Exhibit 99.1
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Bluerock Residential Growth REIT, Inc.
Third Quarter 2014
Supplement Financial Information
(Unaudited)
Table of Contents
| Third Quarter Earnings | 3 |
| Financial and Operating Highlights | 11 |
| Condensed Consolidated Balance Sheets | 14 |
| Consolidated Statements of Operating and Comprehensive Income | 15 |
| Reconciliation of Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) | 16 |
| Development Pipeline | 17 |
| Debt Summary | 18 |
| Definitions of Non-GAAP Financial Measures | 19 |
This press release contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward looking statements are based on the Company’s present expectations, but these statements are not guaranteed to occur, including claims relative to the Company’s pipeline, the Company’s dividends, the fee structure under the Management Agreement, the Company’s future performance, management’s commentary relating to future income and portfolio growth and operating results, dividend coverage and future acquisitions. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Investors should not place undue reliance upon forward looking statements. For further discussion of the factors that could affect outcomes, please refer to the “Risk Factors” section of the prospectus dated October 2, 2014 and filed by the Company with the Securities and Exchange Commission (“SEC”) on October 3, 2014, and subsequent filings by the Company with the SEC.
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Bluerock Residential Growth REIT, Inc.
Third Quarter Earnings
Bluerock Residential Growth REIT Announces Third Quarter 2014 Results at Top End of Guidance, AFFO at $0.22 per share vs. prior quarter at $0.13 and prior year at ($0.34)
New York, NY (November 3, 2014) – Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG) (“the Company”) announced today its financial results for the quarter ended September 30, 2014.
Management Commentary
“We are pleased with our third quarter results as we met the top end of our AFFO guidance of $0.22 per share, which was an increase of 69% or $0.09 per share compared to the second quarter of 2014. We anticipate continued AFFO growth in the fourth quarter, as we successfully deployed the remaining capital from our IPO in the second quarter,” said Ramin Kamfar, the Company’s Chairman and CEO.
“We recently completed a follow-on offering in October providing an additional $33.1 million of net cash that is expected to be deployed in the next several months and will continue to grow our AFFO in 2015,” added Mr. Kamfar.
Highlights for the Third Quarter 2014 and Subsequent Events
| § | Total revenues grew 210% to $9.6 million for the quarter ended September 30, 2014 from $3.1 million for the quarter ended September 30, 2013. |
| § | For the third quarter of 2014, the Company met the high end of adjusted funds from operations (“AFFO”) guidance of $0.22 per share, a significant increase from ($0.34) per share for the prior year quarter. |
| § | On a sequential quarter basis, AFFO increased 69% as compared to the second quarter of 2014. |
| § | The Company reaffirms its AFFO guidance for the fourth quarter of 2014. Due to the higher share count resulting from the follow-on offering in early October, the Company’s prior guidance translates to a range of $0.15 to $0.17 per share based on the 8.9 million shares outstanding as of today. The Company expects this figure to grow significantly in 2015 as it deploys proceeds from its follow-on offering over the next several months. |
| § | The net loss attributable to common stockholders for the quarter ended September 30, 2014 was $2.1 million versus net income of $0.5 million for the quarter ended September 30, 2013. The net loss for the 2014 third quarter was primarily the result of non-cash depreciation and amortization expense of $4.9 million. |
| § | Same store NOI increased 5.7% as compared to the third quarter of the prior year. |
| § | On a sequential quarter basis, same store NOI increased 3.7% as compared to the second quarter of 2014. |
| § | Our average portfolio occupancy for the third quarter of 2014 was 95.5% as compared to 93.2% for the second quarter of 2014, an increase of 230 basis points. |
| § | During the third quarter of 2014, the Company closed the following investments: |
| o | Acquisition of an additional 41.1% interest in our 220-unit, Class A Enders property located in Orlando, Florida, increasing our ownership to 89.5% in the property. |
| o | A convertible preferred equity investment in a 340-unit, $81.8 million Class A development property to be known as Alexan CityCentre located in the heart of Houston’s Energy Corridor, in partnership with Trammell Crow as our development partner. The investment is structured to provide a 15% current return, with an option to convert into partial ownership of the underlying asset upon stabilization. The Company has projected a stabilized return on cost for the development of 7.0%, for value creation of 250+ basis points versus comparable sales in the Houston market. |
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Bluerock Residential Growth REIT, Inc.
Third Quarter Earnings
| o | A convertible preferred equity investment in a 296-unit, $36.8 million Class A development property, located in a master-planned, Publix-anchored retail development in close proximity to the University of Central Florida and Central Florida Research Park. The investment is structured to provide a 15% current return, with an option to convert into partial ownership of the underlying asset upon stabilization. The Company has projected a stabilized return on cost for the development of 7.5%, for value creation of 200+ basis points versus comparable sales in the Orlando market. |
| § | During the third quarter of 2014, the Company completed development and achieved ahead of projection lease up at its 23Hundred At BerryHill property located in Nashville, Tennessee. The property was 98% occupied at September 30, 2014 and is achieving market rents 18% higher than pro forma for a stabilized return on cost of 8.5% (for value creation of approximately 350 basis versus comparable product in the Nashville market). |
| § | General and administrative expenses (excluding non-cash amortization) as a percentage of revenue declined significantly, to 6.9% for the quarter ended September 30, 2014 from 18.1% for the prior year quarter, primarily due to an increase in our asset base and more favorable terms of our new management agreement. The Company expects its general and administrative expenses as a percentage of revenue to continue to decline as it continues to grow its asset base. |
| § | On October 8, 2014, the Company completed a follow-on offering of 3,035,444 shares of Class A common stock at a public offering price of $11.90 per share for total gross proceeds of $36.1 million. The net proceeds of the offering are estimated to be approximately $33.1 million after deducting underwriting discounts and commissions and estimated offering costs. |
| § | The Company declared monthly dividends for the fourth quarter of 2014 equal to a quarterly rate of $0.29 per share on the Company's Classes A and B common stock. This equates to a 9.5% annualized yield based on the closing price of $12.25 for the Class A common stock as of October 31, 2014. |
| § | On October 30, 2014, the Company’s Board of Directors approved the purchase of a 306-unit apartment community located in Orlando, Florida, known as Grande Lakes. The total purchase price of the property is $43.3 million in which the Company would own a 95% interest. Constructed in 2005, Grande Lakes is a Class A multifamily community featuring one-, two-, and three-bedroom units averaging 1,048 square feet. We expect to close on Grande Lakes in early November 2014. |
Financial Results Third Quarter 2014
AFFO for the third quarter of 2014 was $1.3 million, or $0.22 per diluted share, as compared to a deficit of ($0.4) million, or ($0.34) per diluted share as compared to the prior year period. The increase in AFFO from the prior year period is driven by making additional investments in eight properties during the second and third quarters of 2014 and a reduction of cash general and administrative expenses as a percentage of revenue from 18.1% to 6.9% due to an increase in our asset base, and more favorable terms of our new management agreement, which began on April 2, 2014, the date of our initial public offering. The Company expects its general and administrative expenses as a percentage of revenue to continue to decline as it continues to grow its asset base.
