UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to ______
Commission File Number
(Exact name of registrant as specified in its charter)
| ||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
|
|
|
| ||
(Address of principal executive offices) |
| (Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class |
| Trading Symbol |
| Name of each exchange on which registered |
Securities registered pursuant to Section 12(g) of the Exchange Act:
Title of each class |
Series B Redeemable Preferred Stock, $0.01 par value per share |
Warrants to Purchase Shares of Class A Common Stock, $0.01 par value per share |
Series T Redeemable Preferred Stock, $0.01 par value per share |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer | ☐ | ☒ | Non-Accelerated Filer | ☐ | |
Smaller reporting company | Emerging growth company |
|
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Number of shares outstanding of the registrant’s
classes of common stock, as of November 2, 2021:
Class A Common Stock:
Class C Common Stock:
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
FORM 10-Q
September 30, 2021
2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited) | ||||||
September 30, | December 31, | |||||
| 2021 |
| 2020 | |||
ASSETS |
|
|
|
| ||
Net Real Estate Investments |
|
|
|
| ||
Land | $ | | $ | | ||
Buildings and improvements |
| |
| | ||
Furniture, fixtures and equipment |
| |
| | ||
Total Gross Real Estate Investments |
| |
| | ||
Accumulated depreciation |
| ( |
| ( | ||
Total Net Operating Real Estate Investments | | | ||||
Operating real estate held for sale, net | — | | ||||
Total Net Real Estate Investments |
| |
| | ||
Cash and cash equivalents |
| |
| | ||
Restricted cash |
| |
| | ||
Notes and accrued interest receivable, net |
| |
| | ||
Due from affiliates |
| |
| | ||
Accounts receivable, prepaids and other assets, net |
| |
| | ||
Preferred equity investments and investments in unconsolidated real estate joint ventures, net |
| |
| | ||
In-place lease intangible assets, net |
| |
| | ||
Non-real estate assets associated with operating real estate held for sale | — | | ||||
Total Assets | $ | | $ | | ||
LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY |
|
|
|
| ||
Mortgages payable | $ | | $ | | ||
Mortgages payable associated with operating real estate held for sale | — | | ||||
Revolving credit facilities |
| — |
| | ||
Accounts payable | | | ||||
Other accrued liabilities |
| |
| | ||
Due to affiliates |
| |
| | ||
Distributions payable |
| |
| | ||
Liabilities associated with operating real estate held for sale |
| — |
| | ||
Total Liabilities | |
| | |||
| — |
| | |||
| |
| | |||
| |
| | |||
| | |||||
Equity |
|
|
|
| ||
Stockholders’ Equity |
|
|
|
| ||
Preferred stock, $ |
| |
| |||
| |
| | |||
Common stock - Class A, $ |
| |
| | ||
Common stock - Class C, $ |
| |
| | ||
Additional paid-in-capital |
| |
| | ||
Distributions in excess of cumulative earnings |
| ( |
| ( | ||
Total Stockholders’ Equity |
| |
| | ||
Noncontrolling Interests |
|
|
|
| ||
Operating Partnership units |
| |
| ( | ||
Partially owned properties |
| |
| | ||
Total Noncontrolling Interests |
| |
| | ||
Total Equity |
| |
| | ||
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY | $ | $ |
See Notes to Consolidated Financial Statements
3
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except share and per share amounts)
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Revenues |
|
|
|
|
|
|
| |||||
Rental and other property revenues | $ | | $ | | $ | | $ | | ||||
Interest income from loan and ground lease investments |
| |
| |
| |
| | ||||
Total revenues |
| |
| |
| |
| | ||||
Expenses |
|
|
|
|
|
|
|
| ||||
Property operating |
| |
| |
| |
| | ||||
Property management fees |
| |
| |
| |
| | ||||
General and administrative |
| |
| |
| |
| | ||||
Acquisition and pursuit costs |
| |
| |
| |
| | ||||
Weather-related losses, net |
| |
| |
| |
| — | ||||
Depreciation and amortization |
| |
| |
| |
| | ||||
Total expenses |
| |
| |
| |
| | ||||
Operating income |
| |
| |
| |
| | ||||
Other income (expense) |
|
|
|
|
|
|
|
| ||||
Other income |
| |
| |
| |
| | ||||
Preferred returns on unconsolidated real estate joint ventures |
| |
| |
| |
| | ||||
Provision for credit losses | ( | | ( | — | ||||||||
Gain on sale of real estate investments |
| |
| |
| |
| | ||||
Loss on extinguishment of debt and debt modification costs |
| ( |
| |
| ( |
| ( | ||||
Interest expense, net |
| ( |
| ( |
| ( |
| ( | ||||
Total other income (expense) |
| |
| ( |
| |
| | ||||
Net income (loss) |
| |
| ( |
| |
| | ||||
Preferred stock dividends |
| ( |
| ( |
| ( |
| ( | ||||
Preferred stock accretion |
| ( |
| ( |
| ( |
| ( | ||||
Net income (loss) attributable to noncontrolling interests |
|
|
|
|
|
|
| |||||
Operating Partnership units |
| |
| ( |
| |
| ( | ||||
Partially owned properties |
| |
| ( |
| |
| | ||||
Net income (loss) attributable to noncontrolling interests |
| |
| ( |
| |
| ( | ||||
Net income (loss) attributable to common stockholders | $ | | $ | ( | $ | | $ | ( | ||||
| ||||||||||||
Net income (loss) per common share - Basic | $ | | $ | ( | $ | | $ | ( | ||||
Net income (loss) per common share – Diluted | $ | | $ | ( | $ | | $ | ( | ||||
| ||||||||||||
Weighted average basic common shares outstanding |
| |
| |
| |
| | ||||
Weighted average diluted common shares outstanding |
| |
| |
| |
| |
See Notes to Consolidated Financial Statements
4
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)
(In thousands, except share and per share amounts)
Class A Common Stock | Class C Common Stock | Series D Preferred Stock | ||||||||||||||||||||||||||||
Additional | ||||||||||||||||||||||||||||||
Number of | Number of | Number of | Paid- | Cumulative | Net Income | Noncontrolling | ||||||||||||||||||||||||
Shares | Par Value | Shares | Par Value | Shares | Value | in Capital | Distributions | to Stockholders | Interests | Total Equity | ||||||||||||||||||||
Balance, July 1, 2021 |
| | $ | |
| | $ | |
| | $ | |
| $ | | $ | ( | $ | | $ | | $ | | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Issuance of Class A common stock, net |
| |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| — |
| — |
| | ||||||||
Issuance of Class A common stock due to Series B warrant exercise | | | — | — | — | — | | — | — | — | | |||||||||||||||||||
Repurchase of Class A common stock |
| ( |
| ( |
| — |
| — |
| — |
| — |
| ( |
| — |
| — |
| — |
| ( | ||||||||
Issuance of restricted Class A common stock, net of shares withheld for employee taxes | — | — | — | — | — | — | | — | — | — | | |||||||||||||||||||
Issuance of Long-Term Incentive Plan (“LTIP”) Units for executive salaries |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| | ||||||||
Vesting of LTIP Units for compensation | — | — | — | — | — | — | — | — | — | | | |||||||||||||||||||
Issuance of LTIP Units for expense reimbursements | — | — | — | — | — | — | — | — | — | | | |||||||||||||||||||
Common stock distributions declared |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| — |
| — |
| ( | ||||||||
Series B Preferred Stock distributions declared |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| — |
| — |
| ( | ||||||||
Series B Preferred Stock accretion | — | — | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||
Series C Preferred Stock distributions declared | — | — | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||
Series C Preferred Stock accretion |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| — |
| — |
| ( | ||||||||
Series D Preferred Stock distributions declared | — | — | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||
Series T Preferred Stock distributions declared |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| — |
| — |
| ( | ||||||||
Series T Preferred Stock accretion |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| — |
| — |
| ( | ||||||||
Distributions to Operating Partnership noncontrolling interests |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||||
Distributions to partially owned noncontrolling interests |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||||
Holder redemptions of Series T Preferred Stock and conversion into Class A common stock |
| |
| |
| — |
| — |
| — |
| — |
| |
| — |
| — |
| — |
| | ||||||||
Holder redemptions of Series B Preferred Stock and conversion into Class A common stock | | — | — | — | — | — | | — | — | — | | |||||||||||||||||||
Contributions from noncontrolling interests |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| | ||||||||
Series B warrant activity and expiration, net |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| — |
| — |
| — |
| ( | ||||||||
Adjustment for noncontrolling interest ownership in Operating Partnership |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| — |
| ( |
| — | ||||||||
Net income |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| |
| | ||||||||
Balance, September 30, 2021 |
| | $ | |
| | $ | |
| | $ | |
| $ | | $ | ( | $ | | $ | | $ | |
See Notes to Consolidated Financial Statements
5
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)
(In thousands, except share and per share amounts)
Class A Common Stock | Class C Common Stock | Series D Preferred Stock | ||||||||||||||||||||||||||||
Additional | ||||||||||||||||||||||||||||||
Number of | Number of | Number of | Paid- | Cumulative | Net Income | Noncontrolling | ||||||||||||||||||||||||
| Shares |
| Par Value |
| Shares |
| Par Value |
| Shares |
| Value |
| in Capital |
| Distributions |
| to Stockholders |
| Interests |
| Total Equity | |||||||||
Balance, July 1, 2020 | | $ | |
| | $ | |
| | $ | |
| $ | | $ | ( | $ | | $ | | $ | | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Issuance of Class A common stock, net |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| — |
| | ||||||||
Repurchase of Class A common stock | ( | ( | | | | | ( | | | — | ( | |||||||||||||||||||
Vesting of LTIP Units for compensation |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||
Vesting of restricted Class A common stock | | | | | | | | | | — | | |||||||||||||||||||
Issuance of LTIP Units for expense and capitalized cost reimbursements | | | | | | | | | | | | |||||||||||||||||||
Issuance of LTIP Units for executive salaries |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||
Common stock distributions declared |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| — |
| ( | ||||||||
Series A Preferred Stock distributions declared |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| — |
| ( | ||||||||
Series A Preferred Stock accretion |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| — |
| ( | ||||||||
Company redemption of Series A Preferred Stock |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| — |
| ( | ||||||||
Series B Preferred Stock distributions declared |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| — |
| ( | ||||||||
Series B Preferred Stock accretion |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| — |
| ( | ||||||||
Series C Preferred Stock distributions declared | | | | | | | | ( | | — | ( | |||||||||||||||||||
Series C Preferred Stock accretion |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| — |
| ( | ||||||||
Series D Preferred Stock distributions declared |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| — |
| ( | ||||||||
Series T Preferred Stock distributions declared |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| — |
| ( | ||||||||
Series T Preferred Stock accretion |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| — |
| ( | ||||||||
Distributions to Operating Partnership noncontrolling interests |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| ( |
| ( | ||||||||
Distributions to partially owned noncontrolling interests |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| ( |
| ( | ||||||||
Holder redemptions of Series B Preferred Stock and conversion into Class A common stock | | | | | | | | | | — | | |||||||||||||||||||
Holder redemptions of Series T Preferred Stock and conversion into Class A common stock | | | | | | | | | | — | | |||||||||||||||||||
Contributions from noncontrolling interests | | | | | | | | | | | | |||||||||||||||||||
Adjustment for noncontrolling interest ownership in Operating Partnership |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| ( |
| | ||||||||
Net income (loss) | | | | | | | | | | ( | ( | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Balance, September 30, 2020 |
| | $ | |
| | $ | |
| | $ | |
| $ | | $ | ( | $ | | $ | | $ | |
See Notes to Consolidated Financial Statements
6
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)
(In thousands, except share and per share amounts)
Class A Common Stock | Class C Common Stock | Series D Preferred Stock | ||||||||||||||||||||||||||||
Additional | ||||||||||||||||||||||||||||||
Number of | Number of | Number of | Paid- | Cumulative | Net Income | Noncontrolling | ||||||||||||||||||||||||
| Shares |
| Par Value |
| Shares |
| Par Value |
| Shares |
| Value |
| in Capital |
| Distributions |
| to Stockholders |
| Interests |
| Total Equity | |||||||||
Balance, January 1, 2021 | | $ | | | $ | | | $ | | $ | | $ | ( | $ | | $ | | $ | | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Issuance of Class A common stock, net |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||
Issuance costs for Class A common stock ATM |
| |
| |
| |
| |
| |
| |
| ( |
| |
| |
| |
| ( | ||||||||
Issuance of Class A common stock due to Series B warrant exercise |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||
Repurchase of Class A common stock | ( | ( | | | | | ( | | | | ( | |||||||||||||||||||
Issuance of restricted Class A common stock, net of shares withheld for employee taxes | | | | | | | | | | | | |||||||||||||||||||
Issuance of LTIP Units for director compensation | | | | | | | | | | | | |||||||||||||||||||
Issuance of LTIP Units for executive bonuses |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||
Issuance of LTIP Units for executive salaries | | | | | | | | | | | | |||||||||||||||||||
Vesting of LTIP Units for compensation |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | | |||||||||
Issuance of LTIP Units for expense reimbursements | | | | | | | | | | | | |||||||||||||||||||
Common stock distributions declared | | | | | | | | ( | | | ( | |||||||||||||||||||
Series A Preferred Stock distributions declared | | | | | | | | ( | | | ( | |||||||||||||||||||
Series A Preferred Stock accretion | | | | | | | | ( | | | ( | |||||||||||||||||||
Company redemption of Series A Preferred Stock accretion |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| |
| ( | ||||||||
Series B Preferred Stock distributions declared |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| |
| ( | ||||||||
Series B Preferred Stock accretion | | | | | | | | ( | | | ( | |||||||||||||||||||
Series C Preferred Stock distributions declared | | | | | | | | ( | | | ( | |||||||||||||||||||
Series C Preferred Stock accretion | | | | | | | | ( | | | ( | |||||||||||||||||||
Series D Preferred Stock distributions declared |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| |
| ( | ||||||||
Series T Preferred Stock distributions declared |
| | | | | | | |
| ( |
| |
| |
| ( | ||||||||||||||
Series T Preferred Stock accretion |
| | | | | | | |
| ( |
| |
| |
| ( | ||||||||||||||
Distributions to Operating Partnership noncontrolling interests | | | | | | | | | | ( | ( | |||||||||||||||||||
Distributions to partially owned noncontrolling interests |
| | | | | | | |
| |
| |
| ( |
| ( | ||||||||||||||
Conversion of Operating Partnership Units into Class A common stock |
| | | | | | | ( |
| |
| |
| |
| | ||||||||||||||
Redemption of Operating Partnership Units |
| | | | | | | ( |
| |
| |
| ( |
| ( | ||||||||||||||
Holder redemptions of Series T Preferred Stock and conversion into Class A common stock |
| | | | | | | |
| |
| |
| |
| | ||||||||||||||
Holder redemptions of Series B Preferred Stock and conversion into Class A common stock |
| | | | | | | |
| |
| |
| |
| | ||||||||||||||
Company redemptions of Series B Preferred Stock and conversion into Class A common stock | | | | | | | | | | | | |||||||||||||||||||
Company redemption of Series A Preferred Stock activity | | | | | | | | | | | | |||||||||||||||||||
Series B warrant activity and expiration, net |
| | | | | | | ( |
| |
| |
| |
| ( | ||||||||||||||
Contributions from noncontrolling interests |
| | | | | | | |
| |
| |
| |
| | ||||||||||||||
Adjustment for noncontrolling interest ownership in Operating Partnership |
| | | | | | | ( |
| |
| |
| |
| | ||||||||||||||
Net income |
| | | | | | | |
| |
| |
| |
| | ||||||||||||||
Balance, September 30, 2021 |
| | $ | |
| | $ | |
| | $ | | $ | | $ | ( | $ | | $ | | $ | |
7
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)
(In thousands, except share and per share amounts)
Class A Common Stock | Class C Common Stock | Series D Preferred Stock | ||||||||||||||||||||||||||||
Additional | ||||||||||||||||||||||||||||||
Number of | Number of | Number of | Paid- | Cumulative | Net Income | Noncontrolling | ||||||||||||||||||||||||
| Shares |
| Par Value |
| Shares |
| Par Value |
| Shares |
| Value |
| in Capital |
| Distributions |
| to Stockholders |
| Interests |
| Total Equity | |||||||||
Balance, January 1, 2020 | | $ | | | $ | | | $ | | $ | | $ | ( | $ | | $ | | $ | | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Issuance of Class A common stock, net |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||
Issuance of Class A common stock due to Series B warrant exercise | | | | | | | | | | | | |||||||||||||||||||
Issuance of Class A common stock for executive salaries | | | | | | | | | | | | |||||||||||||||||||
Repurchase of Class A common stock |
| ( |
| ( |
| |
| |
| |
| |
| ( |
| |
| |
| |
| ( | ||||||||
Repurchase of Series A, Series C and/or Series D Preferred Stock | | | | | ( | ( | | | | ( | ||||||||||||||||||||
Issuance of restricted Class A common stock, net of shares withheld for employee taxes | | | | | | | |
| |
| |
|
| | ||||||||||||||||
Issuance of LTIP Units for director compensation | | | | | | | | | | | | |||||||||||||||||||
Issuance of LTIP Units for executive bonuses | | | | | | | | | | | | |||||||||||||||||||
Issuance of LTIP Units for executive salaries |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||
Vesting of LTIP Units for compensation | | | | | | | | | | | | |||||||||||||||||||
Issuance of LTIP Units for expense and capitalized cost reimbursements |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||
Common stock distributions declared |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| | ( | |||||||||
Series A Preferred Stock distributions declared |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| |
| ( | ||||||||
Series A Preferred Stock accretion |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| |
| ( | ||||||||
Company redemption of Series A Preferred Stock |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| |
| ( | ||||||||
Series B Preferred Stock distributions declared |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| |
| ( | ||||||||
Series B Preferred Stock accretion |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| |
| ( | ||||||||
Series C Preferred Stock distributions declared |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| |
| ( | ||||||||
Series C Preferred Stock accretion |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| |
| ( | ||||||||
Series D Preferred Stock distributions declared |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| |
| ( | ||||||||
Series T Preferred Stock distributions declared |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| |
| ( | ||||||||
Series T Preferred Stock accretion |
| |
| |
| |
| |
| |
| |
| |
| ( |
| |
| |
| ( | ||||||||
Distributions to Operating Partnership noncontrolling interests | | | | | | | | | | ( | ( | |||||||||||||||||||
Distributions to partially owned noncontrolling interests | | | | | | | | | | ( | ( | |||||||||||||||||||
Conversion of Operating Partnership Units into Class A common stock |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| ( |
| | ||||||||
Holder redemptions of Series B Preferred Stock and conversion into Class A common stock |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||
Company redemptions of Series B Preferred Stock and conversion into Class A common stock | | | | | | | | | | | | |||||||||||||||||||
Holder redemptions of Series T Preferred Stock and conversion into Class A common stock |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||
Cash redemption of Series B Preferred Stock | | | | | | | | | | | | |||||||||||||||||||
Contributions from noncontrolling interests | | | | | | | | | | | | |||||||||||||||||||
Series B warrant activity and exercise, net | | | | | | | ( | | | | ( | |||||||||||||||||||
Transfer of noncontrolling interest to controlling interest | | | | | | | | | | ( | ( | |||||||||||||||||||
Acquisition of noncontrolling interest |
| |
| |
| |
| |
| |
| |
| ( |
| |
| |
| |
| ( | ||||||||
Adjustment for noncontrolling interest ownership in Operating Partnership | | | | | | | | | | ( | | |||||||||||||||||||
Net income (loss) | | | | | | | | | | ( | | |||||||||||||||||||
Balance, September 30, 2020 |
| | $ | |
| | $ | |
| | $ | | $ | | $ | ( | $ | | $ | | $ | |
8
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Nine Months Ended | ||||||
September 30, | ||||||
| 2021 |
| 2020 | |||
Cash flows from operating activities | ||||||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation and amortization | | | ||||
Amortization of fair value adjustments | ( | ( | ||||
Preferred returns on unconsolidated real estate joint ventures | ( | ( | ||||
Gain on sale of real estate investments | ( | ( | ||||
Loss on extinguishment of debt and debt modification costs | | | ||||
Provision for credit losses | | |||||
Amortization of deferred interest income on mezzanine loan | ||||||
Distributions of income and preferred returns from preferred equity investments and unconsolidated real estate joint ventures | | | ||||
Share-based compensation attributable to equity incentive plan | | | ||||
Share-based compensation attributable to executive salaries | | | ||||
Share-based compensation attributable to restricted stock grants | | | ||||
Share-based expense to BRE – LTIP Units | | | ||||
Changes in operating assets and liabilities: |
| |||||
Due to affiliates, net | | | ||||
Accounts receivable, prepaids and other assets | ( | ( | ||||
Notes and accrued interest receivable | ( | | ||||
Accounts payable and other accrued liabilities | | | ||||
Net cash provided by operating activities | | | ||||
Cash flows from investing activities: | ||||||
Acquisitions of real estate investments | ( | ( | ||||
Capital expenditures | ( | ( | ||||
Investment in notes receivable and ground lease | ( | ( | ||||
Repayments on notes receivable | | | ||||
Proceeds from sale of real estate investments | | | ||||
Proceeds from sale and redemption of unconsolidated real estate joint ventures | | | ||||
Purchase of interests from noncontrolling interests | — | ( | ||||
Investment in unconsolidated real estate joint venture interests | ( | ( | ||||
Net cash provided by investing activities | | | ||||
Cash flows from financing activities: | ||||||
Distributions to common stockholders | ( | ( | ||||
Distributions to noncontrolling interests | ( | ( | ||||
Distributions to preferred stockholders | ( | ( | ||||
Contributions from noncontrolling interests | | | ||||
Borrowings on mortgages payable | | | ||||
Repayments on mortgages payable including prepayment penalties | ( | ( | ||||
Proceeds from credit facilities | | | ||||
Repayments on credit facilities | ( | ( | ||||
Payments of deferred financing fees | ( | ( | ||||
Net proceeds from issuance of Class A common stock | | | ||||
Miscellaneous issuance costs | ( | |||||
Repurchase of Class A common stock | ( | ( | ||||
Shares withheld for employee taxes upon vesting of awards | ( | ( | ||||
Redemption of | ( | | ||||
Repurchase of Series A, Series C and/or Series D Preferred Stock | | ( | ||||
Retirement of | ( | ( | ||||
Net proceeds from exercise of Warrants associated with the | | | ||||
Net proceeds from issuance of | | | ||||
Retirement of | ( | ( | ||||
Payments to redeem | ( | |||||
Payments to redeem | ( | ( | ||||
Payments to redeem Operating Partnership Units | ( | |||||
Net cash (used in) provided by financing activities | ( | | ||||
Net increase in cash, cash equivalents and restricted cash | $ | | $ | | ||
Cash, cash equivalents and restricted cash, beginning of year | | | ||||
Cash, cash equivalents and restricted cash, end of period | $ | | $ | | ||
Reconciliation of cash, cash equivalents and restricted cash | ||||||
Cash and cash equivalents | $ | | $ | | ||
Restricted cash | | | ||||
Total cash, cash equivalents and restricted cash, end of period | $ | | $ | | ||
Supplemental disclosure of cash flow information | ||||||
Cash paid for interest (net of interest capitalized) | $ | | $ | | ||
Supplemental disclosure of non-cash investing and financing activities | ||||||
Distributions payable - declared and unpaid | $ | | $ | | ||
Mortgages assumed upon property acquisition | $ | | $ | | ||
Mortgages assumed by buyer upon sale of real estate assets | $ | ( | $ | |||
Capital expenditures held in accounts payable and other accrued liabilities | $ | | $ | ( |
See Notes to Consolidated Financial Statements
9
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Organization and Nature of Business
Bluerock Residential Growth REIT, Inc. (the “Company”) was incorporated as a Maryland corporation on July 25, 2008. The Company’s objective is to maximize long-term stockholder value by acquiring and developing well-located institutional-quality multifamily apartment communities and single-family residential homes in knowledge economy growth markets across the United States. The Company seeks to maximize returns through investments where it believes it can drive substantial growth in its core funds from operations and net asset value primarily through its Value-Add and Invest-to-Own investment strategies.
