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Bluerock Residential Growth REIT Announces Fourth Quarter 2018 Results

- Total Revenues Grew 37% YoY to $50.0 Million -

- Same Store Revenue Growth of 5.5% YoY -

NEW YORK, Feb. 14, 2019 /PRNewswire/ -- 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 December 31, 2018.

Fourth Quarter Highlights

  • Total revenues grew 37% to $50.0 million for the quarter from $36.6 million in the prior year period.
  • Net loss attributable to common stockholders for the fourth quarter of 2018 was ($0.55) per share, as compared to ($1.87) per share in the prior year period.
  • Property Net Operating Income("NOI") grew 32% to $26.8 million, from $20.2 million in the prior year period.
  • Same store revenue and NOI increased 5.5% and 7.6% respectively, as compared to the prior year period.
  • Core funds from operations attributable to common shares and units ("CFFO") increased 47% to $6.3 million, from $4.3 million in the prior year period. CFFO per share is $0.20 for the fourth quarter as compared to $0.14 in the prior year period. Dividend payout on a CFFO basis improved to 81% during the fourth quarter.
  • Adjusted funds from operations attributable to common shares and units ("AFFO") grew 48% to $5.6 million, from $3.8 million in the prior year period. AFFO per share is $0.18 for the quarter as compared to $0.13 in fourth quarter 2017.
  • Consolidated real estate investments, at cost, increased approximately $349.9 million to $1.8 billion, from December 31, 2017.
  • The Company invested approximately $39.7 million for an 85% interest in a multifamily community totaling 512 units with a total purchase price of $143.4 million.
  • The Company completed 339 value-add unit upgrades during the quarter.

Full Year 2018 Highlights 

  • Total revenues grew 49% to $184.7 million for the year from $123.6 million in the prior year.
  • Net loss attributable to common stockholders for 2018 was ($1.82) per share, as compared to ($1.79) per share in the prior year.
  • Property NOI grew 40% to $94.5 million, from $67.3 million in the prior year.
  • Same store revenue and NOI increased 4.5% and 4.9% respectively, as compared to the prior year.
  • CFFO increased 49% to $24.8 million, from $16.7 million in the prior year. CFFO per share increased 29% to $0.80 for the year from $0.62 in the prior year.
  • AFFO grew 46% to $22.2 million, from $15.2 million in the prior year. AFFO per share grew 29% to $0.72 from $0.56 in the prior year.
  • For the full year, the Company made investments in eight properties with 2,309 total units for a total purchase price of $366.5 million.
  • The Company completed 1,186 value-add unit upgrades during the year.

"We are pleased to announce another strong quarter of operating results.  Property NOI is up over 32% and same store NOI is up 7.6% over the prior year.  These results demonstrate the ongoing successful execution of our strategic initiatives. We continue to realize attractive returns on our value-add unit renovation investments along with accretively growing our portfolio with well-located, high quality properties," said Ramin Kamfar, Company Chairman and CEO. "We again covered our dividend and are pleased with our industry-leading performance. With a robust pipeline of opportunities, we remain committed to our investment strategy and are optimistic about our outlook."

Financial Results

Net loss attributable to common stockholders for the fourth quarter of 2018 was $12.8 million, compared to $46.2 million in the prior year period.  Net loss attributable to common stockholders included non-cash expenses of $17.7 million or $0.75 per share in the fourth quarter of 2018 compared to $49.8 million or $2.02 per share for the prior year period. 

CFFO for the fourth quarter of 2018 was $6.3 million, or $0.20 per diluted share, compared to $4.3 million, or $0.14 per diluted share in the prior year period.  CFFO adds back non-cash, non-operating expenses such as accretion on the Company's Series B preferred stock.  CFFO was primarily driven by growth in property NOI of $6.6 million and interest income of $3.5 million arising from significant investment activity. This was primarily offset by a year-over-year increase in interest expense of $4.4 million, general and administrative expenses of $1.5 million, and preferred stock dividends of $1.9 million.

AFFO for the fourth quarter of 2018 was $5.6 million, or $0.18 per diluted share, compared to $3.8 million, or $0.13 per diluted share in the prior year period. 

