Real Estate Investments   1,604,281    1,452,759 
Accumulated depreciation   (80,104)   (55,177)
Total Net Real Estate Investments   1,524,177    1,397,582 
Cash and cash equivalents   25,411    35,015 
Restricted cash   29,775    29,575 
Notes and accrued interest receivable from related parties   162,971    140,903 
Due from affiliates   2,537    2,003 
Accounts receivable, prepaid and other assets   14,358    9,689 
Preferred equity investments and investments in unconsolidated real estate joint ventures   77,061    71,145 
In-place lease intangible assets, net   1,875    4,635 
Total Assets  $1,838,165   $1,690,547 
           
LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY          
Mortgages payable  $1,075,799   $939,494 
Revolving credit facilities   68,209    67,670 
Accounts payable   1,071    1,652 
Other accrued liabilities   27,590    22,952 
Due to affiliates   815    1,575 
Distributions payable   11,690    14,287 
Total Liabilities   1,185,174    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 June 30, 2018 and December 31, 2017   139,137    138,801 
6.000% Series B Redeemable Preferred Stock, liquidation preference $1,000 per share, 725,000 shares authorized; 233,417 and 184,130 issued and outstanding as of June 30, 2018 and December 31, 2017, respectively   206,878    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 June 30, 2018 and December 31, 2017   56,326    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 at June 30, 2018 and December 31, 2017   68,705    68,705 
Common stock - Class A, $0.01 par value, 747,509,582 shares authorized; 23,658,991 and 24,218,359 shares issued and outstanding as of June 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 June 30, 2018 and December 31, 2017   1    1 
Additional paid-in-capital   310,595    318,170 
Distributions in excess of cumulative earnings   (187,720)   (164,286)
Total Stockholders’ Equity   191,818    222,832 
Noncontrolling Interests          
Operating partnership units   36,124    42,999 
Partially owned properties   22,708    20,347 
Total Noncontrolling Interests   58,832    63,346 
Total Equity   250,650    286,178 
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY  $1,838,165   $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, losses on early extinguishment of debt (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 nine additional operating properties subsequent to June 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 income (loss), the most directly comparable GAAP financial measure, for the three and six months ended June 30, 2018 and 2017 (in thousands, except per share amounts):

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2018   2017   2018   2017 
Net (loss) income attributable to common stockholders  $(10,212)  $17,569   $(19,638)  $12,579 
Add back: Net (loss) income attributable to operating partnership units   (3,010)   186    (5,685)   129 
Net (loss) income attributable to common shares and units   (13,222)   17,755    (25,323)   12,708 
                     
Common stockholders and operating partnership units pro-rata share of:                    
Real estate depreciation and amortization(1)   13,990    9,425    28,821    19,338 
Gain on sale of joint venture interests, net       (6,399)       (6,399)
Gain on sale of real estate investments       (26,832)       (34,313)
FFO Attributable to Common Shares and Units  $768   $(6,051)  $3,498   $(8,666)
Common stockholders and operating partnership units pro-rata share of:                    
Acquisition and pursuit costs   28    16    71    3,056 
Non-cash interest expense   1,602    783    2,062    1,261 
Loss on early extinguishment of debt   653    1,551    653    1,551 
Weather-related losses, net           165     
Non-real estate depreciation and amortization (1)   75        139     
Non-recurring income       (16)       (16)
Non-cash preferred returns and equity in income of unconsolidated real estate joint ventures   (233)   (492)   (464)   (492)
Management internalization       340        820 
Non-cash equity compensation   1,638    6,919    3,418    10,120 
Preferred stock accretion   1,400    647    2,510    984 
Core FFO Attributable to Common Shares and Units   5,931    3,697    12,052    8,618 
Common stockholders and operating partnership units pro-rata share of:                    
Normally recurring capital expenditures   (631)   (335)   (1,149)   (629)
AFFO Attributable to Common Shares and Units  $5,300   $3,362   $10,903   $7,989 
Per Share and Unit Information:                    
FFO Attributable to Common Shares and Units - diluted  $0.02   $(0.23)  $0.11   $(0.34)
Core FFO Attributable to Common Shares and Units - diluted  $0.19   $0.14   $0.39   $0.33 
AFFO Attributable to Common Shares and Units - diluted  $0.17   $0.13   $0.35   $0.31 
Weighted average common shares outstanding - diluted   30,814,839    26,352,066    30,873,023    25,815,164 

 

 

(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 attributable to common stockholders to EBITDAre (unaudited and dollars in thousands).