Net loss attributable to common stockholders for the third quarter of 2014 was $2.1 million, as compared to earnings of $0.5 million in the prior year period. The net loss for the 2014 third quarter was primarily the result of non-cash depreciation and amortization expense of $4.9 million. The earnings for the prior period included a $1.6 million gain from the sale of our Hillsboro property.
Same Store Portfolio Performance
Same store NOI for the third quarter of 2014 increased 5.7% to $2.35 million as compared to $2.22 million in the same period in the prior year. This increase was driven by a 4.0% increase in same store revenue which was primarily attributable to a 2.2% increase in average revenue per occupied unit and the acquisition of 22 additional units at our Enders property, balanced by a 60 basis point decrease in average occupancy. Same store expenses increased 1.3%.
On a sequential quarter basis, third quarter 2014 same store NOI increased 3.7% compared to the second quarter 2014. This increase was driven by a 4.3% increase in same store revenue which was primarily attributable to a 2.8% increase in average occupancy and a 1.2% increase in average revenue per occupied unit. Same store expenses increased 5.1% primarily due to a concentration of a one-time expense associated with a 5.7% increase in average occupancy at our Village Green of Ann Arbor property (from 92.6% to 98.3%).
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Bluerock Residential Growth REIT, Inc.
Third Quarter Earnings
Portfolio Summary and Transaction Activity
The following is a summary of our investments as of September 30, 2014:
| Multifamily
Community | Location | Year Built/ Renovated(1) | Units | Average Monthly Effective Rent per Occupied Unit | Occupancy % | |||||||||||||
| Springhouse at Newport News | Newport News, VA | 1985 | 432 | $ | 799 | 93.1 | % | |||||||||||
| The Estates at Perimeter/Augusta | Augusta, GA | 2007 | 240 | 986 | 96.7 | % | ||||||||||||
| Enders Place at Baldwin Park | Orlando, FL | 2003 | 220 | 1,445 | 93.6 | % | ||||||||||||
| 23Hundred At BerryHill | Nashville, TN | 2014 | 266 | 1,447 | 98.1 | % | ||||||||||||
| MDA City Apartments | Chicago, IL | 2006 | 190 | 2,065 | (3) | 95.8 | % | |||||||||||
| Village Green of Ann Arbor | Ann Arbor, MI | 2013 | 520 | 1,088 | 98.5 | % | ||||||||||||
| Grove at Waterford | Hendersonville, TN | 2010 | 252 | 1,004 | 96.8 | % | ||||||||||||
| Villas at Oak Crest | Chattanooga, TN | 1999 | 209 | 814 | 97.1 | % | ||||||||||||
| North Park Towers | Southfield, MI | 2000 | 313 | 1,031 | 95.2 | % | ||||||||||||
| Lansbrook Village | Palm Harbor, FL | 2004 | 581 | 1,101 | 94.5 | % | ||||||||||||
| Alexan CityCentre | Houston, TX | 2014 | 340 | N/A | (2) | - | (2) | |||||||||||
| UCF Orlando | Orlando, FL | 2014 | 296 | N/A | (2) | - | (2) | |||||||||||
| Total | 3,859 | $ | 1,126 | 95.8 | % | |||||||||||||
(1) All dates are for the year construction was completed, except MDA City Apartments, Village Green of Ann Arbor, Villas at Oak Crest and North Park Towers, for which the date represents the most recent year that a significant renovation program was completed.
(2) Property is in development and the Company holds a preferred equity investment with an option to convert into partial ownership of the underlying asset upon stabilization.
(3) Average effective rent per month excluding the property’s retail space is $2,065 for the third quarter compared to $2,063 for the second quarter. Average effective rent per month including the property’s retail space was $2,214 for the third quarter compared to $2,213 for the second quarter.
The following is a summary of acquisitions and investments during the third quarter of 2014:
Investment in Alexan CityCentre: On July 1, 2014, the Company made an investment of $6.6 million in a convertible preferred equity investment, to develop a 340-unit class A, multifamily community located in Houston, Texas, to be known as Alexan CityCentre. Total development costs of the community are projected to be $81.8 million. Our underwriting projected a return on cost for the project of over 7.0% at stabilization, for value creation of 250+ basis points versus comparable sales in the Houston market.
Investment in UCF: On July 29, 2014, the Company made a $3.6 million convertible preferred equity investment to develop a 296-unit class A multifamily community located in Orlando, Florida, in close proximity to the University of Central Florida and Central Florida Research Park, and will be a featured component of a master-planned, Publix-anchored retail development known as Town Park. Total development costs are projected to be $36.8 million. Our underwriting projects a return on cost of over 7.5% at stabilization, for value creation of 200+ basis points versus comparable areas sales in the Orlando market.
The following is a summary of an anticipated acquisition after the close of the third quarter 2014:
Acquisition of Grande Lakes: In early November 2014, the Company expects to close on a 306-unit apartment community located in Orlando, Florida, known as Grande Lakes. The total purchase price of the property is $43.3 million in which the Company would own a 95% interest. Constructed in 2005, Grande Lakes is a Class A multifamily community featuring one-, two-, and three-bedroom units averaging 1,048 square feet. The community features an abundance of amenities, including a resort style pool, fitness center, with indoor basketball court, volleyball court, and business and media centers. Additionally, the unit interiors are institutional quality with nine-foot ceilings, crown moldings, black appliances, upgraded lighting and garden bath tubs.
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Bluerock Residential Growth REIT, Inc.
Third Quarter Earnings
Dividend Details
On October 10, 2014, the Company's Board of Directors declared monthly dividends for the fourth quarter of 2014 equal to a quarterly rate of $0.29 per share on the Company’s Class A common stock and $0.29 per share on the Company’s Class B common stock, payable to the stockholders of record as of October 25, 2014, November 25, 2014 and December 25, 2014, which will be paid in cash on November 5, 2014, December 5, 2014 and January 5, 2015, respectively. Holders of OP 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 declared dividends equal a monthly dividend on the Class A common stock and the Class B common stock as follows: $0.096666 per share for the dividend paid to stockholders of record as of October 25, 2014, $0.096667 per share for the dividend paid to stockholders of record as of November 25, 2014, and $0.096667 per share for the dividend paid to stockholders of record as of December 25, 2014.
Non-GAAP Financial Measures
The foregoing supplemental financial data includes certain non-GAAP financial measures that we believe are helpful in understanding our business, as further described below. Our definition and calculation of these non-GAAP financial measures may differ from those of other REITs, and may, therefore, not be comparable.
Funds from Operations ("FFO") and Adjusted Funds from Operations (“AFFO”)
Funds from operations, or FFO, is a non-GAAP financial measure that is widely recognized as a measure of REIT operating performance. We consider FFO to be an appropriate supplemental measure of our operating performance as it is based on a net income analysis of property portfolio performance that excludes non-cash items such as depreciation. The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time. Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT, using historical accounting for depreciation, could be less informative. We define FFO, consistent with the National Association of Real Estate Investment Trusts, or NAREIT's, definition, as net income, computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis.
