EX-99.1 2 aptssfd2q2021.htm 2Q21 EARNINGS RELEASE AND SUPPLEMENTAL DATA Document

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Preferred Apartment Communities, Inc. Reports Results for Second Quarter 2021

Total Revenues
$118.7 million for Q2 2021; $234.4 million for the six months ended June 30, 2021
______________
Net Loss Per Share
$(0.64) per share for Q2 2021; $(1.38) per share for the six months ended June 30, 2021
______________
Core FFO per Share*
$0.33 per share for Q2 2021; $0.58 per share for the six months ended June 30, 2021
______________
AFFO Per Share*
$0.17 per share for Q2 2021; $0.34 per share for the six months ended June 30, 2021
______________
Multifamily Same Store Results*
Rental and other property revenues increased 5.5% and
same-store net operating income increased 6.4% for Q2 year over year
______________
Sale of Five Office Assets Closed July 29, 2021
Total consideration of $645.5 million
Partial proceeds used to call approximately $221.6 million of Series A Preferred Stock
______________
Guidance Raised
Core FFO range raised to $0.90 - $1.00 for full year 2021


*Core FFO and AFFO results are per weighted-average share and Class A OP Unit outstanding. Core FFO, AFFO and same-store net operating income are non-GAAP measures that are defined beginning on page S-19.








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Atlanta, GA, August 9, 2021
    Preferred Apartment Communities, Inc. (NYSE: APTS) ("we," "our," the "Company," "Preferred Apartment Communities" or "PAC") today reported results for the quarter ended June 30, 2021. Unless otherwise indicated, all per share results are reported based on the basic weighted average shares of Common Stock and Class A Units ("Class A Units") of the Preferred Apartment Communities Operating Partnership (our "Operating Partnership") outstanding. See Definitions of Non-GAAP Measures on page S-19.

“During the second quarter, our high quality Sunbelt multifamily portfolio continued to produce strong results, with top-line same store revenue growth of 5.5% and same store NOI growth of 6.4%. The rent growth we saw in the second quarter has continued into July as our new leases are up 21.3% and our renewals have increased 7.5%. In-migration and employment trends in our markets remain robust, driving strong demand for our well-located multifamily and grocery-anchored retail assets. With our portfolio producing at a high level we have continued to execute against our strategic plan to simplify our business and enhance the flexibility of our capital structure. To that end, on July 29th, we completed the disposition of five office assets and our sole office real estate investment loan to Highwoods Properties, with one additional smaller office portfolio now under contract to Northwoods Investors. At the same time, we announced the call of approximately $221 million of our Preferred Series A stock, which represented the entire amount available to call at the time. As we look ahead, we have a robust pipeline of potential investments, providing a strong foundation for organic and external growth and value creation into 2022 and beyond,” stated Joel Murphy, Preferred Apartment Communities Chairman and Chief Executive Officer.


Conference Call and Supplemental Data

    We will hold our quarterly conference call on Tuesday, August 10, 2021 at 11:00 a.m. Eastern Time to discuss our second quarter 2021 results. To participate in the conference call, please dial in to the following:

Live Conference Call Details
Dial-in Number: 1-877-883-0383
International Dial-in Number: 1-412-902-6506
Company: Preferred Apartment Communities, Inc.
Date: Tuesday, August 10, 2021
Time: 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time)
Passcode: 5239504

    The live broadcast of PAC's second quarter 2021 conference call will be available online on a listen-only basis at the company's website, www.pacapts.com, under "Investors" and then click on the "News and Events" heading.

A replay of the call will be archived on PAC's' website under Investors/News and Events/Events.


For Further Information

Paul Cullen
Executive Vice President-Investor Relations    
Chief Marketing Officer
investorrelations@pacapts.com
770-818-4144








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Operating Results
    
    Our operating results are presented below.
Three months ended June 30,% changeSix months ended June 30,% change
2021202020212020
Revenues (in thousands)
$118,706 $122,980 (3.5)%$234,406 $253,862 (7.7)%
Per share data:
Net income (loss) (1)
$(0.64)$(1.06)— $(1.38)$(5.47)— 
FFO (2)
$0.23 $(0.01)— $0.39 $(3.39)— 
Core FFO (2)
$0.33 $0.22 50.0 %$0.58 $0.50 16.0 %
AFFO (2)
$0.17 $0.05 240.0 %$0.34 $0.52 (34.6)%
Dividends (3)
$0.175 $0.175 — $0.35 $0.4375 (20.0)%
(1) Per weighted average share of Common Stock outstanding for the periods indicated.
(2) FFO, Core FFO and AFFO results are presented per basic weighted average share of Common Stock and Class A Unit in our Operating Partnership outstanding for the periods indicated. See Reconciliations of FFO Attributable to Common Stockholders and Unitholders, Core FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders beginning on page S-3 and Definitions of Non-GAAP Measures beginning on page S-19.
(3) Per share of Common Stock and Class A Unit outstanding.


Financial

Our total revenues for the quarter ended June 30, 2021 decreased approximately $4.3 million, or 3.5%, to $118.7 million from the quarter ended June 30, 2020, due to the absence of revenues from the eight student housing properties that we sold on November 3, 2020. The student housing properties contributed approximately $12.0 million, or 9.8% of our total revenues for the quarter ended June 30, 2020. Excluding the student housing properties' contributions to the second quarter 2020, our total revenues would have increased $7.7 million, or 7.0%.

Our net loss per share was $(0.64) and $(1.06) for the three-month periods ended June 30, 2021 and 2020, respectively. Funds From Operations, or FFO, was $0.23 and $(0.01) per weighted average share of Common Stock and Class A Unit outstanding for the three months ended June 30, 2021 and 2020, respectively. The increase in FFO per share was driven by:

*the absence of the loss on extinguishment of debt that was incurred in second quarter 2020 of $0.13 per share;
*lower preferred stock dividends of $0.10 per share;
*purchase option termination revenue from the repayment of our Vintage Destin loan of $0.05 per share;
*lower interest expense of $0.05 per share;
*improved property results and increases from acquired properties of $0.03 per share;
*lower FFO resulting from the sale of our student housing properties in the fourth quarter 2020 of ($0.08) per share; and
*lower current interest from our real estate loan investment portfolio of ($0.02).

Our Core FFO per share (A) increased to $0.33 for the second quarter 2021 from $0.22 for the second quarter 2020, due to:
*lower preferred stock dividends of $0.10 per share;
*purchase option termination revenue from the repayment of our Vintage Destin loan of $0.05 per share;
*lower interest expense of $0.05 per share;
*improved property results and increases from acquired properties of $0.03 per share;
*lower Core FFO resulting from the sale of our student housing properties in the fourth quarter 2020 of ($0.08) per share; and
*lower current interest from our real estate loan investment portfolio of ($0.02).

Our AFFO per share increased to $0.17 for the second quarter 2021 from $0.05 for the second quarter 2020 due to:

*lower preferred stock dividends of $0.10 per share;
*cash received from purchase option terminations of $0.06 per share;
*lower interest expense of $0.05 per share;
*improved property results and increases from acquired properties of $0.03 per share;
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*accrued interest received of $0.03 per share;
*lower AFFO resulting from the sale of our student housing properties in the fourth quarter 2020 of ($0.08) per share;
*cash paid for closing costs for our renewed revolving line of credit of ($0.04) per share;
*lower current interest from our real estate loan investment portfolio of ($0.02); and
*higher recurring capital expenditures of ($0.01) per share.

Our Core FFO payout ratio to Common Stockholders and Unitholders was approximately 55.3% and our Core FFO payout ratio to our preferred stockholders was approximately 66.8% for the second quarter 2021. (B)

Our AFFO payout ratio to Common Stockholders and Unitholders was approximately 110.3% and our AFFO payout ratio to our preferred stockholders was approximately 80.0% for the second quarter 2021.

As of June 30, 2021, our total assets were approximately $4.3 billion, a decrease from our total assets of approximately $4.8 billion at June 30, 2020, that primarily resulted from the sale of our student housing portfolio during the fourth quarter 2020 for approximately $478.7 million.

(A) Our Core FFO result for the three-month period ended June 30, 2020 has been amended to reflect the movement of the adjustment for expense for current expected credit losses from an adjustment for Core FFO to an adjustment for AFFO.

(B) We calculate the Core FFO and AFFO payout ratios to Common Stockholders as the ratio of Common Stock dividends and distributions to Core FFO and AFFO. We calculate the Core FFO and AFFO payout ratios to preferred stockholders as the ratio of Preferred Stock dividends to the sum of Preferred Stock dividends and Core FFO and AFFO. Since our operations resulted in a net loss from continuing operations for the periods presented, a payout ratio based on net loss is not calculable. See Definitions of Non-GAAP Measures on page S-19.


