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Section 1: 8-K (FORM 8-K)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): November 5, 2018

 

Bluerock Residential Growth REIT, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

Maryland   001-36369   26-3136483
(State or other jurisdiction of incorporation
or organization)
 

(Commission File Number)

 

(I.R.S. Employer

Identification No.)

 

712 Fifth Avenue, 9th Floor

New York, NY 10019

(Address of principal executive offices)

 

(212) 843-1601

(Registrant’s telephone number, including area code)

 

None.

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ¨

 

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. ¨

 

 

 

 

 

 

ITEM 2.02RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

 

On November 5, 2018, Bluerock Residential Growth REIT, Inc., a Maryland corporation, or the Company, issued a press release announcing its financial results for the third quarter ended September 30, 2018. Additionally, the Company is furnishing certain supplemental financial information, or the Supplemental Financial Information. Copies of the press release and the Supplemental Financial Information are furnished as Exhibit 99.1 and Exhibit 99.2 to this Current Report on Form 8-K and is hereby incorporated by reference herein. In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02 shall not be deemed to be “filed” for purposes of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and shall not be incorporated by reference into any registration statement or other document filed under the Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

 

ITEM 7.01REGULATION FD DISCLOSURE.

 

As disclosed above in Item 2.02 of this Current Report on Form 8-K, on November 5, 2018, the Company issued the press release and Supplemental Financial Information attached hereto as Exhibit 99.1 and Exhibit 99.2 announcing the Company’s financial results for the third quarter ended September 30, 2018 and certain other supplemental financial information. In accordance with General Instruction B.2 of Form 8-K, the information set forth herein, in the press release is deemed to be “furnished” and shall not be deemed to be “filed” for purposes of the Exchange Act. The information set forth in this Item 7.01 of this Current Report on Form 8-K shall not be deemed an admission as to the materiality of any information in this Current Report on Form 8-K that is required to be disclosed solely to satisfy the requirements of Regulation FD.

 

ITEM 9.01FINANCIAL STATEMENTS AND EXHIBITS.

 

(d)Exhibits.

 

The following exhibits relating to Items 2.02 and 7.01 of this Current Report on Form 8-K are intended to be furnished to, not filed with, the SEC pursuant to Regulation FD.

 

Exhibit No.   Description
     
99.1   Press Release, dated November 5, 2018.
99.2   Supplemental Financial Information.

 

 

 

 

SIGNATURE

 

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 hereunto duly authorized.

 

  BLUEROCK RESIDENTIAL GROWTH REIT, INC.

 

Dated: November 5, 2018 By: /s/Christopher J. Vohs
    Christopher J. Vohs
    Chief Financial Officer and Treasurer

 

 

 

 

Exhibit Index

 

Exhibit No.   Description
     
99.1   Press Release, dated November 5, 2018.
99.2   Supplemental Financial Information.

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1 

 

 

 

For Immediate Release

Bluerock Residential Growth REIT Announces Third Quarter 2018 Results

 

-   Total Revenues Grew 59% YoY to $47.9 Million   -

-   Industry-Leading Same Store Revenue Growth of 4.8% YoY   -

 

New York, NY (November 5, 2018) – Bluerock Residential Growth REIT, Inc. (NYSE American: BRG) (“the Company”), an owner of highly amenitized multifamily apartment communities, announced today its financial results for the quarter ended September 30, 2018.

 

Third Quarter Highlights

 

Total revenues grew 59% to $47.9 million for the quarter from $30.2 million in the prior year period.

 

Net loss attributable to common stockholders for the third quarter of 2018 was ($0.44) per share, as compared to ($0.45) per share in the prior year period.

 

Property Net Operating Income (“NOI”) grew 52% to $24.2 million, from $16.0 million in the prior year period.

 

Same store revenue and NOI increased 4.8% and 4.0% respectively, as compared to the prior year period.

 

Core funds from operations attributable to common shares and units (“CFFO”) increased 67% to $6.4 million, from $3.8 million in the prior year period.  CFFO per share is $0.21 for the third quarter as compared to $0.14 in the prior year period.  Dividend payout on a CFFO basis improved to 77% during the third quarter.

 
Adjusted funds from operations attributable to common shares and units (“AFFO”) grew 67% to $5.7 million, from $3.4 million in the prior year period. AFFO per share is $0.18 for the quarter as compared to $0.13 in third quarter 2017.
 

Consolidated real estate investments, at cost, increased approximately $197.5 million to $1.7 billion, from December 31, 2017.

 

The Company invested approximately $16 million in a multifamily community totaling 400 units with a total purchase price of $40.2 million and $3 million to buy out a noncontrolling interest in one asset.

 

The Company completed 385 value-add unit upgrades for a year-to-date total of 847 upgrades at an average cost of $4,555 per unit. The Company expects to complete between 900 and 1,200 unit renovations in 2018.

 

Since inception within the existing portfolio, the Company has completed 1,327 value-add unit upgrades and achieved a $107 average monthly rental increase per unit, equating to a 26.7% ROI on all unit upgrades leased as of September 30, 2018.  The Company has identified approximately 4,600 remaining units within the existing portfolio for value-add upgrades with similar economics to the completed renovations.

 

The Company is increasing the low end of its full year 2018 AFFO guidance range from $0.66 to $0.68 per share and is affirming the top end of the range at $0.70 per share. This represents the second consecutive quarter with a guidance increase.

 

 

 

 

“Our third quarter results clearly demonstrate the successful execution of our strategic initiatives, including value-add investments and accretive approach to growing our portfolio,” said Ramin Kamfar, Company Chairman and CEO. “We continued to perform well in the third quarter, with property NOI up 52% and on a CFFO basis we improved our dividend payout to 77% in the third quarter. Our same store operational results are among the best in the multifamily industry, reflecting the contribution from our unit upgrades and our focus on knowledge economy growth markets. These strong results have allowed us to again raise the lower end of our 2018 AFFO guidance range. We believe we have ample runway to continue to create additional value as we focus on accretive operational improvements and completing our value-add unit upgrade programs.”

 

Financial Results

 

Net loss attributable to common stockholders for the third quarter of 2018 was $10.3 million, compared to $12.0 million in the prior year period. Net loss attributable to common stockholders included non-cash expenses of $14.2 million or $0.46 per share in the third quarter of 2018 compared to $14.8 million or $0.55 per share for the prior year period.

 

AFFO for the third quarter of 2018 was $5.7 million, or $0.18 per diluted share, compared to $3.4 million, or $0.13 per diluted share in the prior year period. AFFO was primarily driven by growth in property NOI of $8.2 million and interest income of $3.6 million arising from significant investment activity. This was primarily offset by a year-over-year increase in interest expense of $5.1 million, general and administrative expenses of $2.1 million, and preferred stock dividends of $2.1 million.

 

Core FFO for the third of 2018 was $6.4 million, or $0.21 per diluted share, compared to $3.8 million, or $0.14 per diluted share in the prior year period. Core FFO adds back non-cash, non-operating expenses such as accretion on the Company’s Series B preferred stock.

 

Total Portfolio Performance

$ In thousands, except average rental rates 3Q18   3Q17   Variance   YTD18   YTD17   Variance  
Total Revenues (1) $ 47,877   $ 30,154   58.8%   $134,705   $ 87,004   54.8%  
Property Operating Expenses $ 17,971   $ 12,060   49.0%   $ 50,504   $ 34,205   47.7%  
NOI $ 24,204   $ 15,974   51.5%   $ 67,669   $ 47,058   43.8%  
Operating Margin 57.4%   57.0%   40 bps 57.3%   57.9%   (60) bps
Occupancy Percentage 94.5%   94.2%   30 bps 94.0%   94.4%   (40) bps
Average Rental Rate $    1,253   $    1,214   3.2%   $    1,239   $    1,240   -0.1%  
(1) Including interest income from related parties                

 

For the third quarter of 2018, property revenues increased by 50.4% compared to the same prior year period primarily attributable to the increased size of the portfolio. Total portfolio NOI was $24.2 million, an increase of $8.2 million, or 51.5%, compared to the same period in the prior year. Property operating expenses were up primarily due to the increased size of the portfolio.

 

Property NOI margins were 57.4% of revenue for the quarter, compared to 57.0% of revenue in the prior year quarter.

 

 

 

 

 

Same Store Portfolio Performance

$ In thousands, except average rental rates 3Q18   3Q17   Variance   YTD18   YTD17   Variance 0
Revenues $   29,004   $   27,682   4.8%   $   63,075   $   60,210   4.8%  
Property Operating Expenses $   12,553   $   11,864   5.8%   $   26,741   $   25,189   6.2%  
NOI $   16,451   $   15,818   4.0%   $   36,334   $   35,021   3.7%  
Operating Margin 56.7%   57.1%   (40) bps 57.6%   58.2%   (60) bps
Occupancy Percentage 94.5%   94.4%   10 bps 94.1%   94.5%   (40) bps
Average Rental Rate $     1,273   $     1,220   4.3%   $     1,292   $     1,234   4.7%  

 

The Company’s same store portfolio for the quarter ended September 30, 2018 included 22 properties. For the third quarter of 2018, same store NOI was $16.5 million, an increase of $0.6 million, or 4.0%, compared to the same period in the prior year. Same store property revenues increased by 4.8% compared to the same prior year period, primarily attributable to a 4.3% increase in average rental rates, as well as average occupancy increasing 10 basis points to 94.5%. Same store expenses increased $0.69 million, primarily due to $0.40 million of additional real estate taxes due to higher valuations by municipalities, $0.17 million due to recurring annual maintenance incurred in the current year on certain properties which was not required in the prior year as the properties were undergoing renovations, and $0.11 million related to payroll increase.

 

Acquisition Activity

 

On July 26, 2018, the Company acquired a 93% interest in a 400-unit apartment community located in Houston, Texas, known as Veranda at Centerfield. The total purchase price was approximately $40.2 million, funded in part by a $26.1 million mortgage loan secured by the Veranda at Centerfield property.

 

On August 29, 2018, the Company invested approximately $3 million to increase our ownership stake to 100% in our ARIUM Palms property.

 

Balance Sheet

 

During the third quarter, the Company raised gross proceeds of approximately $29.8 million through the issuance of 29,829 shares of Series B preferred stock with associated warrants at $1,000 per unit.

 

As of September 30, 2018, the Company had $26.4 million of unrestricted cash on its balance sheet, approximately $56.1 million available among its revolving credit facilities, and $1.2 billion of debt outstanding.

 

Dividend

 

The Board of Directors authorized, and the Company declared, a quarterly dividend for the third quarter of 2018 equal to a quarterly rate of $0.1625 per share on its Class A common stock, payable to the stockholders of record as of September 25, 2018, which was paid in cash on October 5, 2018. A portion of each dividend may constitute a return of capital for tax purposes. There is no assurance that we will continue to declare dividends or at this rate.

 

On July 10, 2018, the Board of Directors authorized, and the Company declared, a monthly dividend of $5.00 per share of Series B preferred stock, payable to the stockholders of record as of July 25, 2018, August 24, 2018, and September 25, 2018 which was paid in cash on August 3, 2018, September 5, 2018, and October 5, 2018, respectively.

