BOSTON--(BUSINESS WIRE)--Berkshire Income Realty, Inc. (NYSE MKT: BIR_pa)(NYSE MKT: BIRPRA)(NYSE MKT: BIR-A)(NYSE MKT: BIR.PR.A)("Berkshire" or the "Company") reported its results for the three and six months ended June 30, 2014. Financial highlights for the three and six months ended June 30, 2014 include:
- Same Property Net Operating Income ("Same Property NOI") increased 1.5% for the three months ended June 30, 2014 - Same Property NOI, a non-GAAP financial measure, increased as a result of growth in revenue for properties acquired or placed in service prior to January 1, 2013 ("Same Property Portfolio") that was partially offset by higher repairs and maintenance and higher real estate taxes. The Same Property portfolio had a total revenue increase of approximately 2.8% for the three months ended June 30, 2014 compared to the same period a year ago primarily driven by increase in average monthly rental rates from $1,282 to $1,319. Average physical occupancy for the Same Property Portfolio remained consistent at 96% for the six month periods ended June 30, 2014 and June 30, 2013. A reconciliation of accounting principles generally accepted in the United States of America ("GAAP") net income to Same Property NOI is included in the financial data accompanying this release.
- The Company's Funds From Operations ("FFO") decreased approximately $4.5 million for the three months ended June 30, 2014. - The Company's FFO, a non-GAAP financial measure, for the quarter ended June 30, 2014 was $(1,619,373) compared with $2,839,413 at June 30, 2013. The decrease is mainly attributable to loss on extinguishment of debt for properties sold during the quarter ended June 30, 2014, higher incentive advisory fees, and increased interest expenses incurred on the credit facility, and the loss of operating income provided by properties sold in comparative periods. The decrease was partially offset by higher net operating income from the balance of the portfolio which in turn was driven by higher rents and added operations from the new acquisitions and the development completed in the first quarter of 2013. FFO for the six months ended June 30, 2014, decreased approximately $5.7 million as compared to the same period ended June 30, 2013 and is due primarily to costs related to the acquisition of Pavilion Townplace and Eon at Lindbergh completed in the first quarter of 2014, in addition to the activity previously mentioned. A reconciliation of GAAP net income to FFO is included in the financial data accompanying this release.
- A presentation and reconciliation of net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to FFO and Same Property NOI is set forth on pages 2 to 4 of this press release. For the three months ended June 30, 2014 and 2013, the Company's net income was $54,062,703 and $14,531,303, respectively. For the six months ended June 30, 2014 and 2013, the Company's net income was $50,678,923 and $10,534,627, respectively.
- Development Activities - During the six months ended June 30, 2014, the Company owned interests in two joint venture development projects. The Company continued construction activities on the Aura Prestonwood development project located in Dallas, Texas. The Walnut Creek development project, located in Walnut Creek, California, completed predevelopment planning, secured approvals, permits and financing, and commenced construction activities in July.
- Acquisition of properties - During the six months ended June 30, 2014, the Company acquired two properties, Pavilion Townplace located in Dallas, Texas, a 236-unit property, and EON of Lindbergh located in Atlanta Georgia, a 352-unit property. The purchase prices were $56,000,000 for Pavilion Townplace $64,000,000 for EON at Lindbergh.
- Disposition of properties - During the six months ended June 30, 2014, the Company sold four properties - Chisholm Place and Bear Creek, both located in Dallas, Texas; Laurel Woods located in Austin, Texas; and Berkshires on Brompton located in Houston, Texas. The sale price for Chisholm Place, Bear Creek, Laurel Woods and Berkshires on Brompton were $15,000,000 $9,500,000, $13,200,000 and $38,500,000, respectively. Total gain recognized from the sale of the four assets was $49,519,992.
Chuck Leitner, President and Chairman of the Company, commented: "Second quarter Same Property Portfolio operating results reflect strong revenue growth of 2.8% over the second quarter of 2013. Revenue was partially offset by increased operating expenses and resulted in an increase in Same Property NOI of 1.5%. Gains on the sale of four assets contributed significantly to our positive results and strong financial position, which continues to allow us to execute our strategic plan to improve the quality of the real estate portfolio. Development activities at Aura Prestonwood, a Class A 322-unit multifamily apartment property being developed in Dallas, Texas continues as scheduled. Walnut Creek development project, a Class A 141-unit mixed use multifamily apartment property in Walnut Creek, California, closed on a construction loan and commenced development activity subsequent to the quarter ended June 30, 2014.”