Operational

Our multifamily communities' same-store rental and other property revenues increased 5.5% for the quarter ended June 30, 2021 versus 2020. Our multifamily communities' same-store net operating income increased 6.4% for the quarter ended June 30, 2021 versus 2020. Our same-store multifamily communities include all our multifamily communities except Artisan at Viera, The Menlo, The Blake, Parkside at the Beach, Horizon at Wiregrass and The Ellison, all of which were acquired in the last 23 months.

Our rental rates for our multifamily same-store properties for new and renewal leases increased 11.6% and 5.3% respectively for second quarter 2021 as compared to the expiring leases, excluding shorter-term leases.

Our rental rates for our multifamily same-store properties for new and renewal leases increased 21.3% and 7.5% respectively for July 2021 as compared to the expiring leases, excluding shorter-term leases.
As of June 30, 2021, the average age of our multifamily communities was approximately 6.6 years, which is the youngest in the public multifamily REIT industry.

As of June 30, 2021, all of our owned multifamily communities had achieved stabilization except for one second quarter 2021 acquisition. We define stabilization as reaching 93% for all three consecutive months within a single quarter.

The average physical occupancy of our same-store multifamily communities increased to 96.9% for the three-month period ended June 30, 2021 from 94.7% for the three-month period ended June 30, 2020 and 95.8% for the three-month period ended March 31, 2021.

Our average recurring rental revenue collections before and after any effect of rent deferrals for the second quarter 2021 were approximately 99.3% and 99.3% for multifamily communities, 98.9% and 98.9% for grocery-anchored retail properties and 99.7% and 99.9% for office properties, respectively. Rent deferments provided to our residents and tenants are limited and are primarily related to a change of timing of rent payments with no significant changes to total payments or term.

We granted an additional $78,000 of deferred retail rent during the second quarter 2021, raising the total deferred retail rent granted to approximately $2.0 million, or approximately 1.7% of recurring retail rental revenue cumulatively over the last five quarters. Including this deferred rent, our average recurring retail rental revenue collections were 98.9%, 98.7%, 98.7% and 97.9% for second quarter 2021, first quarter 2021, fourth quarter 2020 and third quarter 2020, respectively. As of June 30, 2021, $1.2 million of the $2.0 million of deferred retail rent was in repayment, of which 93.7% has been collected. In addition
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to the deferrals, we granted an additional $200,000 of COVID-related abatements to retail tenants, raising the total abatement granted to $876,000, or approximately 0.7% of our retail portfolio's recurring rental revenues cumulatively over the last five quarters. These rental abatements were generally accompanied by an increase in the tenant’s lease term or the lease terms were amended to be more favorable to us. We reduced our reserve by $216,000, or 0.8% of total retail revenue in the second quarter 2021, or 0.1% of our consolidated rental and other property revenues. Our retail portfolio's total rent reserves over the last five quarters were approximately $2.1 million, or approximately 1.8% of our retail portfolio's recurring rental revenues cumulatively over the same period.

Financing and Capital Markets

As of June 30, 2021, approximately 95.7% of our permanent property-level mortgage debt has fixed interest rates and approximately 0.8% has variable interest rates which are capped. We believe we are well protected against potential increases in market interest rates. Our overall weighted average interest rate for our mortgage debt portfolio was 3.47% for multifamily communities, 4.13% for office properties, 3.89% for grocery-anchored retail properties and 3.72% in the aggregate.

At June 30, 2021, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 56.4%.

At June 30, 2021, we had $143.5 million available to be drawn on our revolving line of credit and approximately $37.1 million of cash on hand.

During the second quarter 2021, we issued and sold an aggregate of 37,872 shares of preferred stock and redeemed or called an aggregate of 47,986 shares of preferred stock, resulting in a net reduction of 10,114 outstanding shares of preferred stock, for a net redemption cost of approximately $12.9 million. For the period of November 1, 2020 through August 3, 2021, we issued and sold an aggregate of 143,498 shares of preferred stock and redeemed or called an aggregate of 558,190 shares of preferred stock, resulting in a net reduction of 414,692 outstanding shares of preferred stock, for a net redemption cost of approximately $425.0 million.

During the second quarter 2021, we issued and sold an aggregate of 1,442,214 shares of Common Stock under our 2019 ATM Offering, generating gross proceeds of approximately $15.1 million and, after deducting commissions and other costs, net proceeds of approximately $14.9 million.

Significant Transactions
During the second quarter 2021, we closed on the acquisition of The Ellison, a 250-unit multifamily community located in suburban Atlanta, Georgia.

During the second quarter 2021, we received the full principal amounts totaling approximately $23.5 million from the repayment of two real estate loan investments, plus a purchase option termination fee of approximately $3.0 million and $1.8 million of accrued interest from these loan payoffs. These transactions collectively returned approximately $28.3 million of capital to us during the second quarter for investment, preferred stock redemptions, or other corporate purposes.

During the second quarter 2021, we originated two real estate loan investments with a combined commitment amount of $17.1 million, in support of the development of a 316-unit multifamily community in Savannah, Georgia.

Subsequent to Quarter End

On July 29, 2021, we sold five office properties (Galleria 75, 150 Fayetteville, Capitol Towers, CapTrust and Morrocroft) and our 8West real estate loan investment in a single transaction, for a gross sales price of approximately $645.5 million. Based on estimated closing costs, the sale will result in a loss on sale of between $20.0 million and $21.0 million in the third quarter. We utilized a significant portion of the net proceeds to call approximately $221.6 million of our outstanding Series A Redeemable Preferred Stock on August 3, 2021.

Between July 1, 2021 and July 31, 2021, we issued 532,917 shares of Common Stock under the 2019 ATM Offering, for aggregate gross proceeds of approximately $5.5 million at an average price of $10.30 per share.

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On July 8, 2021, we completed the acquisition of Alleia at Presidio, a 231-unit multifamily community located in Ft. Worth, Texas.

On July 19, 2021, we closed on the sale of Vineyards, a 369-unit multifamily community located in Houston, Texas.

On July 22, 2021, we entered into an agreement to sell two office properties, Armour Yards and 251 Armour Yards (the “Armour Yards Portfolio”), to Northwood Investors.

On August 6, 2021, our board of directors declared a quarterly dividend on our Common Stock of $0.175 per share, payable on October 15, 2021 to stockholders of record on September 15, 2021.

Between July 1, 2021 and July 31, 2021, we issued 29,552 shares of Series A1 Preferred Stock and collected net proceeds of approximately $26.6 million after commissions and fees and issued 2,743 shares of Series M1 Preferred Stock and collected net proceeds of approximately $2.7 million after commissions and fees. During the same period, we redeemed 9,735 shares of Series A Preferred Stock, 871 mShares, 70 shares of Series A1 Preferred Stock, and 52 shares of Series M1 Preferred Stock.


2021 Guidance

    Net income (loss) per share - We are continuing to add properties and real estate loan investments to our real estate portfolio and the specific timing of the closing of acquisitions is difficult to predict. Acquisition activity by its nature can cause material variation in our reported depreciation and amortization expense and interest income. Since net income (loss) per share is calculated net of depreciation and amortization expense, our net income (loss) results can fluctuate, possibly significantly, depending upon the timing of the closing of acquisitions. For this reason, we are unable to reasonably forecast this measure or provide a reconciliation of our projected FFO per share to this measure.
    Core FFO - We are revising our guidance to reflect the impact of the call of Series A Preferred Stock, the improving trends in our multifamily and retail portfolios, and the earlier payoffs of some of our real estate loan investment assets. With these variables factored in, we now expect Core FFO per share in the range of $0.90 to $1.00 for the full year 2021.

Underpinning this revised guidance are the following assumptions:

• Multifamily Same-Store NOI growth of 5.0% to 7.0% for the full year, an increase from our previous full year guidance of 2.0% to 3.0%;
• Multifamily acquisition volume of between $300 million and $400 million for the full year, unchanged; and
• New real estate loan investment originations of $50-$100 million for the full year, unchanged.

This guidance continues to include the impact of purchase option termination revenues and CECL reserve reversals as a result of real estate investment loans being repaid, which in combination with the accelerating growth in the multifamily portfolio, is helping to offset the dilution of the office portfolio sale in the short term. The increases in purchase option revenue represents a significant acceleration of payoffs and acquisitions of properties that were contemplated in 2022. This acceleration will have a material benefit to our results in 2021, to the detriment of the results in 2022. These one-time items will be very difficult to replace going forward, as we have fewer purchase option termination revenue opportunities in our current portfolio. We expect the dilution from the office transaction will be more impactful in 2022.