In addition to FFO, we use adjusted funds from operations, or AFFO. AFFO is a computation made by analysts and investors to measure a real estate company's operating performance by removing the effect of items that do not reflect ongoing property operations.
We further adjust FFO by adding back certain items that are not added to net income in NAREIT's definition of FFO, such as acquisition expenses, equity based compensation expenses, and any other non-recurring or non-cash expenses, which are costs that do not relate to the operating performance of our properties, and subtracting recurring capital expenditures (and when calculating the quarterly incentive fee payable to our Manager only, we further adjust FFO to include any realized gains or losses on our real estate investments).
Our calculation of AFFO differs from the methodology used for calculating AFFO by certain other REITs and, accordingly, our AFFO may not be comparable to AFFO reported by other REITs. Our management utilizes FFO and AFFO as measures of our operating performance after adjustment for certain non-cash items, such as depreciation and amortization expenses, and acquisition expenses and pursuit costs that are required by GAAP to be expensed but may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods. Furthermore, although FFO, AFFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we also believe that FFO and AFFO may provide us and our stockholders with an additional useful measure to compare our financial performance to certain other REITs. We also use AFFO for purposes of determining the quarterly incentive fee, if any, payable to our Manager.
Neither FFO nor AFFO is equivalent to net income or cash generated from operating activities determined in accordance with GAAP. Furthermore, FFO and AFFO do not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO nor AFFO should be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity.
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Bluerock Residential Growth REIT, Inc.
Third Quarter Earnings
We made no investments, had one full disposition and two partial dispositions in 2013, and have acquired interests in eight properties during the nine months ended September 30, 2014. The results presented in the following table are not directly comparable and should not be considered an indication of our future operating performance. (Unaudited and dollars in thousands, except share and per share data).
| Three Months Ended | Nine Months Ended | Three Months | ||||||||||||||||||
| September 30, | September 30, | Ended June 30, | ||||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | 2014 | ||||||||||||||||
| Net (loss) income attributable to common shareholders | $ | (2,147 | ) | $ | 532 | $ | (7,729 | ) | $ | (1,891 | ) | $ | (4,536 | ) | ||||||
| Add: Pro-rata share of depreciation and amortization(1) | 2,953 | 486 | 5,645 | 1,902 | 2,157 | |||||||||||||||
| 806 | 1,018 | (2,084 | ) | 11 | (2,379 | ) | ||||||||||||||
| Less: Pro-rata share of gain on sale of joint venture interests | — | (1,688 | ) | (448 | ) | (1,688 | ) | — | ||||||||||||
| Funds from Operations (FFO) | $ | 806 | $ | (670 | ) | $ | (2,532 | ) | $ | (1,677 | ) | $ | (2,379 | ) | ||||||
| Add: Pro-rata share of acquisition and disposition costs | 318 | 325 | 3,657 | 465 | 2,852 | |||||||||||||||
| non-cash equity compensation | 326 | 36 | 676 | 74 | 337 | |||||||||||||||
| Less: Pro-rata share of normally recurring capital expenditures | (162 | ) | (54 | ) | (251 | ) | (77 | ) | (71 | ) | ||||||||||
| Adjusted Funds from Operations (AFFO) | $ | 1,288 | $ | (363 | ) | $ | 1,550 | $ | (1,215 | ) | $ | 739 | ||||||||
| Weighted average shares outstanding - diluted | 5,877,417 | 1,055,762 | 4,269,378 | 1,024,997 | 5,823,296 | |||||||||||||||
| PER SHARE INFORMATION: | ||||||||||||||||||||
| FFO - diluted | $ | 0.14 | $ | (0.63 | ) | $ | (0.59 | ) | $ | (1.64 | ) | $ | (0.41 | ) | ||||||
| AFFO - diluted | $ | 0.22 | $ | (0.34 | ) | $ | 0.36 | $ | (1.19 | ) | $ | 0.13 | ||||||||
| Distributions | $ | 0.29 | $ | 0.40 | $ | 0.84 | $ | 1.19 | $ | 0.29 | ||||||||||
(1) The real estate depreciation and amortization amount includes our share of consolidated real estate-related depreciation and amortization of intangibles, less amounts attributable to noncontrolling interests, and our similar estimated share of unconsolidated depreciation and amortization, which is included in earnings of our unconsolidated real estate joint venture investments.
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Bluerock Residential Growth REIT, Inc.
Third Quarter Earnings
Earnings Before Interest, Income Taxes, Depreciation and Amortization ("EBITDA")
EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. We consider EBITDA to be an appropriate supplemental measure of our performance because it eliminates depreciation, income taxes, interest and non-recurring items, which permits investors to view income from operations unclouded by non-cash depreciation, amortization, the cost of debt or non-recurring items. Below is a reconciliation of net income applicable to common stockholders to EBITDA. (Unaudited and dollars in thousands).
| Three Month Ended | Nine Month Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Net loss attributable to common stockholders | $ | (2,147 | ) | $ | 532 | $ | (7,729 | ) | $ | (1,891 | ) | |||||
| Net loss attributable to noncontrolling interest | (498 | ) | (172 | ) | (1,471 | ) | (993 | ) | ||||||||
| Interest expense | 2,413 | 1,259 | 5,700 | 3,827 | ||||||||||||
| Depreciation and amortization | 4,917 | 1,229 | 10,048 | 4,584 | ||||||||||||
| Gain on sale of joint venture interest | — | — | (1,006 | ) | — | |||||||||||
| Equity in gain on sale of unconsolidated joint venture interest | — | (1,605 | ) | — | (1,605 | ) | ||||||||||
| Acquisition costs | 378 | 55 | 3,528 | 198 | ||||||||||||
| Loss on early extinguishment of debt | — | — | 879 | — | ||||||||||||
| EBITDA | $ | 5,063 | $ | 1,298 | $ | 9,949 | $ | 4,120 | ||||||||
Recurring Capital Expenditures
We define recurring capital expenditures as expenditures that are incurred at every property and exclude development, investment, revenue enhancing and non-recurring capital expenditures.
Non-Recurring Capital Expenditures
We define non-recurring capital expenditures as expenditures for significant projects that upgrade units or common areas and projects that are revenue enhancing.
Same Store Properties
Same store properties are conventional multifamily residential apartments which were owned and operational for the entire periods presented, including each comparative period.
Property Net Operating Income ("Property NOI")
We believe that net operating income, or NOI, is a useful measure of our operating performance. We define NOI as total property revenues less total property operating expenses, excluding depreciation and amortization and interest. Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REITs. We believe that this measure provides an operating perspective not immediately apparent from GAAP operating income or net income. We use NOI to evaluate our performance on a same store and non-same store basis because NOI measures the core operations of property performance by excluding corporate level expenses and other items not related to property operating performance and captures trends in rental housing and property operating expenses. However, NOI should only be used as an alternative measure of our financial performance. The following table reflects same store and non-same store contributions to consolidated NOI together with a reconciliation of NOI to net loss as computed in accordance with GAAP for the periods presented (unaudited and amounts in thousands):
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Bluerock Residential Growth REIT, Inc.