 

 

 

 

 

2018 Guidance

 

Based on the Company’s current outlook and market conditions, the Company is increasing the low end of the 2018 AFFO guidance from $0.66 to $0.68 per share and is reaffirming the top end of the range at $0.70 per share.

 

For additional guidance details, please see page 31 of Company’s Third Quarter 2018 Earnings Supplement available under Investor Relations on the Company’s website (www.bluerockresidential.com). Subsequent to issuing 2018 guidance in February 2018, the Company revised its presentation of AFFO attributable to common stockholders to reflect AFFO attributable to common shares and units. The estimated weighted average diluted shares and units outstanding used to calculate AFFO per share now includes noncontrolling interests – operating partnership units. As the Company’s presentation now also includes the impact of AFFO attributable to operating partnership units, and as shares and units are treated on a one-for-one basis, there is no change to projected AFFO per share for purposes of 2018 AFFO guidance.

 

Conference Call

 

All interested parties can listen to the live conference call at 11:00 AM ET on Monday, November 5, 2018 by dialing +1 (866) 843-0890 within the U.S., or +1 (412) 317-6597, and requesting the "Bluerock Residential Conference."

 

For those who are not available to listen to the live call, the conference call will be available for replay on the Company’s website two hours after the call concludes, and will remain available until December 6, 2018 at http://services.choruscall.com/links/brg181106.html, as well as by dialing +1 (877) 344-7529 in the U.S., or +1 (412) 317-0088 internationally, and requesting conference number 10125116.

 

The full text of this Earnings Release and additional Supplemental Information is available in the Investor Relations section on the Company’s website at http://www.bluerockresidential.com.

 

About Bluerock Residential Growth REIT, Inc.

 

Bluerock Residential Growth REIT, Inc. (NYSE American: BRG) is a real estate investment trust that focuses on developing and acquiring a diversified portfolio of institutional-quality highly amenitized live/work/play apartment communities in demographically attractive knowledge economy growth markets to appeal to the renter by choice. The Company’s objective is to generate value through off-market/relationship-based transactions and, at the asset level, through value add improvements to properties and operations. The Company is included in the Russell 2000 and Russell 3000 Indexes. BRG has elected to be taxed as a real estate investment trust (REIT) for U.S. federal income tax purposes.

 

For more information, please visit the Company’s website at www.bluerockresidential.com.

 

Forward Looking Statements

 

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are based upon the Company’s present expectations, but these statements are not guaranteed to occur. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Investors should not place undue reliance upon forward-looking statements. For further discussion of the factors that could affect outcomes, please refer to the risk factors set forth in Item 1A of the Company’s Annual Report on Form 10-K filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on March 13, 2018, and subsequent filings by the Company with the SEC. We claim the safe harbor protection for forward looking statements contained in the Private Securities Litigation Reform Act of 1995.

 

 

 

 

Portfolio Summary

 

The following is a summary of our operating real estate and mezzanine/preferred investments as of September 30, 2018:

Consolidated Operating Properties  Location  Number
of Units
   Year Built/ Renovated (1)   Ownership Interest  

Average

Rent (2)

   %
Occupied (3)
 
ARIUM at Palmer Ranch  Sarasota, FL   320    2016    100%  $1,283    94%
ARIUM Glenridge  Atlanta, GA   480    1990    90%   1,163    92%
ARIUM Grandewood  Orlando, FL   306    2005    100%   1,363    96%
ARIUM Gulfshore  Naples, FL   368    2016    100%   1,249    93%
ARIUM Hunter’s Creek  Orlando, FL   532    1999    100%   1,349    94%
ARIUM Metrowest  Orlando, FL   510    2001    100%   1,326    95%
ARIUM Palms  Orlando, FL   252    2008    100%   1,332    94%
ARIUM Pine Lakes  Port St. Lucie, FL   320    2003    85%   1,241    93%
ARIUM Westside  Atlanta, GA   336    2008    90%   1,532    98%
Ashton Reserve  Charlotte, NC   473    2015    100%   1,079    93%
Citrus Tower  Orlando, FL   336    2006    97%   1,273    94%
Enders Place at Baldwin Park  Orlando, FL   220    2003    92%   1,749    95%
James on South First  Austin, TX   250    2016    90%   1,248    98%
Marquis at Crown Ridge  San Antonio, TX   352    2009    90%   971    93%
Marquis at Stone Oak  San Antonio, TX   335    2007    90%   1,410    95%
Marquis at The Cascades  Tyler, TX   582    2009    90%   1,091    97%
Marquis at TPC  San Antonio, TX   139    2008    90%   1,468    96%
Outlook at Greystone  Birmingham, AL   300    2007    100%   917    96%
Park & Kingston  Charlotte, NC   168    2015    100%   1,244    98%
Plantation Park  Lake Jackson, TX   238    2016    80%   1,390    97%
Preston View  Morrisville, NC   382    2000    100%   1,074    96%
Roswell City Walk  Roswell, GA   320    2015    98%   1,528    94%
Sands Parc  Daytona Beach, FL   264    2017    100%   1,306    96%
Sorrel  Frisco, TX   352    2015    95%   1,284    93%
Sovereign  Fort Worth, TX   322    2015    95%   1,329    95%
The Brodie  Austin, TX   324    2001    93%   1,250    99%
The Links at Plum Creek  Castle Rock, CO   264    2000    88%   1,417    94%
The Mills  Greenville, SC   304    2013    100%   1,027    93%
The Preserve at Henderson Beach  Destin, FL   340    2009    100%   1,358    96%
Veranda at Centerfield  Houston, TX   400    1999    93%   916    94%
Villages of Cypress Creek  Houston, TX   384    2001    80%   1,090    96%
Wesley Village  Charlotte, NC   301    2010    100%   1,352    95%
Consolidated Operating Properties Subtotal/Average   10,774             $1,253    95%
                             

 

Mezzanine/Preferred Investments  Location  Planned Number of Units   Pro Forma Average Rent (4) 
Alexan CityCentre  Houston, TX   340   $2,144 
Alexan Southside Place  Houston, TX   270    2,012 
Arlo, formerly West Morehead  Charlotte, NC   286    1,507 
Cade Boca Raton, formerly APOK Townhomes  Boca Raton, FL   90    2,549 
Domain at The One Forty, formerly Domain  Garland, TX   299    1,469 
Flagler Village  Fort Lauderdale, FL   385    2,352 
Helios  Atlanta, GA   282    1,486 
Leigh House, formerly Lake Boone Trail  Raleigh, NC   245    1,271 
Novel Perimeter, formerly Crescent Perimeter  Atlanta, GA   320    1,749 
Vickers Historic Roswell, formerly Vickers Village  Roswell, GA   79    3,176 
Whetstone  Durham, NC   204    1,311(2)
Mezzanine and Preferred Investments Subtotal/Average   2,800   $1,817 
              
Portfolio Properties Total/Average   13,574   $1,370 

 

(1) Represents date of last significant renovation or year built if there were no renovations.

(2) Represents the average effective monthly rent per occupied unit for the three months ended September 30, 2018.

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

(4) Alexan CityCentre, Alexan Southside Place, Helios, Leigh House, and Whetstone are preferred equity investments. The Alexan Southside Place, Helios, and Leigh House investments have the option to convert to indirect common interest in the property once the property reaches 70% occupancy. Arlo, Cade Boca Raton, Domain at The One Forty, Flagler Village, Novel Perimeter, and Vickers Historic Roswell are mezzanine loan investments. Additionally, Arlo, Cade Boca Raton, Domain at The One Forty, and Vickers Historic Roswell have an option to purchase indirect property interest upon maturity.

 

 

 

 

Consolidated Statement of Operations

For the Three and Nine Months Ended September 30, 2018 and 2017

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

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2018   2017   2018   2017 
Revenues                
Net rental income  $37,408   $24,827   $104,791   $72,239 
Other property revenues   4,767    3,207    13,382    9,024 
Interest income from related parties   5,702    2,120    16,532    5,741 
Total revenues   47,877    30,154    134,705    87,004 
Expenses                    
Property operating   17,971    12,060    50,504    34,205 
Property management fees   1,141    781    3,208    2,250 
General and administrative   4,732    1,103    13,929    4,249 
Management fees to related parties       2,802        11,733 
Acquisition and pursuit costs   7    15    78    3,215 
Management internalization       826        1,647 
Weather-related losses, net   13    678    181    678 
Depreciation and amortization   15,384    11,763    45,844    33,094 
Total expenses   39,248    30,028    113,744    91,071 
Operating income (loss)   8,629    126    20,961    (4,067)
Other income (expense)                    
Other income               17 
Preferred returns and equity in income of unconsolidated real estate joint ventures   2,789    2,688    7,877    7,865 
Gain on sale of real estate investments               50,040 
Gain on sale of real estate joint venture interest               10,238 
Loss on extinguishment of debt and modification costs   (1,624)       (2,277)   (1,639)
Interest expense, net   (12,905)   (7,395)   (36,063)   (22,339)
Total other (expense) income   (11,740)   (4,707)   (30,463)   44,182 
Net (loss) income   (3,111)   (4,581)   (9,502)   40,115 
Preferred stock dividends   (9,105)   (7,038)   (25,995)   (19,271)
Preferred stock accretion   (1,631)   (905)   (4,141)   (1,889)
Net (loss) income attributable to noncontrolling interests                    
Operating partnership units   (3,157)   (125)   (8,841)   4 
Partially owned properties   (356)   (382)   (824)   18,388 
Net (loss) income attributable to noncontrolling interests   (3,513)   (507)   (9,665)   18,392 
Net (loss) income attributable to common stockholders  $(10,334)  $(12,017)  $(29,973)  $563 
                     
Net (loss) income per common share - Basic  $(0.44)  $(0.45)  $(1.28)  $0.02 
                     
Net (loss) income per common share – Diluted  $(0.44)  $(0.45)  $(1.28)  $0.02 
                     
Weighted average basic common shares outstanding   23,742,129    26,474,093    23,893,957    25,851,536 
Weighted average diluted common shares outstanding   23,742,129    26,474,093    23,893,957    25,852,059 

 

 

 

 

 

Consolidated Balance Sheets

Third Quarter 2018

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

 

   September 30,
2018
   December 31,
2017
 
ASSETS          
Net Real Estate Investments          
Land  $181,985   $169,135 
Buildings and improvements   1,419,423    1,244,193 
Furniture, fixtures and equipment   48,618    38,446 
Construction in progress   241    985 
Total Gross Real Estate Investments   1,650,267    1,452,759 
Accumulated depreciation   (93,751)   (55,177)
Total Net Real Estate Investments   1,556,516    1,397,582 
Cash and cash equivalents   26,356    35,015 
Restricted cash   32,132    29,575 
Notes and accrued interest receivable from related parties   163,241    140,903 
Due from affiliates   2,782    2,003 
Accounts receivable, prepaid and other assets   19,883    9,689 
Preferred equity investments and investments in unconsolidated real estate joint ventures   77,466    71,145 
In-place lease intangible assets, net   1,212    4,635 
Total Assets  $1,879,588   $1,690,547 
           
LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY          
Mortgages payable  $1,107,081   $939,494 
Revolving credit facilities   62,959    67,670 
Accounts payable   1,505    1,652 
Other accrued liabilities   34,268    22,952 
Due to affiliates   537    1,575 
Distributions payable   11,848    14,287 
Total Liabilities   1,218,198    1,047,630 
8.250% Series A Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 10,875,000 shares authorized; and 5,721,460 issued and outstanding as of September 30, 2018 and December 31, 2017   139,355    138,801 
6.000% Series B Redeemable Preferred Stock, liquidation preference $1,000 per share, 725,000 shares authorized; 263,095 and 184,130 issued and outstanding as of September 30, 2018 and December 31, 2017, respectively   234,086    161,742 
7.625% Series C Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares authorized; and 2,323,750 issued and outstanding as of September 30, 2018 and December 31, 2017   56,408    56,196 
Equity          
Stockholders’ Equity          
Preferred stock, $0.01 par value, 230,400,000 shares authorized; none issued and outstanding        
7.125% Series D Cumulative Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares authorized; 2,850,602 issued and outstanding as of September 30, 2018 and December 31, 2017   68,705    68,705 
Common stock - Class A, $0.01 par value, 747,509,582 shares authorized; 23,672,080 and 24,218,359 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively   237    242 
Common stock - Class C, $0.01 par value, 76,603 shares authorized; 76,603 shares issued and outstanding as of September 30, 2018 and December 31, 2017   1    1 
Additional paid-in-capital   309,883    318,170 
Distributions in excess of cumulative earnings   (201,914)   (164,286)
Total Stockholders’ Equity   176,912    222,832 
Noncontrolling Interests          
Operating partnership units   31,911    42,999 
    Partially owned properties   22,718    20,347 
Total Noncontrolling Interests   54,629    63,346 
Total Equity   231,541    286,178 
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY  $1,879,588   $1,690,547 

 

 

 

  

Non-GAAP Financial Measures

 

The foregoing supplemental financial data includes certain non-GAAP financial measures that we believe are helpful in understanding our business and performance, as further described below. Our definition and calculation of these non-GAAP financial measures may differ from those of other REITs, and may, therefore, not be comparable.

 

Funds from Operations, Core Funds from Operations, and Adjusted Funds from Operations

 

We believe that funds from operations (“FFO”), as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), core funds from operations (“Core FFO”), and adjusted funds from operations (“AFFO”) are important non-GAAP supplemental measures of operating performance for a REIT.

 

FFO attributable to common shares and units is a non-GAAP financial measure that is widely recognized as a measure of REIT operating performance. We consider FFO to be an appropriate supplemental measure of our operating performance as it is based on a net income analysis of property portfolio performance that excludes non-cash items such as depreciation. The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time. Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT, using historical accounting for depreciation, could be less informative. We define FFO, consistent with the NAREIT definition, as net income, computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus depreciation and amortization of real estate assets, plus impairment write-downs of depreciable real estate, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis.

 

Core FFO makes certain adjustments to FFO, removing the effect of items that do not reflect ongoing property operations such as stock compensation expense, acquisition expenses, unrealized gains and losses on derivatives, losses on extinguishment of debt and modification costs (includes prepayment penalties incurred and the write-off of unamortized deferred financing costs and fair market value adjustments of assumed debt), non-cash interest, one-time weather-related costs, and preferred stock accretion. We believe that Core FFO is helpful to investors as a supplemental performance measure because it excludes the effects of certain items which can create significant earnings volatility, but which do not directly relate to our core recurring property operations. As a result, we believe that Core FFO can help facilitate comparisons of operating performance between periods and provides a more meaningful predictor of future earnings potential.

 

AFFO makes certain adjustments to Core FFO in order to arrive at a more refined measure of the operating performance of our portfolio. There is no industry standard definition of AFFO and practice is divergent across the industry. AFFO adjusts Core FFO for items that impact our ongoing operations, such as subtracting recurring capital expenditures (and while we were externally managed, when calculating the quarterly incentive fee paid to our former Manager only, we further adjusted FFO to include any realized gains or losses on our real estate investments).  We believe that AFFO is helpful to investors as a meaningful supplemental indicator of our operational performance. 

 

Our calculation of Core FFO and AFFO differs from the methodology used for calculating Core FFO and AFFO by certain other REITs and, accordingly, our Core FFO and AFFO may not be comparable to Core FFO and AFFO reported by other REITs. Our management utilizes FFO, Core FFO, and AFFO as measures of our operating performance after adjustment for certain non-cash items, such as depreciation and amortization expenses, and acquisition and pursuit costs that are required by GAAP to be expensed but may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods. Furthermore, although FFO, Core FFO, AFFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we also believe that FFO, Core FFO, and AFFO may provide us and our stockholders with an additional useful measure to compare our financial performance to certain other REITs. While we were externally managed, we also used AFFO for purposes of determining the quarterly incentive fee paid to our former Manager in prior periods.

 

 

 

  

Neither FFO, Core FFO, nor AFFO is equivalent to net income, including net income attributable to common stockholders, or cash generated from operating activities determined in accordance with GAAP. Furthermore, FFO, Core FFO, and AFFO do not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO, Core FFO, nor AFFO should be considered as an alternative to net income, including net income attributable to common stockholders, as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity.

 

We have acquired interests in eight additional operating properties subsequent to September 30, 2017. Therefore, the results presented in the table below are not directly comparable and should not be considered an indication of our future operating performance.

 

 

 

 

The table below reconciles our calculations of FFO, Core FFO and AFFO to net (loss) income, the most directly comparable GAAP financial measure, for the three and nine months ended September 30, 2018 and 2017 (in thousands, except per share amounts):

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2018   2017   2018   2017 
Net (loss) income attributable to common shares  $(10,334)  $(12,017)  $(29,973)  $563 
Add back: Net (loss) income attributable to operating partnership units   (3,157)   (125)   (8,841)   4 
Net (loss) income attributable to common shares and units   (13,491)   (12,142)   (38,814)   567 
                     
Common stockholders and operating partnership units pro-rata share of:                    
Real estate depreciation and amortization (1)   14,497    10,883    43,318    30,221 
Gain on sale of real estate investments               (6,399)
Gain on sale of joint venture interests, net               (34,313)
FFO Attributable to Common Shares and Units   1,006    (1,259)   4,504    (9,924)
Common stockholders and operating partnership units pro-rata share of:                    
Acquisition and pursuit costs   7    15    78    3,072 
Non-cash interest expense   915    249    2,977    1,510 
Unrealized gain on derivatives   (225)       (225)    
Loss on extinguishment of debt and modification costs   1,573        2,226    1,551 
Weather-related losses, net   13    642    178    642 
Non-real estate depreciation and amortization (1)   77        216     
Non-recurring income               (16)
Non-cash preferred returns and equity in income of unconsolidated real estate joint ventures   (236)   (498)   (700)   (990)
Management internalization       826        1,647 
Non-cash equity compensation   1,621    2,931    5,039    13,050 
Preferred stock accretion   1,631    905    4,141    1,889 
Core FFO Attributable to Common Shares and Units  $6,382   $3,811   $18,434   $12,431 
                     
Common stockholders and operating partnership units pro-rata share of:                    
Normally recurring capital expenditures   (685)   (392)   (1,834)   (1,021)
AFFO Attributable to Common Shares and Units  $5,697   $3,419   $16,600   $11,410 
Per Share and Unit Information:                    
FFO Attributable to Common Shares and Units - diluted  $0.03   $(0.05)  $0.15   $(0.38)
                     
Core FFO Attributable to Common Shares and Units - diluted  $0.21   $0.14   $0.60   $0.48 
                     
AFFO Attributable to Common Shares and Units - diluted  $0.18   $0.13   $0.54   $0.44 
                     
Weighted average common shares and units outstanding - diluted   30,994,530    26,749,092    30,896,740    26,129,840 
                     

 

(1)    The real estate depreciation and amortization amount includes our share of consolidated real estate-related depreciation and amortization of intangibles, less amounts attributable to noncontrolling interests – partially owned properties, and our similar estimated share of unconsolidated depreciation and amortization, which is included in earnings of our unconsolidated real estate joint venture investments. 

 

 

 

 

Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate ("EBITDAre")

 

NAREIT defines earnings before interest, taxes, depreciation and amortization for real estate ("EBITDAre") (September 2017 White Paper) as net income, computed in accordance with GAAP, before interest expense, income taxes, depreciation and amortization expense, and further adjusted for gains and losses from sales of depreciated operating properties, and impairment write-downs of depreciated operating properties.

 

We consider EBITDAre to be an appropriate supplemental measure of our performance because it eliminates depreciation, income taxes, interest and non-recurring items, which permits investors to view income from operations unobscured by non-cash items such as depreciation, amortization, the cost of debt or non-recurring items.

 

Adjusted EBITDAre represents EBITDAre further adjusted for non-comparable items and it is not intended to be a measure of free cash flow for our management’s discretionary use, as it does not consider certain cash requirements such as income tax payments, debt service requirements, capital expenditures and other fixed charges.

 

EBITDAre and Adjusted EBITDAre are not recognized measurements under GAAP. Because not all companies use identical calculations, our presentation of EBITDAre and Adjusted EBITDAre may not be comparable to similarly titled measures of other companies.

 

Below is a reconciliation of net (loss) income attributable to common stockholders to EBITDAre (unaudited and dollars in thousands).

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2018   2017   2018   2017 
Net (loss) income attributable to common stockholders  $(10,334)  $(12,017)  $(29,973)  $563 
Net (loss) income attributable to noncontrolling interests   (3,513)   (507)   (9,665)   18,392 
Preferred stock dividends   9,105    7,038    25,995    19,271 
Preferred stock accretion   1,631    905    4,141    1,889 
Interest expense, net   12,905    7,395    36,063    22,339 
Depreciation and amortization   15,307    11,763    45,628    33,094 
Gain on sale of real estate investments   -    -    -    (50,040)
Gain on sale of real estate joint venture interest, net   -    -    -    (10,238)
Loss on extinguishment of debt and modification costs   1,624    -    2,277    1,639 
EBITDAre  $26,725   $14,577   $74,466   $36,909 
Acquisition and pursuit costs   7    15    78    3,215 
Management internalization   -    826    -    1,647 
Non-real estate depreciation and amortization   77    -    216    - 
Weather-related losses, net   13    678    181    678 
Non-cash equity compensation   1,621    2,931    5,039    13,050 
Non-recurring income   -    -    -    (17)
Non-cash preferred returns and equity in income of unconsolidated real estate joint ventures   (236)   (498)   (700)   (990)
Adjusted EBITDAre  $28,207   $18,529   $79,280   $54,492 
                     

  

 

 

 

Recurring Capital Expenditures

 

We define recurring capital expenditures as expenditures that are incurred at every property and exclude development, investment, revenue enhancing and non-recurring capital expenditures.

