Maryland | 32-0024337 | |
(State or other jurisdiction of incorporation or organization) | (I. R. S. Employer Identification No.) | |
One Beacon Street, Boston, Massachusetts | 02108 | |
(Address of principal executive offices) | (Zip Code) |
(617) 523-7722 | ||
(Registrant’s telephone number, including area code) |
Large Accelerated Filer o | Accelerated Filer o |
Non-accelerated Filer ý (Do not check if a smaller reporting company) | Smaller Reporting Company o |
BERKSHIRE INCOME REALTY, INC. | ||
TABLE OF CONTENTS | ||
ITEM NO. | PAGE NO. | |
PART I | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. |
6/30/2013 | 12/31/2012 | ||||||
(unaudited) | (audited) | ||||||
ASSETS | |||||||
Multifamily apartment communities, net of accumulated depreciation of $229,570,535 and $235,825,752, respectively | $ | 382,660,242 | $ | 402,999,104 | |||
Cash and cash equivalents | 20,782,083 | 12,224,361 | |||||
Cash restricted for tenant security deposits | 1,245,211 | 1,332,178 | |||||
Replacement reserve escrow | 1,042,391 | 986,790 | |||||
Prepaid expenses and other assets | 8,026,311 | 9,545,966 | |||||
Investments in unconsolidated multifamily entities | 15,547,996 | 16,873,924 | |||||
Acquired in-place leases and tenant relationships, net of accumulated amortization of $0 and $599,702, respectively | — | 5,377 | |||||
Deferred expenses, net of accumulated amortization of $3,112,602 and $3,096,284, respectively | 2,975,532 | 3,210,510 | |||||
Total assets | $ | 432,279,766 | $ | 447,178,210 | |||
LIABILITIES AND DEFICIT | |||||||
Liabilities: | |||||||
Mortgage notes payable | $ | 463,075,489 | $ | 478,185,998 | |||
Note payable - other | 1,250,000 | 1,250,000 | |||||
Due to affiliates, net | 1,935,146 | 3,446,460 | |||||
Due to affiliate, incentive advisory fees | 7,317,372 | 6,634,261 | |||||
Dividend and distributions payable | 837,607 | 1,137,607 | |||||
Accrued expenses and other liabilities | 10,967,445 | 15,081,550 | |||||
Tenant security deposits | 1,540,907 | 1,475,298 | |||||
Total liabilities | 486,923,966 | 507,211,174 | |||||
Commitments and contingencies (Note 9) | — | — | |||||
Deficit: | |||||||
Noncontrolling interest in properties | 885,514 | 1,527,431 | |||||
Noncontrolling interest in Operating Partnership (Note 10) | (83,848,935 | ) | (89,708,267 | ) | |||
Series A 9% Cumulative Redeemable Preferred Stock, no par value, $25 stated value, 5,000,000 shares authorized, 2,978,110 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively | 70,210,830 | 70,210,830 | |||||
Class A common stock, $.01 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively | — | — | |||||
Class B common stock, $.01 par value, 5,000,000 shares authorized, 1,406,196 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively | 14,062 | 14,062 | |||||
Excess stock, $.01 par value, 15,000,000 shares authorized, 0 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively | — | — | |||||
Accumulated deficit | (41,905,671 | ) | (42,077,020 | ) | |||
Total deficit | (54,644,200 | ) | (60,032,964 | ) | |||
Total liabilities and deficit | $ | 432,279,766 | $ | 447,178,210 |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Revenue: | |||||||||||||||
Rental | $ | 18,154,499 | $ | 17,044,839 | $ | 35,929,035 | $ | 33,913,424 | |||||||
Utility reimbursement | 852,825 | 721,711 | 1,690,499 | 1,453,630 | |||||||||||
Other | 843,754 | 775,531 | 1,651,633 | 1,516,074 | |||||||||||
Total revenue | 19,851,078 | 18,542,081 | 39,271,167 | 36,883,128 | |||||||||||
Expenses: | |||||||||||||||
Operating | 4,425,981 | 4,200,119 | 9,075,223 | 8,561,080 | |||||||||||
Maintenance | 1,230,171 | 1,176,245 | 2,113,072 | 2,234,698 | |||||||||||
Real estate taxes | 2,024,714 | 1,695,820 | 3,835,212 | 3,425,702 | |||||||||||
General and administrative | 507,809 | 557,173 | 1,237,899 | 1,324,342 | |||||||||||
Management fees | 1,203,974 | 1,152,971 | 2,396,786 | 2,287,663 | |||||||||||
Incentive advisory fees | 622,908 | 344,384 | 1,373,780 | 1,799,978 | |||||||||||
Depreciation | 6,432,388 | 6,120,855 | 12,759,624 | 12,499,149 | |||||||||||
Interest, inclusive of amortization of deferred financing fees | 6,647,682 | 6,093,443 | 13,057,302 | 12,306,267 | |||||||||||
Amortization of acquired in-place leases and tenant relationships | — | 16,104 | 5,377 | 36,072 | |||||||||||
Total expenses | 23,095,627 | 21,357,114 | 45,854,275 | 44,474,951 | |||||||||||
Loss before equity in income (loss) of unconsolidated multifamily entities | (3,244,549 | ) | (2,815,033 | ) | (6,583,108 | ) | (7,591,823 | ) | |||||||
Equity in income (loss) of unconsolidated multifamily entities | (855,136 | ) | (715,572 | ) | (1,631,103 | ) | 407,239 | ||||||||
Loss from continuing operations | (4,099,685 | ) | (3,530,605 | ) | (8,214,211 | ) | (7,184,584 | ) | |||||||
Discontinued operations: | |||||||||||||||
Income (loss) from discontinued operations | (58,070 | ) | 215,114 | 59,780 | (708,274 | ) | |||||||||
Gain on disposition of real estate assets | 18,689,058 | 32,887 | 18,689,058 | 6,622,210 | |||||||||||
Net income from discontinued operations | 18,630,988 | 248,001 | 18,748,838 | 5,913,936 | |||||||||||
Net income (loss) | 14,531,303 | (3,282,604 | ) | 10,534,627 | (1,270,648 | ) | |||||||||
Net (income) loss attributable to noncontrolling interest in properties | 4,724 | (130,281 | ) | (14,808 | ) | (218,306 | ) | ||||||||
Net (income) loss attributable to noncontrolling interest in Operating Partnership (Note 10) | (12,553,460 | ) | 4,966,475 | (6,998,082 | ) | 4,723,683 | |||||||||
Net income attributable to the Company | 1,982,567 | 1,553,590 | 3,521,737 | 3,234,729 | |||||||||||
Preferred dividend | (1,675,194 | ) | (1,675,195 | ) | (3,350,388 | ) | (3,350,389 | ) | |||||||
Net income (loss) available to common shareholders | $ | 307,373 | $ | (121,605 | ) | $ | 171,349 | $ | (115,660 | ) | |||||
Net loss from continuing operations attributable to the Company per common share, basic and diluted | $ | (13.03 | ) | $ | (0.27 | ) | $ | (13.21 | ) | $ | (4.29 | ) | |||
Net income from discontinued operations attributable to the Company per common share, basic and diluted | $ | 13.25 | $ | 0.18 | $ | 13.33 | $ | 4.21 | |||||||
Net income (loss) available to common shareholders per common share, basic and diluted | $ | 0.22 | $ | (0.09 | ) | $ | 0.12 | $ | (0.08 | ) | |||||
Weighted average number of common shares outstanding, basic and diluted | 1,406,196 | 1,406,196 | 1,406,196 | 1,406,196 |
Company Shareholders | |||||||||||||||||||||||||||||
Series A Preferred Stock | Class B Common Stock | Accumulated Deficit | Noncontrolling Interests –Properties | Noncontrolling Interests – Operating Partnership | Total Deficit | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||
Balance at January 1, 2012 | 2,978,110 | $ | 70,210,830 | 1,406,196 | $ | 14,062 | $ | (41,802,722 | ) | $ | 346,524 | $ | (76,785,818 | ) | $ | (48,017,124 | ) | ||||||||||||
Net income (loss) | — | — | — | — | 3,234,729 | 218,306 | (4,723,683 | ) | (1,270,648 | ) | |||||||||||||||||||
Contributions | — | — | — | — | — | 149,659 | — | 149,659 | |||||||||||||||||||||
Distributions | — | — | — | — | — | (898,222 | ) | (1,651,800 | ) | (2,550,022 | ) | ||||||||||||||||||
Distributions to preferred shareholders | — | — | — | — | (3,350,389 | ) | — | — | (3,350,389 | ) | |||||||||||||||||||
Balance at June 30, 2012 | 2,978,110 | $ | 70,210,830 | 1,406,196 | $ | 14,062 | $ | (41,918,382 | ) | $ | (183,733 | ) | $ | (83,161,301 | ) | $ | (55,038,524 | ) |
Company Shareholders | |||||||||||||||||||||||||||||
Series A Preferred Stock | Class B Common Stock | Accumulated Deficit | Noncontrolling Interests –Properties | Noncontrolling Interests – Operating Partnership | Total Deficit | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||
Balance at January 1, 2013 | 2,978,110 | $ | 70,210,830 | 1,406,196 | $ | 14,062 | $ | (42,077,020 | ) | $ | 1,527,431 | $ | (89,708,267 | ) | $ | (60,032,964 | ) | ||||||||||||
Net income (loss) | — | — | — | — | 3,521,737 | 14,808 | 6,998,082 | 10,534,627 | |||||||||||||||||||||
Contributions | — | — | — | — | — | 264,718 | — | 264,718 | |||||||||||||||||||||
Distributions | — | — | — | — | — | (921,443 | ) | (1,138,750 | ) | (2,060,193 | ) | ||||||||||||||||||
Distributions to preferred shareholders | — | — | — | — | (3,350,388 | ) | — | — | (3,350,388 | ) | |||||||||||||||||||
Balance at June 30, 2013 | 2,978,110 | $ | 70,210,830 | 1,406,196 | $ | 14,062 | $ | (41,905,671 | ) | $ | 885,514 | $ | (83,848,935 | ) | $ | (54,644,200 | ) |
BERKSHIRE INCOME REALTY, INC. | |||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(unaudited) | |||||||
For the six months ended | |||||||
June 30, | |||||||
2013 | 2012 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | 10,534,627 | $ | (1,270,648 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Amortization of deferred financing costs | 293,111 | 299,269 | |||||
Amortization of acquired in-place leases and tenant relationships | 5,377 | 36,072 | |||||
Loss on extinguishment of debt | 3,807 | 40,812 | |||||
Depreciation | 13,364,746 | 14,224,774 | |||||
Equity in (income) loss of unconsolidated multifamily entities | 1,631,103 | (407,239 | ) | ||||
Gain on disposition of real estate assets | (18,689,058 | ) | (6,622,210 | ) | |||
Increase (decrease) in cash attributable to changes in assets and liabilities: | |||||||
Tenant security deposits, net | 152,576 | 113,032 | |||||
Prepaid expenses and other assets | 1,519,655 | 2,277,411 | |||||
Due to/from affiliates | (1,511,314 | ) | 1,316,768 | ||||
Due to affiliate - incentive advisory fees | 683,111 | 1,595,879 | |||||
Accrued expenses and other liabilities | (7,622 | ) | (308,353 | ) | |||
Net cash provided by operating activities | 7,980,119 | 11,295,567 | |||||
Cash flows from investing activities: | |||||||
Capital improvements | (9,405,207 | ) | (23,001,173 | ) | |||
Proceeds from sale of multifamily apartment communities | 30,958,927 | 13,929,990 | |||||
Investments in unconsolidated multifamily entities | (305,175 | ) | (44,851 | ) | |||
Distributions from investment in unconsolidated multifamily entities | — | 700,075 | |||||
Interest earned on replacement reserve deposits | (292 | ) | (1,051 | ) | |||