As of September 30, 2021, the Company held an aggregate of
The Company has elected to be treated, and currently qualifies, as a real estate investment trust (“REIT”) for federal income tax purposes. As a REIT, the Company generally is not subject to corporate-level income taxes. To maintain its REIT status, the Company is required, among other requirements, to distribute annually at least
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The Company operates as an umbrella partnership REIT in which Bluerock Residential Holdings, L.P. (its “Operating Partnership”), or the Operating Partnership’s wholly-owned subsidiaries, owns substantially all the property interests acquired and investments made on the Company’s behalf. As of September 30, 2021, limited partners other than the Company owned approximately
Because the Company is the sole general partner of the Operating Partnership and has unilateral control over its management and major operating decisions (even if additional limited partners are admitted to the Operating Partnership), the accounts of the Operating Partnership are consolidated in its consolidated financial statements.
The Company also consolidates entities in which it controls more than
In cases where the Company holds a preferred equity investment in real estate joint ventures where the preferred equity interest must be redeemed by the issuing entity or is redeemable at the Company’s option, the preferred equity investment is accounted for as a held to maturity debt security. These preferred equity investments have a mandatory redemption provision, and the Company has the intent and ability to hold the investment until redemption. The preferred equity investments are included in the Company’s consolidated financial statements as “Preferred equity investments and investments in unconsolidated real estate joint ventures.” All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.
The Company will consider future preferred equity investments and loan investments for consolidation in accordance with the provisions required by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810: Consolidation.
10
Significant Risks and Uncertainties
At the present time, one of the most significant risks and uncertainties is the potential adverse effect of the current pandemic of the novel coronavirus and its variants (“COVID-19”). The Company’s tenants may experience financial difficulty due to the loss of their jobs and some have requested rent deferral or rent abatement during this pandemic. Experts have predicted that the outbreak will trigger, or has already triggered, a period of global economic slowdown or a global recession.
The COVID-19 pandemic could have material and adverse effects on the Company’s financial condition, results of operations and cash flows in the near term due to, but not limited to, the following:
● | reduced economic activity may impact the employment of the Company’s tenants and their ability to pay their obligations to the Company, thus requesting modifications of such obligations, resulting in increases in uncollectible receivables and reductions in rental income; |
● | the negative financial impact of the pandemic could impact the Company’s future compliance with financial covenants of its credit facilities and other debt agreements; |
● | weaker economic conditions could require that the Company recognize impairment in value of its real estate assets due to a reduction in property income; |
● | the Company’s inability to maintain occupancy or leasing rates, or increase these rates at stabilizing development properties, including due to possible reduced foot traffic and lease applications from prospective tenants at the Company’s properties as a result of the shelter-in-place orders and similar government guidelines; and |
● | concentration of the Company’s properties in markets that may be more severely affected by the COVID-19 pandemic due to its significant negative impact on certain key economic drivers in those markets, such as travel and entertainment. |
The extent to which the COVID-19 pandemic impacts the Company’s operations and those of its tenants will depend on future developments, which are uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.
The Company believes it currently has a stable financial condition: as of September 30, 2021, the Company collected
Summary of Significant Accounting Policies
Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission (“SEC”) on February 23, 2021 for discussion of the Company’s significant accounting policies. During the nine months ended September 30, 2021, there were no material changes to these policies.
Interim Financial Information
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with GAAP for interim financial reporting, and the instructions to Form 10-Q and Article 10-1 of Regulation S-X. Accordingly, the financial statements for interim reporting do not include all the information and notes or disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for interim periods should not be considered indicative of the operating results for a full year.
11
The balance sheet at December 31, 2020 has been derived from the audited financial statements at that date but does not include all the information and disclosures required by GAAP for complete financial statements. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in our audited consolidated financial statements for the year ended December 31, 2020 contained in the Annual Report on Form 10-K as filed with the SEC on February 23, 2021.
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
New Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06 “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). The guidance in ASU 2020-06 simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to separately present certain conversion features in equity. In addition, the amendments in the ASU 2020-06 also simplify the guidance in ASC Subtopic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity, by removing certain criteria that must be satisfied to classify a contract as equity, which is expected to decrease the number of freestanding instruments and embedded derivatives accounted for as assets or liabilities. Finally, the amendments revise the guidance on calculating earnings per share, requiring use of the if-converted method for all convertible instruments and rescinding an entity’s ability to rebut the presumption of share settlement for instruments that may be settled in cash or other assets. The amendments in ASU 2020-06 are effective for the Company for fiscal years beginning after December 15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The guidance must be adopted as of the beginning of the fiscal year of adoption. The Company is currently evaluating the impact of this guidance.
In January 2021, the FASB issued ASU No. 2021-01 “Reference Rate Reform (Topic 848)” (“ASU 2021-01”). The amendments in ASU 2021-01 permit entities to elect certain optional expedients in connection with reference rate reform activities and their impact on debt, contract modifications and derivative instruments as it is expected the global market will transition from LIBOR and other interbank offered rates to alternative reference rates. The amendments in ASU 2021-01 are effective immediately and may be elected over time as reference rate reform activities occur through December 31, 2022. The Company will continue to evaluate the impact of the guidance and may apply elections as applicable as changes in the market occur.
Note 3 – Sale of Real Estate Assets
Sale of ARIUM Grandewood
On January 28, 2021, the Company closed on the sale of ARIUM Grandewood located in Orlando, Florida. The property was sold for approximately $
12
Sale of James at South First
On February 24, 2021, the Company closed on the sale of James at South First located in Austin, Texas. The property was sold for $
Sale of Marquis at The Cascades
On March 1, 2021, the Company closed on the sale of the Marquis at The Cascades properties, located in Tyler, Texas, pursuant to the terms and conditions of two separate purchase and sales agreements. The properties were sold for approximately $
Sale of The Conley Interests
On March 18, 2021, The Conley, the underlying asset of an unconsolidated joint venture located in Leander, Texas, was sold. Upon the sale, the Company’s preferred equity investment was redeemed by the joint venture for $
Sale of Alexan Southside Place Interests
On March 25, 2021, Alexan Southside Place, the underlying asset of an unconsolidated joint venture located in Houston, Texas, was sold. In April 2021, the Company received $
Sale of Plantation Park
On April 26, 2021, the Company closed on the sale of Plantation Park located in Lake Jackson, Texas. The property was sold for $
Sale of The Reserve at Palmer Ranch
On June 10, 2021, the Company closed on the sale of The Reserve at Palmer Ranch located in Sarasota, Florida. The property was sold for $
13
Sale of Vickers Historic Roswell
On June 29, 2021, Vickers Historic Roswell, a property located in Roswell, Georgia, was sold. Upon the sale, the mezzanine loan provided by the Company was paid off in the amount of $
Sale of Park & Kingston
On July 7, 2021, the Company closed on the sale of Park & Kingston located in Charlotte, North Carolina. The property was sold for $
Sale of The District at Scottsdale
On July 7, 2021, the Company closed on the sale of The District at Scottsdale located in Scottsdale, Arizona. The property was sold for $
Sale of Mira Vista Interests
On September 23, 2021, Mira Vista, the underlying asset of an unconsolidated joint venture located in Austin, Texas, was sold. Upon the sale, the Company’s preferred equity investment was redeemed by the joint venture for $
14
Note 4 – Investments in Real Estate
As of September 30, 2021, the Company held
Consolidated Operating Investments
|
| Number of |
| Date Built / |
| Ownership |
| ||
Name | Location | Units | Renovated (1) | Interest |
| ||||
Multifamily | |||||||||
ARIUM Glenridge |
|
| |
| 1990 |
| | % | |
ARIUM Westside |
|
| |
| 2008 |
| | % | |
Ashford Belmar |
|
| |
| 1988/1993 |
| | % | |
Avenue 25 | | 2013 | | % | |||||
Burano Hunter’s Creek, formerly ARIUM Hunter’s Creek | | 1999 | | % | |||||
Carrington at Perimeter Park |
|
| |
| 2007 |
| | % | |
Chattahoochee Ridge |
|
| |
| 1996 |
| | % | |
Chevy Chase |
|
| |
| 1971 |
| | % | |
Cielo on Gilbert | | 1985 | | % | |||||
Citrus Tower |
|
| |
| 2006 |
| | % | |
Denim |
|
| |
| 1979 |
| | % | |
Elan |
|
| |
| 2007 |
| | % | |
Element | | 1995 | | % | |||||
Falls at Forsyth |
|
| |
| 2019 |
| | % | |
Gulfshore Apartment Homes |
|
| |
| 2016 |
| | % | |
Outlook at Greystone |
|
| |
| 2007 |
| | % | |
Pine Lakes Preserve |
|
| |
| 2003 |
| | % | |
Providence Trail |
|
| |
| 2007 |
| | % | |
Roswell City Walk |
|
| |
| 2015 |
| | % | |
Sands Parc |
|
| |
| 2017 |
| | % | |
The Brodie |
|
| |
| 2001 |
| | % | |
The Debra Metrowest, formerly ARIUM Metrowest | | 2001 | | % | |||||
The Links at Plum Creek |
|
| |
| 2000 |
| | % | |
The Mills |
|
| |
| 2013 |
| | % | |
The Preserve at Henderson Beach |
|
| |
| 2009 |
| | % | |
The Sanctuary |
|
| |
| 1988 |
| | % | |
Veranda at Centerfield |
|
| |
| 1999 |
| | % | |
Villages of Cypress Creek |
|
| |
| 2001 |
| | % | |
Wesley Village | | 2010 | | % | |||||
Windsor Falls | | 1994 | | % | |||||
Total Units |
15
Number of | Average Year | ||||||||
Single-Family Residential (2) |
| Market | Homes |
| Built |
|
|
| |
Granbury | | 2020-2021 | | % | |||||
Indy |
| |
| 1958 |
| | % | ||
Lubbock | | 1955 | | % | |||||
Navigator Villas | | 2013 | | % | |||||
Springfield |
| |
| 2004 |
| | % | ||
Springtown |
| |
| 1991 |
| | % | ||
Texarkana |
| |
| 1967 |
| | % | ||
Wayford at Concord | | 2019 | | % | |||||
Yauger Park Villas | | 2010 | | % | |||||
Total Homes |
| |
|
|
| ||||
Total Units and Homes |
| |
|
Depreciation expense was $
Intangibles related to the Company’s consolidated investments in real estate consist of the value of in-place leases. Amortization expense related to the in-place leases was $
16
Preferred Equity, Loan and Ground Lease Investments
Actual / | Actual / | |||||||
Planned | Estimated | Actual / Estimated | ||||||
Number of Units | Initial | Construction | ||||||
Lease-up Investment Name(1) |
| Location / Market |
| or Homes |
| Occupancy |
| Completion |
Multifamily | ||||||||
Reunion Apartments |
| 3Q 2021 | 3Q 2022 | |||||
Total Lease-up Units |
| |||||||
Development Investment Name(1) | ||||||||
Multifamily | ||||||||
Zoey |
| 1Q 2022 | 2Q 2022 | |||||
Avondale Hills | 1Q 2023 | 1Q 2023 | ||||||
The Hartley at Blue Hill, formerly The Park at Chapel Hill | 1Q 2022 | 1Q 2023 | ||||||
Deerwood Apartments | 4Q 2022 | 2Q 2023 | ||||||
Chandler |
| 3Q 2023 | 4Q 2023 | |||||
Orange City Apartments | 1Q 2023 | 4Q 2023 | ||||||
Lower Broadway | 4Q 2023 | 2Q 2024 | ||||||
Wayford at Innovation Park | 3Q 2023 | 3Q 2024 | ||||||
Total Units |
| |||||||
Single-Family Residential | ||||||||
Willow Park | | 2Q 2022 | 4Q 2022 | |||||
The Cottages at Myrtle Beach | | 1Q 2023 | 4Q 2023 | |||||
The Cottages of Port St. Lucie | | 1Q 2023 | 4Q 2023 | |||||
Total Homes | | |||||||
Total Development Units and Homes | ||||||||
| Number of Units / | |||||||
Operating Investment Name (1) | Location / Market | Homes | ||||||
Multifamily | ||||||||
Alexan CityCentre |
| |||||||
Belmont Crossing (2) | ||||||||
Deercross | ||||||||
Domain at The One Forty | ||||||||
Georgetown Crossing (2) | ||||||||
Hunter’s Pointe (2) | ||||||||
Motif | ||||||||
Park on the Square (2) | ||||||||
Renew 3030 | ||||||||
Sierra Terrace (2) | ||||||||
Sierra Village (2) | ||||||||
Spring Parc | ||||||||
The Commons (2) | ||||||||
The Crossings of Dawsonville | ||||||||
The Reserve at Palmer Ranch (2) | ||||||||
The Riley | ||||||||
Thornton Flats | ||||||||
Water’s Edge (2) | ||||||||
Total Units | ||||||||
Single-Family Residential | ||||||||
Corpus | | |||||||
Jolin | | |||||||
Peak Housing (3) | | |||||||
Total Homes | | |||||||
Total Operating Units and Homes | ||||||||
Total Units and Homes | |
(1) | Investments in which the Company has a loan, preferred equity or ground lease investment. Operating investments represent stabilized operating investments. Refer to Note 6 and Note 7 for further information. |
(2) | These nine operating investments are collectively known as the Strategic Portfolio. Refer to Note 7 for further information. |
(3) | Peak Housing consists of the Company's preferred equity investments in a private single-family home REIT (refer to Note 7 for further information). Peak Housing consists of the following nine portfolios of single-family residential homes: Corpus, Granbury, Indy, Jolin, Lubbock, Peak I, Springfield, Springtown and Texarkana. The 474 homes presented only represent those in the Peak I portfolio. The number of homes |
17
related to the other eight portfolios are presented separately in the above tables as the Company also holds a common equity interest in the portfolio or has provided a mortgage loan to the portfolio.
(4) | Peak Housing includes portfolios of homes located in Indiana, Missouri and Texas. |
Note 5 – Acquisition of Real Estate
The following describes the Company’s significant acquisition activity and related new financing during the nine months ended September 30, 2021 (dollars in thousands):
Ownership | Purchase | ||||||||||||
Name |
| Location / Market |
| Date |
| Interest |
| Price |
| Mortgage |
| ||
Multifamily |
| ||||||||||||
Windsor Falls | Raleigh, NC | June 17, 2021 | | % | $ | | $ | | (1) | ||||
Single-Family Residential (2) | |||||||||||||
Yauger Park Villas | Olympia, WA | April 14, 2021 | % | | | (3) | |||||||
Wayford at Concord | Concord, NC | June 4, 2021 | % | | — | (4) | |||||||
Indy | Indianapolis, IN | August 12, 2021 | % | | | (5) | |||||||
Springfield | Springfield, MO | August 18, 2021 | % | | | (5) | |||||||
Springtown | Springtown, TX | September 15, 2021 | % | | | (5) | |||||||
Texarkana | Texarkana, TX | September 21, 2021 | % | | | (5) | |||||||
Lubbock | Lubbock, TX | September 24, 2021 | % | | | (5) | |||||||
Granbury | Granbury, TX | September 30, 2021 | % | | | (5) |
(1) | Mortgage balance represents a loan assumption secured by the Windsor Falls property. |
(2) | Single-Family Residential includes single-family residential homes and attached townhomes/flats. |
(3) | Mortgage balance includes a $ |
(4) | Purchase price was funded in full by the Company and its unaffiliated joint venture partner upon acquisition. |
(5) | As part of the acquisition, the Company provided a mortgage loan to the consolidated portfolio owner in the full amount shown. The mortgage loan is eliminated in the Company’s consolidated financial statements. Refer to the Peak Housing Financing disclosure in Note 6 for further information. |
Purchase Price Allocation
The real estate acquisitions above have been accounted for as asset acquisitions. The purchase prices were allocated to the acquired assets and assumed liabilities based on their estimated fair values at the dates of acquisition.
The following table summarizes the assets acquired and liabilities assumed at the acquisition date for acquisitions made during the nine months ended September 30, 2021 (amounts in thousands):
Purchase | |||
Price | |||
| Allocation | ||
Land | $ | | |
Building |
| | |
Building improvements |
| | |
Land improvements |
| | |
Furniture and fixtures |
| | |
In-place leases |
| | |
Total assets acquired | $ | | |
Mortgages assumed | $ | | |
Fair value adjustments | | ||
Total liabilities assumed | $ | |
18
Note 6 – Notes and Interest Receivable
Following is a summary of the notes and accrued interest receivable due from loan investments as of September 30, 2021 and December 31, 2020 (amounts in thousands):
September 30, | December 31, | |||||
Name |
| 2021 |
| 2020 | ||
Avondale Hills | $ | | $ | | ||
Corpus | | — | ||||
Domain at The One Forty |
| |
| | ||
Jolin |
| |
| — | ||
Motif |
| |
| | ||
Reunion Apartments | | | ||||
The Hartley at Blue Hill, formerly The Park at Chapel Hill | | | ||||
Vickers Historic Roswell |
| — |
| | ||
Total | $ | | $ | | ||
Provision for credit losses (1) | ( | ( | ||||
Total, net | $ | | $ | |
(1) | Refer to the Provision for Credit Losses table below. |
Provision for Credit Losses
As of September 30, 2021, the Company’s provision for credit losses on its loan investments was $
| Three Months |
| Nine Months | |||
Ended | Ended | |||||
September 30, 2021 | September 30, 2021 | |||||
Beginning balance as of July 1 and January 1, 2021, respectively | $ | | $ | | ||
Provision for credit loss on pool of assets, net (1) |
| ( |
| | ||
Ending balance | $ | | $ | |
(1) | Under Current Expected Credit Losses (CECL), a provision for credit losses for similar assets is calculated based on a historical default rate applied to the remaining life of the assets. The decrease in the provision during the three months ended September 30, 2021 was primarily the result of a decrease in the trailing twelve-month historical default rate, partially offset by the addition of two investments to the pool of assets. |
19
Following is a summary of the interest income from loan and ground lease investments for the three and nine months ended September 30, 2021 and 2020 (amounts in thousands):
Three Months Ended | Nine Months Ended | |||||||||||
| September 30, | September 30, | ||||||||||
Name |
| 2021 |
| 2020 | 2021 |
| 2020 | |||||
Arlo (1) | $ | — | $ | | $ | — | $ | | ||||
Avondale Hills |
| |
| — |
| |
| — | ||||
Corpus |
| |
| — |
| |
| — | ||||
Domain at The One Forty |
| |
| |
| |
| | ||||
Jolin | | — | | — | ||||||||
Motif (2) |
| |
| |
| |
| | ||||
Novel Perimeter (1) | — | | — | | ||||||||
Reunion Apartments | | | | | ||||||||
The Hartley at Blue Hill |
| |
| |
| |
| | ||||
Vickers Historic Roswell (1) | — | | | | ||||||||
Zoey (3) | | | | | ||||||||
Total | $ | | $ | | $ | | $ | |
(1) | In the fourth quarter 2020, the Arlo and Novel Perimeter properties were sold. In the second quarter 2021, the Vickers Historic Roswell property was sold. Each mezzanine loan provided by the Company was paid off in full upon the sale of each property. |
(2) | The Motif interest income amounts for the three and nine months ended September 30, 2021 are net of a ($ |
(3) | The ground lease project is under development and the full leasehold improvement allowance of $ |
The occupancy percentages of the Company’s loan investments at September 30, 2021 and December 31, 2020 are as follows:
September 30, | December 31, | ||||
Name |
| 2021 |
| 2020 |
|
Avondale Hills |
| (1) | (2) | ||
Corpus | | % | — | ||
Domain at The One Forty | | % | | % | |
Jolin | | % | — | ||
Motif |
| % | % | ||
Reunion Apartments |
| (1) | (2) | ||
The Hartley at Blue Hill |
| (1) | (2) |
(1) | The development had not commenced lease-up as of September 30, 2021. |
(2) | The development had not commenced lease-up as of December 31, 2020. |
Corpus Bridge Loan Financing
On July 9, 2021, the Company provided a $
20
Domain at The One Forty Mezzanine Loan Financing
On June 29, 2021, the Company entered into an amended and restated mezzanine loan agreement (the “Domain Mezz Loan”) with BR Member Domain Phase I, LLC, an affiliate of BRG Manager, LLC, the Company’s former Manager, to increase the Company’s mezzanine loan commitment from $
Jolin Bridge Loan Financing
On August 6, 2021, the Company provided a $
Motif Loan Financing
On January 27, 2021, the Motif property owner entered into a $
On March 29, 2021, the Company entered into an amended and restated mezzanine loan agreement (the “Motif Mezz Loan”) with BR Flagler JV Member, LLC (“Motif JV Member”) to increase its loan commitment to $
21
Peak Housing Financing
During the third quarter 2021, the Company made common and preferred equity investments, along with the operating partnership of Peak Housing REIT (the “Peak REIT OP”), an unaffiliated private REIT, in the following portfolios of single-family residential homes: Granbury, Indy, Lubbock, Springfield, Springtown and Texarkana. These six portfolios are part of Peak Housing (refer to Note 7 for further information about the Company’s preferred equity investment therein). In addition to its common and preferred equity investments, the Company, through wholly-owned lender-entities, provided the full mortgage loan to each respective portfolio owner. These portfolio owners are owned by joint ventures in which the Company has its common equity investments along with Peak REIT OP. To determine if consolidation of the joint ventures was appropriate, the Company evaluated the basis of consolidation under ASC 810: Consolidation using the voting interest equity method as it had determined that the joint ventures were not variable interest entities. As the Company has controlling voting interests and substantive participating rights of the joint ventures under the operating agreements, the Company determined that consolidation of the joint ventures was appropriate. As the entities through which the Company provided the loans (the lender-entities) and the entities to which the loans were provided (the property owners) consolidate into the Company’s financial statements, the loan receivable balances and the loan payable balances are eliminated through consolidation and therefore are not reflected in the Company’s consolidated balance sheets. In addition, the Company’s pro rata share of each loan’s interest expense incurred through the portfolio owner partially offsets, through consolidation, the Company’s interest income for each loan recognized at the wholly-owned lender-entity. The remaining interest income, which is attributable to interest incurred by Peak REIT OP as the noncontrolling interest in each portfolio, is reflected in net income (loss) attributable to common stockholders in the Company’s consolidated statements of operations. Through its impact on the net operations of the portfolio, Peak REIT OP’s pro rata share of each loan’s interest expense is reflected in net income (loss) attributable to noncontrolling interests partially owned properties in the Company’s consolidated statements of operations.