 

Non-Recurring Capital Expenditures

 

We define non-recurring capital expenditures as expenditures for significant projects that upgrade units or common areas and projects that are revenue enhancing.

 

Same Store Properties

 

Same store properties are conventional multifamily residential apartments which were owned and operational for the entire periods presented, including each comparative period.

 

Property Net Operating Income ("Property NOI")

 

We believe that net operating income, or NOI, is a useful measure of our operating performance. We define NOI as total property revenues less total property operating expenses, excluding depreciation and amortization and interest. Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REITs. We believe that this measure provides an operating perspective not immediately apparent from GAAP operating income or net income. We use NOI to evaluate our performance on a same store and non-same store basis; NOI measures the core operations of property performance by excluding corporate level expenses and other items not related to property operating performance and captures trends in rental housing and property operating expenses. However, NOI should only be used as a supplemental measure of our financial performance.

 

Certain amounts in prior periods, related to tenant reimbursements for utility expenses amounting to zero and $3.0 million for the three and nine months ended September 30, 2017, have been reclassified to other property revenues from property operating expenses, to conform to the current period.  In addition, property management fees have been reclassified from property operating expenses.

 

 

 

 

The following table reflects net (loss) income attributable to common stockholders together with a reconciliation to NOI and to same store and non-same store contributions to consolidated NOI, as computed in accordance with GAAP for the periods presented (unaudited and amounts in thousands):

 

   Three Months Ended (1)   Nine Months Ended (2) 
   September 30,   September 30, 
   2018   2017   2018   2017 
Net (loss) income attributable to common shares  $(10,334)  $(12,017)  $(29,973)  $563 
Add back: Net (loss) income attributable to operating partnership units   (3,157)   (125)   (8,841)   4 
Net (loss) income attributable to common shares and units   (13,491)   (12,142)   (38,814)   567 
Add common stockholders and operating partnership units pro-rata share of:                    
Depreciation and amortization   14,497    10,883    43,318    30,221 
Non-real estate depreciation and amortization   77    -    216    - 
Non-cash interest expense   915    249    2,977    1,510 
Unrealized gain on derivatives   (225)   -    (225)   - 
Property management fees   1,077    725    3,033    2,042 
Management fees   -    2,802    -    11,733 
Acquisition and pursuit costs   7    15    78    3,072 
Loss on extinguishment of debt and modification costs   1,573    -    2,226    1,551 
Corporate operating expenses   4,667    1,103    13,864    4,249 
Management internalization   -    826    -    1,647 
Weather-related losses, net   13    642    178    642 
Preferred dividends   9,105    7,038    25,995    19,271 
Preferred stock accretion   1,631    905    4,141    1,889 
Less common stockholders and operating partnership units pro-rata share of:                    
Other income   -    -    -    16 
Preferred returns and equity in income of unconsolidated real estate joint ventures   2,789    2,688    7,877    7,865 
Interest income from related parties   5,702    2,120    16,532    5,741 
Gain on sale of joint venture interests, net of fees   -    -    -    6,399 
Gain on sale of real estate investments   -    -    -    34,313 
Pro-rata share of properties' income   11,355    8,238    32,578    24,060 
Add:                    
Noncontrolling interest pro-rata share of partially owned property income   660    616    1,855    2,405 
Total property income   12,015    8,854    34,433    26,465 
Add:                    
Interest expense   12,189    7,120    33,236    20,593 
Net operating income   24,204    15,974    67,669    47,058 
Less:                    
Non-same store net operating income   7,753    156    31,335    12,037 
Same store net operating income  $16,451   $15,818   $36,334   $35,021 

 

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

 

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

 

 

 

 

 

 

Contact

Investors:

(888) 558.1031
[email protected]

 

Media:

Josh Hoffman

(208) 475.2380

[email protected]

##

 

 

(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2)

 

Exhibit 99.2 

 

Park & Kingston | Charlotte, NC The Preserve at Henderson Beach | Destin, FL Veranda at Centerfield | Houston, TX

 

 1 

 

 

Bluerock Residential Growth REIT, Inc.
Third Quarter 2018
Supplemental Financial Information
(Unaudited)

 

Table of Contents

 

Third Quarter Earnings Release 3
   
Financial and Operating Highlights 17
   
Share and Unit Information 18
   
EBITDAre and Interest Information 19
   
Financial Statistics 20
   
Recent Acquisitions 21
   
Investments in Unconsolidated Real Estate Joint Ventures and Notes and Accrued Interest Receivable from Related Parties 22
   
Portfolio Information 23
   
Renovation Table 24
   
Mezzanine/Preferred Investments 25
   
Condensed Consolidated Balance Sheets 26
   
Consolidated Statements of Operations 27
   
Reconciliation of Funds from Operations (FFO), Core Funds from Operations (Core FFO), and Adjusted Funds from Operations (AFFO) 28
   
Mortgages Payable Summary Information 29
   
2018 Outlook 31
   
Definitions of Non-GAAP Financial Measures 32

 

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are based upon the Company’s present expectations, but these statements are not guaranteed to occur, including statements relating to the Company’s operating environment, operating trends, and outlook. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Investors should not place undue reliance upon forward-looking statements. For further discussion of the factors that could affect outcomes, please refer to the “Risk Factors” set forth in Item 1A of the Company’s Annual Report on Form 10-K filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on March 13, 2018, and subsequent filings by the Company with the SEC, including our periodic reports. We claim the safe harbor protection for forward looking statements contained in the Private Securities Litigation Reform Act of 1995.

 

 2 

 

 

 

 

For Immediate Release

Bluerock Residential Growth REIT Announces Third Quarter 2018 Results

 

-   Total Revenues Grew 59% YoY to $47.9 Million   -

-   Industry-Leading Same Store Revenue Growth of 4.8% YoY   -

 

New York, NY (November 5, 2018) – Bluerock Residential Growth REIT, Inc. (NYSE American: BRG) (“the Company”), an owner of highly amenitized multifamily apartment communities, announced today its financial results for the quarter ended September 30, 2018.

 

Third Quarter Highlights

 

Total revenues grew 59% to $47.9 million for the quarter from $30.2 million in the prior year period.

 

Net loss attributable to common stockholders for the third quarter of 2018 was ($0.44) per share, as compared to ($0.45) per share in the prior year period.

 

Property Net Operating Income (“NOI”) grew 52% to $24.2 million, from $16.0 million in the prior year period.

 

Same store revenue and NOI increased 4.8% and 4.0% respectively, as compared to the prior year period.

 

Core funds from operations attributable to common shares and units (“CFFO”) increased 67% to $6.4 million, from $3.8 million in the prior year period.  CFFO per share is $0.21 for the third quarter as compared to $0.14 in the prior year period.  Dividend payout on a CFFO basis improved to 77% during the third quarter.

 

Adjusted funds from operations attributable to common shares and units (“AFFO”) grew 67% to $5.7 million, from $3.4 million in the prior year period. AFFO per share is $0.18 for the quarter as compared to $0.13 in third quarter 2017.

 

Consolidated real estate investments, at cost, increased approximately $197.5 million to $1.7 billion, from December 31, 2017.

 

The Company invested approximately $16 million in a multifamily community totaling 400 units with a total purchase price of $40.2 million and $3 million to buy out a noncontrolling interest in one asset.

 

The Company completed 385 value-add unit upgrades for a year-to-date total of 847 upgrades at an average cost of $4,555 per unit. The Company expects to complete between 900 and 1,200 unit renovations in 2018.

 

Since inception within the existing portfolio, the Company has completed 1,327 value-add unit upgrades and achieved a $107 average monthly rental increase per unit, equating to a 26.7% ROI on all unit upgrades leased as of September 30, 2018.  The Company has identified approximately 4,600 remaining units within the existing portfolio for value-add upgrades with similar economics to the completed renovations.

 

The Company is increasing the low end of its full year 2018 AFFO guidance range from $0.66 to $0.68 per share and is affirming the top end of the range at $0.70 per share. This represents the second consecutive quarter with a guidance increase.

 

 3 

 

 

“Our third quarter results clearly demonstrate the successful execution of our strategic initiatives, including value-add investments and accretive approach to growing our portfolio,” said Ramin Kamfar, Company Chairman and CEO. “We continued to perform well in the third quarter, with property NOI up 52% and on a CFFO basis we improved our dividend payout to 77% in the third quarter. Our same store operational results are among the best in the multifamily industry, reflecting the contribution from our unit upgrades and our focus on knowledge economy growth markets. These strong results have allowed us to again raise the lower end of our 2018 AFFO guidance range. We believe we have ample runway to continue to create additional value as we focus on accretive operational improvements and completing our value-add unit upgrade programs.”

 

Financial Results

 

Net loss attributable to common stockholders for the third quarter of 2018 was $10.3 million, compared to $12.0 million in the prior year period. Net loss attributable to common stockholders included non-cash expenses of $14.2 million or $0.46 per share in the third quarter of 2018 compared to $14.8 million or $0.55 per share for the prior year period.

 

AFFO for the third quarter of 2018 was $5.7 million, or $0.18 per diluted share, compared to $3.4 million, or $0.13 per diluted share in the prior year period. AFFO was primarily driven by growth in property NOI of $8.2 million and interest income of $3.6 million arising from significant investment activity. This was primarily offset by a year-over-year increase in interest expense of $5.1 million, general and administrative expenses of $2.1 million, and preferred stock dividends of $2.1 million.

 

Core FFO for the third of 2018 was $6.4 million, or $0.21 per diluted share, compared to $3.8 million, or $0.14 per diluted share in the prior year period. Core FFO adds back non-cash, non-operating expenses such as accretion on the Company’s Series B preferred stock.

 

Total Portfolio Performance

$ In thousands, except average rental rates 3Q18   3Q17   Variance   YTD18   YTD17   Variance  
Total Revenues (1) $ 47,877   $ 30,154   58.8%   $134,705   $ 87,004   54.8%  
Property Operating Expenses $ 17,971   $ 12,060   49.0%   $ 50,504   $ 34,205   47.7%  
NOI $ 24,204   $ 15,974   51.5%   $ 67,669   $ 47,058   43.8%  
Operating Margin 57.4%   57.0%   40 bps 57.3%   57.9%   (60) bps
Occupancy Percentage 94.5%   94.2%   30 bps 94.0%   94.4%   (40) bps
Average Rental Rate $    1,253   $    1,214   3.2%   $    1,239   $    1,240   -0.1%  
(1) Including interest income from related parties                

 

For the third quarter of 2018, property revenues increased by 50.4% compared to the same prior year period primarily attributable to the increased size of the portfolio. Total portfolio NOI was $24.2 million, an increase of $8.2 million, or 51.5%, compared to the same period in the prior year. Property operating expenses were up primarily due to the increased size of the portfolio.

 

Property NOI margins were 57.4% of revenue for the quarter, compared to 57.0% of revenue in the prior year quarter.