AFFO, Core FFO and FFO are calculated after deductions for all preferred stock dividends. Reconciliations of net income (loss) attributable to common stockholders to FFO, Core FFO and AFFO for the three-month and six-month periods ended June 30, 2021 and 2020 appear beginning on page S-3 of the attached report, as well as on our website using the following link:

    https://investors.pacapts.com/q2-2021-quarterly-supplemental-financial-data


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Real Estate Assets

    At June 30, 2021, our portfolio of owned real estate assets and potential additions from purchase options we held from our real estate loan investments consisted of:
Owned as of June 30, 2021 (1)
Potential additions from real estate loan investment portfolio (2)
Potential total
Residential properties:
Properties38 13 51 
Units11,393 3,566 14,959 
Grocery-anchored shopping centers:
Properties54 — 54 
Gross leasable area (square feet)6,208,278 — 6,208,278 
Office buildings: (3)
Properties10 
Rentable square feet3,169,000 195,000 3,364,000 
Development properties2— 
Rentable square feet35,000 — 35,000 
(1) One multifamily community, two grocery-anchored shopping centers and two office buildings are owned through consolidated joint ventures. One grocery-anchored shopping center is an investment in an unconsolidated joint venture.
(2) We evaluate each project individually and we make no assurance that we will acquire any of the underlying properties from our real estate loan investment portfolio.
(3) Five of our office properties and the real estate loan investment supporting the 8West office building were sold to Highwoods Realty Limited Partnership, an unrelated party, on July 29, 2021.

The following chart details quarterly cash collections of recurring rental revenues before and after the effect of rent deferrals across all our operating business lines as of August 5, 2021:
Cash Collections of Recurring Rental Revenues (1)
20202021
Unadjusted for rent deferrals:First quarterSecond quarterThird quarterFourth quarterFirst quarterSecond quarter
Multifamily99.9 %98.8 %99.0 %99.1 %99.1 %99.3 %
Office99.9 %98.1 %99.7 %99.7 %99.8 %99.7 %
Grocery-anchored retail (2)
99.6 %91.9 %96.1 %97.8 %98.7 %98.9 %
Cash Collections of Recurring Rental Revenues (1)
20202021
Adjusted for rent deferrals:First quarterSecond quarterThird quarterFourth quarterFirst quarterSecond quarter
Multifamily99.9 %99.4 %99.0 %99.1 %99.2 %99.3 %
Office99.9 %99.9 %100.0 %99.7 %99.9 %99.9 %
Grocery-anchored retail (2)
99.6 %97.0 %97.9 %98.7 %98.7 %98.9 %
(1) Percent of revenue billed includes recurring charges for base rent, operating expense escalations, pet, garage, parking and storage rent, as well as receivables from U.S. Government tenants, from which collection is reasonably assured.
(2) Includes an investment in an unconsolidated joint venture that is not prorated for our ownership percentage.



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The following chart details quarterly occupancy and percent leased rates across all our operating business lines:

Occupancy and Percentages Leased
20202021
Adjusted for rent deferrals:First quarterSecond quarterThird quarterFourth quarterFirst quarterSecond quarter
Occupancy:
Multifamily (stabilized) (1)
95.5 %94.7 %95.6 %95.6 %95.8 %96.8 %
Percent leased: (2)
Office96.7 %96.2 %95.5 %94.7 %91.0 %90.9 %
Grocery-anchored retail (3)
92.6 %92.7 %92.5 %91.0 %90.8 %91.1 %

(1) For quarterly periods, calculated as the average of the number of occupied units on the 20th day of each of the trailing three months from the period end date.
(2) Percent of total area leased as of the period end date.
(3) Includes an investment in an unconsolidated joint venture that is not prorated for our ownership percentage.


Same-Store Financial Data

    The following charts present same-store operating results for the Company’s multifamily communities. We define our population of same-store multifamily communities as those that have achieved occupancy at or above 93% for all three consecutive months within a single quarter ("stabilized") before the beginning of the prior year and that have been owned for at least 15 full months as of the end of the first quarter of the current year, enabling comparisons of the current year quarterly and annual reporting periods to the prior year comparative periods. The Company excludes the operating results of properties for which construction of adjacent phases has commenced and properties which are undergoing significant capital projects, have sustained significant casualty losses, or are being marketed for sale as of the end of the reporting period.

For the periods presented, same-store operating results consist of the operating results of the multifamily communities listed on page S-13, comprising an aggregate 9,591 units, or 84.2% of our multifamily units.

Same-store net operating income is a non-GAAP measure that is most directly comparable to net income (loss), as shown in the reconciliation below. See Definitions of Non-GAAP Measures on page S-19.
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Reconciliation of Net Income (Loss) to Multifamily Communities' Same-Store Net Operating Income ("NOI")
Three months ended:
(in thousands)6/30/20216/30/2020
Net income (loss)$1,557 $(15,950)
Add:
Equity stock compensation925 246 
Depreciation and amortization44,732 51,793 
Interest expense27,296 31,136 
Corporate G&A and other7,696 7,827 
(Income) loss from unconsolidated joint venture175 — 
Management Internalization240 458 
Allowance for expected credit losses(845)482 
Less:
Interest revenue on notes receivable12,814 10,407 
Interest revenue on related party notes receivable410 604 
Miscellaneous revenues321 395 
Loss on extinguishment of debt— (6,156)
Property net operating income68,231 70,742 
Less:
Non same-store property revenues(61,448)(70,156)
Add:
Non same-store property operating expenses18,579 23,242 
Same-store net operating income$25,362 $23,828 


Multifamily Communities' Same-Store NOI
Three months ended:
(in thousands)6/30/20216/30/2020$ change% change
Revenues:
Rental and other property revenues$43,712 $41,418 $2,294 5.5 %
Operating expenses:
Property operating and maintenance7,587 6,996 591 8.4 %
Payroll3,356 3,342 14 0.4 %
Real estate taxes and insurance7,407 7,252 155 2.1 %
Total operating expenses18,350 17,590 760 4.3 %
Same-store net operating income$25,362 $23,828 $1,534 6.4 %
Same-store average physical occupancy 96.9 %94.7 %
Corporate level expenses related to the management and operations of the multifamily portfolio are allocated on a per unit basis to property NOI and are included in Multifamily Same-Store NOI.

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Reconciliation of Net Income (Loss) to Multifamily Communities' Same-Store Net Operating Income ("NOI")
Six months ended:
(in thousands)6/30/20216/30/2020
Net income (loss)$(1,152)$(195,473)
Add:
Equity stock compensation1,499 476 
Depreciation and amortization90,559 101,302 
Interest expense54,287 60,729 
Management fees— 3,099 
Corporate G&A and other15,235 13,775 
(Income) loss from unconsolidated joint venture369 — 
Management Internalization485 179,251 
Allowance for expected credit losses(323)5,615 
Waived asset management and general and administrative expense fees— (1,136)
Less:
Interest revenue on notes receivable23,326 23,846 
Interest revenue on related party notes receivable815 3,141 
Miscellaneous revenues645 3,435 
Gain on sale of real estate, net798 — 
Gain on land sale— 479 
Loss on extinguishment of debt— (6,156)
Property net operating income135,375 142,893 
Less:
Non same-store property revenues(123,273)(139,770)
Add:
Non same-store property operating expenses37,807 45,519 
Same-store net operating income$49,909 $48,642 

Multifamily Communities' Same-Store NOI
Six months ended:
(in thousands)6/30/20216/30/2020$ change% change
Revenues:
Rental and other property revenues$86,346 $83,668 $2,678 3.2 %
Operating expenses:
Property operating and maintenance14,680 14,090 590 4.2 %
Payroll6,620 6,461 159 2.5 %
Real estate taxes and insurance15,137 14,475 662 4.6 %
Total operating expenses36,437 35,026 1,411 4.0 %
Same-store net operating income$49,909 $48,642 $1,267 2.6 %
Corporate level expenses related to the management and operations of the multifamily portfolio are allocated on a per unit basis to property NOI and are included in Multifamily Same-Store NOI.

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

    On May 6, 2021, our board of directors declared a quarterly dividend on our Common Stock of $0.175 per share, which was paid on July 15, 2021 to stockholders of record on June 15, 2021. In conjunction with the Common Stock dividend, our operating partnership declared a distribution on its Class A Units of $0.175 per unit for the second quarter 2021, which was paid on July 15, 2021 to all Class A Unit holders of record on June 15, 2021.


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Monthly Dividends on Preferred Stock

    We declared monthly dividends of $5.00 per share on our Series A Preferred Stock, which totaled approximately $29.0 million for the second quarter 2021 and represents a 6% annual yield. We declared monthly dividends of $5.00 per share on our Series A1 Preferred Stock, which totaled approximately $3.1 million for the second quarter 2021 and also represents a 6% annual yield. We declared dividends totaling approximately $1.4 million on our Series M Preferred Stock, or mShares, for the second quarter 2021. The mShares have a dividend rate that escalates from 5.75% in year one of issuance to 7.50% in year eight and thereafter. We declared dividends totaling approximately $400,000 on our Series M1 Preferred Stock for the second quarter 2021. The Series M1 Preferred Stock has a dividend rate that escalates from 6.1% in year one of issuance to 7.1% in year ten and thereafter.