Third Quarter Earnings
| Three Months Ended | Nine Months | Three Months Ended | ||||||||||||||||||||||
| September 30, | Ended September 30, | September 30, | June 30, | |||||||||||||||||||||
| 2014(1) | 2013(1) | 2014(1) | 2013(1) | 2014(2) | 2014(2) | |||||||||||||||||||
| Net operating income | ||||||||||||||||||||||||
| Same store | $ | 2,352 | $ | 2,224 | $ | 6,680 | $ | 6,606 | $ | 4,287 | $ | 4,132 | ||||||||||||
| Non-same store | 3,602 | 839 | 6,370 | 2,376 | 1,667 | 647 | ||||||||||||||||||
| Total net operating income | 5,954 | 3,063 | 13,050 | 8,982 | 5,954 | 4,779 | ||||||||||||||||||
| Less: | ||||||||||||||||||||||||
| Interest expense | 2,581 | 1,435 | 6,060 | 4,314 | 2,581 | 2,208 | ||||||||||||||||||
| Total property income | 3,373 | 1,628 | 6,990 | 4,668 | 3,373 | 2,571 | ||||||||||||||||||
| Less: | ||||||||||||||||||||||||
| Noncontrolling interest pro-rata share of property income | 1,638 | 1,039 | 3,650 | 3,310 | 1,638 | 1,323 | ||||||||||||||||||
| Other income related to JV/MM entities | 17 | 11 | 56 | 10 | 17 | 50 | ||||||||||||||||||
| Pro-rata share of total properties’ income | 1,718 | 578 | 3,284 | 1,348 | 1,718 | 1,198 | ||||||||||||||||||
| Less pro-rata share of: | ||||||||||||||||||||||||
| Depreciation and amortization | 2,953 | 486 | 5,645 | 1,902 | 2,953 | 2,157 | ||||||||||||||||||
| Affiliate loan interest, net | — | 248 | 191 | 774 | — | 4 | ||||||||||||||||||
| Asset management and oversight fees | 219 | 138 | 536 | 399 | 219 | 533 | ||||||||||||||||||
| Acquisition and disposition costs | 318 | 325 | 3,657 | 465 | 318 | 2,852 | ||||||||||||||||||
| Corporate operating expenses | 769 | 537 | 1,999 | 1,387 | 769 | 361 | ||||||||||||||||||
| Add pro-rata share of: | ||||||||||||||||||||||||
| Other income | 31 | — | 103 | — | 31 | 72 | ||||||||||||||||||
| Equity in operating earnings of unconsolidated joint ventures | 363 | — | 464 | — | 363 | 101 | ||||||||||||||||||
| Gain on sale of joint venture interest | — | 1,688 | 448 | 1,688 | — | — | ||||||||||||||||||
| Net (loss) income attributable to common stockholders | $ | (2,147 | ) | $ | 532 | $ | (7,729 | ) | $ | (1,891 | ) | $ | (2,147 | ) | $ | (4,536 | ) | |||||||
(1) Same
Store sales related to the following properties: Springhouse at Newport News, The Estates at Perimeter/Augusta, Enders Place at
Baldwin Park and MDA Apartments.
(2) Same Store sales related to the following properties: Springhouse at Newport News, The Estates at Perimeter/Augusta,
Enders Place at Baldwin Park, MDA Apartments, Village Green of Ann Arbor, Grove at Waterford and North Park Towers.
Conference Call
All interested parties can listen to the live conference call webcast at 3:00 PM ET on Tuesday, November 4, 2014 by dialing 877.270.2148 within the U.S., or +1 (412) 902-6510, and requesting the "BRG call." For those who are not available to listen to the live call, the webcast will be available for replay on the Company’s website two hours after the call concludes, and will remain available until December 4, 2014 at http://services.choruscall.com/links/blue141104.htm, as well as by dialing +1 (877) 344-7529 in the U.S., or +1 (412) 317-0088 internationally, and requesting conference number 10055679.
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Bluerock Residential Growth REIT, Inc.
Third Quarter Earnings
About Bluerock Residential Growth REIT, Inc.
Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG) is a real estate investment trust formed to acquire a diversified portfolio of institutional-quality apartment properties in demographically attractive growth markets throughout the United States. The Company has elected to be taxed as a real estate investment trust (REIT) for U.S. federal income tax purposes. Please visit the Company’s website at www.bluerockresidential.com.
Forward Looking Statements
This press release contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward looking statements are based on the Company’s present expectations, but these statements are not guaranteed to occur, including claims relative to the Company’s pipeline, the Company’s dividends, the fee structure under the Management Agreement, the Company’s future performance, management’s commentary relating to future income and portfolio growth and operating results, dividend coverage and future acquisitions. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Investors should not place undue reliance upon forward looking statements. For further discussion of the factors that could affect outcomes, please refer to the “Risk Factors” section of the prospectus dated October 2, 2014 and filed by the Company with the Securities and Exchange Commission (“SEC”) on October 3, 2014, and subsequent filings by the Company with the SEC.
Contact
(Media)
Josh Hoffman
(208) 475.2380
jhoffman@bluerockre.com
##
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Bluerock Residential Growth REIT, Inc.
Financial and Operating Highlights
For the Three and Nine Months Ended September 30, 2014 and 2013
(Unaudited and dollars in thousands except for share and per share data)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| OPERATING INFORMATION | ||||||||||||||||
| Total revenue | $ | 9,556 | $ | 3,060 | $ | 20,547 | $ | 8,995 | ||||||||
| FFO per share - diluted(1) | $ | 0.14 | $ | (0.63 | ) | $ | (0.59 | ) | $ | (1.64 | ) | |||||
| AFFO per share - diluted(1) | $ | 0.22 | $ | (0.34 | ) | $ | 0.36 | $ | (1.19 | ) | ||||||
| Distributions per share | $ | 0.29 | $ | 0.40 | $ | 0.84 | $ | 1.19 | ||||||||
| General and administrative expenses(2) | $ | 436 | $ | 425 | $ | 1,340 | $ | 1,218 | ||||||||
| Asset management fees | $ | 225 | $ | 130 | $ | 548 | $ | 374 | ||||||||
| Subtotal | $ | 661 | $ | 555 | $ | 1,888 | $ | 1,592 | ||||||||
| General and administrative and asset management fees as a percentage of revenue | 6.9 | % | 18.1 | % | 9.2 | % | 17.7 | % | ||||||||
| Fixed charge coverage ratio(3) | 2.10 | 1.03 | 1.70 | 1.08 | ||||||||||||
| Property NOI(4) | $ | 5,954 | $ | 3,063 | $ | 13,050 | $ | 8,982 | ||||||||
| Same Store operating margins | 60.9 | % | 59.9 | % | 59.7 | % | 60.2 | % | ||||||||
(1) See page 19 for a reconciliation of the net income attributable to common stockholders to these non-GAAP measurements and the Company's definition of these non-GAAP measurements and reasons for using them.