Vickers Historic Roswell Mezzanine Loan Financing
The Vickers Historic Roswell property was sold on June 29, 2021. Refer to Note 3 for further information.
22
Note 7 – Preferred Equity Investments and Investments in Unconsolidated Real Estate Joint Ventures
The carrying amount of the Company’s preferred equity investments and investments in unconsolidated real estate joint ventures as of September 30, 2021 and December 31, 2020 is summarized in the table below (amounts in thousands):
September 30, | December 31, | |||||
Property |
| 2021 |
| 2020 | ||
Alexan CityCentre | $ | | $ | | ||
Alexan Southside Place (1) |
| — |
| | ||
Chandler | | — | ||||
Deercross | | — | ||||
Deerwood Apartments | | — | ||||
Mira Vista (2) | — | | ||||
Peak Housing (3) | | — | ||||
Renew 3030 | | — | ||||
Spring Parc | | — | ||||
Strategic Portfolio (4) | | | ||||
The Conley (5) |
| — |
| | ||
The Cottages at Myrtle Beach | | — | ||||
The Cottages of Port St. Lucie | | — | ||||
The Crossings at Dawsonville | | — | ||||
The Riley | | — | ||||
Thornton Flats | | | ||||
Wayford at Concord (6) | — | | ||||
Other |
| |
| | ||
Total | $ | | $ | | ||
Provision for credit losses (7) | ( | ( | ||||
Total, net | $ | | $ | |
(1) | On March 25, 2021, Alexan Southside Place, the property underlying the Company’s preferred equity investment, was sold. Refer to Note 3 for further information. |
(2) | On September 23, 2021, the Company’s preferred equity investment in Mira Vista was redeemed. Refer to Note 3 for further information. |
(3) | Peak Housing consists of the following portfolios of single-family residential homes: Corpus, Granbury, Indy, Jolin, Lubbock, Peak I, Springfield, Springtown and Texarkana. |
(4) | Belmont Crossing, Georgetown Crossing, Hunter’s Pointe, Park on the Square, Sierra Terrace, Sierra Village, The Commons, The Reserve at Palmer Ranch and Water’s Edge are collectively known as the Strategic Portfolio. |
(5) | On March 18, 2021, the Company’s preferred equity investment in The Conley was redeemed. Refer to Note 3 for further information. |
(6) | On June 4, 2021, the Company’s preferred equity investment in Wayford at Concord was redeemed. Refer to the Wayford at Concord Interests disclosure below for further information. |
(7) | Refer to the Provision for Credit Losses table below. |
23
Provision for Credit Losses
As of September 30, 2021, the Company’s provision for credit losses on its preferred equity investments was $
| Three Months Ended |
| Nine Months Ended | |||
September 30, | September 30, | |||||
2021 | 2021 | |||||
Beginning balance as of July 1 and January 1, 2021, respectively | $ | | $ | | ||
Provision for credit loss on pool of assets, net (1) |
| |
| | ||
Provision for credit loss – Alexan Southside Place (2) |
| — |
| ( | ||
Ending balance | $ | | $ | |
(1) | Under Current Expected Credit Losses (CECL), a provision for credit losses for similar assets is calculated based on a historical default rate applied to the remaining life of the assets. The increase in the provision during the three months ended September 30, 2021 was the result of a net increase resulting from changes to the pool of assets as |
(2) | On March 25, 2021, Alexan Southside Place, the property underlying the Company’s preferred equity investment, was sold. Refer to Note 3 for further information. |
As of September 30, 2021, the Company, through wholly-owned subsidiaries of the Operating Partnership, had outstanding equity investments in
24
The preferred returns on the Company’s unconsolidated real estate joint ventures for the three and nine months ended September 30, 2021 and 2020 are summarized below (amounts in thousands):
Three Months Ended | Nine Months Ended | |||||||||||
September 30, |
| September 30, | ||||||||||
Property |
| 2021 |
| 2020 | 2021 |
| 2020 | |||||
Alexan CityCentre | $ | | $ | | $ | | $ | | ||||
Alexan Southside Place |
| — |
| |
| — |
| | ||||
Chandler | | — | | — | ||||||||
Deercross | | — | | — | ||||||||
Deerwood Apartments | | — | | — | ||||||||
Helios (1) |
| — |
| |
| — |
| ( | ||||
Leigh House | — | | — | | ||||||||
Mira Vista | | | | | ||||||||
Peak Housing | | — | | — | ||||||||
Renew 3030 | | — | | — | ||||||||
Riverside Apartments | — | | — | | ||||||||
Spring Parc | | — | | — | ||||||||
Strategic Portfolio | | | | | ||||||||
The Conley | — | | | | ||||||||
The Cottages at Myrtle Beach |
| |
| — |
| |
| — | ||||
The Cottages of Port St. Lucie |
| |
| — |
| |
| — | ||||
The Crossings of Dawsonville | | — | | — | ||||||||
The Riley | | — | | — | ||||||||
Thornton Flats | | | | | ||||||||
Wayford at Concord | — | | | | ||||||||
Whetstone Apartments | — | — | — | | ||||||||
Total preferred returns on unconsolidated joint ventures | $ | | $ | | $ | | $ | |
(1) | Of the ($ |
25
The occupancy percentages of the Company’s unconsolidated real estate joint ventures at September 30, 2021 and December 31, 2020 are as follows:
September 30, | December 31, | ||||
Property |
| 2021 |
| 2020 |
|
Alexan CityCentre | | % | | % | |
Chandler | (1) | (2) | |||
Deercross | | % | — | ||
Deerwood Apartments | (1) | — | |||
Lower Broadway | (1) | — | |||
Orange City Apartments | (1) | — | |||
Peak Housing: | |||||
Corpus | | % | — | ||
Granbury | | % | — | ||
Indy | | % | — | ||
Jolin | | % | — | ||
Lubbock | | % | — | ||
Peak I | | % | — | ||
Springfield | | % | — | ||
Springtown | | % | — | ||
Texarkana | | % | — | ||
Renew 3030 | | % | — | ||
Spring Parc | | % | — | ||
Strategic Portfolio: | |||||
Belmont Crossing | | % | | % | |
Georgetown Crossing | | % | | % | |
Hunter’s Pointe | | % | | % | |
Park on the Square | | % | | % | |
Sierra Terrace | | % | | % | |
Sierra Village | | % | | % | |
The Commons | | % | | % | |
The Reserve at Palmer Ranch | | % | — | ||
Water’s Edge | | % | | % | |
The Cottages at Myrtle Beach | (1) | — | |||
The Cottages of Port St. Lucie | (1) | — | |||
The Crossings of Dawsonville | | % | — | ||
The Riley | | % | — | ||
Thornton Flats | | % | | % | |
Wayford at Innovation Park | (1) | — | |||
Willow Park | (1) | — |
(1) | The development had not commenced lease-up as of September 30, 2021. |
(2) | The development had not commenced lease-up as of December 31, 2020. |
Alexan Southside Place Interests
On March 25, 2021, Alexan Southside Place, the property underlying the Company’s preferred equity investment, was sold. Refer to Note 3 for further information.
26
Deercross Interests
On June 25, 2021, the Company made a $
In conjunction with the Deercross investment, the Deercross property owner, which is owned by an entity in which the Company has an equity interest, entered into an $
Deerwood Apartments Interests
On June 16, 2021, the Company entered into a joint venture agreement with an unaffiliated third party (the “Deerwood JV”) to develop an approximately
In conjunction with the Deerwood Apartments development, the Deerwood Apartments property owner, which is owned by an entity in which the Company has an equity interest, entered into a $
Lower Broadway Interests
On July 15, 2021, the Company entered into a joint venture agreement with an unaffiliated third party (the “Lower Broadway JV”) to develop an approximately
In conjunction with the Lower Broadway development, the Lower Broadway property owner, which is owned by an entity in which the Company has an equity interest, entered into a $
27
Mira Vista Interests
On September 23, 2021, the Company’s preferred equity investment in Mira Vista was redeemed. Refer to Note 3 for further information.
Orange City Apartments Interests
On July 26, 2021, the Company entered into a joint venture agreement with an unaffiliated third party (the “Orange City JV”) to develop an approximately
In conjunction with the Orange City Apartments development, the Orange City Apartments property owner, which is owned by an entity in which the Company has an equity interest, entered into a $
Peak Housing Interests
On April 12, 2021, the Company made a $
Of the Company’s total $
Renew 3030 Interests
On August 31, 2021, the Company made a $
28
In conjunction with the Renew 3030 investment, the Renew 3030 property owner, which is owned by an entity in which the Company has an equity interest, entered into a $
Spring Parc Interests
On July 13, 2021, the Company made an $
In conjunction with the Spring Parc investment, the Spring Parc property owner, which is owned by an entity in which the Company has an equity interest, entered into a $
Strategic Portfolio Interests
On June 10, 2021, the Company made an additional preferred equity investment of $
The Conley Interests
On March 18, 2021, the Company’s preferred equity investment in The Conley was redeemed. Refer to Note 3 for further information.
The Cottages at Myrtle Beach Interests
On September 9, 2021, the Company entered into a joint venture agreement with an unaffiliated third party (the “Cottages MB JV”) to develop approximately
29
In conjunction with The Cottages at Myrtle Beach investment, The Cottages at Myrtle Beach property owner, which is owned by an entity in which the Company has an equity interest, entered into a $
The Cottages of Port St. Lucie Interests
On August 26, 2021, the Company entered into a joint venture agreement with an unaffiliated third party (the “Cottages St. Lucie JV”) to develop approximately
In conjunction with The Cottages of Port St. Lucie investment, The Cottages of Port St. Lucie property owner, which is owned by an entity in which the Company has an equity interest, entered into a $
The Crossings of Dawsonville Interests
On July 14, 2021, the Company made a $
In conjunction with The Crossings of Dawsonville investment, The Crossings of Dawsonville property owner, which is owned by an entity in which the Company has an equity interest, entered into a $
The Riley Interests
On March 1, 2021, the Company made a $
In conjunction with The Riley investment, The Riley property owner, which is owned by an entity in which the Company has an equity interest, entered into a $
30
Thornton Flats Interests
On August 26, 2021, the Company, in accordance with terms as set forth in the Thornton Flats operating agreement, funded an additional $
Wayford at Concord Interests
On June 4, 2021, the Company, along with an unaffiliated third party, purchased the interests in the Wayford at Concord property, the underlying asset of the Company’s unconsolidated joint venture (the “Wayford JV”) located in Concord, North Carolina, from the Company’s Wayford JV partner for $
Wayford at Innovation Park Interests
On June 17, 2021, the Company entered into a joint venture agreement with an unaffiliated third party (the “Wayford IP JV”) to develop an approximately
Willow Park Interests
On June 17, 2021, the Company entered into a joint venture agreement with Peak Housing REIT (the “Willow Park JV”) to develop approximately
In conjunction with the Willow Park development, the Willow Park property owner, which is owned by an entity in which the Company has an equity interest, entered into an $
31
Note 8 – Revolving Credit Facilities
The outstanding balances on the revolving credit facilities as of September 30, 2021 and December 31, 2020 are as follows (amounts in thousands):
| September 30, |
| December 31, | |||
Revolving Credit Facilities | 2021 | 2020 | ||||
Amended Senior Credit Facility | $ | — | $ | | ||
Amended Junior Credit Facility |
| — |
| — | ||
Total | $ | — | $ | |
Amended Senior Credit Facility
On March 6, 2020, the Company entered into the Amended Senior Credit Facility. The Amended Senior Credit Facility provides for a revolving loan with an initial commitment amount of $
The Amended Senior Credit Facility provides the Company with the ability to issue up to $
Amended Junior Credit Facility
On September 21, 2021, the Company entered into an amended and restated Junior Credit Facility (the “Amended Junior Credit Facility”). The Amended Junior Credit Facility extended the maturity date of the credit facility to December 21, 2023 and included changes in certain financial and operating covenants. There were no other material changes in terms from the previous credit facility. The Amended Junior Credit Facility provides for a revolving loan with a maximum commitment amount of $
The availability of borrowings under the revolving credit facilities at September 30, 2021 is based on the collateral and compliance with various ratios related to those assets and was approximately $
32
Note 9 – Mortgages Payable
The following table summarizes certain information as of September 30, 2021 and December 31, 2020, with respect to the Company’s senior mortgage indebtedness (amounts in thousands):
Outstanding Principal | As of September 30, 2021 | |||||||||||
September 30, | December 31, | Interest-only | ||||||||||
Property |
| 2021 |
| 2020 |
| Interest Rate |
| through date |
| Maturity Date | ||
Fixed Rate: | ||||||||||||
ARIUM Westside | $ | | $ | |
| | % | (3) | August 1, 2023 | |||
Ashford Belmar |
| |
| |
| | % | December 2022 | December 1, 2025 | |||
Avenue 25 (1) | | | | % | July 2022 | July 1, 2027 | ||||||
Burano Hunter’s Creek (2) | | | | % | (3) | November 1, 2024 | ||||||
Carrington at Perimeter Park(4) | | | | % | (4) | July 1, 2027 | ||||||
Chattahoochee Ridge |
| |
| |
| | % | December 2022 | December 5, 2024 | |||
Citrus Tower | | | | % | (3) | October 1, 2024 | ||||||
Denim(5) | | | | % | August 2024 | August 1, 2029 | ||||||
Elan(6) |
| |
| |
| | % | (6) | July 1, 2027 | |||
Element | | | | % | July 2022 | July 1, 2026 | ||||||
Falls at Forsyth (7) | | — | | % | (3) | July 1, 2025 | ||||||
Gulfshore Apartment Homes | | | | % | September 2022 | September 1, 2029 | ||||||
James on South First |
| — |
| |
| |||||||
Navigator Villas (8) |
| |
| |
| | % | (3) | June 1, 2028 | |||
Outlook at Greystone | | | | % | (3) | June 1, 2025 | ||||||
Park & Kingston |
| — |
| |
| |||||||
Plantation Park |
| — |
| |
| |||||||
Providence Trail |
| |
| |
| | % | (3) | July 1, 2026 | |||
Roswell City Walk |
| |
| |
| | % | (3) | December 1, 2026 | |||
The Brodie |
| |
| |
| | % | (3) | December 1, 2023 | |||
The Debra Metrowest (2) | | | | % | (3) | May 1, 2025 | ||||||
The Links at Plum Creek |
| |
| |
| | % | (3) | October 1, 2025 | |||
The Mills |
| |
| |
| | % | (3) | January 1, 2025 | |||
The Preserve at Henderson Beach | | | | % | September 2028 | September 1, 2029 | ||||||
The Reserve at Palmer Ranch | — | | ||||||||||
The Sanctuary |
| |
| |
| | % | Interest-only | August 1, 2029 | |||
Wesley Village | | | | % | (3) | April 1, 2024 | ||||||
Windsor Falls | | — | | % | November 2022 | November 1, 2027 | ||||||
Yauger Park Villas (9) | | — | | % | (3) | April 1, 2026 | ||||||
Total Fixed Rate | $ | | $ | |||||||||
|
|
|
| |||||||||
Floating Rate (10): | ||||||||||||
ARIUM Glenridge | $ | | $ | |
| | % | (3) | September 1, 2025 | |||
Chevy Chase | | | | % | September 2022 | September 1, 2027 | ||||||
Cielo on Gilbert (11) | | | | % | January 2026 | January 1, 2031 | ||||||
Falls at Forsyth (7) | | — | | % | (3) | July 1, 2025 | ||||||
Fannie Facility Advance |
| |
| |
| | % | June 2022 | June 1, 2027 | |||
Fannie Facility Second Advance (11) | | — | | % | March 2023 | March 1, 2028 | ||||||
Marquis at The Cascades I |
| — |
| |
| |||||||
Marquis at The Cascades II |
| — |
| |
| |||||||
Pine Lakes Preserve |
| |
| |
| | % | July 2025 | July 1, 2030 | |||
The District at Scottsdale | — | | ||||||||||
Veranda at Centerfield |
| |
| |
| | % | (3) | July 26, 2023 (12) | |||
Villages of Cypress Creek |
| |
| |
| | % | July 2022 | July 1, 2027 | |||
Total Floating Rate | $ | | $ | | ||||||||
Total | $ | | $ | |
|
|
|
| ||||
Fair value adjustments | | | ||||||||||
Deferred financing costs, net | ( | ( |
|
| ||||||||
Total continuing operations | $ | | $ | |
|
|
| |||||
Held for Sale | ||||||||||||
ARIUM Grandewood (7)(13) | $ | — | $ | | ||||||||
ARIUM Grandewood (7)(13) | — | | ||||||||||
Deferred financing costs, net | — | ( | ||||||||||
Total held for sale | — | | ||||||||||
Total mortgages payable | $ | | $ | |
(1) | The principal balance includes a $ |
(2) | Burano Hunter’s Creek and The Debra Metrowest, formerly ARIUM Hunter’s Creek and ARIUM Metrowest, respectively. |
(3) | The loan requires monthly payments of principal and interest. |
33
(4) | The principal balance includes a $ |
(5) | The principal balance includes a $ |
(6) | The principal balance includes a $ |
(7) | Refer to the Master Credit Facility with Fannie Mae disclosure below for further information regarding the senior mortgage substitution of collateral. |
(8) | The principal balance includes a $ |
(9) | The principal balance includes a $ |
(10) | Other than Cielo on Gilbert and the Fannie Facility Second Advance, all the Company’s floating rate loans bear interest at one-month LIBOR + margin. In September 2021, one-month LIBOR in effect was |
(11) | The Cielo on Gilbert loan and the Fannie Facility Second Advance bear interest at a floating rate of the 30-day average SOFR + |
(12) | The loan has |
(13) | At December 31, 2020, ARIUM Grandewood had a fixed rate loan with a principal balance of $ |
Deferred financing costs
Costs incurred in obtaining long-term financing are amortized on a straight-line basis to interest expense over the terms of the related financing agreements, as applicable, which approximates the effective interest method.
Loss on Extinguishment of Debt and Debt Modification Costs
Upon repayment of or in conjunction with a material change (i.e. a 10% or greater difference in the cash flows between instruments) in the terms of an underlying debt agreement, the Company writes-off any unamortized deferred financing costs and fair market value adjustments related to the original debt that was extinguished. Prepayment penalties incurred on the early repayment of debt and costs incurred in a debt modification that are not capitalized are also included within loss on extinguishment of debt and debt modification costs on the consolidated statements of operations. Loss on extinguishment of debt and debt modification costs were $
Master Credit Facility with Fannie Mae
On April 30, 2018, the Company, through certain subsidiaries of the Operating Partnership, entered into a Master Credit Facility Agreement (the “Fannie Facility”), which was issued through Fannie Mae’s Multifamily Delegated Underwriting and Servicing Program. The Fannie Facility includes certain restrictive covenants, including indebtedness, liens, investments, mergers and asset sales, and distributions. The Fannie Facility also contains events of default, including payment defaults, covenant defaults, bankruptcy events, and change of control events. Each note under the Fannie Facility is cross-defaulted and cross-collateralized and the Company has guaranteed the obligations under the Fannie Facility. As of September 30, 2021, the mortgage loans secured by The Debra Metrowest (formerly ARIUM Metrowest), Falls at Forsyth and Outlook at Greystone were issued under the Fannie Facility.