Deposits to replacement reserve escrow | (96,790 | ) | (87,990 | ) | |||
Withdrawal from replacement reserve escrow | 41,481 | — | |||||
Net cash provided by (used in) investing activities | 21,192,944 | (8,505,000 | ) | ||||
Cash flows from financing activities: | |||||||
Borrowings from mortgage notes payable | 2,770,663 | 15,904,621 | |||||
Principal payments on mortgage notes payable | (3,047,886 | ) | (2,673,152 | ) | |||
Prepayments of mortgage notes payable | (14,833,286 | ) | (5,506,728 | ) | |||
Borrowings from revolving credit facility - affiliate | 1,627,000 | — | |||||
Principal payments on revolving credit facility - affiliate | (1,627,000 | ) | (7,349,422 | ) | |||
Deferred financing costs | (58,969 | ) | (264,562 | ) | |||
Contributions from noncontrolling interest holders in properties | 264,718 | 149,659 | |||||
Distributions to noncontrolling interest holders in properties | (1,221,443 | ) | (898,222 | ) | |||
Distributions to noncontrolling interest partners in Operating Partnership | (1,138,750 | ) | (1,651,800 | ) | |||
Distributions to preferred shareholders | (3,350,388 | ) | (3,350,389 | ) | |||
Net cash used in financing activities | (20,615,341 | ) | (5,639,995 | ) | |||
Net increase (decrease) in cash and cash equivalents | 8,557,722 | (2,849,428 | ) | ||||
Cash and cash equivalents at beginning of period | 12,224,361 | 9,645,420 | |||||
Cash and cash equivalents at end of period | $ | 20,782,083 | $ | 6,795,992 |
BERKSHIRE INCOME REALTY, INC. | |||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(unaudited) | |||||||
For the six months ended | |||||||
June 30, | |||||||
2013 | 2012 | ||||||
Supplemental disclosure: | |||||||
Cash paid for interest, net of capitalized interest | $ | 13,990,060 | $ | 13,375,735 | |||
Capitalization of interest | 393,677 | 711,739 | |||||
Supplemental disclosure of non-cash investing and financing activities: | |||||||
Capital improvements included in accrued expenses and other liabilities | 159,156 | 2,582,707 | |||||
Dividends declared and payable to preferred shareholders | 837,607 | 837,607 | |||||
Write-off of fully amortized acquired in-place leases and tenant relationships | 605,079 | — | |||||
Sale of real estate: | |||||||
Gross selling price | $ | 31,500,000 | $ | 14,200,000 | |||
Cost of sale | (541,073 | ) | (270,010 | ) | |||
Cash flows from sale of multifamily apartment communities | $ | 30,958,927 | $ | 13,929,990 |
1. | ORGANIZATION AND BASIS OF PRESENTATION |
6/30/2013 | 12/31/2012 | ||||||
Land | $ | 60,847,969 | $ | 63,749,991 | |||
Buildings, improvement and personal property | 551,382,808 | 575,074,865 | |||||
Multifamily apartment communities | 612,230,777 | 638,824,856 | |||||
Accumulated depreciation | (229,570,535 | ) | (235,825,752 | ) | |||
Multifamily apartment communities, net | $ | 382,660,242 | $ | 402,999,104 |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Revenue: | |||||||||||||||
Rental | $ | 991,853 | $ | 2,918,236 | $ | 2,015,158 | $ | 6,161,211 | |||||||
Utility reimbursement | 145,684 | 146,285 | 230,542 | 316,918 | |||||||||||
Other | 114,868 | 148,999 | 245,234 | 298,870 | |||||||||||
Total revenue | 1,252,405 | 3,213,520 | 2,490,934 | 6,776,999 | |||||||||||
Expenses: | |||||||||||||||
Operating | 406,878 | 948,734 | 773,382 | 2,116,073 | |||||||||||
Maintenance | 57,009 | 212,557 | 129,122 | 453,044 | |||||||||||
Real estate taxes | 130,398 | 344,430 | 265,522 | 717,540 | |||||||||||
General and administrative | 22,822 | 27,840 | 31,663 | 20,135 | |||||||||||
Management fees | 48,115 | 128,149 | 94,550 | 263,044 | |||||||||||
Depreciation | 302,285 | 788,901 | 605,122 | 1,725,625 | |||||||||||
Interest, inclusive of deferred financing fees | 339,161 | 547,795 | 527,986 | 2,148,999 | |||||||||||
Loss on extinguishment of debt | 3,807 | — | 3,807 | 40,813 | |||||||||||
Total expenses | 1,310,475 | 2,998,406 | 2,431,154 | 7,485,273 | |||||||||||
Income (loss) from discontinued operations | $ | (58,070 | ) | $ | 215,114 | $ | 59,780 | $ | (708,274 | ) |
6/30/2013 | 12/31/2012 | ||||||
(unaudited) | (audited) | ||||||
ASSETS | |||||||
Multifamily apartment communities, net | $ | 785,672,423 | $ | 807,747,897 | |||
Cash and cash equivalents | 16,359,864 | 16,851,009 | |||||
Other assets | 17,943,144 | 16,927,659 | |||||
Total assets | $ | 819,975,431 | $ | 841,526,565 | |||
LIABILITIES AND PARTNERS’ CAPITAL | |||||||
Mortgage notes payable | $ | 797,247,644 | $ | 800,968,937 | |||
Revolving credit facility | 16,300,000 | 16,300,000 | |||||
Other liabilities | 20,954,771 | 22,050,147 | |||||
Noncontrolling interest | (12,105,967 | ) | (9,478,084 | ) | |||
Partners’ capital | (2,421,017 | ) | 11,685,565 | ||||
Total liabilities and partners’ capital | $ | 819,975,431 | $ | 841,526,565 | |||
Company’s share of partners’ capital | $ | (169,489 | ) | $ | 818,078 | ||
Basis differential (1) | 604,395 | 604,395 | |||||
Carrying value of the Company’s investment in unconsolidated limited partnership (2) | $ | 434,906 | $ | 1,422,473 |
(1) | This amount represents the difference between the Company’s investment in BVF and its share of the underlying equity in the net assets of BVF (adjusted to conform with GAAP). At June 30, 2013 and December 31, 2012, the differential related mainly to $583,240 which represents the Company’s share of syndication costs incurred by BVF, which was not an item required to be funded via a capital investment by the Company. |
(2) | Per the partnership agreement of BVF, the Company’s liability is limited to its investment in BVF. The Company does not guarantee any third-party debt held by BVF. The Company has fully funded its obligations under the partnership agreement as of June 30, 2013 and has no commitment to make additional contributions to BVF. |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Revenue | $ | 33,815,366 | $ | 32,621,656 | $ | 66,886,032 | $ | 68,337,068 | |||||||
Expenses | (41,257,883 | ) | (43,005,473 | ) | (83,516,896 | ) | (92,611,334 | ) | |||||||
Gain on property sales and extinguishment of debt (2) | (57,153 | ) | (146,051 | ) | (78,824 | ) | 28,127,294 | ||||||||
Noncontrolling interest | 1,150,895 | 1,667,766 | 2,603,107 | 3,500,051 | |||||||||||
Net income (loss) attributable to investment | $ | (6,348,775 | ) | $ | (8,862,102 | ) | $ | (14,106,581 | ) | $ | 7,353,079 | ||||
Equity in income (loss) of unconsolidated limited partnership (1)(2) | $ | (444,462 | ) | $ | (620,414 | ) | $ | (987,567 | ) | $ | 514,770 |
(1) | There were no impairment indicators or impairment writeoffs in the six months ended June 30, 2013 or 2012. |
(2) | During the six months ended June 30, 2012, BVF recorded a net gain on the disposition of eight properties. The gain on the sale was $28,127,294, of which the Company's share was approximately $1,967,000 and is reflected in the "Equity in income (loss) of unconsolidated multifamily entities" for the six months ended June 30, 2012. There were no dispositions of property by BVF during the six months ended June 30, 2013. |
6/30/2013 | 12/31/2012 | ||||||
(unaudited) | (audited) | ||||||
ASSETS | |||||||
Multifamily apartment communities, net | $ | 128,732,908 | $ | 114,349,590 | |||
Cash and cash equivalents | 1,168,138 | 565,453 | |||||
Other assets | 652,670 | 738,983 | |||||
Total assets | $ | 130,553,716 | $ | 115,654,026 | |||
LIABILITIES AND MEMBERS’ CAPITAL | |||||||
Mortgage note payable | $ | 75,426,077 | $ | 63,413,844 | |||
Other liabilities | 10,451,759 | 5,419,184 | |||||
Noncontrolling interest | 4,467,588 | 4,682,100 | |||||
Members’ capital | 40,208,292 | 42,138,898 | |||||
Total liabilities and members’ capital | $ | 130,553,716 | $ | 115,654,026 | |||
Company’s share of members’ capital | $ | 13,402,763 | $ | 14,046,299 | |||
Basis differential (1) | $ | 1,710,327 | $ | 1,405,152 | |||
Carrying value of the Company’s investment in unconsolidated limited liability company (2) | $ | 15,113,090 | $ | 15,451,451 |
(1) | This amount represents capitalized interest, pursuant to ASC 835-20, related to the Company's equity investment in NoMa JV. The capitalized interest was computed on the amounts borrowed by the Company to finance its investment in NoMa JV and was not an item required to be funded via a capital investment in NoMa JV. |
(2) | Per the limited liability company agreement of NoMa JV, the Company's liability is limited to its investment in NoMa JV. The Company has fully funded its maximum obligation under the limited liability company agreement as of June 30, 2013 and has no commitment to make additional contributions to NoMa JV. |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Revenue | $ | 873,174 | $ | — | $ | 1,282,316 | $ | — | |||||||
Expenses | (2,242,086 | ) | (317,195 | ) | (3,427,436 | ) | (358,437 | ) | |||||||
Noncontrolling interest | 136,891 | 31,720 | 214,512 | 35,844 | |||||||||||
Net loss attributable to investment | $ | (1,232,021 | ) | $ | (285,475 | ) | $ | (1,930,608 | ) | $ | (322,593 | ) | |||
Equity in loss of unconsolidated limited liability company | $ | (410,674 | ) | $ | (95,158 | ) | $ | (643,536 | ) | $ | (107,531 | ) |
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Loss from continuing operations prior to adjustments | $ | (4,099,685 | ) | $ | (3,530,605 | ) | $ | (8,214,211 | ) | $ | (7,184,584 | ) | ||||
Add: | Net loss attributable to noncontrolling interest in properties | 4,724 | — | — | — | |||||||||||
Net loss attributable to noncontrolling interest in Operating Partnership | — | 4,966,475 | — | 4,723,683 | ||||||||||||
Less: | Preferred dividends | (1,675,194 | ) | (1,675,195 | ) | (3,350,388 | ) | (3,350,389 | ) | |||||||
Net income attributable to noncontrolling interest in properties | — | (130,281 | ) | (14,808 | ) | (218,306 | ) | |||||||||
Net income attributable to noncontrolling interest in Operating Partnership | (12,553,460 | ) | — | (6,998,082 | ) | — | ||||||||||
Loss from continuing operations | $ | (18,323,615 | ) | $ | (369,606 | ) | $ | (18,577,489 | ) | $ | (6,029,596 | ) | ||||
Net income from discontinued operations | $ | 18,630,988 | $ | 248,001 | $ | 18,748,838 | $ | 5,913,936 | ||||||||