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2018   2017   2018   2017 
Net (loss) income attributable to common stockholders  $(10,212)  $17,569   $(19,638)  $12,579 
Net (loss) income attributable to noncontrolling interests   (3,263)   10,171    (6,153)   18,900 
Preferred stock dividends   8,643    6,381    16,890    12,233 
Preferred stock accretion   1,400    647    2,510    984 
Interest expense, net   13,041    7,825    23,158    14,943 
Depreciation and amortization   14,744    10,387    30,321    21,331 
Gain on sale of real estate investments   -    (33,574)   -    (50,040)
Gain on sale of real estate joint venture interest, net   -    (10,238)   -    (10,238)
Loss on early extinguishment of debt   653    1,639    653    1,639 
EBITDAre  $25,006   $10,807   $47,741   $22,331 
Acquisition and pursuit costs   28    18    71    3,200 
Management internalization   -    340    -    820 
Non-real estate depreciation and amortization   75    -    139    - 
Weather-related losses, net   -    -    168    - 
Non-cash equity compensation   1,638    6,919    3,418    10,119 
Non-recurring income   -    (17)   -    (17)
Non-cash preferred returns and equity in income of unconsolidated real estate joint ventures   (233)   (492)   (464)   (492)
Adjusted EBITDAre  $26,514   $17,575   $51,073   $35,961 

 

 

 

 

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 $1.5 million and $3.0 million for the three and six months ended June 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 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, 
   2018   2017   2018   2017 
Net (loss) income attributable to common shares  $(10,212)  $17,569   $(19,638)  $12,579 
Add back: Net (loss) income attributable to operating partnership units   (3,010)   186    (5,685)   129 
Net (loss) income attributable to common shares and units   (13,222)   17,755    (25,323)   12,708 
Add common stockholders and operating partnership units pro-rata share:                    
Depreciation and amortization   13,990    9,425    28,821    19,338 
Non-real estate depreciation and amortization   75        139     
Non-cash interest expense   1,602    783    2,062    1,261 
Property management fees   1,017    668    1,956    1,317 
Management fees       6,163        8,931 
Acquisition and pursuit costs   28    16    71    3,056 
Loss on early extinguishment of debt   653    1,551    653    1,551 
Corporate operating expenses   4,528    1,696    9,197    3,146 
Management internalization       340        820 
Weather-related losses, net           165     
Preferred dividends   8,643    6,381    16,890    12,233 
Preferred stock accretion   1,400    647    2,510    984 
Less common stockholders and operating partnership units pro-rata share:                    
Other income       16        16 
Preferred returns and equity in income of unconsolidated real estate joint ventures   2,626    2,605    5,088    5,177 
Interest income from related parties   5,635    2,097    10,830    3,620 
Gain on sale of joint venture interest       6,399        6,399 
Gain on sale of real estate investments       26,832        34,313 
Pro-rata share of properties’ income   10,453    7,476    21,223    15,820 
Add:                    
Noncontrolling interest pro-rata share of partially owned property income   542    702    1,152    1,790 
Total property income   10,995    8,178    22,375    17,610 
Add:                    
Interest expense, net   11,455    6,864    21,090    13,473 
Net operating income   22,450    15,042    43,465    31,083 
Less:                    
Non-same store net operating income   8,970    2,068    19,387    7,842 
Same store net operating income  $13,480   $12,974   $24,078   $23,241 

 

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

(2) Same Store sales for the six months ended June 30, 2018 related to the following properties: Enders Place at Baldwin Park, ARIUM Grandewood, Park & Kingston, Ashton Reserve, ARIUM Palms, Sorrel, Sovereign, ARIUM Gulfshore, ARIUM at Palmer Ranch, 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

##