 

 4 

 

 

 

Same Store Portfolio Performance

$ In thousands, except average rental rates 3Q18   3Q17   Variance   YTD18   YTD17   Variance 0
Revenues $   29,004   $   27,682   4.8%   $   63,075   $   60,210   4.8%  
Property Operating Expenses $   12,553   $   11,864   5.8%   $   26,741   $   25,189   6.2%  
NOI $   16,451   $   15,818   4.0%   $   36,334   $   35,021   3.7%  
Operating Margin 56.7%   57.1%   (40) bps 57.6%   58.2%   (60) bps
Occupancy Percentage 94.5%   94.4%   10 bps 94.1%   94.5%   (40) bps
Average Rental Rate $     1,273   $     1,220   4.3%   $     1,292   $     1,234   4.7%  

 

The Company’s same store portfolio for the quarter ended September 30, 2018 included 22 properties. For the third quarter of 2018, same store NOI was $16.5 million, an increase of $0.6 million, or 4.0%, compared to the same period in the prior year. Same store property revenues increased by 4.8% compared to the same prior year period, primarily attributable to a 4.3% increase in average rental rates, as well as average occupancy increasing 10 basis points to 94.5%. Same store expenses increased $0.69 million, primarily due to $0.40 million of additional real estate taxes due to higher valuations by municipalities, $0.17 million due to recurring annual maintenance incurred in the current year on certain properties which was not required in the prior year as the properties were undergoing renovations, and $0.11 million related to payroll increase.

 

Acquisition Activity

 

On July 26, 2018, the Company acquired a 93% interest in a 400-unit apartment community located in Houston, Texas, known as Veranda at Centerfield. The total purchase price was approximately $40.2 million, funded in part by a $26.1 million mortgage loan secured by the Veranda at Centerfield property.

 

On August 29, 2018, the Company invested approximately $3 million to increase our ownership stake to 100% in our ARIUM Palms property.

 

Balance Sheet

 

During the third quarter, the Company raised gross proceeds of approximately $29.8 million through the issuance of 29,829 shares of Series B preferred stock with associated warrants at $1,000 per unit.

 

As of September 30, 2018, the Company had $26.4 million of unrestricted cash on its balance sheet, approximately $56.1 million available among its revolving credit facilities, and $1.2 billion of debt outstanding.

 

Dividend

 

The Board of Directors authorized, and the Company declared, a quarterly dividend for the third quarter of 2018 equal to a quarterly rate of $0.1625 per share on its Class A common stock, payable to the stockholders of record as of September 25, 2018, which was paid in cash on October 5, 2018. A portion of each dividend may constitute a return of capital for tax purposes. There is no assurance that we will continue to declare dividends or at this rate.

 

On July 10, 2018, the Board of Directors authorized, and the Company declared, a monthly dividend of $5.00 per share of Series B preferred stock, payable to the stockholders of record as of July 25, 2018, August 24, 2018, and September 25, 2018 which was paid in cash on August 3, 2018, September 5, 2018, and October 5, 2018, respectively.

 

 5 

 

 

 

2018 Guidance

 

Based on the Company’s current outlook and market conditions, the Company is increasing the low end of the 2018 AFFO guidance from $0.66 to $0.68 per share and is reaffirming the top end of the range at $0.70 per share.

 

For additional guidance details, please see page 31 of Company’s Third Quarter 2018 Earnings Supplement available under Investor Relations on the Company’s website (www.bluerockresidential.com). Subsequent to issuing 2018 guidance in February 2018, the Company revised its presentation of AFFO attributable to common stockholders to reflect AFFO attributable to common shares and units. The estimated weighted average diluted shares and units outstanding used to calculate AFFO per share now includes noncontrolling interests – operating partnership units. As the Company’s presentation now also includes the impact of AFFO attributable to operating partnership units, and as shares and units are treated on a one-for-one basis, there is no change to projected AFFO per share for purposes of 2018 AFFO guidance.

 

Conference Call

 

All interested parties can listen to the live conference call at 11:00 AM ET on Monday, November 5, 2018 by dialing +1 (866) 843-0890 within the U.S., or +1 (412) 317-6597, and requesting the "Bluerock Residential Conference."

 

For those who are not available to listen to the live call, the conference call will be available for replay on the Company’s website two hours after the call concludes, and will remain available until December 6, 2018 at http://services.choruscall.com/links/brg181106.html, as well as by dialing +1 (877) 344-7529 in the U.S., or +1 (412) 317-0088 internationally, and requesting conference number 10125116.

 

The full text of this Earnings Release and additional Supplemental Information is available in the Investor Relations section on the Company’s website at http://www.bluerockresidential.com.

 

About Bluerock Residential Growth REIT, Inc.

 

Bluerock Residential Growth REIT, Inc. (NYSE American: BRG) is a real estate investment trust that focuses on developing and acquiring a diversified portfolio of institutional-quality highly amenitized live/work/play apartment communities in demographically attractive knowledge economy growth markets to appeal to the renter by choice. The Company’s objective is to generate value through off-market/relationship-based transactions and, at the asset level, through value add improvements to properties and operations. The Company is included in the Russell 2000 and Russell 3000 Indexes. BRG has elected to be taxed as a real estate investment trust (REIT) for U.S. federal income tax purposes.

 

For more information, please visit the Company’s website at www.bluerockresidential.com.

 

Forward Looking Statements

 

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are based upon the Company’s present expectations, but these statements are not guaranteed to occur. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Investors should not place undue reliance upon forward-looking statements. For further discussion of the factors that could affect outcomes, please refer to the risk factors set forth in Item 1A of the Company’s Annual Report on Form 10-K filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on March 13, 2018, and subsequent filings by the Company with the SEC. We claim the safe harbor protection for forward looking statements contained in the Private Securities Litigation Reform Act of 1995.

 

 6 

 

 

Portfolio Summary

 

The following is a summary of our operating real estate and mezzanine/preferred investments as of September 30, 2018:

Consolidated Operating Properties  Location  Number
of Units
   Year Built/ Renovated (1)   Ownership Interest  

Average

Rent (2)

   %
Occupied (3)
 
ARIUM at Palmer Ranch  Sarasota, FL   320    2016    100%  $1,283    94%
ARIUM Glenridge  Atlanta, GA   480    1990    90%   1,163    92%
ARIUM Grandewood  Orlando, FL   306    2005    100%   1,363    96%
ARIUM Gulfshore  Naples, FL   368    2016    100%   1,249    93%
ARIUM Hunter’s Creek  Orlando, FL   532    1999    100%   1,349    94%
ARIUM Metrowest  Orlando, FL   510    2001    100%   1,326    95%
ARIUM Palms  Orlando, FL   252    2008    100%   1,332    94%
ARIUM Pine Lakes  Port St. Lucie, FL   320    2003    85%   1,241    93%
ARIUM Westside  Atlanta, GA   336    2008    90%   1,532    98%
Ashton Reserve  Charlotte, NC   473    2015    100%   1,079    93%
Citrus Tower  Orlando, FL   336    2006    97%   1,273    94%
Enders Place at Baldwin Park  Orlando, FL   220    2003    92%   1,749    95%
James on South First  Austin, TX   250    2016    90%   1,248    98%
Marquis at Crown Ridge  San Antonio, TX   352    2009    90%   971    93%
Marquis at Stone Oak  San Antonio, TX   335    2007    90%   1,410    95%
Marquis at The Cascades  Tyler, TX   582    2009    90%   1,091    97%
Marquis at TPC  San Antonio, TX   139    2008    90%   1,468    96%
Outlook at Greystone  Birmingham, AL   300    2007    100%   917    96%
Park & Kingston  Charlotte, NC   168    2015    100%   1,244    98%
Plantation Park  Lake Jackson, TX   238    2016    80%   1,390    97%
Preston View  Morrisville, NC   382    2000    100%   1,074    96%
Roswell City Walk  Roswell, GA   320    2015    98%   1,528    94%
Sands Parc  Daytona Beach, FL   264    2017    100%   1,306    96%
Sorrel  Frisco, TX   352    2015    95%   1,284    93%
Sovereign  Fort Worth, TX   322    2015    95%   1,329    95%
The Brodie  Austin, TX   324    2001    93%   1,250    99%
The Links at Plum Creek  Castle Rock, CO   264    2000    88%   1,417    94%
The Mills  Greenville, SC   304    2013    100%   1,027    93%
The Preserve at Henderson Beach  Destin, FL   340    2009    100%   1,358    96%
Veranda at Centerfield  Houston, TX   400    1999    93%   916    94%
Villages of Cypress Creek  Houston, TX   384    2001    80%   1,090    96%
Wesley Village  Charlotte, NC   301    2010    100%   1,352    95%
Consolidated Operating Properties Subtotal/Average   10,774             $1,253    95%
                             

 

Mezzanine/Preferred Investments  Location  Planned Number of Units   Pro Forma Average Rent (4) 
Alexan CityCentre  Houston, TX   340   $2,144 
Alexan Southside Place  Houston, TX   270    2,012 
Arlo, formerly West Morehead  Charlotte, NC   286    1,507 
Cade Boca Raton, formerly APOK Townhomes  Boca Raton, FL   90    2,549 
Domain at The One Forty, formerly Domain  Garland, TX   299    1,469 
Flagler Village  Fort Lauderdale, FL   385    2,352 
Helios  Atlanta, GA   282    1,486 
Leigh House, formerly Lake Boone Trail  Raleigh, NC   245    1,271 
Novel Perimeter, formerly Crescent Perimeter  Atlanta, GA   320    1,749 
Vickers Historic Roswell, formerly Vickers Village  Roswell, GA   79    3,176 
Whetstone  Durham, NC   204    1,311(2)
Mezzanine and Preferred Investments Subtotal/Average   2,800   $1,817 
              
Portfolio Properties Total/Average   13,574   $1,370 

 

(1) Represents date of last significant renovation or year built if there were no renovations.

(2) Represents the average effective monthly rent per occupied unit for the three months ended September 30, 2018.

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

(4) Alexan CityCentre, Alexan Southside Place, Helios, Leigh House, and Whetstone are preferred equity investments. The Alexan Southside Place, Helios, and Leigh House investments have the option to convert to indirect common interest in the property once the property reaches 70% occupancy. Arlo, Cade Boca Raton, Domain at The One Forty, Flagler Village, Novel Perimeter, and Vickers Historic Roswell are mezzanine loan investments. Additionally, Arlo, Cade Boca Raton, Domain at The One Forty, and Vickers Historic Roswell have an option to purchase indirect property interest upon maturity.