On May 27, 2020, the Company, through certain subsidiaries of the Operating Partnership, entered into a $
34
On February 18, 2021, the Company, through certain subsidiaries of the Operating Partnership, entered into a $
The Company may request future fixed rate advances or floating rate advances under the Fannie Facility either by borrowing against the value of the mortgaged properties (based on the valuation methodology established in the Fannie Facility) or adding eligible properties to the collateral pool, subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests. The proceeds of any future advances made under the Fannie Facility may be used, among other things, for general operating purposes and the acquisition and refinancing of additional properties to be identified in the future.
Debt maturities
As of September 30, 2021, contractual principal payments for the five subsequent years and thereafter are as follows (amounts in thousands):
Year |
| Total | |
2021 (October 1-December 31) | $ | | |
2022 |
| | |
2023 |
| | |
2024 |
| | |
2025 |
| | |
Thereafter |
| | |
| $ | | |
Add: Unamortized fair value debt adjustment |
| | |
Subtract: Deferred financing costs, net |
| ( | |
Total | $ | |
The net book value of real estate assets providing collateral for these above borrowings, including the Amended Senior Credit Facility, Amended Junior Credit Facility and Fannie Facility, was $
The mortgage loans encumbering the Company’s properties are generally nonrecourse, subject to certain exceptions for which the Company would be liable for any resulting losses incurred by the lender. These exceptions vary from loan to loan but generally include fraud or a material misrepresentation, misstatement or omission by the borrower, intentional or grossly negligent conduct by the borrower that harms the property or results in a loss to the lender, filing of a bankruptcy petition by the borrower, either directly or indirectly, and certain environmental liabilities. In addition, upon the occurrence of certain events, such as fraud or filing of a bankruptcy petition by the borrower, the Company or our joint ventures would be liable for the entire outstanding balance of the loan, all interest accrued thereon and certain other costs, including penalties and expenses. The mortgage loans generally have a period where a prepayment fee or yield maintenance would be required.
35
Note 10 – Fair Value of Financial Instruments
Fair Value Measurements
For financial assets and liabilities recorded at fair value on a recurring or non-recurring basis, fair value is the price the Company would expect to receive to sell an asset, or pay to transfer a liability, in an orderly transaction with a market participant at the measurement date under current market conditions. In the absence of such data, fair value is estimated using internal information consistent with what market participants would use in a hypothetical transaction.
In determining fair value, observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions; preference is given to observable inputs. In accordance with accounting principles generally accepted in the Unites States of America (“GAAP”) and as defined in ASC Topic 820, “Fair Value Measurement”, these two types of inputs create the following fair value hierarchy:
If the inputs used to measure the fair value fall within different levels of the hierarchy, the fair value is determined based upon the lowest level input that is significant to the fair value measurement. Whenever possible, the Company uses quoted market prices to determine fair value. In the absence of quoted market prices, the Company uses independent sources and data to determine fair value.
Financial Instrument Fair Value Disclosures
As of September 30, 2021 and December 31, 2020, the carrying values of cash and cash equivalents, restricted cash, accounts receivable, due to and due from affiliates, accounts payable, accrued liabilities, and distributions payable approximate their fair value based on their highly-liquid nature and/or short-term maturities. The carrying values of notes receivable approximate fair value because stated interest rate terms are consistent with interest rate terms on new deals with similar leverage and risk profiles. The fair values of notes receivable are classified in Level 3 of the fair value hierarchy due to the significant unobservable inputs that are utilized in their respective valuations.
Derivative Financial Instruments
The estimated fair values of derivative financial instruments are valued using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and volatility. The fair value of interest rate caps is determined using the market-standard methodology of discounting the future expected cash receipts which would occur if floating interest rates rise above the strike rate of the caps. The floating interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. The inputs used in the valuation of interest rate caps fall within Level 2 of the fair value hierarchy.
Fair Value of Debt
As of September 30, 2021 and December 31, 2020, based on the discounted amount of future cash flows using rates currently available to the Company for similar liabilities, the fair value of the Company’s mortgages payable is estimated at $
36
Note 11 – Derivative Financial Instruments
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash payments principally related to the Company’s borrowings.
The Company’s objectives in using interest rate derivative financial instruments are to add stability to interest expense and to manage the Company’s exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate caps as part of its interest rate risk management strategy. Interest rate caps involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.
The Company has not designated any of the interest rate derivatives as hedges. Although these derivative financial instruments were not designated or did not qualify for hedge accounting, the Company believes the derivative financial instruments are effective economic hedges against increases in interest rates. The Company does not use derivative financial instruments for trading or speculative purposes.
As of September 30, 2021, the Company had interest rate caps which effectively limit the Company’s exposure to interest rate risk by providing a ceiling on the underlying floating interest rate for $
The table below presents the classification and fair value of the Company’s derivative financial instruments on the consolidated balance sheets as of September 30, 2021 and December 31, 2020 (amounts in thousands):
Derivatives not designated as hedging | Fair values of derivative | |||||||
instruments under ASC 815‑20 | Balance Sheet Location | instruments | ||||||
September 30, | December 31, | |||||||
|
| 2021 |
| 2020 | ||||
Interest rate caps |
| Accounts receivable, prepaids and other assets | $ | | $ | |
The table below presents the classification and effect of the Company’s derivative financial instruments on the consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 (amounts in thousands):
Derivatives not designated as hedging | Location of Gain or (Loss) | The Effect of Derivative Instruments | ||||||||||||
instruments under ASC 815‑20 | Recognized in Income | on the Statements of Operations | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
| 2021 |
| 2020 | 2021 |
| 2020 | ||||||||
Interest rate caps | Interest Expense | $ | ( | $ | ( | $ | ( | $ | ( |
37
Note 12 – Related Party Transactions
Administrative Services Agreement
In October 2017, the Company entered into an Administrative Services Agreement (the “Administrative Services Agreement”) with Bluerock Real Estate, LLC and its affiliate, Bluerock Real Estate Holdings, LLC (together “BRE”). Pursuant to the Administrative Services Agreement, BRE provides the Company with certain human resources, investor relations, marketing, legal and other administrative services (the “Services”). The Services are provided on an at-cost basis, generally allocated based on the use of such Services for the benefit of the Company’s business, and are invoiced on a quarterly basis. In addition, the Administrative Services Agreement permits certain employees of the Company to provide or cause to be provided services to BRE, on an at-cost basis, generally allocated based on the use of such services for the benefit of the business of BRE, and otherwise subject to the terms of the Services provided by BRE to the Company under the Administrative Services Agreement. Payment by the Company of invoices and other amounts payable under the Administrative Services Agreement will be made in cash or, in the sole discretion of the Company’s board of directors (the “Board”), in the form of LTIP Units. On August 4, 2021, the Company delivered written notice to BRE of the Company’s intention to renew the Administrative Services Agreement for an additional one-year term, to expire on October 31, 2022 unless the Company renews. The Administrative Services Agreement will automatically terminate (i) upon termination by the Company of all Services, or (ii) in the event of non-renewal by the Company.
Pursuant to the Administrative Services Agreement, BRE is responsible for the payment of all employee benefits and any other direct and indirect compensation for the employees of BRE (or their affiliates or permitted subcontractors) assigned to perform the Services, as well as such employees’ worker’s compensation insurance, employment taxes, and other applicable employer liabilities relating to such employees.
The Company and BRE also entered into a Leasehold Cost-Sharing Agreement (the “Leasehold Cost-Sharing Agreement”) with respect to the lease for their New York headquarters (the “NY Lease”) to provide for the allocation and sharing between BRE and the Company of the costs thereunder, including costs associated with tenant improvements. The NY Lease permits the Company and certain of its respective subsidiaries and/or affiliates to share occupancy of the New York headquarters with BRE. Under the NY Lease, the Company, through its Operating Partnership, issued a $
Recorded as part of general and administrative expenses, operating expenses paid by BRE on behalf of the Company of $
Pursuant to the terms of the Administrative Services Agreement, the Company paid operating expenses on behalf of BRE of $
38
Pursuant to the terms of the Administrative Services Agreement and the Leasehold Cost-Sharing Agreement, summarized below are the net related party amounts payable to BRE as of September 30, 2021 and December 31, 2020 (amounts in thousands):
| September 30, | December 31, | ||||
| 2021 |
| 2020 | |||
Amounts Payable to BRE under the Administrative Services Agreement, net |
|
|
|
| ||
Operating and direct expense reimbursements | $ | | $ | | ||
Offering expense reimbursements | | | ||||
Total expense reimbursement amounts payable to BRE, net | $ | | $ | | ||
Amounts Payable to BRE under the Leasehold Cost-Sharing Agreement |
|
| ||||
Operating and direct expense reimbursements | $ | | $ | | ||
Total expense reimbursement amounts payable to BRE | $ | | $ | | ||
Total | $ | | $ | |
As of September 30, 2021 and December 31, 2020, the Company had $
Selling Commissions and Dealer Manager Fees
In conjunction with its offering of the Series T Preferred Stock (the “Series T Preferred Offering”), the Company engaged a related party as dealer manager, and pays up to
Notes and interest receivable
The Company provides loans, in some cases, to related parties in conjunction with the developments of multifamily communities. At September 30, 2021, the following loan investments were provided to related parties: Domain at The One Forty, Motif and The Hartley at Blue Hill (formerly The Park at Chapel Hill). Please refer to Note 6 and the Company’s Form 10-K for the year ended December 31, 2020 for further information.
Preferred Equity Investments and Investments in Unconsolidated Real Estate Joint Ventures
The Company invests, in some cases, with related parties in various joint ventures in which the Company owns either preferred or common interests. At September 30, 2021, the Alexan CityCentre preferred equity investment involved related parties. Please refer to Note 7 and the Company’s Form 10-K for the year ended December 31, 2020 for further information.
39
Note 13 – Stockholders’ Equity and Redeemable Preferred Stock
Net Income (Loss) Per Common Share
Basic net income (loss) per common share is computed by dividing net income (loss) attributable to common stockholders, less dividends on restricted stock and LTIP Units expected to vest, by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per common share is computed by dividing net income (loss) attributable to common stockholders by the sum of the weighted average number of common shares outstanding and any potential dilutive shares for the period. Net income (loss) attributable to common stockholders is computed by adjusting net income (loss) for the non-forfeitable dividends paid on restricted stock and non-vested LTIP Units.
The Company considers the requirements of the two-class method when preparing earnings per share. The Company has two classes of common stock outstanding: Class A common stock, $
The following table reconciles the components of basic and diluted net income (loss) per common share (amounts in thousands, except share and per share amounts):
Three Months Ended | Nine Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||||
Net income (loss) attributable to common stockholders | $ | | $ | ( | $ | | $ | ( | |||||
Dividends on restricted stock and LTIP Units expected to vest |
| ( |
| ( |
| ( |
| ( | |||||
Basic net income (loss) attributable to common stockholders | $ | | $ | ( | $ | | $ | ( | |||||
|
|
|
| ||||||||||
Weighted average common shares outstanding (1) |
| |
| |
| |
| | |||||
Potential dilutive shares (2) |
| |
| — |
| |
| — | |||||
Weighted average common shares outstanding and potential dilutive shares (1) |
| |
| |
| |
| | |||||
| |||||||||||||
Net income (loss) per common share, basic | $ | | $ | ( | $ | | $ | ( | |||||
Net income (loss) per common share, diluted | $ | | $ | ( | $ | | $ | ( |
(1) | Amounts relate to shares of the Company’s Class A and Class C common stock outstanding. |
(2) | For the three and nine months ended September 30, 2021, the following are included in the diluted shares calculation: a) warrants outstanding from issuances in conjunction with the Company’s Series B Preferred Stock offerings that are potentially exercisable for |
For the three and nine months ended September 30, 2020, potential vesting of restricted stock to employees for
The effect of the conversion of OP Units is not reflected in the computation of basic and diluted earnings per share, as they are exchangeable for Class A common stock on a one-for-one basis. The income allocable to such OP Units is allocated on this same basis and reflected as noncontrolling interests in the accompanying consolidated financial statements. As such, the assumed conversion of these OP Units would have no net impact on the determination of diluted earnings per share.
40
Series T Redeemable Preferred Stock Offering
During the nine months ended September 30, 2021, the Company issued
Series B Redeemable Preferred Stock
During the nine months ended September 30, 2021, the Company, at the request of holders, redeemed
As of September 30, 2021, the Company had
At-the-Market Offerings
In September 2019, the Company and its Operating Partnership entered into an At Market Issuance Sales Agreement with respect to the offering and sale of up to $
Stock Repurchase Plans
In October 2020, the Board authorized new stock repurchase plans for the repurchase, from time to time, of up to an aggregate of $
41
During the nine months ended September 30, 2021, the Company repurchased
Redemption of
On February 26, 2021, the Company redeemed all
Operating Partnership and Long-Term Incentive Plan Units
As of September 30, 2021, limited partners other than the Company owned approximately
Equity Incentive Plans
LTIP Unit Grants
On January 1, 2021, the Company granted
In addition, on January 1, 2021, the Company granted
The Company granted LTIP Units to
On March 25, 2021, the Company granted an aggregate of
On April 1, 2021, the Company granted
The Company recognizes compensation expense ratably over the requisite service periods for time-based LTIP Units based on the fair value at the date of grant; thus, the Company recognized compensation expense of approximately $
42
As of September 30, 2021, there was $
Restricted Stock Grants
In April 2019 and 2020, the Company provided restricted stock grants (“RSGs”) to employees under the Incentive Plans. Such RSGs will vest in
On April 1, 2021, the Company provided RSGs to employees under the Incentive Plans. Such RSGs will vest in
The Company recognized compensation expense for all such RSGs of approximately $
As of September 30, 2021, there was $
Distributions
Payable to stockholders | |||||||
Declaration Date |
| of record as of |
| Amount |
| Date Paid or Payable | |
Class A Common Stock |
|
|
|
|
|
| |
December 11, 2020 |
| December 24, 2020 | $ | |
| January 5, 2021 | |
March 12, 2021 |
| March 25, 2021 | $ | |
| April 5, 2021 | |
June 11, 2021 | June 25, 2021 | $ | | July 2, 2021 | |||
September 10, 2021 | September 24, 2021 | $ | | October 5, 2021 | |||
Class C Common Stock |
|
|
|
|
|
| |
December 11, 2020 |
| December 24, 2020 | $ | |
| January 5, 2021 | |
March 12, 2021 |
| March 25, 2021 | $ | |
| April 5, 2021 | |
June 11, 2021 | June 25, 2021 | $ | | July 2, 2021 | |||
September 10, 2021 | September 24, 2021 | $ | | October 5, 2021 | |||
Series A Preferred Stock |
|
|
|
|
|
| |
December 11, 2020 |
| December 24, 2020 | $ | |
| January 5, 2021 | |
January 27, 2021 (1) |
| February 26, 2021 | $ | |
| February 26, 2021 | |
Series B Preferred Stock |
|
|
|
|
|
| |
October 9, 2020 |
| December 24, 2020 | $ | |
| January 5, 2021 | |
January 13, 2021 |
| January 25, 2021 | $ | |
| February 5, 2021 | |
January 13, 2021 |
| February 25, 2021 | $ | |
| March 5, 2021 | |
January 13, 2021 |
| March 25, 2021 | $ | |
| April 5, 2021 | |
April 12, 2021 | April 23, 2021 | $ | | May 5, 2021 | |||
April 12, 2021 | May 25, 2021 | $ | | June 4, 2021 | |||
April 12, 2021 | June 25, 2021 | $ | | July 2, 2021 | |||
July 12, 2021 | July 23, 2021 | $ | | August 5, 2021 | |||
July 12, 2021 | August 25, 2021 | $ | | September 3, 2021 | |||
July 12, 2021 | September 24, 2021 | $ | | October 5, 2021 | |||
Series C Preferred Stock |
|
|
|
|
|
| |
December 11, 2020 |
| December 24, 2020 | $ | |
| January 5, 2021 | |
March 12, 2021 |
| March 25, 2021 | $ | |
| April 5, 2021 | |
June 11, 2021 | June 25, 2021 | $ | | July 2, 2021 | |||
September 10, 2021 | September 24, 2021 | $ | | October 5, 2021 | |||
Series D Preferred Stock |
|
|
|
|
|
| |
December 11, 2020 |
| December 24, 2020 | $ | |
| January 5, 2021 | |
March 12, 2021 |
| March 25, 2021 | $ | |
| April 5, 2021 | |
June 11, 2021 | June 25, 2021 | $ | | July 2, 2021 | |||
September 10, 2021 | September 24, 2021 | $ | | October 5, 2021 | |||
Series T Preferred Stock (2) |
|
|
|
|
|
| |
October 9, 2020 | December 24, 2020 | $ | | January 5, 2021 | |||
January 13, 2021 | January 25, 2021 | $ | | February 5, 2021 | |||
January 13, 2021 | February 25, 2021 | $ | | March 5, 2021 | |||
January 13, 2021 | March 25, 2021 | $ | | April 5, 2021 | |||
April 12, 2021 | April 23, 2021 | $ | | May 5, 2021 | |||
April 12, 2021 | May 25, 2021 | $ | | June 4, 2021 | |||
April 12, 2021 | June 25, 2021 | $ | | July 2, 2021 | |||
July 12, 2021 | July 23, 2021 | $ | | August 5, 2021 | |||
July 12, 2021 | August 25, 2021 | $ | | September 3, 2021 | |||
July 12, 2021 | September 24, 2021 | $ | | October 5, 2021 |
(1) | The dividend was paid on the date indicated to stockholders in conjunction with the redemption of shares of Series A Preferred Stock. |
(2) | Shares of newly issued Series T Preferred Stock that are held only a portion of the applicable monthly dividend period receive a prorated dividend based on the actual number of days in the applicable dividend period during which each such share of Series T Preferred Stock was outstanding. |
43
A portion of each dividend may constitute a return of capital for tax purposes. There is no assurance that the Company will continue to declare dividends or at this rate. Holders of OP Units and LTIP Units are entitled to receive “distribution equivalents” at the same time as dividends are paid to holders of the Company's Class A common stock.
The Company has a dividend reinvestment plan that allows for participating stockholders to have their Class A common stock dividend distributions automatically invested in additional shares of Class A common stock based on the average price of the Class A common stock on the investment date. The Company plans to issue shares of Class A common stock to cover shares required for investment.
The Company also has a dividend reinvestment plan that allows for participating stockholders to have their Series T Preferred Stock dividend distributions automatically reinvested in additional shares of Series T Preferred Stock at a price of $
Distributions declared and paid for the nine months ended September 30, 2021 were as follows (amounts in thousands):
Distributions | ||||||
2021 |
| Declared |
| Paid | ||
First Quarter |
|
|
|
| ||
Class A Common Stock | $ | | $ | | ||
Class C Common Stock |
| |
| | ||
Series A Preferred Stock |
| |
| | ||
Series B Preferred Stock |
| |
| | ||
Series C Preferred Stock |
| |
| | ||
Series D Preferred Stock |
| |
| | ||
Series T Preferred Stock | | | ||||
OP Units |
| |
| | ||
LTIP Units |
| |
| | ||
Total first quarter 2021 | $ | | $ | | ||
Second Quarter |
|
|
|
| ||
Class A Common Stock | $ | | $ | | ||
Class C Common Stock |
| |
| | ||
Series B Preferred Stock |
| |
| | ||
Series C Preferred Stock |
| |
| | ||
Series D Preferred Stock |
| |
| | ||
Series T Preferred Stock | | | ||||
OP Units |
| |
| | ||
LTIP Units |
| |
| | ||
Total second quarter 2021 | $ | | $ | | ||
Third Quarter |
|
|
|
| ||
Class A Common Stock | $ | | $ | | ||
Class C Common Stock |
| |
| | ||
Series B Preferred Stock |
| |
| | ||
Series C Preferred Stock |
| |
| | ||
Series D Preferred Stock |
| |
| | ||
Series T Preferred Stock | | | ||||
OP Units |
| |
| | ||
LTIP Units |
| |
| | ||
Total third quarter 2021 | $ | | $ | | ||
Total | $ | | $ | |
Note 14 – Commitments and Contingencies
The Company is subject to various legal actions and claims arising in the ordinary course of business. Although the outcome of any legal matter cannot be predicted with certainty, management does not believe that any of these legal proceedings or matters will have a material adverse effect on the consolidated financial position or results of operations or liquidity of the Company.