Total Portfolio Performance

$ In thousands, except average rental
rates

4Q18


4Q17


Variance


FY18


FY17


Variance


Total Revenues (1)

$ 50,001


$ 36,574


36.7%


$184,716


$ 123,576


49.5%


Property Operating Expenses

$ 17,493


$ 14,142


23.7%


$ 67,997


$   48,346


40.6%


NOI

$ 26,795


$ 20,243


32.4%


$ 94,464


$   67,300


40.4%


Operating Margin

60.5%


58.9%


160

bps

58.1%


58.2%


(10)

bps

Occupancy Percentage

94.5%


94.1%


40

bps

94.1%


94.3%


(20)

bps

Average Rental Rate

$    1,280


$    1,222


4.7%


$    1,251


$    1,220


2.5%



(1) Including interest income from related parties









For the fourth quarter of 2018, property revenues increased by 36.7% compared to the same prior year period primarily attributable to the increased size of the portfolio.  Total portfolio NOI was $26.8 million, an increase of $6.6 million, or 32.4%, 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 expanded by 160 basis points to 60.5% of revenue for the quarter, compared to 58.9% of revenue in the prior year quarter. 

Same Store Portfolio Performance

$ In thousands, except average rental
rates

4Q18


4Q17


Variance


FY18


FY17


Variance


Revenues

$   31,984


$   30,313


5.5%


$   84,504


$   80,828


4.5%


Property Operating Expenses

$   12,871


$   12,558


2.5%


$   34,967


$   33,585


4.1%


NOI

$   19,113


$   17,755


7.6%


$   49,537


$   47,243


4.9%


Operating Margin

59.8%


58.6%


120

bps

58.6%


58.4%


20

bps

Occupancy Percentage

94.6%


93.8%


80

bps

94.1%


94.4%


(30)

bps

Average Rental Rate

$     1,285


$     1,226


4.8%


$     1,300


$     1,244


4.5%


The Company's same store portfolio for the quarter ended December 31, 2018 included 24 properties.  For the fourth quarter of 2018, same store NOI was $19.1 million, an increase of $1.3 million, or 7.6%, compared to the same period in the prior year. Same store property revenues increased by 5.5% compared to the same prior year period, primarily attributable to a 4.8% increase in average rental rates, as well as average occupancy increasing 80 basis points to 94.6%.  Same store expenses increased $0.3 million, primarily due to $0.15 million related to payroll, $0.11 million in maintenance, and $0.09 million of increased real estate taxes.

Renovation Activity

The Company completed 1,186 value-add unit upgrades during the year, including 339 units during the fourth quarter.

Since inception within the existing portfolio, the Company has completed 1,666 value-add unit upgrades at an average cost of $4,824 per unit and achieved an average monthly rental rate increase of $104 per unit, equating to a 25.9% ROI on all unit upgrades leased as of December 31, 2018.  The Company has identified approximately 4,800 remaining units within the existing portfolio for value-add upgrades with similar projected economics to the completed renovations. The Company expects to complete between 900 and 1,200 unit renovations in 2019. 

Acquisition Activity

On November 15, 2018, the Company acquired an 85% interest in a 512-unit apartment community located in Lakewood, Colorado, known as Ashford Belmar.  The total purchase price was approximately $143.4 million, funded in part by a $100.7 million mortgage loan secured by the Ashford Belmar property.

The Company also entered into three development joint ventures with unrelated third parties in the fourth quarter.  The development joint ventures are for apartment communities with a total of 631 units in Leander, Texas, Austin, Texas, and Concord, North Carolina.  The Company contributed approximately $9.5 million out of total preferred commitments of $40.0 million.

Balance Sheet

During the fourth quarter, the Company raised gross proceeds of approximately $43.7 million through the issuance of 43,656 shares of Series B preferred stock with associated warrants at $1,000 per unit.  For the full year 2018, the Company raised gross proceeds of approximately $123.6 million through the issuance of 123,592 shares of Series B preferred stock.

As of December 31, 2018, the Company had $24.8 million of unrestricted cash on its balance sheet, approximately $48.3 million available among its revolving and term credit facilities, and $1.3 billion of debt outstanding.

Dividend 

The Board of Directors authorized, and the Company declared, a quarterly dividend for the fourth 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 December 24, 2018, which was paid in cash on January 4, 2019. A portion of each dividend may constitute a return of capital for tax purposes. 

On October 12, 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 October 25, 2018, November 23, 2018, and December 24, 2018 which were paid in cash on November 5, 2018, December 5, 2018, and January 4, 2019, respectively.