Funds From Operations
The Company has adopted the revised definition of FFO adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). FFO falls within the definition of a "non-GAAP financial measure" as stated in Item 10(e) of Regulation S-K promulgated by the Securities and Exchange Commission (the "SEC"). Management considers FFO to be an appropriate measure of performance for an equity Real Estate Investment Trust ("REIT"). We calculate FFO by adjusting net income (loss) (computed in accordance with GAAP, including non-recurring items), for gains (or losses) from sales of properties, impairments, real estate related depreciation and amortization, and adjustment for unconsolidated partnerships and ventures. Management believes that in order to facilitate a clear understanding of the historical operating results of the Company, FFO should be considered in conjunction with net income (loss) as presented in the consolidated financial statements included elsewhere herein. Management considers FFO to be a useful measure for reviewing the comparative operating and financial performance of the Company because, by excluding gains and losses related to sales of previously depreciated operating real estate assets and excluding real estate asset depreciation and amortization (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help one compare the operating performance of a company's real estate between periods or as compared to different companies.
The Company's calculation of FFO may not be directly comparable to FFO reported by other REITs or similar real estate companies that have not adopted the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. FFO is not a GAAP financial measure and should not be considered as an alternative to net income (loss), the most directly comparable financial measure of our performance calculated and presented in accordance with GAAP, as an indication of our performance. FFO does not represent cash generated from operating activities determined in accordance with GAAP and is not a measure of liquidity or an indicator of our ability to make cash distributions. We believe that to further understand our performance; FFO should be compared with our reported net income and considered in addition to cash flows in accordance with GAAP, as presented in our consolidated financial statements.
The following table presents a reconciliation of net income to FFO for the three- and six-month periods ended June 30, 2014 and 2013:
Three months ended June 30, |
Six months ended June 30, |
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2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||||
Net income | $ | 54,062,703 | $ | 14,531,303 | $ | 50,678,923 | $ | 10,534,627 | |||||||||||||||||||
Add: | |||||||||||||||||||||||||||
Depreciation of real property | 6,339,996 | 5,615,658 | 11,796,977 | 11,175,225 | |||||||||||||||||||||||
Depreciation of real property included in results of discontinued operations | — | 256,118 | — | 513,336 | |||||||||||||||||||||||
Amortization of acquired in-place leases and tenant relationships | 745,203 | — | 745,203 | 5,377 | |||||||||||||||||||||||
Equity in loss of unconsolidated multifamily entities | — | 855,136 | — | 1,631,103 | |||||||||||||||||||||||
Funds from operations of unconsolidated multifamily entities, net of impairments | (664,672 | ) | 431,695 | (286,435 | ) | 800,396 | |||||||||||||||||||||
Less: | |||||||||||||||||||||||||||
Noncontrolling interest in properties' share of funds from operations | (289,667 | ) | (161,439 | ) | (517,050 | ) | (337,988 | ) | |||||||||||||||||||
Gain on disposition of real estate assets | (49,519,992 | ) | (18,689,058 | ) | (49,519,992 | ) | (18,689,058 | ) | |||||||||||||||||||
Equity in income of unconsolidated multifamily entities | (12,292,944 | ) | — | (12,975,436 | ) | — | |||||||||||||||||||||
Funds from Operations | $ | (1,619,373 | ) | $ | 2,839,413 | $ | (77,810 | ) | $ | 5,633,018 | |||||||||||||||||
FFO decreased for the three- and six-month periods ended June 30, 2014 as compared to the three- and six-month periods ended June 30, 2013. The decrease in FFO is mainly attributable to the acquisition costs related to Pavilion Townplace and EON at Lindbergh expensed pursuant to the guidance of ASC 805-10, loss on extinguishment of debt for properties sold during the six-month period ended June 30, 2014, increased incentive advisory fees, and increased interest expenses incurred on the credit facility. Furthermore, the decrease in FFO is also attributable to the loss of operating income provided by assets that were sold in the second quarter of 2013, which were partially offset by higher net operating income from the balance of the portfolio driven by higher rents and added operations from 2020 Lawrence, a recently completed development project, Pavilion Townplace and EON at Lindbergh, recently acquired properties.
Other Non-GAAP Measures
The Company believes that the use of certain other non-GAAP measures for comparative presentation between reporting periods allows for more meaningful comparisons of the periods presented.