Forward-Looking Statements

    “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Estimates of future earnings, guidance, redemptions of Series A Preferred Stock, potential additions of properties from purchase options and rights of first offer from our real estate loan investments, goals and performance are, by definition, and certain other statements in this Earnings Release and Supplemental Financial Data Report may constitute, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, achievements or transactions to be materially different from the results, guidance, goals, performance, achievements or transactions expressed or implied by the forward-looking statements. These statements may be identified by the use of forward-looking terminology such as "may," "trend," "will," "expects," "plans," "estimates," "anticipates," "projects," "intends," "believes," "strategy," "goals," "objectives," "outlook" and similar expressions. These risks, uncertainties and contingencies include, but are not limited to, (a) the impact of the COVID-19 pandemic, including any variants, and related federal, state and local government actions on PAC’s business operations and the economic conditions in the markets in which PAC operates; (b) PAC’s ability to mitigate the impacts arising from COVID-19 or any variants thereof; and (c) those disclosed in PAC's filings with the SEC. Factors that impact such forward-looking statements include, among others, our business and investment strategy; legislative or regulatory actions; the state of the U.S. economy generally or in specific geographic areas; economic trends and economic recoveries; changes in operating costs, including real estate taxes, utilities and insurance costs; our ability to obtain and maintain debt or equity financing; financing and advance rates for our target assets; our leverage level; changes in the values of our assets; the occurrence of natural or man-made disasters; availability of attractive investment opportunities in our target markets; our ability to maintain our qualification as a real estate investment trust, or REIT, for U.S. federal income tax purposes; availability of quality personnel; our understanding of our competition and market trends in our industry; and interest rates, real estate values, the debt securities markets and the general economy.

    Except as otherwise required by the federal securities laws, we assume no liability to update the information in this Earnings Release and Supplemental Financial Data Report.

    We refer you to the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020 that was filed with the SEC on March 1, 2021, which discuss various factors that could adversely affect our financial results. Such risk factors and information may be updated or supplemented by our Form 10-K, Form 10-Q and Form 8-K filings and other documents filed from time to time with the SEC.

COVID-19

Our percentages of rent collected remained stabilized at or near pre-pandemic levels during the second quarter 2021. While the impacts of COVID-19 are continuing, and particularly so the Delta variant, the effects on our operations have been manageable and we believe this condition will persist, barring a dramatic change in the trajectory of the pandemic. The Company is continuing to monitor the spread and impact of the Delta variant of COVID-19 as well as vaccination rates in its markets.





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Additional Information

    The SEC has declared effective the registration statement filed by the Company for each of our public offerings. Before you invest, you should read the final prospectus, and any prospectus supplements forming a part of the registration statement and other documents the Company has filed with the SEC for more complete information about the Company and the offering. In particular, you should carefully read the risk factors described in the final prospectus and in any related prospectus supplement and in the documents incorporated by reference in the final prospectus and any related prospectus supplement. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, the Company or its dealer manager, Preferred Capital Securities, LLC, will arrange to send you a prospectus with respect to the Series A1/M1 Offering upon request by contacting John A. Isakson at (770) 818-4109, 3284 Northside Parkway NW, Suite 150, Atlanta, Georgia 30327.
    
The final prospectus for the Series A1/M1 Offering, dated October 22, 2019, can be accessed through the following link:







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Table of Contents
Consolidated Statements of Operations
S-2
Reconciliations of FFO Attributable to Common Stockholders and Unitholders, Core FFO and AFFO to Net Income (Loss) Attributable to Common StockholdersS-3
Notes to Reconciliation of FFO Attributable to Common Stockholders and Unitholders, Core FFO and AFFO to Net Income (Loss) Attributable to Common StockholdersS-5
Consolidated Balance SheetsS-7
Consolidated Statements of Cash FlowsS-8
Real Estate Loan Investment PortfolioS-10
Mortgage IndebtednessS-12
Multifamily CommunitiesS-13
Capital ExpendituresS-14
Grocery-Anchored Shopping Center PortfolioS-16
Office Building PortfolioS-18
Definitions of Non-GAAP MeasuresS-19
















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Preferred Apartment Communities, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended June 30,
(In thousands, except per-share figures)20212020
Revenues:
Rental and other property revenues $105,161 $111,574 
Interest income on loans and notes receivable12,814 10,407 
Interest income from related parties410 604 
Miscellaneous revenues321 395 
Total revenues118,706 122,980 
Operating expenses:
Property operating and maintenance15,580 17,283 
Property salary and benefits4,914 5,720 
Property management costs927 1,042 
Real estate taxes and insurance15,509 16,787 
General and administrative7,696 7,827 
Equity compensation to directors and executives925 246 
Depreciation and amortization44,732 51,793 
Allowance for expected credit losses(845)482 
Management Internalization expense240 458 
Total operating expenses89,678 101,638 
Operating income before loss from unconsolidated joint venture29,028 21,342 
Loss from unconsolidated joint venture(175)— 
Operating income28,853 21,342 
Interest expense27,296 31,136 
Loss on extinguishment of debt— (6,156)
Net income (loss)1,557 (15,950)
Net (income) loss attributable to non-controlling interests(3)266 
Net income (loss) attributable to the Company1,554 (15,684)
Dividends declared to preferred stockholders(33,983)(35,624)
Earnings attributable to unvested restricted stock(138)(11)
Net loss attributable to common stockholders$(32,567)$(51,319)
Net loss per share of Common Stock available to
 common stockholders, basic and diluted$(0.64)$(1.06)
Weighted average number of shares of Common Stock outstanding,
basic and diluted50,518 48,220 



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Reconciliation of FFO Attributable to Common Stockholders and Unitholders, Core FFO and AFFO
to Net (Loss) Income Attributable to Common Stockholders (A)
Three months ended June 30,
(In thousands, except per-share figures)20212020
Net loss attributable to common stockholders (See note 1)$(32,567)$(51,319)
Add:Depreciation of real estate assets35,977 40,996 
Amortization of acquired intangible assets and deferred leasing costs8,486 9,973 
Net loss attributable to Class A Unitholders (See note 2)16 (249)
FFO attributable to common stockholders and unitholders11,912 (599)
Acquisition and pursuit costs132 
Loan cost amortization on acquisition term notes and loan coordination fees (See note 3)482 528 
Payment of costs related to property refinancing118 6,863 
Internalization costs (See note 4)240 458 
Deemed dividends for redemptions of and non-cash dividends on preferred stock4,110 2,772 
Expenses related to the COVID-19 global pandemic (See note 5)27 419 
Core FFO attributable to common stockholders and unitholders (A)
16,890 10,573 
Add:Non-cash equity compensation to directors and executives925 246 
Amortization of loan closing costs (See note 7)1,245 1,177 
Depreciation/amortization of non-real estate assets447 616 
Net loan origination fees received (See note 8)386 200 
Deferred interest income received (See note 9)1,569 — 
Amortization of lease inducements (See note 10)452 447 
Less:Amortization of purchase option termination revenues in excess of cash received (See note 11)(227)(435)
Non-cash loan interest income (See note 9)(2,909)(3,109)
Non-cash (income) expense for current expected credit losses (See note 6)(1,256)(122)
Cash paid for loan closing costs(1,881)— 
Amortization of acquired real estate intangible liabilities and SLR (See note 12)(3,248)(4,144)
Amortization of deferred revenues (See note 13)(941)(941)
Normally recurring capital expenditures (See note 14)(2,977)(2,124)
AFFO attributable to common stockholders and Unitholders$8,475 $2,384 
Common Stock dividends and distributions to Unitholders declared:
Common Stock dividends $9,259 $8,624 
Distributions to Unitholders (See note 2)87 130 
Total$9,346 $8,754 
Common Stock dividends and Unitholder distributions per share$0.175 $0.175 
FFO per weighted average basic share of Common Stock and Unit outstanding$0.23 $(0.01)
Core FFO per weighted average basic share of Common Stock and Unit outstanding$0.33 $0.22 
AFFO per weighted average basic share of Common Stock and Unit outstanding$0.17 $0.05 
Weighted average shares of Common Stock and Units outstanding:
Basic:
Common Stock50,518 48,220 
Class A Units535 759 
Common Stock and Class A Units51,053 48,979 
Diluted Common Stock and Class A Units (See note 15)
51,579 48,980 
Actual shares of Common Stock outstanding, including 704 and 548 unvested shares
 of restricted Common Stock at June 30, 2021 and 2020, respectively.52,432 49,831 
Actual Class A Units outstanding at June 30, 2021 and 2020, respectively. 497 742 
Total52,929 50,573 
(A) Our Core FFO result for the three-month period ended June 30, 2020 has been amended to reflect the movement of the adjustment for expense for current expected credit losses from an adjustment for Core FFO to an adjustment for AFFO.
See Notes to Reconciliation of FFO, Core FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders on page S-5.