2019 Guidance

Based on the Company's current outlook and market conditions, the Company anticipates 2019 CFFO in the range of $0.80 to $0.84 per share.  For additional guidance details underlying earnings guidance, please see page 31 of Company's Fourth Quarter 2018 Earnings Supplement available under Investor Relations on the Company's website (www.bluerockresidential.com).

Conference Call

All interested parties can listen to the live conference call at 11:00 AM ET on Thursday, February 14, 2019 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 March 14, 2019 at http://services.choruscall.com/links/brg190214.html, as well as by dialing +1 (877) 344-7529 in the U.S., or +1 (412) 317-0088 internationally, and requesting conference number 10127798.

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 December 31, 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%


$           1,301


97%

ARIUM Glenridge


Atlanta, GA


480


1990


90%


1,195


93%

ARIUM Grandewood


Orlando, FL


306


2005


100%


1,384


95%

ARIUM Gulfshore


Naples, FL


368


2016


100%


1,261


98%

ARIUM Hunter's Creek


Orlando, FL


532


1999


100%


1,387


95%

ARIUM Metrowest


Orlando, FL


510


2001


100%


1,368


94%

ARIUM Palms


Orlando, FL


252


2008


100%


1,335


92%

ARIUM Pine Lakes


Port St. Lucie, FL


320


2003


85%


1,267


95%

ARIUM Westside


Atlanta, GA


336


2008


90%


1,537


99%

Ashford Belmar


Lakewood, CO


512


1988/1993


85%


1,612


92%

Ashton Reserve


Charlotte, NC


473


2015


100%


1,116


93%

Citrus Tower


Orlando, FL


336


2006


97%


1,279


93%

Enders Place at Baldwin Park


Orlando, FL


220


2003


92%


1,762


97%

James on South First


Austin, TX


250


2016


90%


1,277


94%

Marquis at Crown Ridge


San Antonio, TX


352


2009


90%


1,006


93%

Marquis at Stone Oak


San Antonio, TX


335


2007


90%


1,425


94%

Marquis at The Cascades


Tyler, TX


582


2009


90%


1,201


96%

Marquis at TPC


San Antonio, TX


139


2008


90%


1,499


94%

Outlook at Greystone


Birmingham, AL


300


2007


100%


958


91%

Park & Kingston


Charlotte, NC


168


2015


100%


1,243


98%

Plantation Park


Lake Jackson, TX


238


2016


80%


1,408


93%

Preston View


Morrisville, NC


382


2000


100%


1,093


95%

Roswell City Walk


Roswell, GA


320


2015


98%


1,509


95%

Sands Parc


Daytona Beach, FL


264


2017


100%


1,323


97%

Sorrel


Frisco, TX


352


2015


95%


1,279


87%

Sovereign


Fort Worth, TX


322


2015


95%


1,347


95%

The Brodie


Austin, TX


324


2001


93%


1,271


95%

The Links at Plum Creek


Castle Rock, CO


264


2000


88%


1,428


94%

The Mills


Greenville, SC


304


2013


100%


1,019


96%

The Preserve at Henderson Beach


Destin, FL


340


2009


100%


1,350


94%

Veranda at Centerfield


Houston, TX


400


1999


93%


926


94%

Villages of Cypress Creek


Houston, TX


384


2001


80%


1,107


93%

Wesley Village


Charlotte, NC


301


2010


100%


1,326


93%

Consolidated Operating Properties Subtotal/Average


11,286






$         1,280


94%














Mezzanine/Preferred Investments


Location


Planned Number of Units






Pro Forma Average Rent (4)




Alexan CityCentre


Houston, TX


340






$         1,566

(2)



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




North Creek Apartments


Leander, TX


259






1,358




Novel Perimeter, formerly Crescent
Perimeter


Atlanta, GA


320






1,749




Riverside Apartments


Austin, TX


222






1,408




Vickers Historic Roswell, formerly
Vickers Village


Roswell, GA


79






3,176




Wayforth at Concord


Concord, NC


150






1,707




Whetstone Apartments


Durham, NC


204






1,284

(2)