44
Note 15 – Subsequent Events
Declaration of Dividends
| Payable to stockholders |
|
| ||||
Declaration Date |
| of record as of |
| Amount |
| Paid / Payable Date | |
Series B Preferred Stock |
|
|
|
|
|
| |
October 11, 2021 | October 25, 2021 | $ | November 5, 2021 | ||||
October 11, 2021 | November 24, 2021 | $ | December 3, 2021 | ||||
October 11, 2021 | December 23, 2021 | $ | January 5, 2022 | ||||
Series T Preferred Stock (1) |
|
|
|
| |||
October 11, 2021 | October 25, 2021 | $ | November 5, 2021 | ||||
October 11, 2021 | November 24, 2021 | $ | December 3, 2021 | ||||
October 11, 2021 | December 23, 2021 | $ | January 5, 2022 |
(1) | Shares of newly issued Series T Preferred Stock that are held only a portion of the applicable monthly dividend period will receive a prorated dividend based on the actual number of days in the applicable dividend period during which each such share of Series T Preferred Stock was outstanding. |
Distributions Paid
The following distributions were declared and/or paid to the Company’s stockholders, as well as holders of OP Units and LTIP Units, subsequent to September 30, 2021 (amounts in thousands):
Declaration | Distributions | Total | ||||||||||
Shares |
| Date |
| Record Date |
| Date Paid |
| per Share |
| Distribution | ||
Class A Common Stock | September 10, 2021 | September 24, 2021 | October 5, 2021 | $ | | $ | | |||||
Class C Common Stock | September 10, 2021 | September 24, 2021 | October 5, 2021 | | | |||||||
Series B Preferred Stock | July 12, 2021 | September 24, 2021 | October 5, 2021 | | | |||||||
Series C Preferred Stock | September 10, 2021 | September 24, 2021 | October 5, 2021 | | | |||||||
Series D Preferred Stock | September 10, 2021 | September 24, 2021 | October 5, 2021 | | | |||||||
Series T Preferred Stock | July 12, 2021 | September 24, 2021 | October 5, 2021 | | | |||||||
OP Units | September 10, 2021 | September 24, 2021 | October 5, 2021 | | | |||||||
LTIP Units | September 10, 2021 | September 24, 2021 | October 5, 2021 | | | |||||||
Series B Preferred Stock | October 11, 2021 | October 25, 2021 | November 5, 2021 | | | |||||||
Series T Preferred Stock | October 11, 2021 | October 25, 2021 | November 5, 2021 | | | |||||||
Total |
|
|
|
| $ | |
45
Acquisitions of Single-Family Residential Homes
In October 2021, the Company acquired an
Joint Venture Financing
In October 2021, the Company entered into a joint venture with an unaffiliated third party to invest in single-family residential homes. The Company has made a commitment to fund $
46
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of Bluerock Residential Growth REIT, Inc., and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Bluerock Residential Growth REIT, Inc., a Maryland corporation, and, as required by context, Bluerock Residential Holdings, L.P., a Delaware limited partnership, which we refer to as our “Operating Partnership,” and to their subsidiaries. We refer to Bluerock Real Estate, L.L.C., a Delaware limited liability company, as “Bluerock”, and we refer to our former external manager, BRG Manager, LLC, a Delaware limited liability company, as our “former Manager.” Both Bluerock and our former Manager are affiliated with the Company.
Forward-Looking Statements
Statements included in this Quarterly Report on Form 10-Q that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.
The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements.
Currently, one of the most significant factors, however, is the potential adverse effect of the current pandemic of the novel coronavirus and its variants (“COVID-19”) on the financial condition, results of operations, cash flows and performance of the Company and its tenants of our properties, business partners within our network and service providers, as well as the real estate market and the global economy and financial markets. The extent to which COVID-19 impacts the Company and its tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact (including governmental actions that may vary by jurisdiction, such as mandated business closing; “stay-at-home” orders; limits on group activity; and actions to protect residential tenants from eviction), and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, you should interpret many of the risks identified in this Quarterly Report on Form 10-Q, as well as the risks set forth below, as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19.
Additional factors that could have a material adverse effect on our operations and future prospects include, but are not limited to:
● | the factors included in this Quarterly Report on Form 10-Q, including those set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; |
● | use of proceeds of the Company’s securities offerings; |
● | the competitive environment in which we operate; |
● | real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for tenants in such markets; |
● | risks associated with geographic concentration of our investments; |
● | decreased rental rates or increasing vacancy rates; |
● | our ability to lease newly acquired or newly constructed residential properties; |
47
● | potential defaults on or non-renewal of leases by tenants; |
● | creditworthiness of tenants; |
● | our ability to obtain financing for and complete acquisitions under contract at the contemplated terms, or at all; |
● | development and acquisition risks, including rising and unanticipated costs, delays in timing, abandonment of opportunities, and failure of such acquisitions and developments to perform in accordance with projections; |
● | the timing of acquisitions and dispositions; |
● | the performance of our network of leading regional apartment and single-family residential owner/operators with which we invest, including through controlling positions in joint ventures; |
● | potential natural disasters such as hurricanes, tornadoes and floods; |
● | national, international, regional and local economic conditions; |
● | Board determination as to timing and payment of dividends, and our ability to pay future distributions at the dividend rates we have paid historically; |
● | the general level of interest rates; |
● | potential changes in the law or governmental regulations that affect us and interpretations of those laws and regulations, including changes in real estate and zoning or tax laws, and potential increases in real property tax rates; |
● | financing risks, including the risks that our cash flows from operations may be insufficient to meet required payments of principal and interest and we may be unable to refinance our existing debt upon maturity or obtain new financing on attractive terms or at all; |
● | lack of or insufficient amounts of insurance; |
● | our ability to maintain our qualification as a REIT; |
● | litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and |
● | possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by us or a subsidiary owned by us or acquired by us. |
Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking statements included in this report. All forward-looking statements are made as of the date of this report and the risk that actual results will differ materially from the expectations expressed in this report will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this report, whether as a result of new information, future events, changed circumstances or any other reason. The forward-looking statements should be read in light of the risk factors set forth in Item 1A of this Quarterly Report on Form 10-Q, in Item 1A of our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 23, 2021, and subsequent filings by us with the SEC, or (“Risk Factors”).
48
Overview
We were incorporated as a Maryland corporation on July 25, 2008. Our objective is to maximize long-term stockholder value by acquiring and developing well-located institutional-quality multifamily apartment communities and single-family residential homes in knowledge economy growth markets across the United States. We seek to maximize returns through investments where we believe we can drive substantial growth in our core funds from operations and net asset value primarily through our Value-Add and Invest-to-Own investment strategies.
We conduct our operations through Bluerock Residential Holdings, L.P., our operating partnership (the “Operating Partnership”), of which we are the sole general partner. The consolidated financial statements include our accounts and those of the Operating Partnership and its subsidiaries.
As of September 30, 2021, we held an aggregate of 19,772 units, comprised of 17,632 multifamily units and 2,140 single-family residential homes. The aggregate number of units are held through seventy-two real estate investments, consisting of thirty-nine consolidated operating investments and thirty-three investments held through preferred equity, loan or ground lease investments. As of September 30, 2021, the Company’s consolidated operating investments were approximately 96.2% occupied.
We have elected to be taxed as a REIT under Sections 856 through 860 of the Code and have qualified as a REIT commencing with our taxable year ended December 31, 2010. In order to continue to qualify as a REIT, we must distribute to our stockholders each calendar year at least 90% of our taxable income (excluding net capital gains). If we qualify as a REIT for federal income tax purposes, we generally will not be subject to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates and will not be permitted to qualify as a REIT for four years following the year in which our qualification is denied. Such an event could materially and adversely affect our net income and results of operations. We intend to continue to organize and operate in such a manner as to remain qualified as a REIT.
COVID-19
We continue to monitor the impact of the COVID-19 pandemic on all aspects of our business and apartment communities, including how it will impact our tenants and business partners. While, consistent with prior quarters, we did not incur any significant impact on our performance during the three months ended September 30, 2021 from the COVID-19 pandemic, going forward we cannot predict the impact that the COVID-19 pandemic will have on our financial condition, results of operations and cash flows due to the numerous uncertainties. These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others. The outbreak of COVID-19 across the globe, including the United States, has significantly and adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and, as cases of COVID-19 have continued to be identified in additional countries, many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel. Certain states and cities, including where we own communities, have developments and where our Company has places of business located, have also reacted by instituting quarantines, restrictions on travel, “stay-at-home” orders, restrictions on types of business that may continue to operate, and/or restrictions on the types of construction projects that may continue. We cannot predict if additional states and cities will implement similar restrictions or when restrictions currently in place will expire. As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly, including industries in which our tenants are employed. Further, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, consumer spending as well as other unanticipated consequences remain unknown. We also are unable to predict the impact that COVID-19 will have on our tenants, business partners within our network, and our service providers; and therefore, any material effect on these parties could adversely impact us.
49
As of September 30, 2021, we collected 97% of rents from our multifamily properties for the three months ended September 30, 2021. As of October 31, 2021, we collected 97% of October rents from our multifamily properties. In 2020, we had provided rent deferral payment plans as a result of hardships certain tenants experienced due to the impact of COVID-19; for the nine months ended September 30, 2021, the Company did not provide rent deferral payment plans, compared to the onset of the COVID-19 pandemic (quarter ended June 30, 2020) in which 1% of our tenant base was on payment plans. Although we may receive tenant requests for rent deferrals in the coming months, we do not expect to waive our contractual rights under our lease agreements. Further, while occupancy remains strong at 96.2% and 95.8% as of September 30, 2021 and October 31, 2021, respectively, in future periods, we may experience reduced levels of tenant retention, and reduced foot traffic and lease applications from prospective tenants, as a result of the impact of COVID-19.
The impact of the COVID-19 pandemic on our rental revenue for the fourth quarter of 2021 and thereafter cannot be determined at present. The situation surrounding the COVID-19 pandemic remains uncertain, and we are actively managing our response in collaboration with business partners in our network and service providers and assessing potential impacts to our financial position and operating results, as well as potential adverse developments in our business. While we expect COVID-19 to adversely impact our tenants in the short term, we believe the knowledge economy renter by choice targeted by our Class A affordable rent strategy should be less impacted by COVID-19 related job loss, which should provide a downside buffer in the interim and allow us to reaccelerate rent growth more quickly once more economic certainty exists around the COVID-19 pandemic.
Since the beginning of the COVID-19 pandemic, we have taken actions to prioritize the health and well-being of our tenants and our employees, while maintaining our high standard of service. As of September 30, 2021, all our properties are open and are complying with federal, state and local government orders. In keeping with such orders, we have implemented, and will continue to implement, operational changes, including the adoption of social distancing practices, additional use of PPE equipment and a virtual leasing/virtual office structure. Our property offices are now open to the public and to residents by appointment and with strict social distancing protocols in place. Work orders are now being completed, also with strict safety protocols in place including PPE equipment and a safety questionnaire of each resident at time of request. Generally, the outdoor amenity areas at our communities, including pools, pet parks, and outdoor social areas, have re-opened with strict social distancing protocols, limited capacity and cleaning protocols implemented. Our properties continue the cleaning protocols for the sanitization of all community common areas (including handrails, doors and elevators).
In response to shelter-in-place orders, our corporate offices have also transitioned to a remote work environment. There can be no assurances that the continuation of such remote work arrangements for an extended period of time will not strain our business continuity plans, introduce operational risk, including cybersecurity risks, or impair our ability to manage our business.
Other Significant Developments
Acquisitions of and Investments in Real Estate
During the nine months ended September 30, 2021, we acquired one multifamily operating property representing an aggregate of 276 units and eight operating portfolios of single-family residential homes representing an aggregate of 759 homes, for total purchase prices of $196.7 million.
Additionally, we entered into fourteen preferred equity investments in both multifamily apartment communities and single-family residential homes, committing $165.8 million, of which $76.9 million was funded (which includes the full funding of seven investments for $66.2 million), during the period.
We made mortgage loan investments in two portfolios of single-family residential homes amounting to $9.9 million.
In addition to the investments summarized in the tables below, we increased our mezzanine loan investments in Avondale Hills, Domain at The One Forty, Motif, Reunion Apartments and Vickers Historic Roswell by approximately $21.4 million in aggregate, increased our preferred equity investments in Alexan CityCentre, Chandler, The Conley and Thornton Flats by approximately $4.6 million in aggregate, and provided increased funding for the Zoey Ground Lease of approximately $8.3 million.
50
The following is a summary of our real estate investments made during the nine months ended September 30, 2021 (dollars in millions):
|
| Number of |
| Ownership |
| Purchase | ||||||
Name - Operating |
| Location / Market |
| Date of Investment |
| Units / Homes |
| Interest |
| Price | ||
Multifamily | ||||||||||||
Windsor Falls |
| Raleigh, NC | June 17, 2021 |
| 276 |
| 100 | % | $ | 48.8 | ||
Single-Family Residential (1) | ||||||||||||
Yauger Park Villas | Olympia, WA | April 14, 2021 | 80 | 95 | % | 24.5 | ||||||
Wayford at Concord (2) | Concord, NC | June 4, 2021 | 150 | 83 | % | 44.4 | ||||||
Indy | Indianapolis, IN | August 12, 2021 | 44 | 60 | % | 3.8 | ||||||
Springfield | Springfield, MO | August 18, 2021 | 290 | 60 | % | 49.0 | ||||||
Springtown | Springtown, TX | September 15, 2021 | 70 | 80 | % | 9.4 | ||||||
Texarkana | Texarkana, TX | September 21, 2021 | 29 | 80 | % | 3.1 | ||||||
Lubbock | Lubbock, TX | September 24, 2021 | 60 | 80 | % | 5.6 | ||||||
Granbury | Granbury, TX | September 30, 2021 | 36 | 80 | % | 8.1 | ||||||
Total Operating |
|
|
|
| 1,035 |
|
| $ | 196.7 | |||
|
| Actual/Planned |
| |||||||||
Number of |
| Commitment | Investment | |||||||||
Name - Preferred Equity | Location / Market | Date of Investment | Units / Homes | Amount | Amount | |||||||
Multifamily |
|
|
|
|
|
|
|
|
| |||
The Riley |
| Richardson, TX | March 1, 2021 |
| 262 |
| $ | 7.0 | $ | 7.0 | ||
The Reserve at Palmer Ranch (3) |
| Sarasota, FL | June 10, 2021 |
| 320 | 11.4 |
| 11.4 | ||||
Deerwood Apartments |
| Houston, TX | June 16, 2021 |
| 330 |
| 16.5 |
| 2.4 | |||
Wayford at Innovation Park |
| Charlotte, NC | June 17, 2021 |
| 210 |
| 11.7 |
| — | |||
Deercross |
| Indianapolis, IN | June 25, 2021 |
| 372 |
| 4.0 |
| 4.0 | |||
Spring Parc |
| Dallas, TX | July 13, 2021 |
| 304 | 8.0 |
| 8.0 | ||||
The Crossings of Dawsonville |
| Dawsonville, GA | July 14, 2021 |
| 216 |
| 10.5 |
| 10.5 | |||
Lower Broadway | San Antonio, TX | July 15, 2021 | 386 | 15.8 | — | |||||||
Orange City Apartments | Orange City, FL | July 26, 2021 | 298 | 15.1 | — | |||||||
Renew 3030 | Mesa, AZ | August 31, 2021 | 126 | 7.1 | 7.1 | |||||||
Single-Family Residential | ||||||||||||
Peak Housing (4) | Various (5) | 2Q/3Q, 2021 | 474 | 18.2 | 18.2 | |||||||
Willow Park | Willow Park, TX | June 17, 2021 | 46 | 3.8 | — | |||||||
The Cottages of Port St. Lucie | Port St. Lucie, FL | August 26, 2021 | 286 | 18.8 | 3.6 | |||||||
The Cottages at Myrtle Beach | Myrtle Beach, SC | September 9, 2021 | 294 | 17.9 | 4.7 | |||||||
Total Preferred Equity |
|
|
|
| 3,924 |
|
| $ | 76.9 | |||
Number of | Commitment | Investment | ||||||||||
Name - Mortgage Loan | Market | Date of Investment | Homes | Amount | Amount | |||||||
Single-Family Residential | ||||||||||||
Corpus | Corpus Christi, TX | July 9, 2021 | 81 | 6.8 | 6.8 | |||||||
Jolin | Weatherford, TX | August 6, 2021 | 24 | 3.1 | 3.1 | |||||||
Total Mortgage Loan | 105 | $ | 9.9 | |||||||||
Total |
|
|
|
| 5,064 |
|
| $ | 283.5 |
(1) | Single-Family Residential includes single-family residential homes and attached townhomes/flats. |
(2) | We purchased the Wayford at Concord property from our unaffiliated joint venture partner, and as part of the transaction, our preferred equity investment was redeemed. |
(3) | We sold The Reserve at Palmer Ranch to our unaffiliated joint venture partner, and as part of the sale, we simultaneously made a preferred equity investment in the property as part of the Strategic Portfolio. |
(4) | Peak Housing consists of our preferred equity investments in a private single-family home REIT. Peak Housing contains the following nine portfolios of single-family residential homes: Corpus, Granbury, Indy, Jolin, Lubbock, Peak I, Springfield, Springtown and Texarkana. The 474 homes presented only represent those in the Peak I portfolio. The number of homes related to the other eight portfolios are presented separately in the table as we also hold a common equity investment in the portfolio or have provided a mortgage loan to the portfolio. |
(5) | Peak Housing includes portfolios of homes located in Indiana, Missouri and Texas. |
51
Sale of Real Estate Assets and Investments
We sold seven operating properties for net proceeds of $189.3 million. Additionally, three of the properties underlying our preferred equity investments were sold for net proceeds of $32.2 million, of which $0.3 million is to be received subsequent to September 30, 2021. We also received a mezzanine loan payoff of approximately $12.9 million from the sale of one property.
The following is a summary of our real estate sales, mezzanine loan payoffs and redemption of preferred equity investments during the nine months ended September 30, 2021 (dollars in millions):
|
|
| Number of |
| Ownership |
| Sale |
| BRG Net | |||||
Property |
| Location |
| Date Sold |
| Units |
| Interest |
| Price |
| Proceeds | ||
Operating | ||||||||||||||
ARIUM Grandewood |
| Orlando, FL | January 28, 2021 |
| 306 |
| 100 | % | $ | 65.3 | $ | 25.1 | ||
James at South First |
| Austin, TX | February 24, 2021 |
| 250 |
| 90 | % |
| 50.0 |
| 18.1 | ||
Marquis at The Cascades |
| Tyler, TX | March 1, 2021 |
| 582 |
| 90 | % |
| 90.9 |
| 32.6 | ||
Plantation Park |
| Lake Jackson, TX | April 26, 2021 |
| 238 |
| 80 | % |
| 32.0 |
| 2.7 | ||
The Reserve at Palmer Ranch (1) |
| Sarasota, FL | June 10, 2021 |
| 320 |
| 100 | % |
| 57.6 |
| 16.6 | ||
Park & Kingston | Charlotte, NC | July 7, 2021 | 168 | 100 | % | 44.9 | 24.7 | |||||||
The District at Scottsdale | Scottsdale, AZ | July 7, 2021 | 332 | 99 | % | 150.5 | 69.5 | |||||||
Total Operating |
|
|
|
| 2,196 |
|
| 491.2 |
| 189.3 | ||||
Mezzanine Loan |
|
|
|
|
|
|
|
|
|
|
| |||
Vickers Historic Roswell |
| Roswell, GA | June 29, 2021 |
| 79 |
| — |
| 40.3 |
| 12.9 | |||
Total Mezzanine Loan |
|
|
|
| 79 |
|
| 40.3 |
| 12.9 | ||||
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
| |||
The Conley |
| Leander, TX | March 18, 2021 |
| 259 |
| — |
| 52.1 |
| 16.5 | |||
Alexan Southside Place |
| Houston, TX | March 25, 2021 |
| 270 |
| — |
| 45.1 |
| 10.1 | |||
Wayford at Concord (2) |
| Concord, NC | June 4, 2021 |
| 150 |
| — |
| 44.4 |
| 7.0 | |||
Mira Vista | Austin, TX | September 23, 2021 | 200 | 32.6 | 5.6 | |||||||||
Total Preferred Equity |
|
|
|
| 879 |
|
| 174.2 |
| 39.2 | ||||
Total |
|
|
|
| 3,154 |
| $ | 705.7 | $ | 241.4 |
(1) | We sold The Reserve at Palmer Ranch to our unaffiliated joint venture partner, and as part of the sale, we simultaneously made a preferred equity investment in the property as part of the Strategic Portfolio. |
(2) | We purchased the Wayford at Concord property from our unaffiliated joint venture partner, and as part of the transaction, our preferred equity investment was redeemed. |
Series T Preferred Stock Continuous Offering
During the nine months ended September 30, 2021, we issued 13,228,681 shares of Series T Preferred Stock under a continuous registered offering with net proceeds of approximately $297.6 million after commissions, dealer manager fees and discounts of approximately $33.1 million.
Redemption of 8.250% Series A Cumulative Redeemable Preferred Stock
On February 26, 2021, we redeemed all 2,201,547 outstanding shares of our Series A Preferred Stock at a redemption price of $25.00 per share, plus accrued and unpaid dividends up to, and including, the date of redemption in an amount equal to $0.320833 per share, for a total payment of $25.320833 per share, in cash.
Redemptions of Series B Redeemable Preferred Stock
During the nine months ended September 30, 2021, we redeemed 153,524 shares of Series B Preferred Stock through the issuance of 14,839,504 shares of Class A common stock.
52
Our total stockholders’ equity increased $52.9 million from $58.4 million as of December 31, 2020 to $111.3 million as of September 30, 2021. The increase in our total stockholders’ equity is primarily attributable to the issuance of shares of Class A common stock for the redemptions of shares of Series B Preferred Stock of $153.4 million (of which, $150.7 million relates to Company-initiated redemptions) and net income of $94.6 million, offset by dividends declared of $57.7 million, the repurchase of shares of Class A common stock of $119.6 million and preferred stock accretion of $19.2 million during the nine months ended September 30, 2021.