 

 7 

 

 

Consolidated Statement of Operations

For the Three and Nine Months Ended September 30, 2018 and 2017

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

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2018   2017   2018   2017 
Revenues                
Net rental income  $37,408   $24,827   $104,791   $72,239 
Other property revenues   4,767    3,207    13,382    9,024 
Interest income from related parties   5,702    2,120    16,532    5,741 
Total revenues   47,877    30,154    134,705    87,004 
Expenses                    
Property operating   17,971    12,060    50,504    34,205 
Property management fees   1,141    781    3,208    2,250 
General and administrative   4,732    1,103    13,929    4,249 
Management fees to related parties       2,802        11,733 
Acquisition and pursuit costs   7    15    78    3,215 
Management internalization       826        1,647 
Weather-related losses, net   13    678    181    678 
Depreciation and amortization   15,384    11,763    45,844    33,094 
Total expenses   39,248    30,028    113,744    91,071 
Operating income (loss)   8,629    126    20,961    (4,067)
Other income (expense)                    
Other income               17 
Preferred returns and equity in income of unconsolidated real estate joint ventures   2,789    2,688    7,877    7,865 
Gain on sale of real estate investments               50,040 
Gain on sale of real estate joint venture interest               10,238 
Loss on extinguishment of debt and modification costs   (1,624)       (2,277)   (1,639)
Interest expense, net   (12,905)   (7,395)   (36,063)   (22,339)
Total other (expense) income   (11,740)   (4,707)   (30,463)   44,182 
Net (loss) income   (3,111)   (4,581)   (9,502)   40,115 
Preferred stock dividends   (9,105)   (7,038)   (25,995)   (19,271)
Preferred stock accretion   (1,631)   (905)   (4,141)   (1,889)
Net (loss) income attributable to noncontrolling interests                    
Operating partnership units   (3,157)   (125)   (8,841)   4 
Partially owned properties   (356)   (382)   (824)   18,388 
Net (loss) income attributable to noncontrolling interests   (3,513)   (507)   (9,665)   18,392 
Net (loss) income attributable to common stockholders  $(10,334)  $(12,017)  $(29,973)  $563 
                     
Net (loss) income per common share - Basic  $(0.44)  $(0.45)  $(1.28)  $0.02 
                     
Net (loss) income per common share – Diluted  $(0.44)  $(0.45)  $(1.28)  $0.02 
                     
Weighted average basic common shares outstanding   23,742,129    26,474,093    23,893,957    25,851,536 
Weighted average diluted common shares outstanding   23,742,129    26,474,093    23,893,957    25,852,059 

 

 8 

 

 

 

Consolidated Balance Sheets

Third Quarter 2018

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

 

   September 30,
2018
   December 31,
2017
 
ASSETS          
Net Real Estate Investments          
Land  $181,985   $169,135 
Buildings and improvements   1,419,423    1,244,193 
Furniture, fixtures and equipment   48,618    38,446 
Construction in progress   241    985 
Total Gross Real Estate Investments   1,650,267    1,452,759 
Accumulated depreciation   (93,751)   (55,177)
Total Net Real Estate Investments   1,556,516    1,397,582 
Cash and cash equivalents   26,356    35,015 
Restricted cash   32,132    29,575 
Notes and accrued interest receivable from related parties   163,241    140,903 
Due from affiliates   2,782    2,003 
Accounts receivable, prepaid and other assets   19,883    9,689 
Preferred equity investments and investments in unconsolidated real estate joint ventures   77,466    71,145 
In-place lease intangible assets, net   1,212    4,635 
Total Assets  $1,879,588   $1,690,547 
           
LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY          
Mortgages payable  $1,107,081   $939,494 
Revolving credit facilities   62,959    67,670 
Accounts payable   1,505    1,652 
Other accrued liabilities   34,268    22,952 
Due to affiliates   537    1,575 
Distributions payable   11,848    14,287 
Total Liabilities   1,218,198    1,047,630 
8.250% Series A Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 10,875,000 shares authorized; and 5,721,460 issued and outstanding as of September 30, 2018 and December 31, 2017   139,355    138,801 
6.000% Series B Redeemable Preferred Stock, liquidation preference $1,000 per share, 725,000 shares authorized; 263,095 and 184,130 issued and outstanding as of September 30, 2018 and December 31, 2017, respectively   234,086    161,742 
7.625% Series C Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares authorized; and 2,323,750 issued and outstanding as of September 30, 2018 and December 31, 2017   56,408    56,196 
Equity          
Stockholders’ Equity          
Preferred stock, $0.01 par value, 230,400,000 shares authorized; none issued and outstanding        
7.125% Series D Cumulative Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares authorized; 2,850,602 issued and outstanding as of September 30, 2018 and December 31, 2017   68,705    68,705 
Common stock - Class A, $0.01 par value, 747,509,582 shares authorized; 23,672,080 and 24,218,359 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively   237    242 
Common stock - Class C, $0.01 par value, 76,603 shares authorized; 76,603 shares issued and outstanding as of September 30, 2018 and December 31, 2017   1    1 
Additional paid-in-capital   309,883    318,170 
Distributions in excess of cumulative earnings   (201,914)   (164,286)
Total Stockholders’ Equity   176,912    222,832 
Noncontrolling Interests          
Operating partnership units   31,911    42,999 
    Partially owned properties   22,718    20,347 
Total Noncontrolling Interests   54,629    63,346 
Total Equity   231,541    286,178 
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY  $1,879,588   $1,690,547 

 

 9 

 

  

Non-GAAP Financial Measures

 

The foregoing supplemental financial data includes certain non-GAAP financial measures that we believe are helpful in understanding our business and performance, as further described below. Our definition and calculation of these non-GAAP financial measures may differ from those of other REITs, and may, therefore, not be comparable.

 

Funds from Operations, Core Funds from Operations, and Adjusted Funds from Operations

 

We believe that funds from operations (“FFO”), as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), core funds from operations (“Core FFO”), and adjusted funds from operations (“AFFO”) are important non-GAAP supplemental measures of operating performance for a REIT.

 

FFO attributable to common shares and units is a non-GAAP financial measure that is widely recognized as a measure of REIT operating performance. We consider FFO to be an appropriate supplemental measure of our operating performance as it is based on a net income analysis of property portfolio performance that excludes non-cash items such as depreciation. The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time. Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT, using historical accounting for depreciation, could be less informative. We define FFO, consistent with the NAREIT definition, as net income, computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus depreciation and amortization of real estate assets, plus impairment write-downs of depreciable real estate, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis.

 

Core FFO makes certain adjustments to FFO, removing the effect of items that do not reflect ongoing property operations such as stock compensation expense, acquisition expenses, unrealized gains and losses on derivatives, losses on extinguishment of debt and modification costs (includes prepayment penalties incurred and the write-off of unamortized deferred financing costs and fair market value adjustments of assumed debt), non-cash interest, one-time weather-related costs, and preferred stock accretion. We believe that Core FFO is helpful to investors as a supplemental performance measure because it excludes the effects of certain items which can create significant earnings volatility, but which do not directly relate to our core recurring property operations. As a result, we believe that Core FFO can help facilitate comparisons of operating performance between periods and provides a more meaningful predictor of future earnings potential.

 

AFFO makes certain adjustments to Core FFO in order to arrive at a more refined measure of the operating performance of our portfolio. There is no industry standard definition of AFFO and practice is divergent across the industry. AFFO adjusts Core FFO for items that impact our ongoing operations, such as subtracting recurring capital expenditures (and while we were externally managed, when calculating the quarterly incentive fee paid to our former Manager only, we further adjusted FFO to include any realized gains or losses on our real estate investments).  We believe that AFFO is helpful to investors as a meaningful supplemental indicator of our operational performance. 

 

Our calculation of Core FFO and AFFO differs from the methodology used for calculating Core FFO and AFFO by certain other REITs and, accordingly, our Core FFO and AFFO may not be comparable to Core FFO and AFFO reported by other REITs. Our management utilizes FFO, Core FFO, and AFFO as measures of our operating performance after adjustment for certain non-cash items, such as depreciation and amortization expenses, and acquisition and pursuit costs that are required by GAAP to be expensed but may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods. Furthermore, although FFO, Core FFO, AFFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we also believe that FFO, Core FFO, and AFFO may provide us and our stockholders with an additional useful measure to compare our financial performance to certain other REITs. While we were externally managed, we also used AFFO for purposes of determining the quarterly incentive fee paid to our former Manager in prior periods.

 

 10 

 

  

Neither FFO, Core FFO, nor AFFO is equivalent to net income, including net income attributable to common stockholders, or cash generated from operating activities determined in accordance with GAAP. Furthermore, FFO, Core FFO, and AFFO do not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO, Core FFO, nor AFFO should be considered as an alternative to net income, including net income attributable to common stockholders, as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity.

 

We have acquired interests in eight additional operating properties subsequent to September 30, 2017. Therefore, the results presented in the table below are not directly comparable and should not be considered an indication of our future operating performance.

 

 11 

 

 

The table below reconciles our calculations of FFO, Core FFO and AFFO to net (loss) income, the most directly comparable GAAP financial measure, for the three and nine months ended September 30, 2018 and 2017 (in thousands, except per share amounts):

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2018   2017   2018   2017 
Net (loss) income attributable to common shares  $(10,334)  $(12,017)  $(29,973)  $563 
Add back: Net (loss) income attributable to operating partnership units   (3,157)   (125)   (8,841)   4 
Net (loss) income attributable to common shares and units   (13,491)   (12,142)   (38,814)   567 
                     
Common stockholders and operating partnership units pro-rata share of:                    
Real estate depreciation and amortization (1)   14,497    10,883    43,318    30,221 
Gain on sale of real estate investments               (6,399)
Gain on sale of joint venture interests, net               (34,313)
FFO Attributable to Common Shares and Units   1,006    (1,259)   4,504    (9,924)
Common stockholders and operating partnership units pro-rata share of:                    
Acquisition and pursuit costs   7    15    78    3,072 
Non-cash interest expense   915    249    2,977    1,510 
Unrealized gain on derivatives   (225)       (225)    
Loss on extinguishment of debt and modification costs   1,573        2,226    1,551 
Weather-related losses, net   13    642    178    642 
Non-real estate depreciation and amortization (1)   77        216     
Non-recurring income               (16)
Non-cash preferred returns and equity in income of unconsolidated real estate joint ventures   (236)   (498)   (700)   (990)
Management internalization       826        1,647 
Non-cash equity compensation   1,621    2,931    5,039    13,050 
Preferred stock accretion   1,631    905    4,141    1,889 
Core FFO Attributable to Common Shares and Units  $6,382   $3,811   $18,434   $12,431 
                     
Common stockholders and operating partnership units pro-rata share of:                    
Normally recurring capital expenditures   (685)   (392)   (1,834)   (1,021)
AFFO Attributable to Common Shares and Units  $5,697   $3,419   $16,600   $11,410 
Per Share and Unit Information:                    
FFO Attributable to Common Shares and Units - diluted  $0.03   $(0.05)  $0.15   $(0.38)
                     
Core FFO Attributable to Common Shares and Units - diluted  $0.21   $0.14   $0.60   $0.48 
                     
AFFO Attributable to Common Shares and Units - diluted  $0.18   $0.13   $0.54   $0.44 
                     
Weighted average common shares and units outstanding - diluted   30,994,530    26,749,092    30,896,740    26,129,840 
                     

 

(1)    The real estate depreciation and amortization amount includes our share of consolidated real estate-related depreciation and amortization of intangibles, less amounts attributable to noncontrolling interests – partially owned properties, and our similar estimated share of unconsolidated depreciation and amortization, which is included in earnings of our unconsolidated real estate joint venture investments. 