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Reconciliation of FFO Attributable to Common Stockholders and Unitholders, Core FFO and AFFO
to Net (Loss) Income Attributable to Common Stockholders (A)
Six months ended June 30,
(In thousands, except per-share figures)20212020
Net loss attributable to common stockholders (See note 1)$(69,176)$(260,771)
Add:Depreciation of real estate assets72,809 80,771 
Amortization of acquired intangible assets and deferred leasing costs17,196 18,955 
Gain on sale of real estate(798)— 
Net loss attributable to Class A Unitholders (See note 2)(17)(3,343)
FFO attributable to common stockholders and unitholders20,014 (164,388)
Acquisition and pursuit costs378 
Loan cost amortization on acquisition term notes and loan coordination fees (See note 3)906 1,206 
Payment of costs related to property refinancing118 6,863 
Internalization costs (See note 4)485 179,251 
Deemed dividends for redemptions of and non-cash dividends on preferred stock7,937 3,316 
Expenses related to the COVID-19 global pandemic (See note 5)81 448 
Earnest money forfeited by prospective asset purchaser— (2,750)
Core FFO attributable to common stockholders and unitholders (A)
29,546 24,324 
Add:Non-cash equity compensation to directors and executives1,499 476 
Amortization of loan closing costs (See note 7)2,457 2,343 
Depreciation/amortization of non-real estate assets891 1,172 
Net loan origination fees received (See note 8)1,203 467 
Deferred interest income received (See note 9)4,486 8,277 
Amortization of lease inducements (See note 10)900 886 
Earnest money forfeited by prospective asset purchaser— 2,750 
Cash received in excess of amortization of purchase option termination revenues (See note 11)23 325 
Less:Non-cash loan interest income (See note 9)(5,783)(6,128)
Non-cash (income) expense for current expected credit losses (See note 6)(1,139)4,408 
Cash paid for loan closing costs(1,891)— 
Amortization of acquired real estate intangible liabilities and SLR (See note 12)(6,563)(8,797)
Amortization of deferred revenues (See note 13)(1,881)(1,881)
Normally recurring capital expenditures (See note 14)(6,330)(3,542)
AFFO attributable to common stockholders and Unitholders$17,418 $25,080 
Common Stock dividends and distributions to Unitholders declared:
Common Stock dividends $18,250 $21,115 
Distributions to Unitholders (See note 2)183 333 
Total$18,433 $21,448 
Common Stock dividends and Unitholder distributions per share$0.35 $0.4375 
FFO per weighted average basic share of Common Stock and Unit outstanding$0.39 $(3.39)
Core FFO per weighted average basic share of Common Stock and Unit outstanding$0.58 $0.50 
AFFO per weighted average basic share of Common Stock and Unit outstanding$0.34 $0.52 
Weighted average shares of Common Stock and Units outstanding:
Basic:
Common Stock50,277 47,674 
Class A Units572 793 
Common Stock and Class A Units50,849 48,467 
Diluted Common Stock and Class A Units (See note 15)
51,271 48,474 
Actual shares of Common Stock outstanding, including 704 and 548 unvested shares
 of restricted Common Stock at June 30, 2021 and 2020, respectively.52,432 49,831 
Actual Class A Units outstanding at June 30, 2021 and 2020, respectively. 497 742 
Total52,929 50,573 
(A) Our Core FFO result for the three-month period ended June 30, 2020 has been amended to reflect the movement of the adjustment for expense for current expected credit losses from an adjustment for Core FFO to an adjustment for AFFO.
See Notes to Reconciliation of FFO, Core FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders on page S-5.
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Notes to Reconciliations of FFO Attributable to Common Stockholders and Unitholders, Core FFO and AFFO to
Net Loss Attributable to Common Stockholders

1)Rental and other property revenues and property operating expenses for the three months ended June 30, 2021 include activity for the properties acquired since June 30, 2020. Rental and other property revenues and expenses for the three-month and six-month periods ended June 30, 2020 include activity for the acquisitions made during that period only from their respective dates of acquisition.

2)Non-controlling interests in our Operating Partnership, consisted of a total of 497,291 Class A Units as of June 30, 2021. Included in this total are 419,228 Class A Units which were granted as partial consideration to the seller in conjunction with the seller's contribution to us on February 29, 2016 of the Wade Green grocery-anchored shopping center. The remaining Class A units were awarded primarily to our key executive officers. The Class A Units are apportioned a percentage of our financial results as non-controlling interests. The weighted average ownership percentage of these holders of Class A Units was calculated to be 1.05% and 1.55% for the three-month periods ended June 30, 2021 and 2020, respectively.

3)     We paid loan coordination fees to Preferred Apartment Advisors, LLC, (our "Former Manager") to reflect the administrative effort involved in arranging debt financing for acquired properties prior to the Internalization Transaction. The fees were calculated as 0.6% of the amount of any mortgage indebtedness on newly-acquired properties or refinancing and are amortized over the lives of the respective mortgage loans. This non-cash amortization expense is an addition to FFO in the calculation of Core FFO and AFFO. At June 30, 2021, aggregate unamortized loan coordination fees were approximately $10.9 million, which will be amortized over a weighted average remaining loan life of approximately 10.2 years.

4)    This adjustment reflects the add-back of (i) consideration paid to the owners of the Former Manager and NMP Advisors, LLC (our "Former Sub-Manager"), (ii) accretion of the discount on the deferred liability payable to the owners of the Former Manager and (iii) due diligence and pursuit costs incurred by the Company related to the internalization of the functions performed by the Former Manager (the "Internalization Transaction").

5)    This additive adjustment to FFO consists of non-recurring costs for signage, cleaning and supplies necessary to create and maintain work environments necessary to adhere to CDC guidelines during the current COVID-19 pandemic. Since we do not expect to incur similar costs once the COVID-19 pandemic has subsided, we add these costs back to FFO in our calculation of Core FFO.

6)    Effective January 1, 2020, we adopted ASU 2016-03, which requires us to estimate the amount of future credit losses we expect to incur over the lives of our real estate loan investments at the inception of each loan. This loss reserve may be adjusted upward or downward over the lives of our loans and therefore the aggregate net adjustment for each period could be positive (removing the non-cash effect of a net increase in aggregate loss reserves) or negative (removing the non-cash effect of a net decrease in aggregate loss reserves) in these adjustments to Core FFO in calculating AFFO.

7)    We incur loan closing costs on our existing mortgage loans, which are secured on a property-by-property basis by each of our acquired real estate assets, and also for occasional amendments to our syndicated revolving line of credit with Key Bank National Association, or our Revolving Line of Credit. These loan closing costs are also amortized over the lives of the respective loans and the Revolving Line of Credit, and this non-cash amortization expense is an addition to FFO in the calculation of AFFO. Neither we nor the Operating Partnership have any recourse liability in connection with any of the mortgage loans, nor do we have any cross-collateralization arrangements with respect to the assets securing the mortgage loans, other than security interests in 49% of the equity interests of the subsidiaries owning such assets, granted in connection with our Revolving Line of Credit, which provides for full recourse liability. At June 30, 2021, unamortized loan costs on all the Company's indebtedness were approximately $30.9 million, which will be amortized over a weighted average remaining loan life of approximately 8.5 years.

8)    We receive loan origination fees in conjunction with the origination of certain real estate loan investments. These fees are then recognized as revenue over the lives of the applicable loans as adjustments of yield using the effective interest method. The total fees received are additive adjustments in the calculation of AFFO. Correspondingly, the amortized non-cash income is a deduction in the calculation of AFFO. Over the lives of certain loans, we accrue additional interest amounts that become due to us at the time of repayment of the loan or refinancing of the property, or when the property is sold. This non-cash interest income is subtracted from Core FFO in our calculation of AFFO. The amount of additional accrued interest becomes an additive adjustment to FFO once received from the borrower.

9)    This adjustment reflects the receipt during the periods presented of additional interest income (described in note 8 above) which was earned and accrued on various real estate loans prior to those periods and previously deducted in our calculation of AFFO.

10)    This adjustment removes the non-cash amortization of costs incurred to induce tenants to lease space in our office buildings and grocery-anchored shopping centers.