Results of Operations
The following is a summary of our stabilized consolidated operating real estate investments as of September 30, 2021:
| Number of |
| Date |
| Ownership |
| Average |
| % |
| |||||
Name |
| Location | Units | Built/Renovated (1) | Interest | Rent (2) | Occupied (3) |
| |||||||
Multifamily | |||||||||||||||
ARIUM Glenridge |
| Atlanta, GA |
| 480 |
| 1990 |
| 90 | % | $ | 1,408 |
| 93.5 | % | |
ARIUM Westside |
| Atlanta, GA |
| 336 |
| 2008 |
| 90 | % |
| 1,566 |
| 94.9 | % | |
Ashford Belmar |
| Lakewood, CO |
| 512 |
| 1988/1993 |
| 85 | % |
| 1,732 |
| 95.9 | % | |
Avenue 25 |
| Phoenix, AZ |
| 254 |
| 2013 |
| 100 | % |
| 1,351 |
| 94.1 | % | |
Burano Hunter’s Creek, formerly ARIUM Hunter’s Creek | Orlando, FL | 532 | 1999 | 100 | % | 1,471 | 95.7 | % | |||||||
Carrington at Perimeter Park |
| Morrisville, NC |
| 266 |
| 2007 |
| 100 | % |
| 1,330 |
| 97.4 | % | |
Chattahoochee Ridge |
| Atlanta, GA |
| 358 |
| 1996 |
| 90 | % |
| 1,453 |
| 97.5 | % | |
Chevy Chase | Austin, TX | 320 | 1971 | 92 | % | 1,008 | 98.8 | % | |||||||
Cielo on Gilbert |
| Mesa, AZ |
| 432 |
| 1985 |
| 90 | % |
| 1,178 |
| 97.0 | % | |
Citrus Tower |
| Orlando, FL |
| 336 |
| 2006 |
| 97 | % |
| 1,436 |
| 95.2 | % | |
Denim |
| Scottsdale, AZ |
| 645 |
| 1979 |
| 100 | % |
| 1,344 |
| 96.1 | % | |
Elan |
| Austin, TX |
| 270 |
| 2007 |
| 100 | % |
| 1,192 |
| 97.0 | % | |
Element | Las Vegas, NV | 200 | 1995 | 100 | % | 1,365 | 94.5 | % | |||||||
Falls at Forsyth |
| Cumming, GA |
| 356 |
| 2019 |
| 100 | % |
| 1,491 |
| 98.3 | % | |
Gulfshore Apartment Homes |
| Naples, FL |
| 368 |
| 2016 |
| 100 | % |
| 1,347 |
| 98.4 | % | |
Outlook at Greystone |
| Birmingham, AL | 300 | 2007 | 100 | % | 1,196 | 95.7 | % | ||||||
Pine Lakes Preserve |
| Port St. Lucie, FL |
| 320 |
| 2003 |
| 100 | % |
| 1,524 |
| 95.9 | % | |
Providence Trail |
| Mount Juliet, TN |
| 334 |
| 2007 |
| 100 | % |
| 1,355 |
| 97.9 | % | |
Roswell City Walk |
| Roswell, GA |
| 320 |
| 2015 |
| 98 | % |
| 1,705 |
| 97.2 | % | |
Sands Parc |
| Daytona Beach, FL |
| 264 |
| 2017 |
| 100 | % |
| 1,455 |
| 98.5 | % | |
The Brodie |
| Austin, TX |
| 324 |
| 2001 |
| 100 | % |
| 1,392 |
| 96.0 | % | |
The Debra Metrowest, formerly ARIUM Metrowest | Orlando, FL | 510 | 2001 | 100 | % | 1,477 | 95.5 | % | |||||||
The Links at Plum Creek |
| Castle Rock, CO |
| 264 |
| 2000 |
| 88 | % |
| 1,531 |
| 95.1 | % | |
The Mills |
| Greenville, SC |
| 304 |
| 2013 |
| 100 | % |
| 1,099 |
| 98.7 | % | |
The Preserve at Henderson Beach |
| Destin, FL |
| 340 |
| 2009 |
| 100 | % |
| 1,665 |
| 95.9 | % | |
The Sanctuary |
| Las Vegas, NV |
| 320 |
| 1988 |
| 100 | % |
| 1,232 |
| 93.1 | % | |
Veranda at Centerfield |
| Houston, TX |
| 400 |
| 1999 |
| 93 | % |
| 1,062 |
| 94.5 | % | |
Villages of Cypress Creek |
| Houston, TX |
| 384 |
| 2001 |
| 80 | % |
| 1,222 |
| 96.4 | % | |
Wesley Village |
| Charlotte, NC |
| 301 |
| 2010 |
| 100 | % |
| 1,429 |
| 95.7 | % | |
Windsor Falls | Raleigh, NC | 276 | 1994 | 100 | % | 1,170 | 95.3 | % | |||||||
Total Units | 10,626 | ||||||||||||||
Number of | Average Year | ||||||||||||||
Single-Family Residential (4) | Market | Homes | Built | ||||||||||||
Granbury | Granbury, TX | 36 | 2020-2021 | 80 | % | 1,556 | 97.2 | % | |||||||
Indy | Indianapolis, IN | 44 | 1958 | 60 | % | 753 | 88.6 | % | |||||||
Lubbock | Lubbock, TX | 60 | 1955 | 80 | % | 969 | 93.3 | % | |||||||
Navigator Villas | Pasco, WA | 176 | 2013 | 90 | % | 1,215 | 97.2 | % | |||||||
Springfield | Springfield, MO | 290 | 2004 | 60 | % | 1,126 | 96.2 | % | |||||||
Springtown | Springtown, TX | 70 | 1991 | 80 | % | 1,216 | 100.0 | % | |||||||
Texarkana | Texarkana, TX | 29 | 1967 | 80 | % | 940 | 93.1 | % | |||||||
Wayford at Concord | Concord, NC | 150 | 2019 | 83 | % | 1,868 | 98.0 | % | |||||||
Yauger Park Villas | Olympia, WA | 80 | 2010 | 95 | % | 2,043 | 97.5 | % | |||||||
Total Homes | 935 | — | — | ||||||||||||
Total Units and Homes/Average |
|
| 11,561 |
|
| $ | 1,384 | (5) | 96.2 | % |
53
The following is a summary of our preferred equity, loan and ground lease investments as of September 30, 2021:
Actual/ |
| Total Actual/ |
|
| Actual/ |
|
| ||||||||||||||
Planned | Estimated | Actual/ | Estimated | Actual/ | Pro | ||||||||||||||||
Number | Construction | Estimated | Initial | Estimated | Forma | ||||||||||||||||
of Units | Cost | Cost to Date | Construction | Occupancy | Construction | Average | |||||||||||||||
Lease-up Investment Name (1) |
| Location / Market |
| or Homes |
| (in millions) |
| (in millions) |
| Cost Per Unit |
| or Home |
| Completion |
| Rent (2) | |||||
Multifamily |
| ||||||||||||||||||||
Reunion Apartments |
| Orlando, FL |
| 280 | $ | 48.3 | $ | 44.0 | $ | 172,500 |
| 3Q 2021 |
| 3Q 2022 | $ | 1,366 | |||||
Total Lease-up Units |
|
| 280 |
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
| ||||||||||||||
Development Investment Name (1) |
|
|
|
|
|
|
|
| |||||||||||||
Multifamily |
|
|
|
|
|
|
|
| |||||||||||||
Zoey |
| Austin, TX |
| 307 |
| 59.5 |
| 48.9 |
| 193,811 |
| 1Q 2022 |
| 2Q 2022 |
| 1,762 | |||||
Avondale Hills |
| Decatur, GA |
| 240 |
| 50.9 |
| 29.1 |
| 212,083 |
| 1Q 2023 |
| 1Q 2023 |
| 1,538 | |||||
The Hartley at Blue Hill, formerly The Park at Chapel Hill |
| Chapel Hill, NC |
| 414 |
| 99.2 |
| 60.5 |
| 239,614 |
| 1Q 2022 |
| 1Q 2023 |
| 1,599 | |||||
Deerwood Apartments | Houston, TX | 330 | 65.8 | 13.9 | 199,394 | 4Q 2022 | 2Q 2023 | 1,590 | |||||||||||||
Chandler | Chandler, AZ | 208 | 48.2 | 8.4 | 231,731 | 3Q 2023 | 4Q 2023 | 1,457 | |||||||||||||
Orange City Apartments | Orange City, FL | 298 | 60.5 | 7.5 | 203,020 | 1Q 2023 | 4Q 2023 | 1,457 | |||||||||||||
Lower Broadway | San Antonio, TX | 386 | 91.5 | 20.8 | 237,047 | 4Q 2023 | 2Q 2024 | 1,769 | |||||||||||||
Wayford at Innovation Park | Charlotte, NC | 210 | 62.0 | 4.8 | 295,238 | 3Q 2023 | 3Q 2024 | 1,994 | |||||||||||||
Total Units | 2,393 | ||||||||||||||||||||
Single-Family Residential | |||||||||||||||||||||
Willow Park | Willow Park, TX | 46 | 12.7 | 5.4 | 276,087 | 2Q 2022 | 4Q 2022 | 2,362 | |||||||||||||
The Cottages at Myrtle Beach | Myrtle Beach, SC | 294 | 63.2 | 11.6 | 214,966 | 1Q 2023 | 4Q 2023 | 1,743 | |||||||||||||
The Cottages of Port St. Lucie | Port St. Lucie, FL | 286 | 69.6 | 9.9 | 243,357 | 1Q 2023 | 4Q 2023 | 2,133 | |||||||||||||
Total Homes | 626 | ||||||||||||||||||||
Total Development Units and Homes |
|
| 3,019 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Number |
|
|
|
|
|
|
|
|
|
| Average | ||||||||
Operating Investment Name (1) | Location / Market | of Units / Homes | Rent (2) | ||||||||||||||||||
Multifamily |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Alexan CityCentre |
| Houston, TX |
| 340 |
|
|
|
|
|
|
|
|
|
| $ | 1,628 | |||||
Belmont Crossing |
| Smyrna, GA |
| 192 |
|
|
|
|
|
|
|
|
|
|
| 924 | |||||
Deercross |
| Indianapolis, IN |
| 372 |
|
|
|
|
|
|
|
|
|
|
| 771 | |||||
Domain at The One Forty |
| Garland, TX |
| 299 |
|
|
|
|
|
|
|
|
|
|
| 1,416 | |||||
Georgetown Crossing |
| Savannah, GA |
| 168 |
|
|
|
|
|
|
|
|
|
|
| 1,105 | |||||
Hunter's Pointe |
| Pensacola, FL |
| 204 |
|
|
|
|
|
|
|
|
|
|
| 1,009 | |||||
Motif |
| Fort Lauderdale, FL |
| 385 |
|
|
|
|
|
|
|
|
|
|
| 2,263 | |||||
Park on the Square |
| Pensacola, FL |
| 240 |
|
|
|
|
|
|
|
|
|
|
| 1,233 | |||||
Renew 3030 |
| Mesa, AZ |
| 126 |
|
|
|
|
|
|
|
|
|
|
| 1,098 | |||||
Sierra Terrace |
| Atlanta, GA |
| 135 |
|
|
|
|
|
|
|
|
|
| 1,292 | ||||||
Sierra Village |
| Atlanta, GA |
| 154 |
|
|
|
|
|
|
|
|
|
|
| 1,254 | |||||
Spring Parc |
| Dallas, TX |
| 304 |
|
|
|
|
|
|
|
|
|
|
| 953 | |||||
The Commons |
| Jacksonville, FL |
| 328 |
|
|
|
|
|
|
|
|
|
|
| 933 | |||||
The Crossings of Dawsonville |
| Dawsonville, GA |
| 216 |
|
|
|
|
|
|
|
|
|
|
| 1,447 | |||||
The Reserve at Palmer Ranch |
| Sarasota, FL |
| 320 |
|
|
|
|
|
|
|
|
|
|
| 1,448 | |||||
The Riley |
| Richardson, TX |
| 262 |
|
|
|
|
|
|
|
|
|
|
| 1,485 | |||||
Thornton Flats |
| Austin, TX |
| 104 |
|
|
|
|
|
|
|
|
|
|
| 1,628 | |||||
Water's Edge | Pensacola, FL | 184 | 1,214 | ||||||||||||||||||
Total Units | 4,333 | ||||||||||||||||||||
Single-Family Residential | |||||||||||||||||||||
Corpus | Corpus Christi, TX | 81 | 1,146 | ||||||||||||||||||
Jolin | Weatherford, TX | 24 | 1,360 | ||||||||||||||||||
Peak Housing (3) | Various (4) | 474 | 968 | ||||||||||||||||||
Total Homes | 579 | ||||||||||||||||||||
Total Operating Units and Homes |
|
| 4,912 |
|
|
|
|
|
|
|
|
|
|
| |||||||
Total Units and Homes/Average |
| 8,211 |
|
|
|
|
|
|
|
|
|
| $ | 1,440 |
(1) | Investments in which the Company has a loan, preferred equity or ground lease investment. Operating investments represent stabilized operating investments. Refer to Note 6 and Note 7 in our consolidated financial statements for further information. |
(2) | For development investments, represents the average pro forma effective monthly rent per occupied unit for all expected occupied units upon stabilization. For operating investments, represents the average effective monthly rent per occupied unit. |
54
(3) | Peak Housing consists of our preferred equity investments in a private single-family home REIT (refer to Note 7 in our consolidated financial statements for further information). Peak Housing contains the following nine portfolios of single-family residential homes: Corpus, Granbury, Indy, Jolin, Lubbock, Peak I, Springfield, Springtown and Texarkana. The 474 homes presented only represent those in the Peak I portfolio. The number of homes related to the other eight portfolios are presented separately in the tables above as the Company also holds a common equity investment in the portfolio or has provided a mortgage loan to the portfolio. |
(4) | Peak Housing includes portfolios of homes located in Indiana, Missouri and Texas. |
Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020
Revenue
Rental and other property revenues increased $1.1 million, or 2%, to $49.8 million for the three months ended September 30, 2021 as compared to $48.7 million for the same prior year period. This was due to a $7.3 million increase from the acquisition of nine properties in 2021 and the full period impact of four properties acquired in 2020, a $2.9 million increase from same store properties, and a $0.3 million increase from other non-same store properties, partially offset by a $9.4 million decrease driven by the sales of seven properties in 2021 and the full period impact of one property sold in 2020.
Interest income from mezzanine loan and ground lease investments decreased $1.9 million, or 32%, to $4.0 million for the three months ended September 30, 2021 as compared to $5.9 million for the same prior year period primarily due to the sales of three underlying properties in 2021 and 2020 and decreases in interest rates in 2021, partially offset by increases in the average outstanding balance of mezzanine loans in 2021.
Expenses
Property operating expenses decreased $0.4 million, or 2%, to $19.1 million for the three months ended September 30, 2021 as compared to $19.5 million for the same prior year period. This was primarily due to a $4.0 million decrease from sold properties, partially offset by a $2.8 million increase from the acquisition of properties in 2021 and 2020 and a $0.8 million increase from same store properties. Property NOI margins increased to 61.6% of total revenues for the three months ended September 30, 2021 from 59.8% in the prior year period. Property NOI margins are computed as total rental and other property revenues less property operating expenses, divided by total rental and other property revenues.
Property management fees expense increased $0.03 million, or 2%, to $1.26 million for the three months ended September 30, 2021 as compared to $1.23 million in the same prior year period. Property management fees incurred are based on property level revenues.
General and administrative expenses amounted to $6.9 million for the three months ended September 30, 2021 as compared to $5.9 million for the same prior year period primarily due to increases in compensation and benefits.
Acquisition and pursuit costs amounted to $0.4 million for the three months ended September 30, 2021 as compared to $2.2 million for the same prior year period. The 2020 expense primarily related to the write-off of pre-acquisition costs from one abandoned deal due to the uncertainty from COVID-19. Abandoned pursuit costs can vary greatly, and the costs incurred in any given period may be significantly different in future periods primarily due to increases in compensation and benefits.
Weather-related losses, net amounted to $0.1 million for the three months ended September 30, 2021. The 2021 expense related to storm damages to one property in Arizona and one property in Florida. No weather-related losses were recorded in 2020.
Depreciation and amortization expenses were flat at $19.2 million for the three months ended September 30, 2021 as compared to the same prior year period. This was due to a $3.3 million decrease from sold properties and a $0.4 million decrease from other non-same store properties, offset by a $3.3 million increase from the acquisition of properties in 2021 and 2020 and a $0.4 million increase from same store properties.
55
Other Income and Expense
Other income and expense amounted to income of $36.6 million for the three months ended September 30, 2021 compared to expense of $10.5 million for the same prior year period. This was primarily due to an increase in gains on sale of real estate investments of $48.9 million, partially offset by an increase in loss on early extinguishment of debt of $3.1 million.
Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020
Revenue
Rental and other property revenues increased $3.9 million, or 3%, to $150.6 million for the nine months ended September 30, 2021 as compared to $146.7 million for the same prior year period. This was due to a $19.7 million increase from the acquisition of nine properties in 2021 and the full period impact of six properties acquired in 2020 and a $5.7 million increase from same store properties, partially offset by a $21.5 million decrease driven by the sales of seven properties in 2021 and the full period impact of four properties sold in 2020.
Interest income from related parties and ground leases decreased $4.3 million, or 25%, to $12.8 million for the nine months ended September 30, 2021 as compared to $17.1 million for the same prior year period primarily due to the sales of three underlying properties in 2021 and 2020 and decreases in interest rates in 2021, partially offset by increases in the average outstanding balance of mezzanine loans in 2021.
Expenses
Property operating expenses increased $0.6 million, or 1%, to $58.0 million for the nine months ended September 30, 2021 as compared to $57.4 million for the same prior year period. This was primarily due to a $7.7 million increase from the acquisition of properties in 2021 and 2020 and a $2.2 million increase from same store properties, partially offset by a $9.3 million decrease from sold properties. Property NOI margins increased to 61.5% of total revenues for the nine months ended September 30, 2021 from 60.8% in the prior year period. Property NOI margins are computed as total rental and other property revenues less property operating expenses, divided by total rental and other property revenues.
Property management fees expense increased $0.1 million, or 2%, to $3.8 million for the nine months ended September 30, 2021 as compared to $3.7 million in the same prior year period. Property management fees incurred are based on property level revenues.
General and administrative expenses amounted to $20.1 million for the nine months ended September 30, 2021 as compared to $17.6 million for the same prior year period primarily due to increases in compensation, benefits, and professional, audit and tax services.
Acquisition and pursuit costs amounted to $0.4 million for the nine months ended September 30, 2021 as compared to $3.9 million for the same prior year period. The 2020 expense primarily related to the write-off of pre-acquisition costs from abandoned deals due to the uncertainty from COVID-19, of which $3.3 million of the total costs related to two abandoned deals. Abandoned pursuit costs can vary greatly, and the costs incurred in any given period may be significantly different in future periods.
Weather-related losses, net amounted to $0.5 million for the nine months ended September 30, 2021. The 2021 expense related to freeze damages at eight properties in Texas and storm damages to one property in Arizona and one property in Florida. No weather-related losses were recorded in 2020.
Depreciation and amortization expenses were $59.5 million for the nine months ended September 30, 2021 as compared to $60.2 million for the same prior year period. This was due to a $8.9 million decrease from sold properties and a $0.2 million decrease from same store properties, partially offset by a $8.4 million increase from the acquisition of properties in 2021 and 2020.
Other Income and Expense
Other income and expense amounted to income of $98.3 million for the nine months ended September 30, 2021 compared to income of $10.1 million for the same prior year period. This was primarily due to an increase in gains on sale of real estate investments of $79.2 million, a decrease in loss on early extinguishment of debt of $7.2 million, and a $2.2 million net decrease in interest expense.
56
Property Operations
We define “same store” properties as those that we owned and operated for the entirety of both periods being compared, except for properties that are in the construction or lease-up phases, properties that are undergoing development or significant redevelopment, or properties held for sale. We move properties previously excluded from our same store portfolio for these reasons into the same store designation once they have stabilized or the development or redevelopment is complete and such status has been reflected fully in all quarters during the applicable periods of comparison. For newly constructed or lease-up properties or properties undergoing significant redevelopment, we consider a property stabilized upon attainment of 90.0% physical occupancy.
For comparison of our three months ended September 30, 2021 and 2020, the same store properties included properties owned at July 1, 2020. Our same store properties for the three months ended September 30, 2021 and 2020 consisted of 25 properties, representing 8,882 units.
For comparison of our nine months ended September 30, 2021 and 2020, the same store properties included properties owned at January 1, 2020. Our same store properties for the nine months ended September 30, 2021 and 2020 consisted of 24 properties, representing 8,628 units.
The following table presents the same store and non-same store results from operations for the three and nine months ended September 30, 2021 and 2020 (dollars in thousands):
| Three Months Ended |
| ||||||||||
September 30, | Change |
| ||||||||||
| 2021 |
| 2020 |
| $ |
| % |
| ||||
Property Revenues | ||||||||||||
Same Store |
| $ | 40,011 |
| $ | 37,138 |
| $ | 2,873 | 7.7 | % | |
Non-Same Store |
| 9,772 |
| 11,528 |
| (1,756) | (15.2) | % | ||||
Total property revenues |
| 49,783 |
| 48,666 |
| 1,117 | 2.3 | % | ||||
|
|
|
| |||||||||
Property Expenses |
|
|
|
|
|
|
| |||||
Same Store |
| 15,422 |
| 14,620 |
| 802 | 5.5 | % | ||||
Non-Same Store |
| 3,716 |
| 4,951 |
| (1,235) | (24.9) | % | ||||
Total property expenses |
| 19,138 |
| 19,571 |
| (433) | (2.2) | % | ||||
|
|
|
| |||||||||
Same Store NOI |
| 24,589 |
| 22,518 |
| 2,071 | 9.2 | % | ||||
Non-Same Store NOI |
| 6,056 |
| 6,577 |
| (521) | (7.9) | % | ||||
Total NOI (1) |
| $ | 30,645 |
| $ | 29,095 |
| $ | 1,550 | 5.3 | % |
| Nine Months Ended |
|
|
|
| |||||||
September 30, | Change |
| ||||||||||
2021 |
| 2020 |
| $ |
| % |
| |||||
Property Revenues |
|
|
| |||||||||
Same Store | $ | 113,222 |
| $ | 107,479 |
| $ | 5,743 |
| 5.3 | % | |
Non-Same Store | 37,364 |
| 39,234 |
| (1,870) |
| (4.8) | % | ||||
Total property revenues | 150,586 |
| 146,713 |
| 3,873 |
| 2.6 | % | ||||
|
|
|
| |||||||||
Property Expenses |
|
|
|
| ||||||||
Same Store | 43,306 |
| 41,089 |
| 2,217 |
| 5.4 | % | ||||
Non-Same Store | 14,672 |
| 16,352 |
| (1,680) |
| (10.3) | % | ||||
Total property expenses | 57,978 |
| 57,441 |
| 537 |
| 0.9 | % | ||||
|
|
|
| |||||||||
Same Store NOI | 69,916 |
| 66,390 |
| 3,526 |
| 5.3 | % | ||||
Non-Same Store NOI | 22,692 |
| 22,882 |
| (190) |
| (0.8) | % | ||||
Total NOI (1) | $ | 92,608 |
| $ | 89,272 |
| $ | 3,336 |
| 3.7 | % |
(1) | See “Net Operating Income” below for a reconciliation of Same Store NOI, Non-Same Store NOI and Total NOI to net income (loss) and a discussion of how management uses this non-GAAP financial measure. |
57
Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020
Same store NOI for the three months ended September 30, 2021 increased 9.2%, or $2.1 million, compared to the 2020 period. Same store property revenues increased 7.7%, or $2.9 million, as compared to the 2020 period, primarily attributable to a 7.1% increase in average rental rates and a 30-basis point increase in occupancy. Of our twenty-five same store properties, all twenty-five recognized rental rate increases and fourteen recognized increases in occupancy during the period. In addition, ancillary income, such as termination fees, late fees, and pet fees, increased $0.3 million.