Net income (loss) available to common shareholders | $ | 307,373 | $ | (121,605 | ) | $ | 171,349 | $ | (115,660 | ) | ||||||
Net loss from continuing operations attributable to the Company per common share, basic and diluted | $ | (13.03 | ) | $ | (0.27 | ) | $ | (13.21 | ) | $ | (4.29 | ) | ||||
Net income from discontinued operations attributable to the Company per common share, basic and diluted | $ | 13.25 | $ | 0.18 | $ | 13.33 | $ | 4.21 | ||||||||
Net income (loss) available to common shareholders per common share, basic and diluted | $ | 0.22 | $ | (0.09 | ) | $ | 0.12 | $ | (0.08 | ) | ||||||
Weighted average number of common shares outstanding, basic and diluted | 1,406,196 | 1,406,196 | 1,406,196 | 1,406,196 | ||||||||||||
Dividend declared per common share | $ | — | $ | — | $ | — | $ | — |
• | The NoMa Project is a 603-unit mid-rise multifamily apartment development project in Washington, D.C. The Company has a 30% interest in the joint venture and has made a commitment to invest approximately $14.5 million in the project. As of June 30, 2013, the Company has invested 100% of its total committed capital amount. The Company accounts for its investment in the NoMa Project as an equity method investment. As of June 30, 2013, construction of the NoMa Project is complete. |
• | The second project is a 154-unit multifamily apartment development project in Walnut Creek, California (the "Walnut Creek Project"). The Company will own a 98% interest in the project once fully committed and its current total commitment in the joint venture is approximately $16.9 million. As of June 30, 2013, the Company has made capital contributions |
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Net income (loss) | $ | 14,531,303 | $ | (3,282,604 | ) | $ | 10,534,627 | $ | (1,270,648 | ) | ||||||
Adjust: | Net (income) loss attributable to noncontrolling interest in properties | 4,724 | (130,281 | ) | (14,808 | ) | (218,306 | ) | ||||||||
Income (loss) before noncontrolling interest in Operating Partnership | 14,536,027 | (3,412,885 | ) | 10,519,819 | (1,488,954 | ) | ||||||||||
Preferred dividend | (1,675,194 | ) | (1,675,195 | ) | (3,350,388 | ) | (3,350,389 | ) | ||||||||
Income (loss) available to common equity | 12,860,833 | (5,088,080 | ) | 7,169,431 | (4,839,343 | ) | ||||||||||
Noncontrolling interest in Operating Partnership | 97.61 | % | 97.61 | % | 97.61 | % | 97.61 | % | ||||||||
Net income (loss) attributable to noncontrolling interest in Operating Partnership | $ | 12,553,460 | $ | (4,966,475 | ) | $ | 6,998,082 | $ | (4,723,683 | ) |
For the six months ended | |||||||
June 30, | |||||||
2013 | 2012 | ||||||
Balance at beginning of period | $ | (89,708,267 | ) | $ | (76,785,818 | ) | |
Net income (loss) attributable to noncontrolling interest in Operating Partnership | 6,998,082 | (4,723,683 | ) | ||||
Distributions to noncontrolling interest partners in Operating Partnership | (1,138,750 | ) | (1,651,800 | ) | |||
Balance at end of period | $ | (83,848,935 | ) | $ | (83,161,301 | ) |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Property management fees | $ | 824,676 | $ | 868,807 | $ | 1,636,509 | $ | 1,726,079 | |||||||
Expense reimbursements | 49,533 | 53,325 | 98,807 | 106,650 | |||||||||||
Salary reimbursements | 2,158,870 | 2,337,405 | 4,549,457 | 5,003,577 | |||||||||||
Asset management fees | 407,914 | 412,315 | 815,827 | 824,630 | |||||||||||
Incentive advisory fee | 622,908 | 344,384 | 1,373,780 | 1,799,978 | |||||||||||
Construction management fees | 113,322 | 34,825 | 119,118 | 41,087 | |||||||||||
Development fees | — | 69,705 | 69,715 | 139,410 | |||||||||||
Interest on revolving credit facility | 20,168 | 13,270 | 32,981 | 114,908 | |||||||||||
Total | $ | 4,197,391 | $ | 4,134,036 | $ | 8,696,194 | $ | 9,756,319 |
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF BERKSHIRE INCOME REALTY, INC. |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Cash provided by operating activities | $ | 3,280,980 | $ | 4,943,024 | $ | 7,980,119 | $ | 11,295,567 | |||||||
Cash provided by (used in) investing activities | 26,883,104 | (11,297,995 | ) | 21,192,944 | (8,505,000 | ) | |||||||||
Cash (used in) provided by financing activities | (18,664,547 | ) | 4,391,845 | (20,615,341 | ) | (5,639,995 | ) |
Development Projects | Anticipated Total # of Units | Anticipated Average Apt Size (Sq Ft) | Anticipated Rentable Building Size (Sq Ft) (1) | Budgeted Costs (in millions) | Costs Incurred to-date June 30, 2013 (in millions) | Anticipated Completion Date | ||||||||||||
NoMa (2) | 603 | 770 | 465,724 | 143.4 | 130.7 | Completed Q2 2013 | ||||||||||||
Walnut Creek (3) | 154 | 854 | 145,550 | 48.0 | 2.4 | Q2 2015 | ||||||||||||
Total / Average | 757 | 812 | 611,274 | $ | 191.4 | $ | 133.1 |
(1) | Includes retail space of 1,250 sq ft at the NoMa Project and 14,000 sq ft at the Walnut Creek Project. |
(2) | The NoMa Project received temporary certificates of occupancy for all units on May 10, 2013 from the Government of the District of Columbia. As of June 30, 2013, the NoMa Project construction was complete. |
(3) | The Company is currently reviewing a revised development budget, which reflects revisions in construction costs and operating assumptions. |
Six months ended | Six months ended | |||||||||||||||||||||
June 30, 2013 | June 30, 2012 | |||||||||||||||||||||
# of Units | Average Apt Size (Sq Ft) | Average Monthly Rent Rate per Apt | Impact of Average Rent Concessions | # of Units | Average Apt Size (Sq Ft) | Average Monthly Rent Rate per Apt | Impact of Average Rent Concessions | |||||||||||||||
New leases | 1,465 | 964 | $ | 1,150 | $ | 10 | 1,600 | 958 | $ | 1,069 | $ | 30 | ||||||||||
Renewed leases | 1,318 | 963 | $ | 1,176 | $ | — | 1,568 | 957 | $ | 1,092 | $ | — |
Same Property Portfolio | ||||||||||||||
Three months ended June 30, | ||||||||||||||
2013 | 2012 | Increase/ (Decrease) | % Change | |||||||||||
Revenue: | ||||||||||||||
Rental | $ | 17,776,266 | $ | 17,050,704 | $ | 725,562 | 4.26 | % | ||||||
Utility reimbursement and other | $ | 1,629,047 | $ | 1,496,368 | 132,679 | 8.87 | % | |||||||
Total revenue | 19,405,313 | 18,547,072 | 858,241 | 4.63 | % | |||||||||
Operating Expenses: | ||||||||||||||
Operating | $ | 4,170,385 | $ | 4,174,779 | (4,394 | ) | (0.11 | )% | ||||||
Maintenance | $ | 1,201,036 | $ | 1,176,246 | 24,790 | 2.11 | % | |||||||
Real estate taxes | 1,808,209 | 1,695,220 | 112,989 | 6.67 | % | |||||||||
General and administrative | — | — | — | — | % | |||||||||
Management fees | 776,560 | 740,657 | 35,903 | 4.85 | % | |||||||||
Incentive advisory fees | — | — | — | — | % | |||||||||
Total operating expenses | 7,956,190 | 7,786,902 | 169,288 | 2.17 | % | |||||||||
Net Operating Income | 11,449,123 | 10,760,170 | 688,953 | 6.40 | % | |||||||||
Non-operating expenses: | ||||||||||||||
Depreciation | 5,878,085 | 6,120,856 | (242,771 | ) | (3.97 | )% | ||||||||
Interest, inclusive of amortization of deferred financing fees | 6,141,147 | 6,206,422 | (65,275 | ) | (1.05 | )% | ||||||||
Amortization of acquired in-place leases and tenant relationships | — | 16,104 | (16,104 | ) | (100.00 | )% | ||||||||
Total non-operating expenses | 12,019,232 | 12,343,382 | (324,150 | ) | (2.63 | )% | ||||||||
Net loss | $ | (570,109 | ) | $ | (1,583,212 | ) | $ | 1,013,103 | 63.99 | % |
Total Property Portfolio | |||||||||||||||
Three months ended June 30, | |||||||||||||||
2013 | 2012 | Increase/ (Decrease) | % Change | ||||||||||||
Revenue: | |||||||||||||||
Rental | 18,154,499 | 17,044,839 | $ | 1,109,660 | 6.51 | % | |||||||||
Utility reimbursement and other | 1,696,579 | 1,497,242 | 199,337 | 13.31 | % | ||||||||||
Total revenue | 19,851,078 | 18,542,081 | 1,308,997 | 7.06 | % | ||||||||||
Operating Expenses: | |||||||||||||||
Operating | 4,425,981 | 4,200,119 | 225,862 | 5.38 | % | ||||||||||
Maintenance | 1,230,171 | 1,176,245 | 53,926 | 4.58 | % | ||||||||||
Real estate taxes | 2,024,714 | 1,695,820 | 328,894 | 19.39 | % | ||||||||||
General and administrative | 507,809 | 557,173 | (49,364 | ) | (8.86 | )% | |||||||||
Management fees | 1,203,974 | 1,152,971 | 51,003 | 4.42 | % | ||||||||||
Incentive advisory fees | 622,908 | 344,384 | 278,524 | 80.88 | % | ||||||||||
Total operating expenses | 10,015,557 | 9,126,712 | 888,845 | 9.74 | % | ||||||||||
Net Operating Income | 9,835,521 | 9,415,369 | 420,152 | 4.46 | % | ||||||||||
Non-operating expenses: | |||||||||||||||
Depreciation | 6,432,388 | 6,120,855 | 311,533 | 5.09 | % | ||||||||||
Interest, inclusive of amortization of deferred financing fees | 6,647,682 | 6,093,443 | 554,239 | 9.10 | % | ||||||||||
Amortization of acquired in-place leases and tenant relationships | — | 16,104 | (16,104 | ) | (100.00 | )% | |||||||||
Total non-operating expenses | 13,080,070 | 12,230,402 | 849,668 | 6.95 | % | ||||||||||
Loss before equity in loss of unconsolidated multifamily entities and discontinued operations | (3,244,549 | ) | (2,815,033 | ) | (429,516 | ) | (15.26 | )% | |||||||
Equity in loss of unconsolidated multifamily entities | (855,136 | ) | (715,572 | ) | (139,564 | ) | (19.50 | )% | |||||||
Discontinued operations | 18,630,988 | 248,001 | 18,382,987 | 7,412.46 | % | ||||||||||
Net income (loss) | $ | 14,531,303 | $ | (3,282,604 | ) | $ | 17,813,907 | 542.68 | % |
Same Property Portfolio | ||||||||||||||
Three months ended June 30, | ||||||||||||||
2013 | 2012 | Increase/ (Decrease) | % Change | |||||||||||
Rental | ||||||||||||||
Market rent | $ | 18,819,943 | $ | 18,195,912 | $ | 624,031 | 3.43 | % | ||||||
Occupancy | (1,043,677 | ) | (1,145,208 | ) | 101,531 | 8.87 | % | |||||||
Total Rental | $ | 17,776,266 | $ | 17,050,704 | $ | 725,562 | 4.26 | % |
Same Property Portfolio | ||||||||||||||
Three months ended June 30, | ||||||||||||||
2013 | 2012 | Increase/ (Decrease) | % Change | |||||||||||
Utility reimbursement and other | ||||||||||||||
Utility reimbursement | $ | 852,825 | $ | 721,712 | $ | 131,113 | 18.17 | % | ||||||
Other | 776,222 | 774,656 | 1,566 | 0.20 | % | |||||||||
Total Utility reimbursement and other | $ | 1,629,047 | $ | 1,496,368 | $ | 132,679 | 8.87 | % |
Same Property Portfolio | ||||||||||||||