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11)    Occasionally we receive fees in exchange for the termination of our purchase options related to certain multifamily communities. These fees are recorded as revenue over the period beginning on the date of termination until the earlier of (i) the maturity of the real estate loan investment and (ii) the sale of the property. The receipt of the cash termination fees are an additive adjustment in our calculation of AFFO and the removal of non-cash revenue from the recognition of the termination fees are a reduction to Core FFO in our calculation of AFFO; both of these adjustments are presented in a single net number within this line. For periods in which recognized termination fee revenues exceeded the amount of cash received, a negative adjustment is shown to Core FFO in our calculation of AFFO; for periods in which cash received exceeded the amount of recognized termination fee revenues, an additive adjustment is shown to Core FFO in our calculation of AFFO.

12)    This adjustment reflects straight-line rent adjustments and the reversal of the non-cash amortization of below-market and above-market lease intangibles, which were recognized in conjunction with our acquisitions and which are amortized over the estimated average remaining lease terms from the acquisition date for multifamily communities and over the remaining lease terms for grocery-anchored shopping center assets and office buildings. At June 30, 2021, the balance of unamortized below-market lease intangibles was approximately $47.8 million, which will be recognized over a weighted average remaining lease period of approximately 8.4 years.

13)    This adjustment removes the non-cash amortization of deferred revenue recorded by us in conjunction with Company-owned lessee-funded tenant improvements in our office buildings.
    
14)    We deduct from Core FFO normally recurring capital expenditures that are necessary to maintain our assets’ revenue streams in the calculation of AFFO. This adjustment also deducts from Core FFO capitalized amounts for third party costs during the period to originate or renew leases in our grocery-anchored shopping centers and office buildings. This adjustment includes approximately $17,000 and $35,000 of recurring capitalized expenditures incurred at our corporate offices during the three-month and six-month periods ended June 30, 2021, respectively. No adjustment is made in the calculation of AFFO for nonrecurring capital expenditures. See Capital Expenditures, Grocery-Anchored Shopping Center Portfolio, and Office Building Portfolio sections for definitions of these terms.

15)    Since our AFFO results are positive for the periods reflected, we are presenting recalculated diluted weighted average shares of Common Stock and Class A Units for these periods for purposes of this table, which includes the dilutive effect of common stock equivalents from grants of the Class B Units, warrants included in units of Series A Preferred Stock issued, as well as annual grants of restricted Common Stock and restricted stock units. The weighted average shares of Common Stock outstanding presented on the Consolidated Statements of Operations are the same for basic and diluted for any period for which we recorded a net loss available to common stockholders.



See Definitions of Non-GAAP Measures beginning on page S-19.













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Preferred Apartment Communities, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except per-share par values)June 30, 2021December 31, 2020
Assets
Real estate
Land$611,966 $605,282 
Building and improvements3,092,932 3,034,727 
Tenant improvements189,413 184,288 
Furniture, fixtures, and equipment319,328 306,725 
Construction in progress10,980 12,269 
Gross real estate4,224,619 4,143,291 
Less: accumulated depreciation(582,583)(509,547)
Net real estate 3,642,036 3,633,744 
Real estate loan investments, net 269,862 279,895 
Total real estate and real estate loan investments, net3,911,898 3,913,639 
Cash and cash equivalents37,105 28,657 
Restricted cash53,679 47,059 
Notes receivable2,977 1,863 
Note receivable and revolving line of credit due from related party9,011 9,011 
Accrued interest receivable on real estate loans23,183 22,528 
Acquired intangible assets, net of amortization 110,656 127,138 
Tenant lease inducements, net17,352 18,206 
Investment in unconsolidated joint venture6,288 6,657 
Tenant receivables and other assets98,050 106,321 
Total assets$4,270,199 $4,281,079 
Liabilities and equity
Liabilities
Mortgage notes payable, net of deferred loan costs and mark-to-market adjustment$2,636,752 $2,594,464 
Revolving line of credit56,500 22,000 
Unearned purchase option termination fees246 723 
Deferred revenue34,130 36,010 
Accounts payable and accrued expenses47,216 41,912 
Deferred liability to Former Manager23,675 23,335 
Contingent liability due to Former Manager14,725 14,814 
Accrued interest payable7,825 7,877 
Dividends and partnership distributions payable20,811 20,137 
Acquired below market lease intangibles, net of amortization 47,820 51,934 
Prepaid rent, security deposits and other liabilities30,119 29,425 
Total liabilities2,919,819 2,842,631 
Commitments and contingencies
Equity
Stockholders' equity
Series A Redeemable Preferred Stock, $0.01 par value per share; 3,050 shares authorized; 2,226 shares
 issued; 1,647 and 1,735 shares outstanding at June 30, 2021 and December 31, 2020, respectively16 17 
Series A1 Redeemable Preferred Stock, $0.01 par value per share; up to 1,000 shares authorized; 218 and 149
shares issued and 217 and 149 shares outstanding at June 30, 2021 and December 31, 2020, respectively
Series M Redeemable Preferred Stock, $0.01 par value per share; 500 shares authorized; 106 shares
  issued; 86 and 89 shares outstanding at June 30, 2021 and December 31, 2020, respectively
Series M1 Redeemable Preferred Stock, $0.01 par value per share; up to 1,000 shares authorized; 26 and 19
  shares issued; 25 and 19 shares outstanding at June 30, 2021 and December 31, 2020, respectively— — 
Common Stock, $0.01 par value per share; 400,067 shares authorized; 51,728 and 49,994 shares issued
and outstanding at June 30, 2021 and December 31, 2020, respectively517 500 
Additional paid-in capital1,543,665 1,631,646 
Accumulated (deficit) earnings (193,539)(192,446)
Total stockholders' equity1,350,662 1,439,719 
Non-controlling interest(282)(1,271)
Total equity1,350,380 1,438,448 
Total liabilities and equity$4,270,199 $4,281,079 




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Preferred Apartment Communities, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Six months ended June 30,
(In thousands)20212020
Operating activities:
Net loss $(1,152)$(195,473)
Reconciliation of net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expense90,559 101,302 
Amortization of above and below market leases(2,871)(3,570)
Amortization of deferred revenues and other non-cash revenues (2,545)(2,482)
Amortization of purchase option termination fees(4,440)(4,475)
Amortization of equity compensation, lease incentives and other non-cash expenses2,809 1,781 
Deferred loan cost amortization3,307 3,424 
Non-cash accrued interest income on real estate loan investments(5,585)(6,156)
Receipt of accrued interest income on real estate loan investments4,930 8,865 
Gains on sale of real estate and land, net(798)(479)
Loss from unconsolidated joint venture369 — 
Cash received for purchase option terminations4,463 4,800 
Loss on extinguishment of debt— 6,156 
(Decrease) increase in allowance for expected credit losses(323)5,615 
Changes in operating assets and liabilities:
Decrease (increase) in tenant receivables and other assets3,710 (12,112)
(Increase) in tenant lease incentives(45)(382)
Increase in accounts payable and accrued expenses7,476 36,431 
Increase in deferred liability to Former Manager— 22,851 
Increase in contingent liability— 15,004 
Increase (decrease) in accrued interest, prepaid rents and other liabilities2,047 (2,234)
Net cash provided by (used in) operating activities101,911 (21,134)
Investing activities:
Investments in real estate loans(30,825)(24,547)
Repayments of real estate loans41,435 53,896 
Notes receivable issued (1,257)(686)
Notes receivable repaid143 10,041 
Notes receivable issued to and draws on line of credit by related parties— (9,624)
Repayments of notes receivable and lines of credit by related parties— 4,546 
Origination fees received on real estate loan investments1,203 467 
Acquisition of properties(66,772)(185,970)
Disposition of properties4,798 — 
Proceeds from land sales259 738 
Investment in property development— (50)
Capital improvements to real estate assets(18,278)(26,422)
Deposits paid on acquisitions(1,558)(105)
Net cash used in investing activities(70,852)(177,716)
 (Continued on next page)
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Preferred Apartment Communities, Inc.
Consolidated Statements of Cash Flows - continued
(Unaudited)
Six months ended June 30,
(In thousands)20212020
Financing activities:
Proceeds from mortgage notes payable60,293 336,849 
Repayments of mortgage notes payable(20,572)(134,493)
Payments for deposits and other mortgage loan costs(2,411)(10,541)
Payments for mortgage prepayment costs— (5,919)
Proceeds from lines of credit225,000 284,000 
Payments on lines of credit(190,500)(191,500)
Repayment of Term Loan— (70,000)
Proceeds from sales of preferred stock and Units, net of offering costs and redemptions68,283 120,497 
Proceeds from exercises of Warrants— 29 
Payments for redemptions of preferred stock(83,256)(48,202)
Proceeds from sales of common stock14,879 — 
Common Stock dividends paid(17,736)(24,647)
Preferred stock dividends and Class A Unit distributions paid(67,870)(68,538)
Payments for deferred offering costs(2,001)(9,701)
(Distributions to) contributions from non-controlling interests(100)197 
Net cash (used in) provided by financing activities(15,991)178,031 
Net increase in cash, cash equivalents and restricted cash15,068 (20,819)
Cash, cash equivalents and restricted cash, beginning of year75,716 137,253 
Cash, cash equivalents and restricted cash, end of period$90,784 $116,434 