(2) Excludes $343 and $708, for the three and nine months ended September 30, 2014, respectively, of non-cash amortization of Long-Term Incentive Plan unit expense and non-cash directors compensation and $36 and $74 for the three and nine months ended September 30, 2013, respectively.
(3) Is calculated as EBITDA divided by interest expense, including capitalized interest and excluding prepayment costs/refunds. Individual line items in this calculation include results from discontinued operations where applicable. See page 20 for a reconciliation of net income applicable to common shares to EBITDA and the Company's definition of EBITDA and reasons for using it.
(4) See page 21 for a reconciliation of net income attributable to common stockholders to this non-GAAP measurement and the Company's definition of this non-GAAP measurement and reasons for using it.
| 11 |
Bluerock Residential Growth REIT, Inc.
Financial and Operating Highlights
Third Quarter 2014
(Unaudited and dollars in thousands except for share and per share data)
| 2014 | 2013 | |||||||
| CAPITALIZATION DATA | ||||||||
| Cash and cash equivalents | $ | 7,612 | $ | 2,984 | ||||
| Net real estate assets | $ | 307,093 | $ | 163,005 | ||||
| Total assets | $ | 337,749 | $ | 172,526 | ||||
| Debt(1) | $ | 226,100 | $ | 114,141 | ||||
| Noncontrolling interests | $ | 41,602 | $ | 34,082 | ||||
| Total stockholders' equity attributable to BRG | $ | 100,661 | $ | 46,083 | ||||
| Common shares outstanding(2) | 5,882,211 | 1,060,889 | ||||||
| Share price, end of period (3) | $ | 13.00 | N/A | |||||
| Total capitalization(4) | $ | 337,942 | $ | 172,752 | ||||
| Undepreciated book value of operating real estate | $ | 317,454 | $ | 168,514 | ||||
| Debt to capitalization | 66.9 | % | 66.1 | % | ||||
| Annual distributions | $ | 1.16 | $ | 1.59 | ||||
| Annual distributions yield based on share price, end of period | 8.9 | % | N/A | |||||
(1) Represents mortgage payables, including those classified as held for sale, line of credit, and Creekside mortgage payable of $12,598, which is classified as liabilities related to discontinued operations.
(2) For 2014, amounts relate to Class A, Class B-1, B-2, B-3 common shares and Long-Term Incentive Plan Units outstanding and excludes 282,759 Operating Partnership Units. For 2013, amounts relate to common shares outstanding.
(3) Prior to our IPO which closed on April 2, 2014, our shares were not listed on any public exchange.
(4) Represents cash, undepreciated book value of real estate assets, and the Company's investment in unconsolidated joint ventures of $12,876 million and $1,254 million at September 30, 2014 and December 31, 2013, respectively.
| 12 |
| Bluerock Residential Growth REIT, Inc. |
| Financial and Operating Highlights |
| Third Quarter 2014 |
| (Unaudited) |
| Location | Number of Units | Year Built/ Renovated(1) | Average Monthly Effective Rent per Occupied Unit(6) | Property Revenue per Occupied Unit(9) | Average Occupancy(11) | |||||||||||||||
| PORTFOLIO INFORMATION | ||||||||||||||||||||
| Same Store: | ||||||||||||||||||||
| Springhouse | Newport News, VA | 432 | 1985 | $ | 799 | $ | 820 | 93.1 | % | |||||||||||
| The Estates at Perimeter | Augusta, GA | 240 | 2007 | 986 | 1,011 | 95.4 | % | |||||||||||||
| Enders Place at Baldwin Park | Orlando, FL | 220 | 2003 | 1,445 | 1,506 | 95.9 | % | |||||||||||||
| MDA Apartments | Chicago, IL | 190 | 1929/2006(2) | 2,065 | (7) | 2,091 | (8) | 95.6 | % | |||||||||||
| Total Same Store | 1,082 | 1,199 | 1,230 | 95.0 | % | |||||||||||||||
| Non Same Store: | ||||||||||||||||||||
| Villas at Oak Crest | Chattanooga, TN | 209 | 1985, 1999(3) | 814 | 860 | 97.0 | % | |||||||||||||
| Grove at Waterford | Hendersonville, TN | 252 | 2010 | 1,004 | 1,049 | 97.5 | % | |||||||||||||
| Village Green | Ann Arbor, MI | 520 | 1989-1992/2013(4) | 1,088 | 1,123 | 98.3 | % | |||||||||||||
| North Park Towers | Southfield, MI | 313 | 1967/2000 | 1,031 | 1,057 | 94.4 | % | |||||||||||||
| 23Hundred@Berry Hill | Nashville, TN | 266 | 2013-2014 | 1,447 | 1,464 | 92.4 | % | |||||||||||||
| Lansbrook Village | Palm Harbor, FL | 581 | 1998-2004(5) | 1,101 | 1,145 | 94.1 | % | |||||||||||||
| Total Non Same Store | 2,141 | 1,089 | 1,125 | 95.4 | % | |||||||||||||||
| Development: | ||||||||||||||||||||
| Alexan CityCentre | Houston, TX | 340 | 2016 | N/A | N/A | N/A | ||||||||||||||
| UCF Orlando | Orlando, FL | 296 | 2015 | N/A | N/A | N/A | ||||||||||||||
| Total Development | 636 | N/A | N/A | N/A | ||||||||||||||||
| Total Portfolio | 3,859 | $ | 1,126 | (10) | $ | 1,160 | 95.3 | % | ||||||||||||
| (1) | Renovation means significant upgrades, alterations or additions to building common areas, interiors, exteriors and/or systems. |
| (2) | The MDA property’s original structure was built in 1929 as an office building. The MDA property underwent a complete rehabilitation in 2006, converting the structure into a high-rise apartment community. |
| (3) | Phase I (1985) features 121 units, with 88 units added in phase II (1999). |
| (4) | The Village Green property was constructed in rolling phases from 1989 to 1992. |
| (5) | The Lansbrook property was constructed in rolling phases from 1998 to 2004. |
| (6) | Average monthly effective rent per occupied unit represents the average monthly rent of occupied units during the period. |
| (7) | Average effective rent per month excluding the property’s retail space was $2,065 for the third quarter compared to $2,063 for the second quarter. Average effective rent per month including the property’s retail space was $2,214 for the third quarter compared to $2,213 for the second quarter. |
| (8) | Property revenue per occupied unit excluding the property’s retail space was $2,091 for the second and third quarters. Property revenue per occupied unit including the property’s retail space was $2,240 for the second and third quarters. |
| (9) | Property revenue per occupied unit is total revenue divided by average number of occupied units during the period. |
| (10) | Excludes the Alexan and UCF properties, which were under development at September 30, 2014. |
| (11) | Our average portfolio occupancy was 95.5%, excluding Villas at Oak Crest, a preferred equity investment, and our 23Hundred@BerryHill property, which construction was completed in the third quarter of 2014. |