Mezzanine and Preferred Investments Subtotal/Average


3,431






$         1,692


















Portfolio Properties Total/Average


14,717






$         1,377



















(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 December 31, 2018.
(3) Percent occupied is calculated as (i) the number of units occupied as of December 31, 2018, divided by (ii) total number of units, expressed as a
percentage.
(4) Alexan CityCentre, Alexan Southside Place, Helios, Leigh House, North Creek Apartments, Riverside Apartments, Wayforth at Concord,
and Whetstone Apartments are preferred equity investments. Leigh House has the option to convert to indirect common interest in the property once the
property reaches 70% occupancy.  North Creek Apartments, Riverside Apartments, and Wayforth at Concord have the option to purchase the
property at stabilization.  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 Twelve Months Ended December 31, 2018 and 2017

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




Three Months Ended



Year Ended




December 31,



December 31,




2018



2017



2018



2017


Revenues

















Net rental income


$

39,534



$

30,568



$

144,325



$

102,806


Other property revenues



4,754




3,817




18,136




12,840


Interest income from related parties



5,723




2,189




22,255




7,930


Total revenues



50,011




36,574




184,716




123,576


Expenses

















Property operating



17,493




14,142




67,997




48,346


Property management fees



1,184




934




4,391




3,185


General and administrative



5,623




3,292




19,553




7,541


Management fees to related parties






993







12,726


Acquisition and pursuit costs



37




19




116




3,233


Management internalization






41,907







43,554


Weather-related losses, net



107




336




288




1,014


Depreciation and amortization



16,839




15,530




62,683




48,624


Total expenses



41,283




77,153




155,028




168,223


Operating income (loss)



8,728




(40,579)




29,688




(44,647)


Other income (expense)

















Other income












17


Preferred returns and equity in income of unconsolidated real estate
joint ventures



2,435




2,472




10,312




10,336


Gain on sale of real estate investments






123







50,163


Gain on sale of real estate joint venture interests






24







10,262


Loss on extinguishment of debt and debt modification costs









(2,277)




(1,639)


Interest expense, net



(16,935)




(9,181)




(52,998)




(31,520)


     Total other (expense) income



(14,500)




(6,562)




(44,963)




37,619


Net loss



(5,772)




(47,141)




(15,275)




(7,028)


Preferred stock dividends



(9,642)




(7,753)




(35,637)




(27,023)


Preferred stock accretion



(1,829)




(1,123)




(5,970)




(3,011)


Net (loss) income attributable to noncontrolling interests

















Operating partnership units



(3,998)




(9,376)




(12,839)




(9,372)


Partially owned properties



(460)




(400)




(1,284)




17,989


Net (loss) income attributable to noncontrolling interests



(4,458)




(9,776)




(14,123)




8,617


Net loss attributable to common stockholders


$

(12,785)



$

(46,241)



$

(42,759)



$

(45,679)



















Net loss per common share – Basic


$

(0.55)



$

(1.87)



$

(1.82)



$

(1.79)



















Net loss per common share – Diluted


$

(0.55)



$

(1.87)



$

(1.82)



$

(1.79)



















Weighted average basic common shares outstanding



23,702,897




24,701,535




23,845,800




25,561,673


Weighted average diluted common shares outstanding



23,702,897




24,701,535




23,845,800




25,561,673


 

 

Consolidated Balance Sheets

Fourth Quarter 2018

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




December 31,
2018



December 31,
2017


ASSETS









Net Real Estate Investments









Land


$

200,385



$

169,135


Buildings and improvements



1,546,244




1,244,193


Furniture, fixtures and equipment



55,050




38,446


Construction in progress



989




985


Total Gross Real Estate Investments



1,802,668




1,452,759


Accumulated depreciation



(108,911)




(55,177)


Total Net Real Estate Investments



1,693,757




1,397,582


Cash and cash equivalents



24,775




35,015


Restricted cash



27,469




29,575


Notes and accrued interest receivable from related parties



164,084




140,903


Due from affiliates



2,854




2,003


Accounts receivable, prepaids and other assets



14,395




9,689


Preferred equity investments and investments in unconsolidated real estate joint ventures



89,033




71,145


In-place lease intangible assets, net



1,768




4,635


TOTAL ASSETS


$

2,018,135



$

1,690,547











LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY









Mortgages payable


$

1,206,136



$

939,494


Revolving credit facilities



82,209




67,670


Accounts payable



1,486




1,652


Other accrued liabilities



31,690




22,952


Due to affiliates



726




1,575


Distributions payable



12,073




14,287


Total Liabilities



1,334,320




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 December 31, 2018 and 2017



139,545




138,801



6.000% Series B Redeemable Preferred Stock, liquidation preference $1,000 per share, 1,225,000 and 725,000
shares authorized; 306,009 and 184,130 issued and outstanding as of December 31, 2018 and 2017,
respectively