 

 12 

 

 

Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate ("EBITDAre")

 

NAREIT defines earnings before interest, taxes, depreciation and amortization for real estate ("EBITDAre") (September 2017 White Paper) as net income, computed in accordance with GAAP, before interest expense, income taxes, depreciation and amortization expense, and further adjusted for gains and losses from sales of depreciated operating properties, and impairment write-downs of depreciated operating properties.

 

We consider EBITDAre to be an appropriate supplemental measure of our performance because it eliminates depreciation, income taxes, interest and non-recurring items, which permits investors to view income from operations unobscured by non-cash items such as depreciation, amortization, the cost of debt or non-recurring items.

 

Adjusted EBITDAre represents EBITDAre further adjusted for non-comparable items and it is not intended to be a measure of free cash flow for our management’s discretionary use, as it does not consider certain cash requirements such as income tax payments, debt service requirements, capital expenditures and other fixed charges.

 

EBITDAre and Adjusted EBITDAre are not recognized measurements under GAAP. Because not all companies use identical calculations, our presentation of EBITDAre and Adjusted EBITDAre may not be comparable to similarly titled measures of other companies.

 

Below is a reconciliation of net (loss) income attributable to common stockholders to EBITDAre (unaudited and dollars in thousands).

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2018   2017   2018   2017 
Net (loss) income attributable to common stockholders  $(10,334)  $(12,017)  $(29,973)  $563 
Net (loss) income attributable to noncontrolling interests   (3,513)   (507)   (9,665)   18,392 
Preferred stock dividends   9,105    7,038    25,995    19,271 
Preferred stock accretion   1,631    905    4,141    1,889 
Interest expense, net   12,905    7,395    36,063    22,339 
Depreciation and amortization   15,307    11,763    45,628    33,094 
Gain on sale of real estate investments   -    -    -    (50,040)
Gain on sale of real estate joint venture interest, net   -    -    -    (10,238)
Loss on extinguishment of debt and modification costs   1,624    -    2,277    1,639 
EBITDAre  $26,725   $14,577   $74,466   $36,909 
Acquisition and pursuit costs   7    15    78    3,215 
Management internalization   -    826    -    1,647 
Non-real estate depreciation and amortization   77    -    216    - 
Weather-related losses, net   13    678    181    678 
Non-cash equity compensation   1,621    2,931    5,039    13,050 
Non-recurring income   -    -    -    (17)
Non-cash preferred returns and equity in income of unconsolidated real estate joint ventures   (236)   (498)   (700)   (990)
Adjusted EBITDAre  $28,207   $18,529   $79,280   $54,492 
                     

  

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Recurring Capital Expenditures

 

We define recurring capital expenditures as expenditures that are incurred at every property and exclude development, investment, revenue enhancing and non-recurring capital expenditures.

 

Non-Recurring Capital Expenditures

 

We define non-recurring capital expenditures as expenditures for significant projects that upgrade units or common areas and projects that are revenue enhancing.

 

Same Store Properties

 

Same store properties are conventional multifamily residential apartments which were owned and operational for the entire periods presented, including each comparative period.

 

Property Net Operating Income ("Property NOI")

 

We believe that net operating income, or NOI, is a useful measure of our operating performance. We define NOI as total property revenues less total property operating expenses, excluding depreciation and amortization and interest. Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REITs. We believe that this measure provides an operating perspective not immediately apparent from GAAP operating income or net income. We use NOI to evaluate our performance on a same store and non-same store basis; NOI measures the core operations of property performance by excluding corporate level expenses and other items not related to property operating performance and captures trends in rental housing and property operating expenses. However, NOI should only be used as a supplemental measure of our financial performance.

 

Certain amounts in prior periods, related to tenant reimbursements for utility expenses amounting to zero and $3.0 million for the three and nine months ended September 30, 2017, have been reclassified to other property revenues from property operating expenses, to conform to the current period.  In addition, property management fees have been reclassified from property operating expenses.

 

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The following table reflects net (loss) income attributable to common stockholders together with a reconciliation to NOI and to same store and non-same store contributions to consolidated NOI, as computed in accordance with GAAP for the periods presented (unaudited and amounts in thousands):

 

   Three Months Ended (1)   Nine Months Ended (2) 
   September 30,   September 30, 
   2018   2017   2018   2017 
Net (loss) income attributable to common shares  $(10,334)  $(12,017)  $(29,973)  $563 
Add back: Net (loss) income attributable to operating partnership units   (3,157)   (125)   (8,841)   4 
Net (loss) income attributable to common shares and units   (13,491)   (12,142)   (38,814)   567 
Add common stockholders and operating partnership units pro-rata share of:                    
Depreciation and amortization   14,497    10,883    43,318    30,221 
Non-real estate depreciation and amortization   77    -    216    - 
Non-cash interest expense   915    249    2,977    1,510 
Unrealized gain on derivatives   (225)   -    (225)   - 
Property management fees   1,077    725    3,033    2,042 
Management fees   -    2,802    -    11,733 
Acquisition and pursuit costs   7    15    78    3,072 
Loss on extinguishment of debt and modification costs   1,573    -    2,226    1,551 
Corporate operating expenses   4,667    1,103    13,864    4,249 
Management internalization   -    826    -    1,647 
Weather-related losses, net   13    642    178    642 
Preferred dividends   9,105    7,038    25,995    19,271 
Preferred stock accretion   1,631    905    4,141    1,889 
Less common stockholders and operating partnership units pro-rata share of:                    
Other income   -    -    -    16 
Preferred returns and equity in income of unconsolidated real estate joint ventures   2,789    2,688    7,877    7,865 
Interest income from related parties   5,702    2,120    16,532    5,741 
Gain on sale of joint venture interests, net of fees   -    -    -    6,399 
Gain on sale of real estate investments   -    -    -    34,313 
Pro-rata share of properties' income   11,355    8,238    32,578    24,060 
Add:                    
Noncontrolling interest pro-rata share of partially owned property income   660    616    1,855    2,405 
Total property income   12,015    8,854    34,433    26,465 
Add:                    
Interest expense   12,189    7,120    33,236    20,593 
Net operating income   24,204    15,974    67,669    47,058 
Less:                    
Non-same store net operating income   7,753    156    31,335    12,037 
Same store net operating income  $16,451   $15,818   $36,334   $35,021 

 

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

 

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

 

 

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Contact

Investors:

(888) 558.1031
[email protected]

 

Media:

Josh Hoffman

(208) 475.2380

[email protected]

##

 

 

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Bluerock Residential Growth REIT, Inc.
Financial and Operating Highlights
For the Three and Nine Months Ended September 30, 2018
(Unaudited and dollars in thousands except for share and per share data)

 

   Three Months Ended       Nine Months Ended     
OPERATING  September 30,       September 30,     
INFORMATION  2018   2017   % Change   2018   2017   % Change 
                         
Total revenue  $47,877   $30,154    58.8%  $134,705   $87,004    54.8%
                               
Total assets  $1,879,588   $1,535,197    22.4%  $1,879,588   $1,535,197    22.4%
                               
Property NOI (1)  $24,204   $15,974    51.5%  $67,669   $47,058    43.8%
                               
Property NOI margins   57.4%   57.0%   0.7%   57.3%   57.9%   (1.0)%
                               
Net (loss) income per common share - Diluted  $(0.44)  $(0.45)   -   $(1.28)  $0.02    - 
                               
AFFO attributable to common shares and units per share (2)  $0.18   $0.13    38.5%  $0.54   $0.44    22.7%

 

 

 

(1) See page 34 for the Company's definition of this non-GAAP measurement and reasons for using it.

(2) See page 32 for the Company’s definition of this non-GAAP measurement and reasons for using it.

 

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Bluerock Residential Growth REIT, Inc.
Share and Unit Information
Third Quarter 2018
(Unaudited)

 

Weighted Average Common Stock and Units Outstanding for the quarter ended September 30, 2018    
Class A Common Stock   23,665,526 
Class C Common Stock   76,603 
Weighted Average Common Stock Outstanding, Diluted   23,742,129 
LTIP Units   1,021,717 
OP Units   6,230,684 
Weighted Average Common Stock and Total Units Outstanding, Diluted   30,994,530 
      
Outstanding Common Stock and Units at September 30, 2018   31,808,500 
      
Outstanding 8.250% Series A Cumulative Redeemable Preferred Stock at September 30, 2018   5,721,460 
      
Outstanding 6.000% Series B Redeemable Preferred Stock at September 30, 2018   263,095 
      
Outstanding 7.625% Series C Cumulative Redeemable Preferred Stock at September 30, 2018   2,323,750 
      
Outstanding 7.125% Series D Cumulative Preferred Stock at September 30, 2018   2,850,602 

 

The following table reflects the impact of various LTIP Unit issuances, share repurchases, and other share/unit changes subsequent to June 30, 2018:

 

Share Type  Shares and units
outstanding June
30, 2018
   LTIP Issuances   Other   Shares and units
outstanding
September 30,
2018 (1)
   Ownership
%
 
Class A Common Stock   23,658,991    -    13,089    23,672,080    74.42%
Class C Common Stock   76,603    -    -    76,603    0.24%
Total share equivalents   23,735,594    -    13,089    23,748,683    74.66%
OP Units   6,230,757    -    (90)   6,230,667    19.59%
LTIP Units   1,790,084    39,066    -    1,829,150    5.75%
Total noncontrolling interest   8,020,841    39,066    (90)   8,059,817    25.34%
Total shares, OP and LTIP Units   31,756,435    39,066    12,999    31,808,500    100.00%

 

(1)Directors and officers own 25% of the 31,808,500 total shares and units outstanding as of September, including 1,056,211 non-vested LTIP Units.

 

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Bluerock Residential Growth REIT, Inc.
EBITDAre and Interest Information
Third Quarter 2018
(Unaudited and dollars in thousands)

 

   Consolidated 
   Three Months Ended 
   September 30, 2018 
Q3 EBITDAre CALCULATION     
Net loss attributable to common stockholders  $(10,334)
Net loss attributable to noncontrolling interests   (3,513)
Preferred stock dividends   9,105 
Preferred stock accretion   1,631 
Interest expense, net   12,905 
Depreciation and amortization   15,307 
Loss on extinguishment of debt and modification costs   1,624 
EBITDAre (1)  $26,725 
Acquisition and pursuit costs   7 
Non-real estate depreciation and amortization   77 
Weather-related losses, net   13 
Non-cash equity compensation   1,621 
Non-cash preferred returns and equity in income of unconsolidated real estate joint ventures   (236)
Adjusted EBITDAre  $28,207 
      
Modified Q3 EBITDAre calculation (2)     
Adjusted EBITDAre  $28,207 
Adjustment   182 
Modified Q3 EBITDAre  $28,389 
Modified Q3 EBITDAre annualized  $113,556 
      
Modified Q3 interest calculation (2)(3)     
Interest Expense  $12,189 
Adjustment   72 
Modified Q3 interest expense  $12,261 
Modified Q3 interest expense annualized  $49,044 

 

(1) See page 33 for a reconciliation of net income attributable to common stockholders to EBITDAre and the Company's definition of EBITDAre and reasons for using it.