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Real Estate Loan Investments

The following tables present details pertaining to our portfolio of fixed rate, interest-only real estate loan investments.
Project/PropertyLocationMaturity dateOptional extension dateTotal loan commitments
Carrying amount (1) as of
Current / deferred interest % per annum
June 30, 2021December 31, 2020
Multifamily communities:(in thousands)
BerryessaSan Jose, CA2/13/20222/13/2023$137,616 $132,103 $126,237 8.5 / 3
The AnsonNashville, TN11/24/202111/24/20236,240 6,240 6,240 8.5 / 4.5
The Anson CapitalNashville, TN11/24/202111/24/20235,659 5,050 4,839 8.5 / 4.5
V & ThreeCharlotte, NC8/15/20218/15/202210,336 10,335 10,335 8.5 / 5
V & Three CapitalCharlotte, NC8/18/20218/18/20227,338 7,338 7,162 8.5 / 5
Cameron SquareAlexandria, VA10/11/202110/11/202321,340 21,298 20,874 8.5 / 3
Cameron Square CapitalAlexandria, VA10/11/202110/11/20238,850 8,850 8,850 8.5 / 3
SouthpointFredericksburg, VA2/28/20222/28/20247,348 7,348 7,348 8.5 / 4
Southpoint CapitalFredericksburg, VA2/28/20222/28/20244,962 4,828 4,626 8.5 / 4
Hidden River IITampa, FL10/11/202210/11/20244,462 4,462 4,462 8.5 / 3.5
Hidden River II CapitalTampa, FL10/11/202210/11/20242,763 2,568 2,461 8.5 / 3.5
Vintage Horizon WestOrlando, FL10/11/202210/11/202410,900 9,412 9,019 8.5 / 5.5
Chestnut FarmsCharlotte, NC2/28/2025N/A13,372 12,179 11,671 8.5 / 5.5
Vintage Jones FranklinRaleigh, NC11/14/20235/14/202510,000 8,608 7,904 8.5 / 5.5
Solis Cumming Town
CenterAtlanta, GA9/3/20249/3/202620,681 13,433 5,584 8.5 / 5.5
Hudson at Metro WestOrlando, FL9/1/20243/1/202616,791 5,015 — 8.5 / 4.5
Oxford Club DriveAtlanta, GA3/30/2022N/A7,744 7,744 — 13
Populus at PoolerSavannah, GA5/27/20255/27/202615,907 — — 8.5 / 4.25
Populus at Pooler CapitalSavannah, GA5/27/20255/27/20261,169 — — 8.5 / 4.25
Repaid multifamily communities:
NewberghAtlanta, GAN/AN/AN/A— 11,749 
(2)
Newbergh CapitalAtlanta, GAN/AN/AN/A— 6,176 
(2)
Vintage DestinDestin, FLN/AN/AN/A— 9,736 
(3)
Kennesaw CrossingAtlanta, GAN/AN/AN/A— 13,025 
(4)
Office property:
8West (5)
Atlanta, GA11/29/202211/29/202419,193 12,735 11,858 8.5 / 5
$332,671 279,546 290,156 
Unamortized loan origination fees(1,755)(1,194)
Allowances for expected credit losses and doubtful accounts(7,929)(9,067)
Carrying amount$269,862 $279,895 
(1) Carrying amounts presented per loan are amounts drawn.
(2) On March 12, 2021, we received approximately $23.7 million in full satisfaction of the principal and all interest due on the loans.
(3) On June 1, 2021, we received approximately $13.8 million in full satisfaction of the principal and all interest due on the loan.
(4) On June 30, 2021, we received approximately $14.8 million in full satisfaction of the principal and all interest due on the loan.
(5) This loan was sold at par, plus accrued interest to date, to Highwoods Properties, an unrelated party, on July 29, 2021.



    




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We hold options or rights of first offer, but not obligations, to purchase some of the properties which are partially financed by our real estate loan investments. Certain option purchase prices may be negotiated at the time of the loan closing and are to be calculated based upon market cap rates at the time of exercise of the purchase option, with discounts up to 15 basis points (if any), depending on the loan. As of June 30, 2021, potential property acquisitions and units from projects in our real estate loan investment portfolio consisted of:
Total units uponPurchase option window
Project/PropertyLocation
completion (1)
BeginEnd
Multifamily communities
Purchase options at discount to market:
V & ThreeCharlotte, NC338 
S + 90 days (2)
S + 150 days (2)
The AnsonNashville, TN301 
S + 90 days (2)
S + 150 days (2)
SouthpointFredericksburg, VA240 
S + 90 days (2)
S + 150 days (2)
Hidden River IITampa, FL204 
S + 90 days (2)
S + 150 days (2)
Purchase options with no discount or rights of first offer:
Hudson at Metro WestOrlando, FL320 
S + 90 days (2)
S + 150 days (2)
Vintage Horizon WestOrlando, FL340 
(3)
(3)
Vintage Jones FranklinRaleigh, NC277 
(3)
(3)
Club DriveAtlanta, GA352 
(5)
(5)
Populus at PoolerSavannah, GA316 
(6)
(6)
Cameron SquareAlexandria, VA302 
(4)
(4)
Solis Chestnut FarmCharlotte, NC256 
(4)
(4)
Solis Cumming Town CenterAtlanta, GA320 
(4)
(4)
Office property
8WestAtlanta, GA— 
(7)
(7)
3,566 
(1) We evaluate each project individually and we make no assurance that we will acquire any of the underlying properties from our real estate loan investment portfolio.
(2) The option period window begins and ends at the number of days indicated beyond the achievement of a 93% physical occupancy rate by the underlying property.
(3) The option period window begins on the later of one year following receipt of final certificate of occupancy or 90 days beyond the achievement of a 93% physical occupancy rate by the underlying property and ends 60 days beyond the option period beginning date.
(4) We hold a right of first offer on the property.
(5) The underlying loan is a land acquisition bridge loan that is anticipated to be converted to a real estate loan investment in the future with a purchase option or right of first offer.
(6) The option period begins upon the property's achievement of 80% occupancy. If we are unable to reach an agreement on the property's market value, we have a right of first offer.
(7) The real estate loan investment supporting the 8West office building and five of our office properties were sold to Highwoods Realty Limited Partnership, an unrelated party, on July 29, 2021.


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Mortgage Indebtedness

    The following table and chart summarizes the future maturities of our mortgage notes payable:
(in thousands)Total
Maturity dates occurring in:
2021$83,288 
2022121,001 
2023116,768 
2024290,171 
202558,234 
2026255,709 
2027280,530 
2028339,189 
2029322,040 
2030359,458 
Thereafter454,038 
Totals$2,680,426 