272,842




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 December 31, 2018 and 2017



56,485




56,196


Equity









Stockholders' Equity









Preferred stock, $0.01 par value, 229,900,000 and 230,400,000 shares authorized; none issued and
outstanding as of December 31, 2018 and 2017, respectively







7.125% Series D Cumulative Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares
authorized; 2,850,602 issued and outstanding at December 31, 2018 and 2017



68,705




68,705


Common stock - Class A, $0.01 par value, 747,509,582 shares authorized; 23,322,211 and 24,218,359
shares issued and outstanding as of December 31, 2018 and 2017, respectively



233




242


Common stock - Class C, $0.01 par value, 76,603 shares authorized; 76,603 shares issued and outstanding as
of December 31, 2018 and 2017



1




1


Additional paid-in-capital



307,938




318,170


Distributions in excess of cumulative earnings



(218,531)




(164,286)


Total Stockholders' Equity



158,346




222,832


Noncontrolling Interests









Operating partnership units



27,613




42,999


    Partially owned properties



28,984




20,347


        Total Noncontrolling Interests



56,597




63,346


Total Equity



214,943




286,178


TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY


$

2,018,135



$

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 ("CFFO"), 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.

CFFO 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 debt 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 CFFO is helpful to investors as a supplemental performance measure because it excludes the effects of certain items which can create significant earnings volatility, but which do not directly relate to our core recurring property operations. As a result, we believe that CFFO can help facilitate comparisons of operating performance between periods and provides a more meaningful predictor of future earnings potential.

AFFO makes certain adjustments to CFFO 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 CFFO 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 CFFO and AFFO differs from the methodology used for calculating CFFO and AFFO by certain other REITs and, accordingly, our CFFO and AFFO may not be comparable to CFFO and AFFO reported by other REITs. Our management utilizes FFO, CFFO, 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, CFFO, AFFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we also believe that FFO, CFFO, 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, CFFO, 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, CFFO, 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, CFFO, 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 five additional operating properties and three investments accounted for on the equity method of accounting subsequent to December 31, 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, CFFO and AFFO to net loss, the most directly comparable GAAP financial measure, for the three and twelve months ended December 31, 2018 and 2017 (in thousands, except per share amounts):


Three Months Ended



Year Ended



December 31,



December 31,



2018



2017



2018



2017



Net loss attributable to common shares

$

(12,785)



$

(46,241)



$

(42,759)



$

(45,679)



Add back: Net loss attributable to operating partnership units


(3,998)




(9,376)




(12,839)




(9,372)



Net loss attributable to common shares and units


(16,783)




(55,617)




(55,598)




(55,051)




















Common stockholders and operating partnership units pro-rata share of:

















Real estate depreciation and amortization (1)


15,785




14,520




59,103




44,741



Gain on sale of real estate investments





(123)







(34,436)



Gain on sale of joint venture interests, net





(15)







(6,414)



FFO Attributable to Common Shares and Units


(998)




(41,235)




3,505




(51,160)



Common stockholders and operating partnership units pro-rata share of:

















     Acquisition and pursuit costs


37




19




116




3,091



Non-cash interest expense


780




428




3,757




1,939



Unrealized loss on derivatives


3,001







2,776






     Loss on extinguishment of debt and debt modification costs








2,226




1,551



     Weather-related losses, net


102




315




280




956



     Non-real estate depreciation and amortization (1)


85




6




301




6



     Non-recurring income











(16)



     Non-cash preferred returns and equity in income of unconsolidated 
     real estate joint ventures


(280)




(253)




(980)




(1,243)



     Management internalization





41,907







43,554



     Non-cash equity compensation


1,768




1,972




6,807




15,022



     Preferred stock accretion


1,829




1,123




5,970




3,011



CFFO Attributable to Common Shares and Units

$

6,324



$

4,282



$

24,758



$

16,711




















Common stockholders and operating partnership units pro-rata share of:

















Normally recurring capital expenditures


(735)




(520)




(2,569)




(1,541)



AFFO Attributable to Common Shares and Units

$

5,589



$

3,762



$

22,189



$

15,170




















Per Share and Unit Information:

















FFO Attributable to Common Shares and Units - diluted

$

(0.03)



$

(1.39)



$

0.11



$

(1.89)




















CFFO Attributable to Common Shares and Units - diluted

$

0.20



$

0.14



$

0.80



$

0.62




















AFFO Attributable to Common Shares and Units - diluted

$

0.18



$

0.13



$

0.72



$

0.56




















Weighted average common shares and units outstanding - diluted


31,113,092




29,710,465




30,995,249




27,032,354




















(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 attributable to common stockholders to EBITDAre (unaudited and dollars in thousands).