| 13 |
| Bluerock Residential Growth REIT, Inc. |
| Condensed Consolidated Balance Sheets |
| Third Quarter 2014 |
| (Unaudited and dollars in thousands except for share and per share data) |
| September 30, 2014 | December 31, 2013 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Net Real Estate Investments | ||||||||
| Land | $ | 41,425 | $ | 25,750 | ||||
| Buildings and improvements | 252,454 | 102,761 | ||||||
| Construction in progress | 229 | 16,696 | ||||||
| Furniture, fixtures and equipment | 8,282 | 2,942 | ||||||
| Total Gross Operating Real Estate Investments | 302,390 | 148,149 | ||||||
| Accumulated depreciation | (10,036 | ) | (4,516 | ) | ||||
| Total Net Operating Real Estate Investments | 292,354 | 143,633 | ||||||
| Operating real estate held for sale, net | 14,739 | 19,372 | ||||||
| Total Net Real Estate Investments | 307,093 | 163,005 | ||||||
| Cash and cash equivalents | 7,612 | 2,984 | ||||||
| Restricted cash | 4,214 | 2,002 | ||||||
| Due from affiliates | 544 | 514 | ||||||
| Accounts receivable, prepaids and other assets | 1,783 | 1,434 | ||||||
| Investments in unconsolidated real estate joint ventures | 12,876 | 1,254 | ||||||
| In-place lease value, net | 545 | — | ||||||
| Deferred financing costs, net | 2,131 | 762 | ||||||
| Non-real estate assets associated with operating real estate held for sale | 951 | — | ||||||
| Assets related to discontinued operations | — | 571 | ||||||
| Total Assets | $ | 337,749 | $ | 172,526 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Mortgages payable | $ | 215,315 | $ | 96,535 | ||||
| Mortgage payable associated with operating real estate held-for-sale | 11,500 | — | ||||||
| Line of credit | — | 7,571 | ||||||
| Accounts payable | 1,624 | 2,397 | ||||||
| Other accrued liabilities | 5,470 | 2,280 | ||||||
| Due to affiliates | 1,784 | 2,254 | ||||||
| Distributions payable | 596 | 143 | ||||||
| Liabilities associated with operating real estate held for sale | 435 | — | ||||||
| Liabilities related to discontinued operations | 364 | 15,263 | ||||||
| Total Liabilities | 237,088 | 126,443 | ||||||
| Stockholders’ Equity | ||||||||
| Preferred stock, $0.01 par value, 250,000,000 shares authorized; none issued and outstanding as of September 30, 2014 and December 31, 2013 | — | — | ||||||
| Common stock, $0.01 par value, no and 749,999,000 shares authorized as of September 30, 2014 and December 31, 2013, respectively; no and 2,413,811 shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively | — | 24 | ||||||
| Common stock - Class A, $0.01 par value, 747,586,185 and no shares authorized as of September 30, 2014 and December 31, 2013, respectively; 4,495,744 and no shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively | 45 | — | ||||||
| Common stock - Class B-1, $0.01 par value, 804,605 and no shares authorized as of September 30, 2014 and December 31, 2013, respectively; 353,630 and no shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively | 4 | — | ||||||
| Common stock - Class B-2, $0.01 par value, 804,605 and no shares authorized as of September 30, 2014 and December 31, 2013, respectively; 353,630 and no shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively | 4 | — | ||||||
| Common stock - Class B-3, $0.01 par value, 804,605 and no shares authorized as of September 30, 2014 and December 31, 2013, respectively; 353,629 and no shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively | 4 | — | ||||||
| Nonvoting convertible stock, $0.01 par value per share; no shares authorized, issued or outstanding, as of September 30, 2014 and 1,000 shares authorized, issued and outstanding as of December 31, 2013 | — | — | ||||||
| Additional paid-in-capital, net of costs | 80,350 | 21,747 | ||||||
| Cumulative distributions and net losses | (21,348 | ) | (9,770 | ) | ||||
| Total Stockholders’ Equity | 59,059 | 12,001 | ||||||
| Noncontrolling Interests | ||||||||
| Operating partnership units | 3,112 | — | ||||||
| Partially owned properties | 38,490 | 34,082 | ||||||
| Total Noncontrolling Interests | 41,602 | 34,082 | ||||||
| Total Equity | 100,661 | 46,083 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 337,749 | $ | 172,526 | ||||
| 14 |
| Bluerock Residential Growth REIT, Inc. |
| Consolidated Statements of Operations |
| For the Three and Nine Months Ended September 30, 2014 and 2013 |
| (Unaudited and dollars in thousands except for share and per share data) |
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Revenues | ||||||||||||||||
| Net rental income | $ | 9,185 | $ | 2,975 | $ | 19,754 | $ | 8,755 | ||||||||
| Other | 371 | 85 | 793 | 240 | ||||||||||||
| Total revenues | 9,556 | 3,060 | 20,547 | 8,995 | ||||||||||||
| Expenses | ||||||||||||||||
| Property operating | 4,067 | 1,306 | 9,008 | 3,881 | ||||||||||||
| General and administrative | 778 | 461 | 2,048 | 1,291 | ||||||||||||
| Asset management fees | 225 | 130 | 548 | 374 | ||||||||||||
| Acquisition costs | 378 | 55 | 3,528 | 198 | ||||||||||||
| Depreciation and amortization | 4,917 | 1,063 | 9,864 | 4,089 | ||||||||||||
| Total expenses | 10,365 | 3,015 | 24,996 | 9,833 | ||||||||||||
| Operating loss (income) | (809 | ) | 45 | (4,449 | ) | (838 | ) | |||||||||
| Other (expense) income | ||||||||||||||||
| Other income | 52 | — | 185 | — | ||||||||||||
| Equity in income (loss) of unconsolidated joint ventures | 411 | (150 | ) | 492 | (98 | ) | ||||||||||
| Equity in gain on sale of unconsolidated joint venture interest | — | 1,605 | — | 1,605 | ||||||||||||
| Interest expense, net | (2,413 | ) | (1,138 | ) | (5,551 | ) | (3,461 | ) | ||||||||
| Total other (expense) income | (1,950 | ) | 317 | (4,874 | ) | (1,954 | ) | |||||||||
| Net (loss) income from continuing operations | (2,759 | ) | 362 | (9,323 | ) | (2,792 | ) | |||||||||
| Discontinued operations | ||||||||||||||||
| Gain (loss) on operations of rental property | 114 | (2 | ) | (4 | ) | (92 | ) | |||||||||
| Loss on early extinguishment of debt | — | — | (879 | ) | — | |||||||||||
| Gain on sale of joint venture interest | — | — | 1,006 | — | ||||||||||||
| Income (loss) from discontinued operations | 114 | (2 | ) | 123 | (92 | ) | ||||||||||
| Net (loss) income | (2,645 | ) | 360 | (9,200 | ) | (2,884 | ) | |||||||||