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Multifamily Communities

As of June 30, 2021, our multifamily community portfolio consisted of the following properties:
Three months ended
June 30, 2021
PropertyLocationNumber of unitsAverage unit size (sq. ft.)Average physical occupancyAverage rent per unit
Same-Store Communities:
Aldridge at Town VillageAtlanta, GA300969 98.1 %$1,451 
Green ParkAtlanta, GA310985 96.7 %$1,530 
Overton RiseAtlanta, GA294 1,018 95.4 %$1,603 
Summit Crossing IAtlanta, GA345 1,034 98.1 %$1,301 
Summit Crossing IIAtlanta, GA140 1,100 98.1 %$1,401 
The Reserve at Summit CrossingAtlanta, GA1721,002 97.9 %$1,381 
Avenues at CypressHouston, TX240 1,170 96.3 %$1,488 
Avenues at NorthpointeHouston, TX280 1,167 96.8 %$1,429 
Stone CreekHouston, TX246 852 96.9 %$1,185 
VineyardsHouston, TX369 1,122 98.2 %$1,211 
Aster at Lely ResortNaples, FL308 1,071 97.2 %$1,485 
SorrelJacksonville, FL290 1,048 96.6 %$1,360 
Lux at SorrelJacksonville, FL2651,025 97.0 %$1,404 
525 Avalon ParkOrlando, FL487 1,394 96.9 %$1,526 
Citi LakesOrlando, FL346 984 96.1 %$1,457 
Village at Baldwin ParkOrlando, FL528 1,069 96.1 %$1,691 
Luxe at Lakewood RanchSarasota, FL2801,105 95.8 %$1,517 
Venue at Lakewood RanchSarasota, FL237 1,001 97.5 %$1,564 
Crosstown WalkTampa, FL342 1,070 97.3 %$1,388 
Overlook at Crosstown WalkTampa, FL180986 96.9 %$1,462 
Citrus VillageTampa, FL296 980 96.3 %$1,397 
Five Oaks at WestchaseTampa, FL218983 97.4 %$1,552 
Lodge at Hidden RiverTampa, FL300980 96.3 %$1,444 
Lenox VillageNashville, TN273 906 96.7 %$1,319 
Regent at LenoxNashville, TN18 1,072 100.0 %$1,379 
Retreat at LenoxNashville, TN183 773 97.3 %$1,263 
CityPark ViewCharlotte, NC284 948 95.5 %$1,168 
CityPark View SouthCharlotte, NC2001,005 95.8 %$1,290 
Colony at CenterpointeRichmond, VA2551,149 98.2 %$1,431 
Founders VillageWilliamsburg, VA247 1,070 96.8 %$1,435 
Retreat at GreystoneBirmingham, AL312 1,100 97.1 %$1,419 
Vestavia ReserveBirmingham, AL2721,113 97.1 %$1,562 
Adara Overland ParkKansas City, KS2601,116 96.3 %$1,347 
Claiborne CrossingLouisville, KY242 1,204 96.8 %$1,394 
City VistaPittsburgh, PA272 1,023 96.7 %$1,472 
Total/Average Same-Store Communities9,591 96.9 %
Stabilized Communities:
Artisan at VieraMelbourne, FL2591,070 95.9 %$1,703 
The MenloJacksonville, FL332 966 95.6 %$1,517 
The BlakeOrlando, FL281908 95.5 %$1,466 
Parkside at the BeachPanama City Beach, FL2881,041 98.3 %$1,444 
Horizon at Wiregrass Tampa, FL392973 97.8 %$1,539 
Total/Average Stabilized Communities1,552 96.8 %
The EllisonAtlanta, GA250 1,064 — — 
Total multifamily community units11,393 

    
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For the three-month period ended June 30, 2021, our average same-store multifamily communities' physical occupancy was 96.9%. We calculate average same-store physical occupancy for quarterly periods as the average of the number of occupied units on the 20th day of each of the trailing three months from the reporting period end date and that have been owned for at least 15 full months as of the end of the first quarter of each year. We exclude the operating results of properties for which construction of adjacent phases has commenced, properties which are undergoing significant capital projects, have sustained significant casualty losses, or are being marketed for sale as of the end of the reporting period. We believe "Same Property" information is useful as it allows both management and investors to gauge our management effectiveness via comparisons of financial and operational results between interim and annual periods for those subsets of multifamily communities owned for current and prior comparative periods.

    For the three-month period ended June 30, 2021, our average stabilized physical occupancy was 96.8%. We calculate average stabilized physical occupancy for quarterly periods as the average number of occupied units on the 20th day of each of the trailing three months from the reporting period end date. All of our multifamily communities were stabilized for the three-month period ended June 30, 2021 except The Ellison.

    For the three-month period ended June 30, 2021, our average economic occupancy was 96.5%. We define average economic occupancy as market rent reduced by vacancy losses, expressed as a percentage. All of our multifamily properties are included in these calculations except for properties which are not yet stabilized (which we define as properties having first achieved 93% physical occupancy for three full months in a quarter), properties which are owned for less than the entire reporting period and properties which are undergoing significant capital projects, have sustained significant casualty losses or are adding additional phases. We also exclude properties which are currently being marketed for sale, of which we had none at June 30, 2021. Average economic occupancy is useful both to management and investors as a gauge of our effectiveness in realizing the full revenue generating potential of our multifamily communities given market rents and occupancy rates.

Capital Expenditures

    We regularly incur capital expenditures related to our owned multifamily communities. Capital expenditures may be nonrecurring and discretionary, as part of a strategic plan intended to increase a property’s value and corresponding revenue-generating ability, or may be normally recurring and necessary to maintain the income streams and present value of a property. Certain capital expenditures may be budgeted and reserved for upon acquiring a property as initial expenditures necessary to bring a property up to our standards or to add features or amenities that we believe make the property a compelling value to prospective residents in its individual market. These budgeted nonrecurring capital expenditures in connection with an acquisition are funded from the capital source(s) for the acquisition and are not dependent upon subsequent property operating cash flows for funding. Certain recurring safety-related operational capital expenditures have continued without interruption as they remain necessary for the continued normal operation of our properties.






















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For the three-month period ended June 30, 2021, our capital expenditures for multifamily communities consisted of:
    
Capital Expenditures - Multifamily Communities
Recurring Non-recurring Total
(in thousands, except per-unit figures)AmountPer UnitAmountPer UnitAmountPer Unit
Appliances$183 $16.37 $— $— $183 $16.37 
Carpets489 43.86 — — 489 43.86 
Wood / vinyl flooring 66 5.94 158 14.20 224 20.14 
Mini blinds and ceiling fans30 2.74 — — 30 2.74 
Fire safety— — 78 6.99 78 6.99 
HVAC220 19.76 — — 220 19.76 
Computers, equipment, misc.15 1.35 47 4.14 62 5.49 
Elevators— — 10 0.92 10 0.92 
Exterior painting and lighting— — 122 10.90 122 10.90 
Leasing office and other common amenities
18 1.62 179 16.11 197 17.73 
Major structural projects
— — 295 26.51 295 26.51 
Cabinets, countertops and unit upgrades— — 287 25.74 287 25.74 
Landscaping and fencing— — 255 22.86 255 22.86 
Parking lots and sidewalks19 1.72 0.19 21 1.91 
Signage and sanitation— — 0.57 0.57 
Totals$1,040 $93.36 $1,439 $129.13 $2,479 $222.49 
    



























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Grocery-Anchored Shopping Center Portfolio
    
As of June 30, 2021, our grocery-anchored shopping center portfolio consisted of the following properties:
Property nameLocationYear built
GLA (1)
Percent leasedGrocery anchor tenant
Castleberry-Southard Atlanta, GA200680,018 100.0 %Publix
Cherokee Plaza Atlanta, GA1958102,864 100.0 %Kroger
Governors Towne Square Atlanta, GA200468,658 100.0 %Publix
Lakeland Plaza Atlanta, GA 1990301,711 95.3 %Sprouts
Powder Springs Atlanta, GA 199977,853 96.7 %Publix
Rockbridge Village Atlanta, GA 2005102,432 84.4 %Kroger
Roswell Wieuca Shopping Center Atlanta, GA 200774,370 97.8 %The Fresh Market
Royal Lakes Marketplace Atlanta, GA 2008119,493 94.5 %Kroger
Sandy Plains Exchange Atlanta, GA 199772,784 100.0 %Publix
Summit Point Atlanta, GA 2004111,970 82.2 %Publix
Thompson Bridge Commons Atlanta, GA 200192,587 96.2 %Kroger
Wade Green Village Atlanta, GA 199374,978 94.5 %Publix
Woodmont Village Atlanta, GA 200285,639 96.3 %Kroger
Woodstock Crossing Atlanta, GA 199466,122 100.0 %Kroger
East Gate Shopping Center Augusta, GA 199575,716 95.0 %Publix
Fury's Ferry Augusta, GA 199670,458 98.0 %Publix
Parkway Centre Columbus, GA 199953,088 97.7 %Publix
Greensboro Village Nashville, TN 200570,203 100.0 %Publix
Spring Hill Plaza Nashville, TN 200566,693 100.0 %Publix
Parkway Town Centre Nashville, TN 200565,587 100.0 %Publix
The Market at Salem Cove Nashville, TN 201062,356 97.8 %Publix
The Market at Victory Village Nashville, TN 200771,300 100.0 %Publix
The Overlook at Hamilton Place Chattanooga, TN 1992213,095 100.0 %The Fresh Market
Shoppes of Parkland Miami-Ft. Lauderdale, FL2000145,720 100.0 %BJ's Wholesale Club
Crossroads Market Naples, FL1993126,895 100.0 %Publix
Neapolitan Way (2)
 Naples, FL1985137,580 91.5 %Publix
Berry Town Center Orlando, FL 200399,441 84.0 %Publix
Deltona Landings Orlando, FL 199959,966 98.4 %Publix
University Palms Orlando, FL 199399,172 98.9 %Publix
Disston Plaza Tampa-St. Petersburg, FL 1954129,150 96.1 %Publix
Barclay Crossing Tampa, FL 199854,958 100.0 %Publix
Polo Grounds Mall West Palm Beach, FL1966130,285 97.3 %Publix
Kingwood Glen Houston, TX 1998103,397 97.1 %Kroger
Independence Square Dallas, TX 1977140,218 87.0 %Tom Thumb
Midway Market Dallas, TX 200285,599 94.9 %Kroger
Oak Park Vill