Three months ended June 30, | ||||||||||||||
2013 | 2012 | Increase/ (Decrease) | % Change | |||||||||||
Operating | ||||||||||||||
Payroll | $ | 1,771,712 | $ | 1,722,075 | $ | 49,637 | 2.88 | % | ||||||
Utilities | 1,229,819 | 1,163,255 | 66,564 | 5.72 | % | |||||||||
Insurance | 394,685 | 376,716 | 17,969 | 4.77 | % | |||||||||
Property-related G&A | 419,691 | 520,024 | (100,333 | ) | (19.29 | )% | ||||||||
Leasing | 193,867 | 186,409 | 7,458 | 4.00 | % | |||||||||
Advertising | 141,050 | 149,181 | (8,131 | ) | (5.45 | )% | ||||||||
(Gain) loss on fixed assets replacement | — | — | — | — | % | |||||||||
Other | 19,561 | 57,119 | (37,558 | ) | (65.75 | )% | ||||||||
Total Operating | $ | 4,170,385 | $ | 4,174,779 | $ | (4,394 | ) | (0.11 | )% |
Same Property Portfolio | ||||||||||||||
Three months ended June 30, | ||||||||||||||
2013 | 2012 | Increase/ (Decrease) | % Change | |||||||||||
Maintenance | ||||||||||||||
Pool service | $ | 118,232 | $ | 106,849 | $ | 11,383 | 10.65 | % | ||||||
Exterminating | 35,498 | 49,097 | (13,599 | ) | (27.70 | )% | ||||||||
Landscaping | 206,622 | 218,010 | (11,388 | ) | (5.22 | )% | ||||||||
Supplies | 18,172 | 16,281 | 1,891 | 11.61 | % | |||||||||
Cleaning | 184,275 | 195,650 | (11,375 | ) | (5.81 | )% | ||||||||
Snow removal | (1,762 | ) | (7,484 | ) | 5,722 | (76.46 | )% | |||||||
Painting | 212,282 | 221,640 | (9,358 | ) | (4.22 | )% | ||||||||
Repairs | 272,409 | 200,296 | 72,113 | 36.00 | % | |||||||||
Other | 155,308 | 175,907 | (20,599 | ) | (11.71 | )% | ||||||||
Total Maintenance | $ | 1,201,036 | $ | 1,176,246 | $ | 24,790 | 2.11 | % |
Same Property Portfolio | ||||||||||||||
Six months ended June 30, | ||||||||||||||
2013 | 2012 | Increase/ (Decrease) | % Change | |||||||||||
Revenue: | ||||||||||||||
Rental | $ | 35,354,543 | $ | 33,929,850 | $ | 1,424,693 | 4.20 | % | ||||||
Utility reimbursement and other | 3,215,789 | 2,967,030 | 248,759 | 8.38 | % | |||||||||
Total revenue | 38,570,332 | 36,896,880 | 1,673,452 | 4.54 | % | |||||||||
Operating Expenses: | ||||||||||||||
Operating | 8,568,580 | 8,496,332 | 72,248 | 0.85 | % | |||||||||
Maintenance | 2,058,858 | 2,234,697 | (175,839 | ) | (7.87 | )% | ||||||||
Real estate taxes | 3,603,707 | 3,424,202 | 179,505 | 5.24 | % | |||||||||
General and administrative | — | — | — | — | % | |||||||||
Management fees | 1,541,959 | 1,463,349 | 78,610 | 5.37 | % | |||||||||
Incentive advisory fees | — | — | — | — | % | |||||||||
Total operating expenses | 15,773,104 | 15,618,580 | 154,524 | 0.99 | % | |||||||||
Net Operating Income | 22,797,228 | 21,278,300 | 1,518,928 | 7.14 | % | |||||||||
Non-operating expenses: | ||||||||||||||
Depreciation | 11,739,677 | 12,499,149 | (759,472 | ) | (6.08 | )% | ||||||||
Interest, inclusive of amortization of deferred financing fees | 12,239,265 | 12,426,279 | (187,014 | ) | (1.50 | )% | ||||||||
Amortization of acquired in-place leases and tenant relationships | 5,378 | 36,072 | (30,694 | ) | (85.09 | )% | ||||||||
Total non-operating expenses | 23,984,320 | 24,961,500 | (977,180 | ) | (3.91 | )% | ||||||||
Net loss | $ | (1,187,092 | ) | $ | (3,683,200 | ) | $ | 2,496,108 | 67.77 | % |
Total Property Portfolio | |||||||||||||||
Six months ended June 30, | |||||||||||||||
2013 | 2012 | Increase/ (Decrease) | % Change | ||||||||||||
Revenue: | |||||||||||||||
Rental | $ | 35,929,035 | $ | 33,913,424 | $ | 2,015,611 | 5.94 | % | |||||||
Utility reimbursement and other | 3,342,132 | 2,969,704 | 372,428 | 12.54 | % | ||||||||||
Total revenue | 39,271,167 | 36,883,128 | 2,388,039 | 6.47 | % | ||||||||||
Operating Expenses: | |||||||||||||||
Operating | 9,075,223 | 8,561,080 | 514,143 | 6.01 | % | ||||||||||
Maintenance | 2,113,072 | 2,234,698 | (121,626 | ) | (5.44 | )% | |||||||||
Real estate taxes | 3,835,212 | 3,425,702 | 409,510 | 11.95 | % | ||||||||||
General and administrative | 1,237,899 | 1,324,342 | (86,443 | ) | (6.53 | )% | |||||||||
Management fees | 2,396,786 | 2,287,663 | 109,123 | 4.77 | % | ||||||||||
Incentive advisory fees | 1,373,780 | 1,799,978 | (426,198 | ) | (23.68 | )% | |||||||||
Total operating expenses | 20,031,972 | 19,633,463 | 398,509 | 2.03 | % | ||||||||||
Net Operating Income | 19,239,195 | 17,249,665 | 1,989,530 | 11.53 | % | ||||||||||
Non-operating expenses: | |||||||||||||||
Depreciation | 12,759,624 | 12,499,149 | 260,475 | 2.08 | % | ||||||||||
Interest, inclusive of amortization of deferred financing fees | 13,057,302 | 12,306,267 | 751,035 | 6.10 | % | ||||||||||
Amortization of acquired in-place leases and tenant relationships | 5,377 | 36,072 | (30,695 | ) | (85.09 | )% | |||||||||
Total non-operating expenses | 25,822,303 | 24,841,488 | 980,815 | 3.95 | % | ||||||||||
Loss before equity in income (loss) of unconsolidated multifamily entities and discontinued operations | (6,583,108 | ) | (7,591,823 | ) | 1,008,715 | 13.29 | % | ||||||||
Equity in income (loss) of unconsolidated multifamily entities | (1,631,103 | ) | 407,239 | (2,038,342 | ) | 500.53 | % | ||||||||
Discontinued operations | 18,748,838 | 5,913,936 | 12,834,902 | 217.03 | % | ||||||||||
Net income (loss) | $ | 10,534,627 | $ | (1,270,648 | ) | $ | 11,805,275 | 929.08 | % |
Same Property Portfolio | ||||||||||||||
Six months ended June 30, | ||||||||||||||
2013 | 2012 | Increase/ (Decrease) | % Change | |||||||||||
Rental | ||||||||||||||
Market rent | $ | 37,618,426 | $ | 36,273,983 | $ | 1,344,443 | 3.71 | % | ||||||
Occupancy | (2,263,883 | ) | (2,344,133 | ) | 80,250 | (3.42 | )% | |||||||
Total Rental | $ | 35,354,543 | $ | 33,929,850 | $ | 1,424,693 | 4.20 | % |
Same Property Portfolio | ||||||||||||||
Six months ended June 30, | ||||||||||||||
2013 | 2012 | Increase/ (Decrease) | % Change | |||||||||||
Utility reimbursement and other | ||||||||||||||
Utility reimbursement | $ | 1,690,499 | $ | 1,453,631 | $ | 236,868 | 16.29 | % | ||||||
Other | 1,525,290 | 1,513,399 | 11,891 | 0.79 | % | |||||||||
Total Utility reimbursement and other | $ | 3,215,789 | $ | 2,967,030 | $ | 248,759 | 8.38 | % |
Same Property Portfolio | ||||||||||||||
Six months ended June 30, | ||||||||||||||
2013 | 2012 | Increase/ (Decrease) | % Change | |||||||||||
Operating | ||||||||||||||
Payroll | $ | 3,615,742 | $ | 3,667,629 | $ | (51,887 | ) | (1.41 | )% | |||||
Utilities | 2,683,212 | 2,555,575 | 127,637 | 4.99 | % | |||||||||
Insurance | 781,885 | 728,151 | 53,734 | 7.38 | % | |||||||||
Property-related G&A | 886,893 | 971,800 | (84,907 | ) | (8.74 | )% | ||||||||
Leasing | 346,838 | 370,590 | (23,752 | ) | (6.41 | )% | ||||||||
Advertising | 296,448 | 311,155 | (14,707 | ) | (4.73 | )% | ||||||||
(Gain) loss on fixed assets replacement | (78,450 | ) | (218,092 | ) | 139,642 | (64.03 | )% | |||||||
Other | 36,012 | 109,524 | (73,512 | ) | (67.12 | )% | ||||||||
Total Operating | $ | 8,568,580 | $ | 8,496,332 | $ | 72,248 | 0.85 | % |
Same Property Portfolio | ||||||||||||||
Six months ended June 30, | ||||||||||||||
2013 | 2012 | Increase/ (Decrease) | % Change | |||||||||||
Maintenance | ||||||||||||||
Pool service | $ | 150,568 | $ | 142,589 | $ | 7,979 | 5.60 | % | ||||||
Exterminating | 69,607 | 87,574 | (17,967 | ) | (20.52 | )% | ||||||||
Landscaping | 376,079 | 423,448 | (47,369 | ) | (11.19 | )% | ||||||||
Supplies | 32,575 | 29,316 | 3,259 | 11.12 | % | |||||||||
Cleaning | 350,332 | 365,854 | (15,522 | ) | (4.24 | )% | ||||||||
Snow removal | 12,932 | 14,906 | (1,974 | ) | (13.24 | )% | ||||||||
Painting | 381,156 | 416,013 | (34,857 | ) | (8.38 | )% | ||||||||
Repairs | 409,709 | 431,934 | (22,225 | ) | (5.15 | )% | ||||||||
Other | 275,900 | 323,063 | (47,163 | ) | (14.60 | )% | ||||||||
Total Maintenance | $ | 2,058,858 | $ | 2,234,697 | $ | (175,839 | ) | (7.87 | )% |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net income (loss) | $ | 14,531,303 | $ | (3,282,604 | ) | $ | 10,534,627 | $ | (1,270,648 | ) | |||||
Add: | |||||||||||||||
Depreciation of real property | 5,615,658 | 5,561,784 | 11,175,225 | 11,359,480 | |||||||||||
Depreciation of real property included in results of discontinued operations | 256,118 | 673,904 | 513,336 | 1,474,474 | |||||||||||
Amortization of acquired in-place leases and tenant relationships | — | 16,104 | 5,377 | 36,072 | |||||||||||
Equity in loss of unconsolidated multifamily entities | 855,136 | 715,572 | 1,631,103 | — | |||||||||||
Funds from operations of unconsolidated multifamily entities, net of impairments | 431,695 | 312,207 | 800,396 | 577,655 | |||||||||||
Less: | |||||||||||||||
Funds from operations of noncontrolling interest in properties | (161,439 | ) | (352,865 | ) | (337,988 | ) | (664,832 | ) | |||||||
Gain on disposition of real estate assets | (18,689,058 | ) | (32,887 | ) | (18,689,058 | ) | (6,622,210 | ) | |||||||
Equity in income of unconsolidated multifamily entities | — | — | — | (407,239 | ) | ||||||||||
Funds from Operations | $ | 2,839,413 | $ | 3,611,215 | $ | 5,633,018 | $ | 4,482,752 |
2013 | 2014 | 2015 | 2016 | 2017 | Thereafter | Total | |||||||||||||||||||||
Fixed Rate Debt | $ | 42,658,216 | $ | 50,345,341 | $ | 63,169,749 | $ | 73,012,841 | $ | 39,800,983 | $ | 194,088,359 | $ | 463,075,489 | |||||||||||||
Interest Payments (2) | 12,924,577 | 23,319,767 | 18,405,402 | 16,308,651 | 12,449,798 | 87,839,289 | 171,247,484 | ||||||||||||||||||||
Average Interest Rate(1)(2) | 5.60 | % | 5.66 | % | 5.68 | % | 5.69 | % | 5.69 | % | 5.63 | % | 5.60 | % |
(1) | The Company's mortgage notes are fixed rate instruments; therefore, the Company's outstanding mortgage debt is not sensitive to changes in the capital markets except upon maturity. |
(2) | Interest payments represent amounts expected to be made on outstanding debt as of June 30, 2013. Average interest rate represents weighted average of stated interest rates on the mortgage debt as applied to the principal balance payable in the respective period. |
2013 | 2014 | 2015 | 2016 | 2017 | Thereafter | Total | |||||||||||||||||||||
Fixed Rate Debt (1) | $ | — | $ | — | $ | 18,545 | $ | 38,493 | $ | 40,442 | $ | 1,152,520 | $ | 1,250,000 | |||||||||||||
Interest Payments (3) | 30,993 | 62,500 | 62,757 | 61,098 | 59,149 | 239,289 | 515,786 | ||||||||||||||||||||