| Net loss attributable to Noncontrolling Interest Operating partner units | (116 | ) | — | (321 | ) | — | ||||||||||
| Partially owned properties | (382 | ) | (172 | ) | (1,150 | ) | (993 | ) | ||||||||
| Net loss attributable to noncontrolling interest | (498 | ) | (172 | ) | (1,471 | ) | (993 | ) | ||||||||
| Net (loss) income attributable to common shareholders | $ | (2,147 | ) | $ | 532 | $ | (7,729 | ) | $ | (1,891 | ) | |||||
| 15 |
| Bluerock Residential Growth REIT, Inc. |
| Reconciliation of Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) |
| For the Three and Nine Months Ended September 30, 2014 and 2013 |
| (Unaudited and dollars in thousands except for share and per share data) |
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Net (loss) income attributable to common shareholders | $ | (2,147 | ) | $ | 532 | $ | (7,729 | ) | $ | (1,891 | ) | |||||
| Add: Pro-rata share of depreciation and amortization(1) | 2,953 | 486 | 5,645 | 1,902 | ||||||||||||
| 806 | 1,018 | (2,084 | ) | 11 | ||||||||||||
| Less: Pro-rata share of gain on sale of joint venture interests | — | (1,688 | ) | (448 | ) | (1,688 | ) | |||||||||
| Funds from Operations (FFO)(2) | $ | 806 | $ | (670 | ) | $ | (2,532 | ) | $ | (1,677 | ) | |||||
| Add: Pro-rata share of acquisition and disposition costs | 318 | 325 | 3,657 | 465 | ||||||||||||
| non-cash equity compensation | 326 | 36 | 676 | 74 | ||||||||||||
| Less: Pro-rata share of normally recurring capital expenditures | (162 | ) | (54 | ) | (251 | ) | (77 | ) | ||||||||
| Adjusted Funds from Operations (AFFO)(2) | $ | 1,288 | $ | (363 | ) | $ | 1,550 | $ | (1,215 | ) | ||||||
| Weighted average shares outstanding - diluted | 5,877,417 | 1,055,762 | 4,269,378 | 1,024,997 | ||||||||||||
| PER SHARE INFORMATION: | ||||||||||||||||
| FFO - diluted | $ | 0.14 | $ | (0.63 | ) | $ | (0.59 | ) | $ | (1.64 | ) | |||||
| AFFO - diluted | $ | 0.22 | $ | (0.34 | ) | $ | 0.36 | $ | (1.19 | ) | ||||||
| Distributions | $ | 0.29 | $ | 0.40 | $ | 0.84 | $ | 1.19 | ||||||||
(1) The real estate depreciation and amortization amount includes our share of consolidated real estate-related depreciation and amortization of intangibles, less amounts attributable to noncontrolling interests, and our similar estimated share of unconsolidated depreciation and amortization, which is included in earnings of our unconsolidated real estate joint venture investments.
(2) See page 19 for the Company's definitions of these non-GAAP measurements. Individual line items included in FFO and AFFO calculations include results from discontinued operations where applicable.
| 16 |
| Bluerock Residential Growth REIT, Inc. |
| Development Pipeline |
| As of September 30, 2014 |
| (Unaudited and dollars in thousands except for share and per share data) |
This table includes forward-looking statements based on current judgments and current knowledge of management, which are subject to certain risks, trends and uncertainties that could cause results to vary from those projected. Please see the paragraph on forward-looking statements on page 10 of this document for a discussion of risks and uncertainties.
Consolidated Current Development
| Estimated/Actual Dates for | ||||||||||||||||||||||||||||||||
| Under Construction(1) | Total Units | Total Estimated Construction Cost | Cost to Date | Total Debt | Construction
Start | Initial Occupancy | Construction
Completion | Stablized Operations(2) | ||||||||||||||||||||||||
| Alexan CityCentre(3) | 340 | $ | 81,800 | $ | 19,488 | $ | 57,000 | 4Q14 | 4Q16 | 3Q17 | 4Q17 | |||||||||||||||||||||
| UCF Orlando(4) | 296 | $ | 36,770 | $ | 12,365 | $ | 27,500 | 2Q14 | 3Q15 | 4Q15 | 2Q16 | |||||||||||||||||||||
(1) Properties are under development and the Company holds a preferred equity investment with an option to convert into partial ownership of the underlying asset upon stabilization.
(2) We defined stabilized occupancy as the earlier of the attainment of 90% physical occupancy or one year after the completion of construction.
(3) Alexan CityCentre is a convertible preferred equity investment that earns a preferred return of 15%.
(4) UCF Orlando is a convertible preferred equity investment that earns a preferred return of 15%.
| 17 |
| Bluerock Residential Growth REIT, Inc. |
| Debt Summary |
| As of September 30, 2014 |
| (Unaudited and dollars in thousands except for share and per share data) |
| Outstanding Principal | Interest Rate | Fixed/ Floating | Maturity Date | |||||||||
| Springhouse | $ | 22,598 | 5.66 | % | Fixed | January 1, 2020 | ||||||
| Enders Place at Baldwin Park | 25,500 | 4.30 | %(1) | Fixed | November 1, 2022 | |||||||
| 23Hundred@Berry Hill | 23,245 | 3.00 | %(2) | Floating | September 30, 2015 | |||||||
| MDA City Apartments | 37,600 | 5.35 | % | Fixed | January 1, 2023 | |||||||
| Village Green Ann Arbor | 43,200 | 3.92 | % | Fixed | October 1, 2022 | |||||||
| Grove at Waterford | 20,100 | 3.59 | % | Fixed | May 1, 2019 | |||||||
| Lansbrook Village | 42,357 | 4.45 | % | Fixed | March 31, 2018 | |||||||
| Total | 214,600 | |||||||||||
| Fair value adjustments | 715 | |||||||||||
| Total continuing operations | 215,315 | |||||||||||
| North Park Towers - held for sale | 11,500 | 5.65 | % | Fixed | January 6, 2024 | |||||||
| Total | $ | 226,815 | ||||||||||
| Weighted average interest rate | 4.44 | % | ||||||||||
Note: The above schedule does not include a mortgage note of $17,400 related to The Estates at Perimeter/Augusta property as the property is accounted for under the equity method and is not consolidated. The note bears a 4.245% fixed rate with a maturity date of September 1, 2017.
(1) The principal includes a $17,500 loan at a 3.97% interest rate and a $8,000 supplemental loan at a 5.01% interest rate.
(2) The loan is based on a floating rate, which is benchmarked to three-month Libor plus 2.50% and may be extended for two additional twelve month periods at the option of the borrower.
| 18 |
| Bluerock Residential Growth REIT, Inc. |
| Definitions of Non-GAAP Financial Measures |
The foregoing supplemental financial data includes certain non-GAAP financial measures that we believe are helpful in understanding our business, as further described below. Our definition and calculation of these non-GAAP financial measures may differ from those of other REITs, and may, therefore, not be comparable.