Same store expenses for the three months ended September 30, 2021 increased 5.5%, or $0.8 million, compared to the 2020 period. The increase was partially due to non-controllable expenses; real estate taxes increased $0.2 million due to municipality tax increases and insurance increased $0.1 million due to industrywide multifamily price increases. The remaining increase was due to the following increases: $0.2 million in repairs and maintenance, $0.2 million in administrative costs, and $0.1 million in marketing and payroll.
Non-same store property revenues and property expenses for the three months ended September 30, 2021 decreased $1.8 million and $1.2 million, respectively, compared to the 2020 period due to the timing and volume of operating property transactions. We acquired thirteen operating properties representing 2,323 units and sold eight properties representing 2,286 units since July 1, 2020.
Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020
Same store NOI for the nine months ended September 30, 2021 increased 5.3%, or $3.5 million, compared to the 2020 period. Same store property revenues increased 5.3%, or $5.7 million, as compared to the 2020 period, primarily attributable to a 3.6% increase in average rental rates and an 80-basis point increase in occupancy. Of our twenty-four same store properties, twenty-one recognized increases in rental rates and seventeen recognized increases in occupancy during the period. In addition, bad debt decreased $0.5 million and ancillary income, such as termination fees, late fees, and pet fees, increased $0.9 million.
Same store expenses for the nine months ended September 30, 2021 increased 5.4%, or $2.2 million, compared to the 2020 period. The increase was primarily due to non-controllable expenses; real estate taxes increased $0.6 million due to municipality tax increases and insurance increased $0.5 million due to industrywide multifamily price increases. The remaining increase was due to the following increases: $0.4 million in repairs and maintenance, $0.4 million in administrative costs, $0.2 million in turnover, and $0.1 million in marketing.
Non-same store property revenues and property expenses for the nine months ended September 30, 2021 decreased $1.9 million and $1.7 million, respectively, compared to the 2020 period due to the timing and volume of operating property transactions. We acquired fifteen operating properties representing 2,933 units and sold eleven properties representing 3,118 units since January 1, 2020.
Net Operating Income
We believe that net operating income (“NOI”), is a useful measure of our operating performance. We define NOI as total property revenues less total property operating expenses, excluding depreciation and amortization and interest. Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REITs. NOI also is a computation made by analysts and investors to measure a real estate company’s operating performance.
We believe that this measure provides an operating perspective not immediately apparent from GAAP operating income or net income. We use NOI to evaluate our performance on a same store and non-same store basis; NOI allows us to evaluate the operating performance of our properties because it measures the core operations of property performance by excluding corporate level expenses and other items not related to property operating performance and captures trends in rental housing and property operating expenses.
58
However, NOI should only be used as a supplemental measure of our financial performance. The following table reflects net income (loss) attributable to common stockholders together with a reconciliation to NOI and to same store and non-same store contributions to consolidated NOI, as computed in accordance with GAAP for the periods presented (amounts in thousands):
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Net income (loss) attributable to common stockholders | $ | 12,544 | $ | (17,058) | $ | 30,696 | $ | (18,461) | ||||
Add back: Net income (loss) attributable to Operating Partnership Units |
| 4,994 |
| (6,270) |
| 13,176 |
| (6,679) | ||||
Net income (loss) attributable to common stockholders and unit holders |
| 17,538 |
| (23,328) |
| 43,872 |
| (25,140) | ||||
Add common stockholders and Operating Partnership Units pro-rata share of: | ||||||||||||
Real estate depreciation and amortization |
| 18,187 |
| 18,309 |
| 56,627 |
| 57,353 | ||||
Non-real estate depreciation and amortization |
| 122 |
| 122 |
| 365 |
| 364 | ||||
Non-cash interest expense |
| 363 |
| 731 |
| 1,517 |
| 2,323 | ||||
Unrealized loss on derivatives |
| 41 |
| 98 |
| 31 |
| 67 | ||||
Loss on extinguishment of debt and debt modification costs |
| 2,975 |
| — |
| 6,148 |
| 13,590 | ||||
Provision for credit losses | 17 | — | 584 | — | ||||||||
Property management fees |
| 1,191 |
| 1,173 |
| 3,608 |
| 3,540 | ||||
Acquisition and pursuit costs |
| 413 |
| 2,242 |
| 428 |
| 3,933 | ||||
Corporate operating expenses |
| 6,781 |
| 5,817 |
| 19,871 |
| 17,279 | ||||
Weather-related losses, net |
| 140 |
| — |
| 500 |
| — | ||||
Preferred dividends |
| 15,772 |
| 15,003 |
| 44,756 |
| 42,787 | ||||
Preferred stock accretion |
| 4,840 |
| 4,451 |
| 19,152 |
| 11,978 | ||||
Less common stockholders and Operating Partnership Units pro-rata share of: | ||||||||||||
Other income, net |
| 216 |
| 52 |
| 324 |
| 49 | ||||
Preferred returns on unconsolidated real estate joint ventures |
| 3,322 |
| 2,935 |
| 7,938 |
| 8,343 | ||||
Interest income from loan and ground lease investments |
| 4,149 |
| 5,923 |
| 12,984 |
| 17,149 | ||||
Gain on sale of real estate investments |
| 43,359 |
| — |
| 124,416 |
| 55,360 | ||||
Pro-rata share of properties’ income |
| 17,334 |
| 15,708 |
| 51,797 |
| 47,173 | ||||
Add: | ||||||||||||
Noncontrolling interest pro-rata share of partially owned property income |
| 977 |
| 725 |
| 2,356 |
| 2,278 | ||||
Total property income |
| 18,311 |
| 16,433 |
| 54,153 |
| 49,451 | ||||
Add: | ||||||||||||
Interest expense |
| 12,334 |
| 12,662 |
| 38,455 |
| 39,821 | ||||
Net operating income |
| 30,645 |
| 29,095 |
| 92,608 |
| 89,272 | ||||
Less: |
| |||||||||||
Non-same store net operating income |
| 6,056 |
| 6,577 |
| 22,692 |
| 22,882 | ||||
Same store net operating income | $ | 24,589 | $ | 22,518 | $ | 69,916 | $ | 66,390 |
Liquidity and Capital Resources
Liquidity is a measure of our ability to meet potential cash requirements, both short- and long-term. Our primary short-term liquidity requirements historically have related to (a) our operating expenses and other general business needs, (b) distributions to our stockholders, (c) committed investments and capital requirements to fund development and renovations at existing properties, (d) ongoing commitments to repay borrowings, including our credit facilities and our maturing short-term debt, and (e) Class A common stock, Series C Preferred Stock and Series D Preferred Stock repurchases under our stock repurchase plans.
Our ability to access capital on favorable terms as well as to use cash from operations to continue to meet our short-term liquidity needs could be affected by various risks and uncertainties, including the effects of the COVID-19 pandemic and other risks detailed in Part II, Item 1A titled “Risk Factors” and in the other reports we have filed with the SEC.
59
We believe we currently have a stable financial condition; as of September 30, 2021, we collected 97% of rents from our multifamily properties for the three months ended September 30, 2021. As of October 31, 2021, we collected 97% of October rents from our multifamily properties. In 2020, we had provided rent deferral payment plans as a result of hardships certain tenants experienced due to the impact of COVID-19; for the nine months ended September 30, 2021, we did not provide rent deferral payment plans, compared to the onset of the COVID-19 pandemic (quarter ended June 30, 2020) in which 1% of our tenant base was on payment plans. Although we may receive tenant requests for rent deferrals in the coming months, we do not expect to waive our contractual rights under our lease agreements. Further, while occupancy remains strong at 96.2% and 95.8% as of September 30, 2021 and October 31, 2021, respectively, in future periods we may experience reduced levels of tenant retention, and reduced foot traffic and lease applications from prospective tenants, as a result of the impact of COVID-19.
As we did in 2020 and to date in 2021, we expect to maintain a proactive capital allocation process and selectively sell assets at appropriate cap rates, which would be expected to generate cash sources for both our short-term and long-term liquidity needs. Due to the uncertainty surrounding the impact of COVID-19, we had suspended interior renovations at several properties as part of assuming a more conservative posture; however, we have selectively restarted the program at various properties as we gained more visibility on the economic recovery nationally and within our specific markets.
In general, we believe our available cash balances, the proceeds from the Amended Senior and Amended Junior Credit Facilities, the Fannie Facility, other financing arrangements and cash flows from operations will be sufficient to fund our liquidity requirements with respect to our existing portfolio for the next 12 months. We expect that properties added to our portfolio with the proceeds from our credit facilities, as well as proceeds raised in our continuous Series T Preferred Offering through the end of its offering period in November 2021, will have a positive impact on our future results of operations. In general, we expect that our results related to our portfolio will improve in future periods as a result of anticipated future investments in and acquisitions of real estate. However, there can be no assurance that the worldwide economic disruptions arising from the COVID-19 pandemic will not cause conditions in the lending, capital and other financial markets to deteriorate, nor that our future revenues or access to capital and other sources of funding will not become constrained, which could reduce the amount of liquidity and credit available for use in acquiring and further diversifying our portfolio of multifamily and single-family assets. We cannot provide any assurances that we will be able to add properties to our portfolio at the anticipated pace, or at all.
We believe we will be able to meet our primary liquidity requirements going forward through:
● | $163.3 million in cash available at September 30, 2021; |
● | $137.4 million of capacity on our credit facilities as of September 30, 2021; |
● | cash generated from operating activities; and |
● | proceeds raised in our continuous Series T Preferred Offering through the end of its offering period in November 2021, proceeds from future borrowings and potential offerings, including potential offerings of common and preferred stock through underwritten offerings, as well as issuances of units of limited partnership interest in our Operating Partnership, or OP Units. |
Only 0.2%, or $3.0 million, of our mortgage debt is maturing through the remainder of 2021. As of September 30, 2021, the aggregate amount of our contractual commitments to fund future cash obligations in certain of our preferred equity, loan and joint venture investments was $107.0 million, an increase from $35.0 million as of December 31, 2020; as of November 5, 2021, this amount was $159.1 million.
In October 2020, our Board authorized new stock repurchase plans for the repurchase, from time to time, of up to an aggregate of $75 million in outstanding shares of our Class A common stock, Series A Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock. On February 9, 2021, our Board authorized the modification of the stock repurchase plans to increase the maximum repurchase amount from an aggregate of $75 million in shares to $150 million in shares. During the nine months ended September 30, 2021, we purchased 11,140,637 shares of Class A common stock for a total purchase price of approximately $119.6 million. Under the current repurchase plans, the total purchase price of shares repurchased by us was approximately $138.5 million, and as of September 30, 2021, the value of shares that was available for repurchase under the repurchase plans was $11.5 million. We did not repurchase any shares under the repurchase plans after September 30, 2021. The repurchase plans terminated upon the close of the NYSE American trading day on November 8, 2021, the filing date of this Form 10-Q with the SEC.
60
At the current time, we do not anticipate the need to establish any material contingency reserves related to the COVID-19 pandemic, but we continue to assess along with our network of business partners the possible need for such contingencies, whether at the corporate or property level.
As equity capital market conditions permit, we may supplement our capital for short-term liquidity needs with proceeds of potential offerings of common and preferred stock through underwritten offerings, as well as issuance of OP Units. Given the significant volatility in the trading price of our Class A common stock and REIT equities generally associated with the COVID-19 pandemic and our otherwise stable financial condition and liquidity position, we cannot provide assurances that these offerings are a likely source of capital to meet short-term liquidity needs.
Our primary long-term liquidity requirements relate to (a) costs for additional multifamily apartment community and single-family residential home investments, (b) repayment of long-term debt and our credit facilities, (c) capital expenditures, and (d) cash redemption requirements related to our Series B Preferred Stock, Series C Preferred Stock and Series T Preferred Stock.
We intend to finance our long-term liquidity requirements with net proceeds of additional issuances of common and preferred stock, our credit facilities, as well as future borrowings. Our success in meeting these requirements will therefore depend upon our ability to access capital. Further, our ability to access equity capital is dependent upon, among other things, general market conditions for REITs and the capital markets generally, market perceptions about us and our asset class, and current trading prices of our securities, all of which may continue to be adversely impacted by the COVID-19 pandemic.
We may also meet our long-term liquidity needs through borrowings from a number of sources, either at the corporate or project level. We believe the Amended Senior and Amended Junior Credit Facilities, as well as the Fannie Facility, will continue to enable us to deploy our capital more efficiently and provide capital structure flexibility as we grow our asset base. We expect the combination of these facilities to provide us flexibility by allowing us, among other things, to use borrowings under our Amended Senior and Amended Junior Credit Facilities to acquire properties pending placement of permanent mortgage indebtedness, including under the Fannie Facility. In addition to restrictive covenants, these credit facilities contain material financial covenants. At September 30, 2021, we were in compliance with all covenants under our credit facilities. We will continue to monitor the debt markets, including Fannie Mae and Freddie Mac, and as market conditions permit, access borrowings that are advantageous to us.
We intend to continue to use prudent amounts of leverage in making our investments, which we define as having total indebtedness of approximately 65% of the fair market value of the properties in which we have invested. For purposes of calculating our leverage, we assume full consolidation of all of our real estate investments, whether or not they would be consolidated under GAAP, include assets we have classified as held for sale, and include any joint venture level indebtedness in our total indebtedness. However, we are not subject to any limitations on the amount of leverage we may use, and accordingly, the amount of leverage we use may be significantly less or greater than we currently anticipate. We expect our leverage to decline commensurately as we execute our business plan to grow our net asset value.
If we are unable to obtain financing on favorable terms or at all, we would likely need to curtail our investment activities, including acquisitions and improvements to and developments of, real properties, which could limit our growth prospects. This, in turn, could reduce cash available for distribution to our stockholders and may hinder our ability to raise capital by issuing more securities or borrowing more money. We also may be forced to dispose of assets at inopportune times to maintain our REIT qualification and Investment Company Act exemption.
We expect to maintain distributions paid to our Series B Preferred Stock, our Series C Preferred Stock, our Series D Preferred Stock and our Series T Preferred Stock in accordance with the terms of those securities which require monthly or quarterly dividends depending on the series. While our policy is generally to pay distributions from cash flow from operations, our distributions through September 30, 2021 have been paid from cash flow from operations, proceeds from our continuous preferred stock offerings, including our continuous offering of Series T Preferred Stock, which will reach the end of its offering period in November 2021, sales of assets, proceeds from underwritten securities offerings, and may in the future be paid from additional sources, such as from borrowings.
61
We have notes receivable in conjunction with properties that are in various stages of development, in lease-up and operating. To date, these investments have generally been structured as mezzanine loans and mortgage loans to these types of projects. The notes receivable provide a current stated return, and in certain cases, an accrued return, and required repayment based on a fixed maturity date, generally in relation to the property’s construction loan or mortgage loan maturity. If the property does not repay the notes receivable upon maturity, our income, FFO, CFFO and cash flows could be reduced below the stated returns currently being recognized if the property does not produce sufficient cash flow to pay its operating expenses and debt service, or to refinance its debt obligations. In addition, we have, in certain cases, an option to purchase up to 100% of the common interest which holds an interest in the entity that owns the property. If we were to convert into common ownership, our income, FFO, CFFO and cash flows would be reflective of our pro rata share of the property’s results, which could be a reduction from what our notes receivable currently generate.
We also have preferred equity interests in properties that are in various stages of development, in lease-up and operating. Our preferred equity investments are structured to provide a current preferred return, and in some cases, an accrued return, during all phases. Each joint venture in which we own a preferred equity interest is required to redeem our preferred equity interests, plus any accrued preferred return, based on a fixed maturity date, generally in relation to the property’s construction loan or mortgage loan maturity. Upon redemption of our preferred equity interests, our income, FFO, CFFO and cash flows could be reduced below the preferred returns currently being recognized. Alternatively, if the joint ventures do not redeem our preferred equity interest when required, our income, FFO, CFFO and cash flows could be reduced if the property does not produce sufficient cash flow to pay its operating expenses, debt service and preferred return obligations. As we evaluate our capital position and capital allocation strategy, we may consider alternative means of financing the loan and preferred equity investment activities at the subsidiary level.
Off-Balance Sheet Arrangements
As of September 30, 2021, we have off-balance sheet arrangements that may have a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures. As of September 30, 2021, we own interests in nineteen joint ventures that are accounted for as held to maturity debt securities or loans.
Cash Flows from Operating Activities
As of September 30, 2021, we held seventy-two real estate investments, consisting of thirty-nine consolidated operating investments and thirty-three investments held through preferred equity, loan or ground lease investments. During the nine months ended September 30, 2021, net cash provided by operating activities was $63.2 million after net income of $119.4 million was adjusted for the following:
● | non-cash items of $75.4 million; |
● | an increase in accounts receivable, prepaids and other assets of $7.1 million; and |
● | an increase in notes and accrued interest receivable of $3.1 million, offset by: |
● | distributions and preferred returns from unconsolidated joint ventures of $8.7 million; |
● | an increase in amortization of deferred interest income on mezzanine loan of $2.0 million; |
● | an increase in loss on extinguishment of debt and debt modification costs of $6.7 million; |
● | an increase in accounts payable and other accrued liabilities of $11.9 million; and |
● | an increase in due to affiliates of $0.1 million. |
Cash Flows from Investing Activities
During the nine months ended September 30, 2021, net cash provided by investing activities was $169.2 million, primarily due to the following:
● | $417.9 million of proceeds from the sale of real estate investments; |
● | $36.7 million of proceeds from the sale and redemption of unconsolidated real estate joint ventures; and |
● | $12.4 million of repayments on notes receivable, offset by: |
● | $157.8 million used in acquiring consolidated real estate investments; |
● | $121.0 million used for investments in unconsolidated joint ventures, notes receivable and a ground lease; and |
● | $19.0 million used on capital expenditures. |
62
Cash Flows from Financing Activities
During the nine months ended September 30, 2021, net cash used in financing activities was $152.6 million, primarily due to the following:
● | $186.0 million of repayments of our mortgages payable; |
● | $119.6 million paid for the repurchase of Class A common stock; |
● | $63.0 million in repayments on revolving credit facilities; |
● | $55.1 million paid for the redemption of Series A Preferred Stock; |
● | $45.0 million paid in cash distributions to preferred stockholders; |
● | $22.9 million in distributions paid to our noncontrolling interests; |
● | $12.4 million paid in cash distributions to common stockholders; |
● | $1.1 million increase in deferred financing costs; |
● | $0.6 million of Class A common stock ATM issuance costs; and |
● | $0.1 million paid for the redemption of Series B Preferred Stock; |
● | partially offset by net proceeds of $296.6 million from issuance of Series T Preferred Stock; |
● | net proceeds of $30.0 million from borrowings on revolving credit facilities; |
● | net borrowings of $12.9 million on mortgages payable; |
● | contributions from noncontrolling interests of $12.6 million; and |
● | net proceeds of $1.3 million from the exercise of Warrants. |
Capital Expenditures
The following table summarizes our total capital expenditures for the nine months ended September 30, 2021 and 2020 (amounts in thousands):
Nine Months Ended | |||||||
September 30, | |||||||
| 2021 |
| 2020 | ||||
Redevelopment/renovations | $ | 14,023 |
| $ | 6,461 | ||
Routine capital expenditures | 4,478 |
| 2,962 | ||||
Normally recurring capital expenditures | 2,421 | 2,262 | |||||
Total capital expenditures | $ | 20,922 |
| $ | 11,685 |
Redevelopment and renovation costs are non-recurring capital expenditures for significant projects that are revenue enhancing through unit or common area upgrades, such as clubhouse renovations and kitchen remodels. Routine capital expenditures are necessary non-revenue generating improvements that extend the useful life of the property and that are less frequent in nature, such as roof repairs and asphalt resurfacing. Normally recurring capital expenditures are necessary non-revenue generating improvements that occur on a regular ongoing basis, such as carpet and appliances.
Funds from Operations and Core Funds from Operations Attributable to Common Stockholders and Unit Holders
We believe that funds from operations (“FFO”), as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), and core funds from operations (“CFFO”) are important non-GAAP supplemental measures of operating performance for a REIT.
63
FFO attributable to common stockholders and unit holders is a non-GAAP financial measure that is widely recognized as a measure of REIT operating performance. We consider FFO to be an appropriate supplemental measure of our operating performance as it is based on a net income analysis of property portfolio performance that excludes non-cash items such as depreciation. The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time. Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT, using historical accounting for depreciation, could be less informative. We define FFO, consistent with the NAREIT definition, as net income (loss), computed in accordance with GAAP, excluding gains or losses on sales of depreciable real estate property, plus depreciation and amortization of real estate assets, plus impairment write-downs of certain real estate assets and investments in entities where the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for notes receivable, unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis.
CFFO makes certain adjustments to FFO, removing the effect of items that do not reflect ongoing property operations such as acquisition expenses, non-cash interest expense, unrealized gains or losses on derivatives, losses on extinguishment of debt and debt modification costs (includes prepayment penalties incurred and the write-off of unamortized deferred financing costs and fair market value adjustments of assumed debt), one-time weather-related costs, non-cash equity compensation and preferred stock accretion. Commencing in 2020, we do not deduct the accrued portion of the preferred income on our preferred equity investments from FFO to determine CFFO as the income is deemed fully collectible. The accrued portion of the preferred income totaled $1.9 million and $0.4 million, and $4.6 million and $1.2 million for the three and nine months ended September 30, 2021 and 2020, respectively. We believe that CFFO is helpful to investors as a supplemental performance measure because it excludes the effects of certain items which can create significant earnings volatility, but which do not directly relate to our core recurring property operations. As a result, we believe that CFFO can help facilitate comparisons of operating performance between periods and provides a more meaningful predictor of future earnings potential.