Three Months Ended


Year Ended 



December 31,


December 31, 



2018


2017


2018


2017

Net loss attributable to common stockholders


$

(12,785)



$

(46,241)



$

(42,759)



$

(45,679)


Net (loss) income attributable to noncontrolling interests



(4,458)




(9,776)




(14,123)




8,617


Preferred stock dividends



9,642




7,753




35,637




27,023


Preferred stock accretion



1,829




1,123




5,970




3,011


Interest expense, net



16,935




9,181




52,998




31,520


Depreciation and amortization



16,754




15,524




62,382




48,618


Gain on sale of real estate investments



-




(123)




-




(50,163)


Gain on sale of joint venture interests, net



-




(24)




-




(10,262)


Loss on extinguishment of debt and debt modification costs



-




-




2,277




1,639


EBITDAre


$

27,917



$

(22,583)



$

102,382



$

14,324


Acquisition and pursuit costs



37




19




116




3,233


Management internalization



-




41,907




-




43,554


Non-real estate depreciation and amortization



85




6




301




6


Weather-related losses, net



107




336




288




1,014


Non-cash equity compensation



1,768




1,972




6,807




15,022


Non-recurring income



-




-




-




(17)


Non-cash preferred returns and equity in income of 
     unconsolidated real estate joint ventures



(280)




(253)




(980)




(1,243)


Adjusted EBITDAre


$

29,634



$

21,404



$

108,914



$

75,893



















 

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, including related to tenant reimbursements for utility expenses amounting to zero and $3.0 million for the three and twelve months ended December 31, 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 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

Year Ended



December 31,

December 31,



2018

2017

2018

2017

Net loss attributable to common shares

$       (12,785)

$      (46,241)

$          (42,759)

$          (45,679)

Add back: Net loss attributable to operating partnership units

(3,998)

(9,376)

(12,839)

(9,372)

Net loss attributable to common shares and units

(16,783)

(55,617)

(55,598)

(55,051)

Add common stockholders and operating partnership units pro-rata share of:






Depreciation and amortization

15,785

14,520

59,103

44,741


Non-real estate depreciation and amortization

85

6

301

6


Non-cash interest expense

780

428

3,757

1,939


Unrealized loss on derivatives

3,001

-

2,776

-


Property management fees

1,118

873

4,151

2,915


Management fees to related parties

-

993

-

12,726


Acquisition and pursuit costs

37

19

116

3,091


Loss on extinguishment of debt and debt modification costs

-

-

2,226

1,551


Corporate operating expenses

5,552

3,292

19,416

7,541


Management internalization

-

41,907

-

43,554


Weather-related losses, net

102

315

280

956


Preferred dividends

9,642

7,753

35,637

27,023


Preferred stock accretion

1,829

1,123

5,970

3,011

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

2,435

2,472

10,312

10,336


Interest income from related parties

5,723

2,189

22,255

7,930


Gain on sale of joint venture interests, net

-

15

-

6,414


Gain on sale of real estate investments

-

123

-

34,436

Pro-rata share of properties' income

12,990

10,813

45,568

34,871

Add:







Noncontrolling interest pro-rata share of partially owned
property income

774

707

2,629

3,112

Total property income

13,764

11,520

48,197

37,983

Add:







Interest expense

13,031

8,723

46,267

29,317

Net operating income

26,795

20,243

94,464

67,300

Less:







Non-same store net operating income

7,682

2,488

44,927

20,057

Same store net operating income (1)

$          19,113

$         17,755

$            49,537

$            47,243






(1) Same store portfolio for the three months ended December 31, 2018 consists of 24 properties, which represent 7,962 units.  Same store portfolio
for the year ended December 31, 2018 consists of 16 properties, which represent 5,151 units.

 

 

Cision

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