Funds from Operations ("FFO") and Adjusted Funds from Operations (“AFFO”)
Funds from operations, or FFO, is a non-GAAP financial measure that is widely recognized as a measure of REIT operating performance. We consider FFO to be an appropriate supplemental measure of our operating performance as it is based on a net income analysis of property portfolio performance that excludes non-cash items such as depreciation. The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time. Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT, using historical accounting for depreciation, could be less informative. We define FFO, consistent with the National Association of Real Estate Investment Trusts, or NAREIT's, definition, as net income, computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis.
In addition to FFO, we use adjusted funds from operations, or AFFO. AFFO is a computation made by analysts and investors to measure a real estate company's operating performance by removing the effect of items that do not reflect ongoing property operations.
We further adjust FFO by adding back certain items that are not added to net income in NAREIT's definition of FFO, such as acquisition expenses, equity based compensation expenses, and any other non-recurring or non-cash expenses, which are costs that do not relate to the operating performance of our properties, and subtracting recurring capital expenditures (and when calculating the quarterly incentive fee payable to our Manager only, we further adjust FFO to include any realized gains or losses on our real estate investments).
Our calculation of AFFO differs from the methodology used for calculating AFFO by certain other REITs and, accordingly, our AFFO may not be comparable to AFFO reported by other REITs. Our management utilizes FFO and AFFO as measures of our operating performance after adjustment for certain non-cash items, such as depreciation and amortization expenses, and acquisition expenses and pursuit costs that are required by GAAP to be expensed but may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods. Furthermore, although FFO, AFFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we also believe that FFO and AFFO may provide us and our stockholders with an additional useful measure to compare our financial performance to certain other REITs. We also use AFFO for purposes of determining the quarterly incentive fee, if any, payable to our Manager.
Neither FFO nor AFFO is equivalent to net income or cash generated from operating activities determined in accordance with GAAP. Furthermore, FFO and AFFO do not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO nor AFFO should be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity.
We made no investments, had one full disposition and two partial dispositions in 2013, and have acquired interests in eight properties during the nine months ended September 30, 2014. The results presented in the table on page 16 are not directly comparable and should not be considered an indication of our future operating performance.
| 19 |
| Bluerock Residential Growth REIT, Inc. |
| Definitions of Non-GAAP Financial Measures |
| (Unaudited and dollars in thousands except for share and per share data) |
Earnings Before Interest, Income Taxes, Depreciation and Amortization ("EBITDA")
EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. We consider EBITDA to be an appropriate supplemental measure of our performance because it eliminates depreciation, income taxes, interest and non-recurring items, which permits investors to view income from operations unclouded by non-cash depreciation, amortization, the cost of debt or non-recurring items. Below is a reconciliation of net income applicable to common shares to EBITDA.
| Three Month Ended | Nine Month Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Net loss attributable to common stockholders | $ | (2,147 | ) | $ | 532 | $ | (7,729 | ) | $ | (1,891 | ) | |||||
| Net loss attributable to noncontrolling interest | (498 | ) | (172 | ) | (1,471 | ) | (993 | ) | ||||||||
| Interest expense | 2,413 | 1,259 | 5,700 | 3,827 | ||||||||||||
| Depreciation and amortization | 4,917 | 1,229 | 10,048 | 4,584 | ||||||||||||
| Gain on sale of joint venture interest | — | — | (1,006 | ) | — | |||||||||||
| Equity in gain on sale of unconsolidated joint venture interest | — | (1,605 | ) | — | (1,605 | ) | ||||||||||
| Acquisition costs | 378 | 55 | 3,528 | 198 | ||||||||||||
| Loss on early extinguishment of debt | — | — | 879 | — | ||||||||||||
| EBITDA | $ | 5,063 | $ | 1,298 | $ | 9,949 | $ | 4,120 | ||||||||
Recurring Capital Expenditures
We define recurring capital expenditures as expenditures that are incurred at every property and exclude development, investment, revenue enhancing and non-recurring capital expenditures.
Non-Recurring Capital Expenditures
We define non-recurring capital expenditures as expenditures for significant projects that upgrade units or common areas and projects that are revenue enhancing.
Same Store Properties
Same store properties are conventional multifamily residential apartments which were owned and operational for the entire periods presented.
| 20 |
| Bluerock Residential Growth REIT, Inc. |
| Definitions of Non-GAAP Financial Measures |
| (Unaudited and dollars in thousands except for share and per share data) |
Property Net Operating Income ("Property NOI")
We believe that net operating income, or NOI, is a useful measure of our operating performance. We define NOI as total property revenues less total property operating expenses, excluding depreciation and amortization and interest. Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REITs. We believe that this measure provides an operating perspective not immediately apparent from GAAP operating income or net income. We use NOI to evaluate our performance on a same store and non-same store basis because NOI measures the core operations of property performance by excluding corporate level expenses and other items not related to property operating performance and captures trends in rental housing and property operating expenses. However, NOI should only be used as an alternative measure of our financial performance. The following table reflects same store and non-same store contributions to consolidated NOI together with a reconciliation of NOI to net loss as computed in accordance with GAAP for the periods presented (amounts in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Net operating income | ||||||||||||||||
| Same store | $ | 2,352 | $ | 2,224 | $ | 6,680 | $ | 6,606 | ||||||||
| Non-same store | 3,602 | 839 | 6,370 | 2,376 | ||||||||||||
| Total net operating income | 5,954 | 3,063 | 13,050 | 8,982 | ||||||||||||
| Less: | ||||||||||||||||
| Interest expense | 2,581 | 1,435 | 6,060 | 4,314 | ||||||||||||
| Total property income | 3,373 | 1,628 | 6,990 | 4,668 | ||||||||||||
| Less: | ||||||||||||||||
| Noncontrolling interest pro-rata share of property income | 1,638 | 1,039 | 3,650 | 3,310 | ||||||||||||
| Other income related to JV/MM entities | 17 | 11 | 56 | 10 | ||||||||||||
| Pro-rata share of total properties’ income | 1,718 | 578 | 3,284 | 1,348 | ||||||||||||
| Less pro-rata share of: | ||||||||||||||||
| Depreciation and amortization | 2,953 | 486 | 5,645 | 1,902 | ||||||||||||
| Affiliate loan interest, net | — | 248 | 191 | 774 | ||||||||||||
| Asset management and oversight fees | 219 | 138 | 536 | 399 | ||||||||||||
| Acquisition and disposition costs | 318 | 325 | 3,657 | 465 | ||||||||||||
| Corporate operating expenses | 769 | 537 | 1,999 | 1,387 | ||||||||||||
| Add pro-rata share of: | ||||||||||||||||
| Other income | 31 | — | 103 | — | ||||||||||||
| Equity in operating earnings of unconsolidated joint ventures | 363 | — | 464 | — | ||||||||||||
| Gain on sale of joint venture interest | — | 1,688 | 448 | 1,688 | ||||||||||||
| Net (loss) income attributable to common stockholders | $ | (2,147 | ) | $ | 532 | $ | (7,729 | ) | $ | (1,891 | ) | |||||
| 21 |