Average Interest Rate (2)(3) | 5.00 | % | 5.00 | % | 5.00 | % | 5.00 | % | 5.00 | % | 5.00 | % | 5.00 | % |
(1) | Relates to the Colorado Energy Loan as described in Note 6 - Note Payable - Other of Notes to Consolidated Financial Statements. |
(2) | The Company's note payable - other is a fixed rate instrument; therefore, the Company's outstanding note payable - other is not sensitive to changes in the capital markets except upon maturity. |
(3) | Interest payments represent amounts expected to be made on outstanding debt as of June 30, 2013. Average interest rate represents the stated interest rates on the note payable - other for the respective period. |
31.1 | Certification of Principal Executive Officer Pursuant of 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 | Certification of Principal Executive Officer Pursuant of 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2 | Certification of Principal Financial Officer Pursuant of 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101. | The following materials from Berkshire Income Realty, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Changes in Deficit, (iv) the Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements. |
BERKSHIRE INCOME REALTY, INC. | |
August 14, 2013 | /s/ David C. Quade |
David C. Quade | |
President and Principal Executive Officer |
August 14, 2013 | /s/ David E. Doherty |
David E. Doherty | |
Senior Vice President and Principal Financial Officer |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | disclosed in this report any change in the Company's internal control over financial reporting that occurred during the Company's second fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and |
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. |
David C. Quade |
Principal Executive Officer |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | disclosed in this report any change in the Company's internal control over financial reporting that occurred during the Company's second fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and |
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. |
David E. Doherty |
Principal Financial Officer |
Commitments and Contingencies
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6 Months Ended | ||||||||
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Jun. 30, 2013
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COMMITMENTS AND CONTINGENCIES [Abstract] | |||||||||
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES The Company is party to certain legal actions arising in the ordinary course of its business, such as those relating to tenant issues. All such proceedings taken together are not expected to have a material adverse effect on the Company. While the resolution of these matters cannot be predicted with certainty, management believes that the final outcome of such legal proceedings and claims will not have a material adverse effect on the Company’s liquidity, financial position or results of operations. The Company has commitments to two joint venture multifamily development projects as of June 30, 2013 and December 31, 2012:
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Consolidated Statements of Operations Statement (USD $)
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3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Revenue: | ||||
Rental | $ 18,154,499 | $ 17,044,839 | $ 35,929,035 | $ 33,913,424 |
Utility reimbursement | 852,825 | 721,711 | 1,690,499 | 1,453,630 |
Other | 843,754 | 775,531 | 1,651,633 | 1,516,074 |
Total revenue | 19,851,078 | 18,542,081 | 39,271,167 | 36,883,128 |
Expenses: | ||||
Operating | 4,425,981 | 4,200,119 | 9,075,223 | 8,561,080 |
Maintenance | 1,230,171 | 1,176,245 | 2,113,072 | 2,234,698 |
Real estate taxes | 2,024,714 | 1,695,820 | 3,835,212 | 3,425,702 |
General and administrative | 507,809 | 557,173 | 1,237,899 | 1,324,342 |
Management fees | 1,203,974 | 1,152,971 | 2,396,786 | 2,287,663 |
Incentive advisory fees | 622,908 | 344,384 | 1,373,780 | 1,799,978 |
Depreciation | 6,432,388 | 6,120,855 | 12,759,624 | 12,499,149 |
Interest, inclusive of amortization of deferred financing fees | 6,647,682 | 6,093,443 | 13,057,302 | 12,306,267 |
Amortization of acquired in-place leases and tenant relationships | 0 | 16,104 | 5,377 | 36,072 |
Total expenses | 23,095,627 | 21,357,114 | 45,854,275 | 44,474,951 |
Loss before equity in income (loss) in unconsolidated multifamily entities | (3,244,549) | (2,815,033) | (6,583,108) | (7,591,823) |
Equity in income (loss) of unconsolidated multifamily entities | (855,136) | (715,572) | (1,631,103) | 407,239 |
Loss from continuing operations | (4,099,685) | (3,530,605) | (8,214,211) | (7,184,584) |
Discontinued operations: | ||||
Income (loss) from discontinued operations | (58,070) | 215,114 | 59,780 | (708,274) |
Gain on disposition of real estate assets | 18,689,058 | 32,887 | 18,689,058 | 6,622,210 |
Net income from discontinued operations | 18,630,988 | 248,001 | 18,748,838 | 5,913,936 |
Net income (loss) | 14,531,303 | (3,282,604) | 10,534,627 | (1,270,648) |
Net (income) loss attributable to noncontrolling interest in properties | 4,724 | (130,281) | (14,808) | (218,306) |
Net (income) loss attributable to noncontrolling interest in Operating Partnership | (12,553,460) | 4,966,475 | (6,998,082) | 4,723,683 |
Net income attributable to the Company | 1,982,567 | 1,553,590 | 3,521,737 | 3,234,729 |
Preferred Stock Dividends, Income Statement Impact | (1,675,194) | (1,675,195) | (3,350,388) | (3,350,389) |
Net income (loss) available to common shareholders | $ 307,373 | $ (121,605) | $ 171,349 | $ (115,660) |
Net loss from continuing operations attributable to the Company per common share, basic and diluted (dollars per share) | $ (13.03) | $ (0.27) | $ (13.21) | $ (4.29) |
Net income from discontinued operations attributable to the Company per common share, basic and diluted (dollars per share) | $ 13.25 | $ 0.18 | $ 13.33 | $ 4.21 |
Net income (loss) available to common shareholders per common share, basic and diluted | $ 0.22 | $ (0.09) | $ 0.12 | $ (0.08) |
Weighted average number of common shares outstanding, basic and diluted (shares) | 1,406,196 | 1,406,196 | 1,406,196 | 1,406,196 |
Investment in Unconsolidated Limited Partnership (Equity Method Investee, Unconsolidated Limited Partnership [Member])
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Equity Method Investee, Unconsolidated Limited Partnership [Member]
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Schedule of Equity Method Investments [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments | INVESTMENT IN UNCONSOLIDATED LIMITED PARTNERSHIP On August 12, 2005, the Company, together with affiliates and other unaffiliated parties, entered into a subscription agreement to invest in the Berkshire Multifamily Value Fund, L.P. (“BVF”), an affiliate of Berkshire Property Advisors, L.L.C. (“Berkshire Advisor” or the “Advisor”). Under the terms of the agreement and the related limited partnership agreement, the Company and its affiliates agreed to invest up to $25,000,000, or approximately 7%, of the total capital of the partnership. The Company’s final commitment under the subscription agreement with BVF totaled $23,400,000. BVF’s investment strategy was to acquire middle-market properties where there is an opportunity to add value through repositioning or rehabilitation. In accordance with ASC 810-10 issued by FASB as amended by ASU 2009-17 related to the consolidation of variable interest entities, the Company has performed an analysis of its investment in BVF to determine whether it would qualify as a variable interest entity (“VIE”) and whether it should be consolidated or accounted for as an equity investment in an unconsolidated joint venture. As a result of the Company’s qualitative assessment to determine whether its investment in BVF is a VIE, the Company determined that the investment is a VIE based upon the fact that the holders of the equity investment at risk lack the power, through voting or similar rights to direct the activities of BVF that most significantly impact BVF’s economic performance. Under the terms of the limited partnership agreement of BVF, the general partner of BVF has the full, exclusive and complete right, power, authority, discretion, obligation and responsibility to make all decisions affecting the business of BVF. After making the determination that its investment in BVF was a VIE, the Company performed an assessment of which partner would be considered the primary beneficiary of BVF and therefore would be required to consolidate BVF’s balance sheets and result of operations. This assessment was based upon which entity (1) had the power to direct matters that most significantly impact the activities of BVF, and (2) had the obligation to absorb losses or the right to receive benefits of BVF that could potentially be significant to the entity based upon the terms of the partnership and management agreements of BVF. As a result of fees paid to an affiliate of the general partner of BVF for asset management and other services, the Company has determined that the general partner of BVF has the obligation to absorb the losses or the right to receive benefits of BVF while retaining the power to make significant decisions for BVF. Based upon this understanding, the Company concluded that the general partner of BVF should consolidate BVF and as such, the Company accounts for its investment in BVF as an equity investment in an unconsolidated joint venture. As of June 30, 2013, the Company had invested 100% of its total committed capital amount of $23,400,000 in BVF for an ownership interest of approximately 7% and had received distributions from BVF of $1,400,150, or approximately 6%, of its committed capital. The summarized statement of assets, liabilities and partners’ capital of BVF is as follows:
The Company evaluates the carrying value of its investment in BVF for impairment periodically and records impairment charges when events or circumstances change indicating that a decline in the fair values below the carrying values has occurred and such decline is other-than-temporary. No such other-than-temporary impairment charges have been recognized during the six months ended June 30, 2013 or twelve months ended December 31, 2012. The summarized statements of operations of BVF for the three and six months ended June 30, 2013 and 2012 are as follows:
The Company has determined that its valuation of the real estate was categorized within Level 3 of the fair value hierarchy in accordance with ASC 820-10, as it utilized significant unobservable inputs in its assessment.
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Multifamily Apartment Communities (Tables)
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Jun. 30, 2013
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MULTIFAMILY APARTMENT COMMUNITIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Real Estate and Accumulated Depreciation | The following summarizes the carrying value of the Company’s multifamily apartment communities:
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Schedule of Discontinued Operations, Income Statement | The operating results of discontinued operations for the three and six months ended June 30, 2013 and 2012 are presented in the following table.
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Noncontrolling Interest in Operating Partnership
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Jun. 30, 2013
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NONCONTROLLING INTEREST IN OPERATING PARTNERSHIP [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling Interest in Operating Partnership | NONCONTROLLING INTEREST IN OPERATING PARTNERSHIP The following table sets forth the calculation of net income (loss) attributable to noncontrolling interest in the Operating Partnership for the three and six months ended June 30, 2013 and 2012:
The following table sets forth a summary of the items affecting the noncontrolling interest in the Operating Partnership:
Distributions of $1,651,800 have been adjusted from Accumulated Deficit to Noncontrolling Interest-Operating Partnership to properly reflect such amounts within the Consolidated Statement of Changes in Deficit for the six months ended June 30, 2012. Management has determined such adjustment to be immaterial to the overall financial statements. As of June 30, 2013 and December 31, 2012, the noncontrolling interest in the Operating Partnership consisted of 5,242,223 Operating Partnership units held by parties other than the Company. |
Investment in Unconsolidated Limited Liability Company : Statement of Operations (Details) (USD $)
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3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Schedule of Equity Method Investments [Line Items] | ||||
Equity in income (loss) of unconsolidated multifamily entities | $ (855,136) | $ (715,572) | $ (1,631,103) | $ 407,239 |
Joint Venture [Member] | Equity Method Investee, Unconsolidated Limited Liability Company [Member]
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Schedule of Equity Method Investments [Line Items] | ||||
Revenue | 873,174 | 0 | 1,282,316 | 0 |
Expenses | (2,242,086) | (317,195) | (3,427,436) | (358,437) |
Noncontrolling interest | 136,891 | 31,720 | 214,512 | 35,844 |
Net income (loss) attributable to investment | (1,232,021) | (285,475) | (1,930,608) | (322,593) |
Equity in income (loss) of unconsolidated multifamily entities | $ (410,674) | $ (95,158) | $ (643,536) | $ (107,531) |
Earnings Per Share (Tables)
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The reconciliation of the basic and diluted earnings per common share for the three and six months ended June 30, 2013 and 2012 follows:
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Investment in Unconsolidated Limited Liability Company (Tables) (Equity Method Investee, Unconsolidated Limited Liability Company [Member])
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Equity Method Investee, Unconsolidated Limited Liability Company [Member]
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Schedule of Equity Method Investments [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments, Summary of Balance Sheet Information | The summarized statement of assets, liabilities and members’ capital of NoMa JV is as follows:
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Equity Method Investments, Summary of Statement of Operations | The summarized statements of operations of NoMa JV for the three and six months ended June 30, 2013 and 2012 are as follows:
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Noncontrolling Interest in Operating Partnership Summary of Noncontrolling Interest (Details) (USD $)
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3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Dec. 31, 2012
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Redeemable Noncontrolling Interest [Line Items] | |||||
Noncontrolling Interest, Ownership Units Held by Noncontrolling Owners | 5,242,223 | 5,242,223 | 5,242,223 | ||
Noncontrolling interest, ownership percentage by noncontrolling partners | 97.61% | 97.61% | 97.61% | 97.61% | |
Net income (loss) attributable to noncontrolling interest in Operating Partnership | $ 12,553,460 | $ (4,966,475) | $ 6,998,082 | $ (4,723,683) | |
Noncontrolling interest in Operating Partnership
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Redeemable Noncontrolling Interest [Line Items] | |||||
Balance at beginning of period | (89,708,267) | ||||
Net income (loss) attributable to noncontrolling interest in Operating Partnership | (4,966,475) | 6,998,082 | (4,723,683) | ||
Distributions | (1,138,750) | (1,651,800) | |||
Balance at end of period | $ (83,848,935) | $ (83,161,301) | $ (83,848,935) | $ (83,161,301) |
Investment in Unconsolidated Limited Partnership : Summarized Balance Sheets (Details) (Joint Venture [Member], Equity Method Investee, Unconsolidated Limited Partnership [Member], USD $)
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Jun. 30, 2013
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Dec. 31, 2012
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Joint Venture [Member] | Equity Method Investee, Unconsolidated Limited Partnership [Member]
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ASSETS | ||||||||
Multifamily apartment communities, net | $ 785,672,423 | $ 807,747,897 | ||||||
Cash and cash equivalents | 16,359,864 | 16,851,009 | ||||||
Other assets | 17,943,144 | 16,927,659 | ||||||
Total assets | 819,975,431 | 841,526,565 | ||||||
LIABILITIES AND PARTNERS' CAPITAL | ||||||||
Mortgage notes payable | 797,247,644 | 800,968,937 | ||||||
Revolving credit facility | 16,300,000 | 16,300,000 | ||||||
Other liabilities | 20,954,771 | 22,050,147 | ||||||
Noncontrolling interest | (12,105,967) | (9,478,084) | ||||||
Partners' capital | (2,421,017) | 11,685,565 | ||||||
Total liabilities and partners' capital | 819,975,431 | 841,526,565 | ||||||
Company's share of partners' capital | 169,489 | (818,078) | ||||||
Basis differential | 604,395 | [1] | 604,395 | [1] | ||||
Carrying value of the Company's investment | 434,906 | [2] | 1,422,473 | [2] | ||||
Equity Method Investment, Difference Between Carrying Amount and Underlying Equity, Syndication Costs | $ 583,240 | $ 583,240 | ||||||
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Revolving Credit Facility - Affiliate (Details) (USD $)
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3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
Affiliated Entity [Member]
Maximum [Member]
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Jun. 30, 2013
Line of Credit [Member]
Affiliated Entity [Member]
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Feb. 17, 2011
Line of Credit [Member]
Affiliated Entity [Member]
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Debt Instrument [Line Items] | |||||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 20,000,000 | $ 40,000,000 | |||||
Line of Credit Facility, Interest Rate Description | 5% above the 30 day LIBOR rate, as announced by Reuter's | ||||||
Line of Credit, Termination Notice Period | 60 days | ||||||
Line of Credit Clean Up Requirement, Consecutive Days | 14 days | ||||||
Line of Credit, Clean Up Period Required | 365 days | ||||||
Line of Credit Facility, Commitment Fee Amount | 400,000 | ||||||
Proceeds from revolving credit facility - affiliate | 1,627,000 | 0 | |||||
Principal payments on revolving credit facility - affiliate | 1,627,000 | 7,349,422 | |||||
Related Party Transaction, Amounts of Transaction | $ 4,197,391 | $ 4,134,036 | $ 8,696,194 | $ 9,756,319 |
Subsequent Events (Details) (USD $)
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3 Months Ended | 6 Months Ended | 0 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Aug. 06, 2013
Subsequent Event [Member]
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Subsequent Event [Line Items] | |||||
Members or Limited Partners, Subsequent Distribution Amount Authorized | $ 12,000,000 | ||||
Common Stock, Dividends, Per Share, Declared | $ 0 | $ 0 | $ 0 | $ 0 | $ 0.203954 |
Multifamily Apartment Communities (Details) (USD $)
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Jun. 30, 2013
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Dec. 31, 2012
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Real Estate Investment Property, Net [Abstract] | ||
Land | $ 60,847,969 | $ 63,749,991 |
Buildings, improvement and personal property | 551,382,808 | 575,074,865 |
Multifamily apartment communities | 612,230,777 | 638,824,856 |
Accumulated depreciation | (229,570,535) | (235,825,752) |
Multifamily apartment communities, net | $ 382,660,242 | $ 402,999,104 |
Investment in Unconsolidated Limited Partnership (Tables) (Equity Method Investee, Unconsolidated Limited Partnership [Member])
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Equity Method Investee, Unconsolidated Limited Partnership [Member]
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Schedule of Equity Method Investments [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments, Summary of Balance Sheet Information | The summarized statement of assets, liabilities and partners’ capital of BVF is as follows:
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Equity Method Investments, Summary of Statement of Operations | The summarized statements of operations of BVF for the three and six months ended June 30, 2013 and 2012 are as follows:
The Company has determined that its valuation of the real estate was categorized within Level 3 of the fair value hierarchy in accordance with ASC 820-10, as it utilized significant unobservable inputs in its assessment.
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Organization and Basis of Presentation
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6 Months Ended |
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Jun. 30, 2013
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ORGANIZATION AND BASIS OF PRESENTATION [Abstract] | |
Organization and Basis of Presentation | ORGANIZATION AND BASIS OF PRESENTATION Berkshire Income Realty, Inc. (the “Company”), a Maryland corporation, was incorporated on July 19, 2002 and 100 Class B common shares were issued upon organization. The Company is in the business of acquiring, owning, operating, developing and rehabilitating multifamily apartment communities. As of June 30, 2013, the Company owned, or had an interest in, 20 multifamily apartment communities consisting of 5,499 total apartment units and one multifamily development project. The Company conducts its business through Berkshire Income Realty-OP, L.P. (the "Operating Partnership"). The Company elected to be treated as a real estate investment trust ("REIT") under Section 856 of the Tax Code (the "Code"), with the filing of its first tax return. As a result, the Company generally is not subject to federal corporate income tax on its taxable income that is distributed to its shareholders. A REIT is subject to a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its annual taxable income. The Company's policy is to make sufficient distributions of its taxable income to meet the REIT distribution requirements. The Company must also meet other operational requirements with respect to its investments, assets and income. The Company monitors these various requirements on a quarterly basis and believes that as of and for the six months ended June 30, 2013 and 2012, it was in compliance on all such requirements. Accordingly, the Company has made no provision for federal income taxes in the accompanying consolidated financial statements. The Company is subject to certain state level taxes based on the location of its properties. Discussion of acquisitions for the six months ended June 30, 2013 The Company did not acquire any properties during the six-month period ended June 30, 2013. Discussion of dispositions for the six months ended June 30, 2013 On June 25, 2013, the Company completed the sale of Walden Pond and Gables of Texas, both located in Houston, Texas, to an unaffiliated buyer. The combined sale price was $31,500,000 and was subject to normal operating prorations and adjustments as provided for in the purchase and sale agreement. Recent Accounting Pronouncements In May 2011, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Update ("ASU") 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. ASU 2011-04 clarifies some existing concepts, eliminates wording differences between accounting principles generally accepted in the United States of America ("GAAP") and International Financial Reporting Standards ("IFRS"), and in some limited cases, changes some principles to achieve convergence between GAAP and IFRS. ASU 2011-04 results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between GAAP and IFRS. ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. ASU 2011-04 became effective for the Company on January 1, 2012. The adoption of ASU 2011-04 did not have a material effect on the Company's operating results, financial position, or disclosures. In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income, which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income, or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of equity. In December 2011, the FASB issued ASU 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05, which deferred the new requirement to present components of reclassifications of other comprehensive income on the face of the income statement. Both ASU 2011-05 and ASU 2011-12 became effective for the Company on January 1, 2012. The adoption of ASU 2011-05 and ASU 2011-12 did not have any effect on the Company's operating results, financial position, or disclosures. Unaudited interim consolidated financial statements The accompanying interim consolidated financial statements of the Company are unaudited; however, the consolidated financial statements have been prepared in accordance with GAAP for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair statement for the interim periods have been included. The results of operations for the interim periods are not necessarily indicative of the results to be obtained for other interim periods or for the full fiscal year. The interim financial statements and notes thereto should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. Consolidated Statements of Comprehensive Income (Loss) For the six months ended June 30, 2013 and 2012, comprehensive income (loss) equaled net income (loss). Therefore, the Consolidated Statement of Comprehensive Income and Loss required to be presented has been omitted from the consolidated financial statements. Reclassifications Certain prior period balances have been reclassified in order to conform to the current period presentation. Out of period adjustment During the third quarter of fiscal 2012, the Company recorded out of period adjustments that (i) decreased interest expense by an aggregate of $341,368 to reflect additional capitalization of interest relating to the three month periods ended March 31, 2012 and June 30, 2012 of $154,356 and $187,012, respectively, and (ii) reduced incentive advisory fees expense by $90,235 relating to an over accrual for such expenses during the three month period ended June 30, 2012. The cumulative effect of out of period adjustments for the year ended December 31, 2012 was a $431,603 decrease in the net loss. The Company has determined that these adjustments did not have an impact on any prior annual period and were not material to any prior interim periods, and the resulting correction is not material. Distributions of $1,651,800 have been adjusted from Accumulated Deficit to Noncontrolling Interest-Operating Partnership to properly reflect such amounts within the Consolidated Statement of Changes in Deficit for the six months ended June 30, 2012. Management has determined such adjustment to be immaterial to the overall financial statements. |
Investment in Unconsolidated Limited Liability Company (Equity Method Investee, Unconsolidated Limited Liability Company [Member])
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Equity Method Investee, Unconsolidated Limited Liability Company [Member]
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Schedule of Equity Method Investments [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments | INVESTMENT IN UNCONSOLIDATED LIMITED LIABILITY COMPANY On March 2, 2011, the Operating Partnership executed an agreement with Berkshire Multifamily Value Fund II ("BVF-II"), an affiliated entity, to create a joint venture, BIR/BVF-II NoMa JV, L.L.C. ("NoMa JV"), to participate in and take an ownership position in a real estate development project. BVF-II is the managing member of NoMa JV and has a percentage ownership interest of approximately 67% while the Operating Partnership has a percentage ownership interest of approximately 33%. Also on March 2, 2011, NoMa JV acquired a 90% interest in NOMA Residential West I, LLC. (“NOMA Residential”). NOMA Residential has developed and is operating a 603-unit multifamily apartment community in Washington, D.C. (the "NoMa Project"). The remaining 10% interest in NOMA Residential is owned by the developer, an unrelated third party (the “NoMa Developer”). The governing agreements for NOMA Residential give the NoMa Developer the authority to manage the construction and development of, and subsequent to completion, the day-to-day operations of NOMA Residential. The agreement also provides for fees to the NoMa Developer, limits the authority of the NoMa Developer and provides for distributions based on percentage interest and thereafter in accordance with achievement of economic hurdles. The NoMa Project was completed as of June 30, 2013. In accordance with ASC 810-10, as amended by ASU 2009-17, related to the consolidation of variable interest entities, the Company has performed an analysis of its investment in NoMa JV to determine whether it would qualify as a VIE and whether it should be consolidated or accounted for as an equity investment in an unconsolidated joint venture. As a result of the Company's qualitative assessment to determine whether its investment is a VIE, the Company determined that the investment is a VIE based upon the holders of the equity investment at risk lacking the power, through voting rights or similar rights to direct the activities of the entity that most significantly impact the entity's economic performance. Under the terms of the limited liability company agreement of NoMa JV, the managing member has the full, exclusive and complete right, power, authority, discretion, obligation and responsibility to make all decisions affecting the business of NoMa JV. After making the determination that its investment in NoMa JV was a VIE, the Company performed an assessment of which partner would be considered the primary beneficiary of NoMa JV and would be required to consolidate the VIE's balance sheet and results of operations. This assessment was based upon which entity (1) had the power to direct matters that most significantly impact the activities of NoMa JV, and (2) had the obligation to absorb losses or the right to receive benefits of NoMa JV that could potentially be significant to the VIE based upon the terms of the partnership and management agreements of NoMa JV. Because the managing member owns two-thirds of the entity and all profits and losses are split pro-rata in accordance with capital accounts, the Company has determined that the managing member has the obligation to absorb the losses or the right to receive benefits of the VIE while retaining the power to make significant decisions for NoMa JV. Based upon this understanding, the Company concluded that the managing member should consolidate NoMa JV and as such, the Company accounts for its investment in NoMa JV as an equity investment in an unconsolidated joint venture. As of June 30, 2013, the Company had invested 100% of its total committed capital amount of $14,520,000 in NoMa JV for an ownership interest of approximately 33% and had recorded $1,710,327 of capitalized interest on the investment. The Company's maximum exposure to loss in NoMa JV is its investment of capital of $14,520,000. The summarized statement of assets, liabilities and members’ capital of NoMa JV is as follows:
The Company evaluates the carrying value of its investment in NoMa JV for impairment periodically and records impairment charges when events or circumstances change indicating that a decline in the fair values below the carrying values has occurred and such decline is other-than-temporary. No such other-than-temporary impairment charges have been recognized during the six months ended June 30, 2013 or twelve months ended December 31, 2012. The summarized statements of operations of NoMa JV for the three and six months ended June 30, 2013 and 2012 are as follows:
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Multifamily Apartment Communities
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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MULTIFAMILY APARTMENT COMMUNITIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Multifamily Apartment Communities | MULTIFAMILY APARTMENT COMMUNITIES The following summarizes the carrying value of the Company’s multifamily apartment communities:
The Company accounts for its acquisitions of investments in real estate in accordance with Accounting Standards Codification ("ASC") 805-10, which requires the fair value of the real estate acquired to be allocated to the acquired tangible assets, consisting of land, building, furniture, fixtures and equipment and identified intangible assets and liabilities, consisting of the value of the above-market and below-market leases, the value of in-place leases and the value of other tenant relationships, based in each case on their fair values. The value of in-place leases and tenant relationships is determined based on the specific expiration dates of the in-place leases and amortized over a period of 12 months and the tenant relationships are based on the straight-line method of amortization over a 24-month period. The Company evaluated the carrying value of its multifamily apartment communities for impairment pursuant to ASC 360-10. The Company did not record an impairment adjustment during the six months ended June 30, 2013 or twelve months ended December 31, 2012. Discontinued Operations On March 23, 2012, the Company completed the sale of Riverbirch, a 210-unit multifamily apartment community located in Charlotte, North Carolina, to an unaffiliated buyer. The sale price of Riverbirch was $14,200,000 and was subject to normal operating prorations and adjustments as provided for in the purchase and sale agreement. On November 5, 2012, the Company completed the sale of Silver Hill and Arboretum, both located in Newport News, Virginia, to an unaffiliated buyer. The combined sale price was $25,425,000 and was subject to normal operating prorations and adjustments as provided for in the purchase and sale agreement. On November 30, 2012, the Company completed the sale of Arrowhead and Moorings, both located in Chicago, Illinois, to an unaffiliated buyer. The combined total sale price was $37,000,000 and was subject to normal operating prorations and adjustments as provided for in the purchase and sale agreement. On June 25, 2013, the Company completed the sale of Walden Pond and Gables of Texas, both located in Houston, Texas, to an unaffiliated buyer. The combined sale price was $31,500,000 and was subject to normal operating prorations and adjustments as provided for in the purchase and sale agreement. The results of operations for Arboretum, Arrowhead, Gables of Texas, Moorings, Riverbirch, Silver Hill and Walden Pond have been restated and are presented as results from discontinued operations in the Consolidated Statement of Operations for the three and six months ended June 30, 2013 and 2012, respectively, pursuant to ASC 205-20. The operating results of discontinued operations for the three and six months ended June 30, 2013 and 2012 are presented in the following table.
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Note Payable - Other (Details) (USD $)
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0 Months Ended | ||
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Jun. 12, 2012
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Jun. 30, 2013
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Dec. 31, 2012
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Debt Instrument [Line Items] | |||
Note payable - other | $ 1,250,000 | $ 1,250,000 | |
Zocalo [Member]
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Debt Instrument [Line Items] | |||
Debt Instrument, Borrowing Capacity, Amount | 1,250,000 | ||
2020 Lawrence [Member]
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Debt Instrument [Line Items] | |||
Debt Instrument, Payment Period | 10 years | ||
Debt Instrument, Interest Rate, Stated Percentage | 5.00% | ||
Debt Instrument, Maturity Date | Jun. 11, 2022 | ||
Notes Payable, Fair Value Disclosure | $ 1,312,000 | $ 1,357,000 |
Noncontrolling Interest in Operating Partnership (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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NONCONTROLLING INTEREST IN OPERATING PARTNERSHIP [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Calculation of Noncontrolling Interest | The following table sets forth the calculation of net income (loss) attributable to noncontrolling interest in the Operating Partnership for the three and six months ended June 30, 2013 and 2012:
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Schedule of Noncontrolling Interest | The following table sets forth a summary of the items affecting the noncontrolling interest in the Operating Partnership:
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Multifamily Apartment Communities : Discontinued Operations (Details) (USD $)
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3 Months Ended | 6 Months Ended | 0 Months Ended | |||||
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Jun. 30, 2013
apartments
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Jun. 30, 2012
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Jun. 30, 2013
apartments
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Jun. 30, 2012
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Mar. 23, 2012
Riverbirch [Member]
apartments
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Nov. 05, 2012
Silver Hill & Arboretum [Member]
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Nov. 30, 2012
Arrowhead & Moorings [Member]
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Jun. 25, 2013
Walden and Gables [Member]
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Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||
Number of Units in Real Estate Property | 5,499 | 5,499 | 210 | |||||
Gross selling price | $ 31,500,000 | $ 14,200,000 | $ 14,200,000 | $ 25,425,000 | $ 37,000,000 | $ 31,500,000 | ||
Revenue: | ||||||||
Rental | 991,853 | 2,918,236 | 2,015,158 | 6,161,211 | ||||
Utility reimbursement | 145,684 | 146,285 | 230,542 | 316,918 | ||||
Other | 114,868 | 148,999 | 245,234 | 298,870 | ||||
Total revenue | 1,252,405 | 3,213,520 | 2,490,934 | 6,776,999 | ||||
Expenses: | ||||||||
Operating | 406,878 | 948,734 | 773,382 | 2,116,073 | ||||
Maintenance | 57,009 | 212,557 | 129,122 | 453,044 | ||||
Real estate taxes | 130,398 | 344,430 | 265,522 | 717,540 | ||||
General and administrative | 22,822 | 27,840 | 31,663 | 20,135 | ||||
Management fees | 48,115 | 128,149 | 94,550 | 263,044 | ||||
Depreciation | 302,285 | 788,901 | 605,122 | 1,725,625 | ||||
Interest, inclusive of deferred financing fees | 339,161 | 547,795 | 527,986 | 2,148,999 | ||||
Loss on extinguishment of debt | 3,807 | 0 | 3,807 | 40,813 | ||||
Total expenses | 1,310,475 | 2,998,406 | 2,431,154 | 7,485,273 | ||||
Income (loss) from discontinued operations | $ (58,070) | $ 215,114 | $ 59,780 | $ (708,274) |
Investment in Unconsolidated Limited Liability Company : Summarized Balance Sheets (Details) (Joint Venture [Member], Equity Method Investee, Unconsolidated Limited Liability Company [Member], USD $)
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Jun. 30, 2013
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Dec. 31, 2012
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Joint Venture [Member] | Equity Method Investee, Unconsolidated Limited Liability Company [Member]
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ASSETS | ||||||||
Multifamily apartment communities, net | $ 128,732,908 | $ 114,349,590 | ||||||
Cash and cash equivalents | 1,168,138 | 565,453 | ||||||
Other assets | 652,670 | 738,983 | ||||||
Total assets | 130,553,716 | 115,654,026 | ||||||
LIABILITIES AND PARTNERS' CAPITAL | ||||||||
Mortgage notes payable | 75,426,077 | 63,413,844 | ||||||
Other liabilities | 10,451,759 | 5,419,184 | ||||||
Noncontrolling interest | 4,467,588 | 4,682,100 | ||||||
Partners' capital | 40,208,292 | 42,138,898 | ||||||
Total liabilities and partners' capital | 130,553,716 | 115,654,026 | ||||||
Company's share of partners' capital | (13,402,763) | (14,046,299) | ||||||
Basis differential | 1,710,327 | [1] | 1,405,152 | [1] | ||||
Carrying value of the Company's investment | $ 15,113,090 | [2] | $ 15,451,451 | [2] | ||||
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