 

(2) Adjustment to EBITDAre and interest expense represents the estimated impact over the full period of the following investment activity assuming the transactions had occurred on July 1, 2018: acquisition of Veranda at Centerfield and additional investments in our preferred investments at Helios and Vickers Historic Roswell. Actual results may differ significantly from the presented, adjusted amounts including annualized amounts.

 

(3) Interest expense excludes non-cash interest expense.

 

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Bluerock Residential Growth REIT, Inc.
Financial Statistics
Third Quarter 2018
(Unaudited and dollars in thousands)

 

   Consolidated 
   Three Months Ended 
   September 30, 2018 
     
Interest Coverage Ratio     
Modified Q3 EBITDAre *  $28,389 
Modified Q3 interest expense (4) *  $12,261 
Interest Coverage Ratio   2.32x
      
Quarterly Fixed Charge Coverage Ratio     
Modified Q3 interest expense (4) *  $12,261 
Preferred stock dividends  $9,105 
Total fixed charges  $21,366 
Modified Q3 EBITDAre *  $28,389 
Modified Q3 EBITDAre fixed charge coverage ratio   1.33x
      
Net Debt / Modified EBITDAre Ratio     
Total debt (1)  $1,179,053 
Less: cash (3)  $(58,488)
Net debt (total debt less cash)  $1,120,565 
Modified Q3 EBITDAre, (annualized)*  $113,556 
Net Debt / Modified EBITDAre Ratio   9.87x
      
Leverage as a Percentage of assets     
Total debt (1)  $1,179,053 
Total undepreciated assets (2)  $1,973,339 
Total Debt / Total Undepreciated Assets   59.7%
Net Debt / Net Undepreciated Assets (less cash)   58.5%
      
Leverage as a Percentage of Enterprise Value     
Total market cap (5)  $850,643 
Total debt (1)  $1,179,053 
Total Enterprise Value  $2,029,696 
Total Debt / Total Enterprise Value   58.1%
Net Debt / Total Enterprise Value   55.2%

 

(1) Total debt excludes amortization of fair market value adjustments of $2.3 million and deferred financing costs of $11.3 million.

 

(2) Total undepreciated assets is calculated as total assets plus accumulated depreciation on real estate assets.

 

(3) Cash includes cash, cash equivalents, and restricted cash.

 

(4) Interest expense excludes non-cash interest expense.

 

(5) Total market cap is calculated by using common shares, preferred shares, and equivalents (OP Units/LTIP Units) multiplied by the September 30, 2018 closing share prices.

 

* Adjustment to EBITDAre and interest expense represents the estimated impact over the full period of the following investment activity assuming the transactions had occurred on July 1, 2018: acquisition of Veranda at Centerfield and additional investments in our preferred investments at Helios and Vickers Historic Roswell. Actual results may differ significantly from the presented, adjusted amounts including annualized amounts. See prior page for calculations.

 

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Bluerock Residential Growth REIT, Inc.
Recent Acquisitions
(Unaudited)

 

Summary of Recent Acquisitions

 

Property  Location  Date of
Investment
  Year Built/
Renovated
   Number
of Units
   Indirect
Ownership
Interest in
Property
   Purchase
Price (in
millions)
   Average
Rent(1)
 
                           
The Links at Plum Creek  Castle Rock, CO  3/26/2018   2000    264    88%  $61.1   $1,417 
                                
Sands Parc  Daytona Beach, FL  5/01/2018   2017    264    100%   46.2    1,306 
                                
Plantation Park  Lake Jackson, TX  6/14/2018   2016    238    80%   35.6    1,390 
                                
Veranda at Centerfield  Houston, TX  7/26/2018   1999    400    93%   40.2    916 
                                
Total/Average for recent acquisitions           1,166        $183.1   $1,245 

 

(1) Represents the average effective monthly rent per occupied unit for the three months ended September 30, 2018.

 

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Bluerock Residential Growth REIT, Inc.
Investments in Unconsolidated Real Estate Joint Ventures and Notes and Accrued Interest Receivable from Related Parties
For the Three Months Ended and Nine Months Ended September 30, 2018
(Unaudited and dollars in thousands)

 

Multifamily Community Name  Investment
Balance as of
July 1, 2018
   Change   Investment
Balance as of 
September 30,
2018
   Return as of
September
30, 2018
   AFFO Earned
for the Three
Months Ended
September 30,
2018
   AFFO Earned
for the Nine
Months Ended
September 30,
2018
 
Preferred and Equity Investments                              
Alexan CityCentre  $10,277   $-   $10,277    (1)  $436   $1,221 
Alexan Southside   22,376    -    22,376    (2)   908    2,595 
Helios   18,464    404    18,868    15.0%   708    1,957 
Leigh House, formerly Lake Boone Trail   12,917    -    12,917    (3)   501    1,404 
Whetstone   12,932    -    12,932    (4)   -    - 
Other   95    1    96    (5)   -    - 
   $77,061   $405   $77,466        $2,553   $7,177 
                               
Mezzanine Loans (5)                              
Arlo, formerly West Morehead  $24,883   $-   $24,883    15.0%  $929   $2,758 
Cade Boca Raton, formerly APOK Townhomes   11,361    -    11,361    15.0%   424    1,259 
Domain at The One Forty, formerly Domain   20,528    -    20,528    15.0%   767    2,275 
Flagler Village   75,408    -    75,408    12.9%   2,427    6,822 
Novel Perimeter, formerly Crescent Perimeter   20,859    -    20,859    15.0%   779    2,312 
Vickers Historic Roswell, formerly Vickers Village   9,932    270    10,202    15.0%   376    1,106 
   $162,971   $270   $163,241        $5,702   $16,532 

 

(1) The preferred investment includes $6.5 million earning a 15% return and $3.8 million earning a 20% return.

 

(2) The preferred investment includes $17.3 million earning a 15% return and $5.1 million earning a 20% return.

 

(3) The preferred investment includes $11.9 million earning a 15% return and $1.0 million earning a 20% return

 

(4) Commencing April 1, 2017, the preferred income is being accrued and not currently paid. As of September 30, 2018, $12.2 million is earning and accruing a 6.5% return and $0.7 million is earning and accruing a 20% preferred return.

 

(5) The Company also holds an equity method investment with 0.5% common ownership.

 

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Bluerock Residential Growth REIT, Inc.
Portfolio Information
Third Quarter 2018
(Unaudited)

 

<
Multifamily Community Name  Location  Number
of Units
   Year Built/
Renovated (1)
   Average
Rent(2)
   Revenue per
Occupied
Unit(3)
   Average
Occupancy
 
Consolidated Operating Properties:                            
ARIUM at Palmer Ranch  Sarasota, FL   320    2016   $1,283   $1,457    93.2%
ARIUM Glenridge  Atlanta, GA   480    1990    1,163    1,329    92.7%
ARIUM Grandewood  Orlando, FL   306    2005    1,363    1,508    95.9%
ARIUM Gulfshore  Naples, FL   368    2016    1,249    1,389    90.3%
ARIUM Hunter’s Creek  Orlando, FL   532    1999    1,349    1,508    93.0%
ARIUM Metrowest  Orlando, FL   510    2001    1,326    1,522    93.5%
ARIUM Palms  Orlando, FL   252    2008    1,332    1,488    93.9%
ARIUM Pine Lakes  Port St. Lucie, FL   320    2003    1,241    1,457    93.8%
ARIUM Westside  Atlanta, GA   336    2008    1,532(4)   1,658(4)   95.5%
Ashton Reserve  Charlotte, NC   473    2015    1,079    1,191    92.7%
Citrus Tower  Orlando, FL   336    2006    1,273    1,402    95.3%
Enders Place at Baldwin Park  Orlando, FL   220    2003    1,749    1,854    96.1%
James on South First  Austin, TX   250    2016    1,248    1,415    96.9%
Marquis at Crown Ridge  San Antonio, TX   352    2009    971    1,098    93.8%
Marquis at Stone Oak  San Antonio, TX   335    2007    1,410    1,515    92.7%
Marquis at The Cascades  Tyler, TX   582    2009    1,091    1,185    95.9%
Marquis at TPC  San Antonio, TX   139    2008    1,468    1,564    96.7%
Outlook at Greystone  Birmingham, AL   300    2007    917    1,119    93.0%
Park & Kingston  Charlotte, NC   168    2015    1,244    1,330    94.8%
Plantation Park  Lake Jackson, TX   238    2016    1,390    1,502    95.2%
Preston View  Morrisville, NC   382    2000    1,074    1,173    95.3%
Roswell City Walk  Roswell, GA   320    2015    1,528    1,754    94.8%
Sands Parc  Daytona Beach, FL   264    2017    1,306    1,434    96.9%
Sorrel  Frisco, TX   352    2015    1,284    1,360    91.6%
Sovereign  Fort Worth, TX   322    2015    1,329    1,465    94.7%
The Brodie  Austin, TX   324    2001    1,250    1,404    98.0%
The Links at Plum Creek  Castle Rock, CO   264    2000    1,417    1,544    94.2%
The Mills  Greenville, SC   304    2013    1,027    1,150    96.7%
The Preserve at Henderson Beach  Destin, FL   340    2009    1,358    1,493    96.3%
Veranda at Centerfield  Houston, TX   400    1999    916    1,023    94.7%
Villages of Cypress Creek  Houston, TX   384    2001    1,090    1,229    94.3%
Wesley Village  Charlotte, NC   301    2010    1,352    1,431    95.9%
                             
Total Consolidated Operating Properties      10,774        $1,253   $1,390    94.5%
                             
Mezzanine/Preferred Investments:                            
Alexan CityCentre  Houston, TX   340        $2,144(5)    N/A      N/A  
Alexan Southside Place  Houston, TX   270         2,012(5)    N/A      N/A  
Arlo, formerly West Morehead  Charlotte, NC   286         1,507(5)    N/A      N/A  
Cade Boca Raton, formerly APOK Townhomes  Boca Raton, FL   90         2,549(5)    N/A      N/A  
Domain at The One Forty, formerly Domain  Garland, TX   299         1,469(5)    N/A      N/A  
Flagler Village  Fort Lauderdale, FL   385         2,352(5)    N/A      N/A  
Helios  Atlanta, GA   282         1,486(5)    N/A      N/A  
Leigh House, formerly Lake Boone Trail  Raleigh, NC   245         1,271(5)    N/A      N/A  
Novel Perimeter, formerly Crescent Perimeter  Atlanta, GA   320         1,749(5)    N/A      N/A  
Vickers Historic Roswell, formerly Vickers Village  Roswell, GA   79         3,176(5)    N/A      N/A  
Whetstone  Durham, NC   204         1,311    1,483    95.6%
                             
Total Mezzanine/Preferred Investments      2,800        $1,817   $1,483    95.6%
                             
Total Portfolio      13,574        $1,370