Our calculation of CFFO differs from the methodology used for calculating CFFO by certain other REITs and, accordingly, our CFFO may not be comparable to CFFO reported by other REITs. Our management utilizes FFO and CFFO as measures of our operating performance after adjustment for certain non-cash items, such as depreciation and amortization expenses, and acquisition and pursuit costs that are required by GAAP to be expensed but may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods. Furthermore, although FFO and CFFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we also believe that FFO and CFFO may provide us and our stockholders with an additional useful measure to compare our financial performance to certain other REITs.
Neither FFO nor CFFO is equivalent to net income (loss), including net income (loss) attributable to common stockholders, or cash generated from operating activities determined in accordance with GAAP. Furthermore, FFO and CFFO do not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO nor CFFO should be considered as an alternative to net income (loss), including net income (loss) attributable to common stockholders, as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity.
We have acquired twelve operating investments, made fifteen investments through preferred equity or loans, sold eight operating investments and received payoffs of our loan or preferred equity in eight investments subsequent to September 30, 2020. We paid a quarterly common stock dividend of $0.1625 per share and unit, or a 102% payout on a CFFO basis, during the three months ended September 30, 2021. The results presented in the table below are not directly comparable and should not be considered an indication of our future operating performance.
64
The table below presents our calculation of FFO and CFFO for the three and nine months ended September 30, 2021 and 2020 (in thousands, except per share amounts):
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Net income (loss) attributable to common stockholders | $ | 12,544 | $ | (17,058) | $ | 30,696 | $ | (18,461) | ||||
Add back: Net income (loss) attributable to Operating Partnership Units |
| 4,994 |
| (6,270) |
| 13,176 |
| (6,679) | ||||
Net income (loss) attributable to common stockholders and unit holders |
| 17,538 |
| (23,328) |
| 43,872 |
| (25,140) | ||||
Common stockholders and Operating Partnership Units pro-rata share of: |
|
|
| |||||||||
Real estate depreciation and amortization |
| 18,187 |
| 18,309 |
| 56,627 |
| 57,353 | ||||
Provision for credit losses | 17 | — | 584 | — | ||||||||
Gain on sale of real estate investments |
| (43,359) |
| — |
| (124,416) |
| (55,360) | ||||
FFO Attributable to Common Stockholders and Unit Holders |
| (7,617) |
| (5,019) |
| (23,333) |
| (23,147) | ||||
Common stockholders and Operating Partnership Units pro-rata share of: |
|
|
| |||||||||
Acquisition and pursuit costs |
| 413 |
| 2,242 |
| 428 |
| 3,933 | ||||
Non-cash interest expense |
| 363 |
| 731 |
| 1,517 |
| 2,323 | ||||
Unrealized loss on derivatives |
| 41 |
| 98 |
| 31 |
| 67 | ||||
Loss on extinguishment of debt and debt modification costs |
| 2,975 |
| — |
| 6,148 |
| 13,590 | ||||
Amortization of deferred interest income on mezzanine loan | 984 | — | 1,981 | — | ||||||||
Weather-related losses, net |
| 140 |
| — |
| 500 |
| — | ||||
Non-real estate depreciation and amortization |
| 122 |
| 122 |
| 365 |
| 364 | ||||
Other income, net |
| (216) |
| (52) |
| (168) |
| (49) | ||||
Non-cash equity compensation |
| 3,395 |
| 2,850 |
| 10,184 |
| 8,589 | ||||
Preferred stock accretion |
| 4,840 |
| 4,451 |
| 19,152 |
| 11,978 | ||||
CFFO Attributable to Common Stockholders and Unit Holders | $ | 5,440 | $ | 5,423 | $ | 16,805 | $ | 17,648 | ||||
Per Share and Unit Information: |
|
|
| |||||||||
FFO Attributable to Common Stockholders and Unit Holders - diluted | $ | (0.20) | $ | (0.15) | $ | (0.64) | $ | (0.70) | ||||
CFFO Attributable to Common Stockholders and Unit Holders - diluted | $ | 0.15 | $ | 0.16 | $ | 0.46 | $ | 0.53 | ||||
Weighted average common shares and units outstanding - diluted |
| 37,461,558 |
| 33,688,877 |
| 36,360,295 |
| 33,187,360 |
Operating cash flow, FFO and CFFO may also be used to fund all or a portion of certain capitalizable items that are excluded from FFO and CFFO.
Presentation of this information is intended to assist the reader in comparing the sustainability of the operating performance of different REITs, although it should be noted that not all REITs calculate FFO or CFFO the same way, so comparisons with other REITs may not be meaningful. FFO or CFFO should not be considered as an alternative to net income (loss) attributable to common stockholders or as an indication of our liquidity, nor is either indicative of funds available to fund our cash needs, including our ability to make distributions. Both FFO and CFFO should be reviewed in connection with other GAAP measurements.
65
Contractual Obligations
The following table summarizes our contractual obligations as of September 30, 2021 which consisted of mortgage notes secured by our properties. At September 30, 2021, our estimated future required payments on these obligations were as follows (amounts in thousands):
|
| Remainder of |
| ||||||||||||
| Total |
| 2021 |
| 2022-2023 |
| 2024-2025 |
| Thereafter | ||||||
Mortgages Payable (Principal) | $ | 1,342,158 | $ | 3,007 | $ | 139,654 | $ | 532,514 | $ | 666,983 | |||||
Estimated Interest Payments on Mortgages Payable |
| 254,640 |
| 12,027 |
| 94,550 |
| 73,765 |
| 74,298 | |||||
Total | $ | 1,596,798 | $ | 15,034 | $ | 234,204 | $ | 606,279 | $ | 741,281 |
Estimated interest payments are based on the stated rates for mortgage notes payable assuming the interest rate in effect for the most recent quarter remains in effect through the respective maturity dates.
Distributions
Payable to stockholders | Date | ||||||
Declaration Date |
| of record as of |
| Amount |
| Paid or Payable | |
Class A Common Stock |
|
|
|
|
|
| |
December 11, 2020 |
| December 24, 2020 | $ | 0.162500 |
| January 5, 2021 | |
March 12, 2021 |
| March 25, 2021 | $ | 0.162500 |
| April 5, 2021 | |
June 11, 2021 | June 25, 2021 | $ | 0.162500 | July 2, 2021 | |||
September 10, 2021 |
| September 24, 2021 | $ | 0.162500 |
| October 5, 2021 | |
Class C Common Stock |
|
|
|
|
|
| |
December 11, 2020 |
| December 24, 2020 | $ | 0.162500 |
| January 5, 2021 | |
March 12, 2021 |
| March 25, 2021 | $ | 0.162500 |
| April 5, 2021 | |
June 11, 2021 | June 25, 2021 | $ | 0.162500 | July 2, 2021 | |||
September 10, 2021 |
| September 24, 2021 | $ | 0.162500 |
| October 5, 2021 | |
Series A Preferred Stock |
|
|
|
|
|
| |
December 11, 2020 |
| December 24, 2020 | $ | 0.515625 |
| January 5, 2021 | |
January 27, 2021 (1) |
| February 26, 2021 | $ | 0.320833 |
| February 26, 2021 | |
Series B Preferred Stock |
|
|
|
|
|
| |
October 9, 2020 |
| December 24, 2020 | $ | 5.00 |
| January 5, 2021 | |
January 13, 2021 |
| January 25, 2021 | $ | 5.00 |
| February 5, 2021 | |
January 13, 2021 |
| February 25, 2021 | $ | 5.00 |
| March 5, 2021 | |
January 13, 2021 |
| March 25, 2021 | $ | 5.00 |
| April 5, 2021 | |
April 12, 2021 | April 23, 2021 | $ | 5.00 | May 5, 2021 | |||
April 12, 2021 | May 25, 2021 | $ | 5.00 | June 4, 2021 | |||
April 12, 2021 | June 25, 2021 | $ | 5.00 | July 2, 2021 | |||
July 12, 2021 |
| July 23, 2021 | $ | 5.00 |
| August 5, 2021 | |
July 12, 2021 |
| August 25, 2021 | $ | 5.00 |
| September 3, 2021 | |
July 12, 2021 |
| September 24, 2021 | $ | 5.00 |
| October 5, 2021 | |
Series C Preferred Stock |
|
|
|
|
|
| |
December 11, 2020 |
| December 24, 2020 | $ | 0.4765625 |
| January 5, 2021 | |
March 12, 2021 |
| March 25, 2021 | $ | 0.4765625 |
| April 5, 2021 | |
June 11, 2021 | June 25, 2021 | $ | 0.4765625 | July 2, 2021 | |||
September 10, 2021 | September 24, 2021 | $ | 0.4765625 | October 5, 2021 | |||
Series D Preferred Stock |
|
|
|
|
|
| |
December 11, 2020 |
| December 24, 2020 | $ | 0.4453125 |
| January 5, 2021 | |
March 12, 2021 |
| March 25, 2021 | $ | 0.4453125 |
| April 5, 2021 | |
June 11, 2021 | June 25, 2021 | $ | 0.4453125 | July 2, 2021 | |||
September 10, 2021 |
| September 24, 2021 | $ | 0.4453125 |
| October 5, 2021 | |
Series T Preferred Stock (2) |
|
|
|
|
|
| |
October 9, 2020 | December 24, 2020 | $ | 0.128125 | January 5, 2021 | |||
January 13, 2021 | January 25, 2021 | $ | 0.128125 | February 5, 2021 | |||
January 13, 2021 | February 25, 2021 | $ | 0.128125 | March 5, 2021 | |||
January 13, 2021 | March 25, 2021 | $ | 0.128125 | April 5, 2021 | |||
April 12, 2021 | April 23, 2021 | $ | 0.128125 | May 5, 2021 | |||
April 12, 2021 | May 25, 2021 | $ | 0.128125 | June 4, 2021 | |||
April 12, 2021 | June 25, 2021 | $ | 0.128125 | July 2, 2021 | |||
July 12, 2021 | July 23, 2021 | $ | 0.128125 | August 5, 2021 | |||
July 12, 2021 | August 25, 2021 | $ | 0.128125 | September 3, 2021 | |||
July 12, 2021 | September 24, 2021 | $ | 0.128125 | October 5, 2021 |
(1) | The dividend was paid on the date indicated to stockholders in conjunction with the redemption of shares of Series A Preferred Stock. |
66
(2) | Shares of newly issued Series T Preferred Stock that are held only a portion of the applicable monthly dividend period receive a prorated dividend based on the actual number of days in the applicable dividend period during which each such share of Series T Preferred Stock was outstanding. |
A portion of each dividend may constitute a return of capital for tax purposes. There is no assurance that we will continue to declare dividends or at this rate. Holders of OP Units and LTIP Units are entitled to receive “distribution equivalents” at the same time as dividends are paid to holders of our Class A common stock.
We have a dividend reinvestment plan that allows for participating stockholders to have their Class A common stock dividend distributions automatically reinvested in additional shares of Class A common stock based on the average price of the Class A common stock on the investment date. We plan to issue shares of Class A common stock to cover shares required for investment.
We also have a dividend reinvestment plan that allows for participating stockholders to have their Series T Preferred Stock dividend distributions automatically reinvested in additional shares of Series T Preferred Stock at a price of $25.00 per share. We plan to issue shares of Series T Preferred Stock to cover shares required for investment.
Our Board will determine the amount of dividends to be paid to our stockholders. The Board’s determination will be based on several factors, including funds available from operations, our capital expenditure requirements and the annual distribution requirements necessary to maintain our REIT status under the Internal Revenue Code. As a result, our distribution rate and payment frequency may vary from time to time. However, to qualify as a REIT for tax purposes, we must make distributions equal to at least 90% of our “REIT taxable income” each year. While our policy is generally to pay distributions from cash flow from operations, we may declare distributions in excess of funds from operations.
Distributions paid were funded from cash provided by operating activities except with respect to $1.8 million for the nine months ended September 30, 2021 which was funded from sales of real estate, borrowings, and/or proceeds from our equity offerings.
Nine Months Ended | |||||||
September 30, | |||||||
| 2021 |
| 2020 | ||||
(in thousands) | |||||||
Cash provided by operating activities | $ | 63,248 | $ | 61,931 | |||
Cash distributions to preferred stockholders | $ | (45,013) | $ | (42,144) | |||
Cash distributions to common stockholders |
| (12,361) |
| (11,748) | |||
Cash distributions to noncontrolling interests, excluding $15.2 million and $2.7 million from the sale of real estate investments in 2021 and 2020, respectively |
| (7,688) |
| (5,784) | |||
Total distributions |
| (65,062) |
| (59,676) | |||
(Shortfall) excess | $ | (1,814) | $ | 2,255 | |||
Proceeds from sale of real estate investments, net of noncontrolling distributions of $15.2 million and $2.7 million in 2021 and 2020, respectively | $ | 189,336 | $ | 60,520 | |||
Proceeds from sale and redemption of our preferred equity investment in unconsolidated real estate joint ventures | $ | 36,662 | $ | 35,542 |
Significant Accounting Policies and Critical Accounting Estimates
Our significant accounting policies and critical accounting estimates are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020 and Note 2 “Basis of Presentation and Summary of Significant Accounting Policies” of our interim Consolidated Financial Statements.
Subsequent Events
Other than the items disclosed in Note 15 “Subsequent Events” to our interim Consolidated Financial Statements for the period ended September 30, 2021, no material events have occurred that required recognition or disclosure in these financial statements. Refer to Note 15 of our interim Consolidated Financial Statements for discussion.
67
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to interest rate risk primarily through borrowing activities. There is inherent roll-over risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and our future financing requirements. We are not subject to foreign exchange rates or commodity price risk, and all our financial instruments were entered into for other than trading purposes.
Our interest rate risk is monitored using a variety of techniques. The table below presents the principal payments (in thousands) and the weighted average interest rates on outstanding debt, by year of expected maturity, to evaluate the expected cash flows and sensitivity to interest rate changes. Fair value adjustments and unamortized deferred financing costs, net, of approximately ($0.9) million are excluded:
| 2021 |
| 2022 |
| 2023 |
| 2024 |
| 2025 |
| Thereafter |
| Total |
| ||||||||
Mortgage Notes Payable | $ | 3,007 | $ | 13,552 | $ | 126,102 | $ | 201,503 | $ | 331,011 | $ | 666,983 | $ | 1,342,158 |
| |||||||
Weighted Average Interest Rate |
| 3.57 | % |
| 3.54 | % |
| 3.20 | % |
| 3.75 | % |
| 3.82 | % |
| 3.43 | % |
| 3.55 | % |
The fair value of mortgages payable is estimated at $1,379.2 million as of September 30, 2021.
The table above incorporates those exposures that exist as of September 30, 2021; it does not consider those exposures or positions which could arise after that date. As a result, our ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during the period and interest rates.
As of September 30, 2021, we had nine interest rate caps, which are not accounted for as hedges, that we primarily use as part of our interest rate risk management strategy. Our interest rate caps effectively limit our exposure to interest rate risk by providing a ceiling on the underlying floating interest rates of our floating rate debt.
As of September 30, 2021, a 100-basis point increase or decrease in interest rates on the portion of our debt bearing interest at floating rates would result in an increase in interest expense of approximately $0.7 million or decrease in interest expense of approximately $0.05 million, respectively, for the quarter ended September 30, 2021.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, including our Chief Executive Officer and Chief Financial Officer, evaluated, as of September 30, 2021, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2021 to provide reasonable assurance that information required to be disclosed by us in this report filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
We believe, however, that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, within a company have been detected.
Changes in Internal Control over Financial Reporting
There has been no change in internal control over financial reporting that occurred during the quarter ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
68
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Other than the following, there have been no material changes to our potential risks and uncertainties presented in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the twelve months ended December 31, 2020 filed with the SEC on February 23, 2021.
Our investments in single-family residential properties are a new component of our portfolio and may be difficult to evaluate.
We expect our investments in single-family residential properties to grow significantly as a portion of our overall residential portfolio. Public company investments in single-family residential properties for rent is relatively new. The lack of a long-term company and industry track record covering multiple real estate cycles may make it difficult for you to evaluate our potential future performance with respect to these investments.
Your interests could be diluted by the incurrence of additional debt, the issuance of additional shares of preferred stock, including additional shares of Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock (together the “Preferred Stock”) and by other transactions.
As of September 30, 2021, our total indebtedness was approximately $1.3 billion, and we may incur significant additional debt in the future. The Preferred Stock is subordinate to all our existing and future debt and liabilities and those of our subsidiaries. Our future debt may include restrictions on our ability to pay dividends to preferred stockholders in the event of a default under the debt facilities or under other circumstances. Our charter currently authorizes the issuance of up to 250,000,000 shares of preferred stock in one or more classes or series, and as of September 30, 2021, the number of preferred shares outstanding was as follows: 359,925 shares of Series B Preferred Stock, 2,295,845 shares of Series C Preferred Stock, 2,774,338 shares of Series D Preferred Stock and 22,920,168 shares of Series T Preferred Stock. The issuance of additional preferred stock on parity with or senior to the Preferred Stock would dilute the interests of the holders of shares of Preferred Stock, and any issuance of preferred stock senior to the Preferred Stock or of additional indebtedness could affect our ability to pay dividends on, redeem or pay the liquidation preference on the Preferred Stock. We may issue preferred stock on parity with the Preferred Stock without the consent of the holders of the Preferred Stock. Other than the Asset Coverage Ratio, our letter agreement with Cetera Financial Group, Inc. pertaining to our Series B Preferred Stock that requires us to maintain a preferred dividend coverage ratio, the articles supplementary establishing our Series T Preferred Stock that requires us to maintain a preferred dividend coverage ratio, and the right of holders to cause us to redeem the Series C Preferred Stock upon a Change of Control/Delisting, none of the provisions relating to the Preferred Stock relate to or limit our indebtedness or afford the holders of shares of Preferred Stock protection in the event of a highly leveraged or other transaction, including a merger or the sale, lease or conveyance of all or substantially all our assets or business, that might adversely affect the holders of shares of Preferred Stock.
69
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
In October 2020, our Board authorized new stock repurchase plans for the repurchase, from time to time, of up to an aggregate of $75.0 million in outstanding shares of our Class A common stock, Series A Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock to be conducted in accordance with Rules 10b5-1 and 10b-18 of Securities Exchange Act of 1934, as amended (the “Exchange Act”). On February 9, 2021, our Board authorized the modification of the stock repurchase plans to increase the maximum repurchase amount from an aggregate of $75 million in shares to an aggregate of $150 million in shares of Class A common stock, Series C Preferred Stock, and/or Series D Preferred Stock. The extent to which we repurchased shares of our Class A common stock, Series C Preferred Stock and/or Series D Preferred Stock, and the timing of any such purchases, depended on a variety of factors including general business and market conditions and other corporate considerations. Share repurchases under the repurchase plans were made in the open market or through privately negotiated transactions, subject to certain price limitations and other conditions established under the plans. Open market repurchases were structured to occur in conformity with the method, timing, price and volume requirements of Rule 10b-18 of the Exchange Act. During the three months ended September 30, 2021, we purchased 2,977,477 shares of Class A common stock for a total purchase price of approximately $33.8 million. We made no repurchases of any series of our preferred stock during the third quarter 2021. The repurchase plans terminated upon the close of the NYSE American trading day on November 8, 2021, the filing date of this Form 10-Q with the SEC.
The following table is a summary of our repurchase activity during the quarter ended September 30, 2021:
Total Number of Shares |
| Maximum Dollar Value of | ||||||||
Total Number of | Weighted Average | Purchased as Part of the |
| Shares that May Yet Be | ||||||
Period | Shares Purchased (1) | Price Per Share | Publicly Announced Plans |
| Purchased Under the Plans | |||||
Class A Common Stock |
|
|
|
|
|
|
|
| ||
July 1, 2021 – July 31, 2021 | 2,415,333 | $ | 11.01 | 2,415,333 | $ | 18,654,414 | ||||
August 1, 2021 – August 31, 2021 | 562,144 | 12.77 | 562,144 | 11,475,518 | ||||||
September 1, 2021 – September 30, 2021 | — | — | — | 11,475,518 | ||||||
Total Class A Common Stock |
| 2,977,477 | $ | 11.34 |
| 2,977,477 |
|
|
(1) | Includes shares repurchased by us pursuant to the stock repurchase plans as noted above and publicly announced in our Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC on February 23, 2021, for up to an aggregate of $150.0 million in shares of our Class A common stock, Series C Preferred Stock and/or Series D Preferred Stock. The repurchase plans terminated upon the close of the NYSE American trading day on November 8, 2021, the filing date of this Form 10-Q with the SEC. |
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
70
Item 6. Exhibits
10.1 | |
31.1 | |
31.2 | |
32.1 | |
99.1 | |
99.2 | |
101.1 | The following information from the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2021, formatted in iXBRL (inline eXtensible Business Reporting Language): (i) Balance Sheets; (ii) Statements of Operations; (iii) Statement of Stockholders’ Equity; (iv) Statements of Cash Flows; (v) notes to consolidated financial statements. |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
71
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| BLUEROCK RESIDENTIAL GROWTH REIT, INC. | |
|
|
|
|
DATE: | November 8, 2021 |
| /s/ R. Ramin Kamfar |
|
|
| R. Ramin Kamfar |
|
|
| Chief Executive Officer |
|
|
| (Principal Executive Officer) |
DATE: | November 8, 2021 |
| /s/ Christopher J. Vohs |
|
|
| Christopher J. Vohs |
|
|
| Chief Financial Officer and Treasurer |
|
|
| (Principal Financial Officer, Principal Accounting Officer) |
72