Same Property NOI falls within the definition of a "non-GAAP financial measure" as stated in Item 10(e) of Regulation S-K promulgated by the SEC and should not be considered as an alternative to net income (loss), the most directly comparable financial measure of our performance calculated and presented in accordance with GAAP. The Company believes Same Property NOI is a measure of operating results that is useful to investors to analyze the performance of a real estate company because it provides a direct measure of the operating results of the Company's multifamily apartment communities. The Company also believes it is a useful measure to facilitate the comparison of operating performance among competitors. The calculation of Same Property NOI requires classification of income statement items between operating and non-operating expenses, where operating items include only those items of revenue and expense which are directly related to the income producing activities of the properties. We believe that to achieve a more complete understanding of the Company's performance, Same Property NOI should be compared with our reported net income. Management uses Same Property NOI to evaluate the operating results of properties without reflecting the effect of investing and financing activities such as mortgage debt and capital expenditures which, have an impact on interest expense and depreciation and amortization. The Same Property portfolio consists of 15 properties acquired or placed in service on or prior to January 1, 2013 and owned through June 30, 2014.
The following table represents the reconciliation of GAAP net income to the other non-GAAP measures presented for the three- and six- month periods ended June 30, 2014 and 2013:
Three months ended June 30, |
Six months ended June 30, |
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2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||||
Net income | $ | 54,062,703 | $ | 14,531,303 | $ | 50,678,923 | $ | 10,534,627 | |||||||||||||||||||
Add: | |||||||||||||||||||||||||||
Depreciation | 7,243,111 | 6,432,388 | 13,529,323 | 12,759,624 | |||||||||||||||||||||||
Interest, inclusive of amortization of deferred financing fees | 7,967,522 | 6,647,682 | 15,061,340 | 13,057,302 | |||||||||||||||||||||||
Loss on extinguishment of debt | 1,743,652 | — | 1,743,652 | — | |||||||||||||||||||||||
Amortization of acquired in-place leases and tenant relationships | 745,203 | — | 745,203 | 5,377 | |||||||||||||||||||||||
Net (income) loss from discontinued operations | — | (18,630,988 | ) | 114,216 | (18,748,838 | ) | |||||||||||||||||||||
Gain on disposition of real estate assets | (49,519,992 | ) | — | (49,519,992 | ) | — | |||||||||||||||||||||
Equity in (income) loss of unconsolidated multifamily entities | (12,292,944 | ) | 855,136 | (12,975,436 | ) | 1,631,103 | |||||||||||||||||||||
Net operating income | 9,949,255 | 9,835,521 | 19,377,229 | 19,239,195 | |||||||||||||||||||||||
Add: | |||||||||||||||||||||||||||
Net operating income related to properties acquired or |
489,069 | 448,903 | 981,495 | 1,291,998 | |||||||||||||||||||||||
Same Property net operating income | $ | 10,438,324 | $ | 10,284,424 | $ | 20,358,724 | $ | 20,531,193 | |||||||||||||||||||
The Company
The Company is a Real Estate Investment Trust ("REIT") whose objective is to acquire, own, operate, develop and rehabilitate multifamily apartment communities. The Company owns interests in fifteen multifamily apartment communities and two multifamily development projects, of which six are located in the Baltimore/Washington, D.C. metropolitan area; three are located in Dallas, Texas; two are located in Atlanta, Georgia; and one is located in each of Houston, Texas; Sherwood, Oregon; Tampa, Florida; Philadelphia, Pennsylvania; Walnut Creek, California; and Denver, Colorado. The Company also owns interests in two unconsolidated multifamily entities.
Forward Looking Statements
With the exception of the historical information contained in this release, the matters described herein may contain forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, including statements about apartment rental demand and fundamentals, involve a number of risks, uncertainties or other factors beyond the Company's control, which may cause material differences in actual results, performance or other expectations. These factors include, but are not limited to, changes in economic conditions generally and the real estate and bond markets specifically, especially as they may affect rental markets, legislative/regulatory changes (including changes to laws governing the taxation of REITs), possible sales of assets, the acquisition restrictions placed on the Company by an affiliated entity, Berkshire Multifamily Value Plus Fund III, LP, availability of capital, interest rates and interest rate spreads, changes in accounting principles generally accepted in the United States of America and policies and guidelines applicable to REITs, those set forth in Part I, Item 1A - Risk Factors of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and other risks and uncertainties as may be detailed from time to time in the Company's public announcements and SEC filings. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company assumes no obligation to update such information.
BERKSHIRE INCOME REALTY, INC.
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June 30, 2014 |
December 31, 2013 |
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ASSETS | ||||||||||||||
Multifamily apartment communities, net of accumulated depreciation
of |
$ | 486,124,326 | $ | 381,663,433 | ||||||||||
Cash and cash equivalents | 17,591,612 | 15,254,613 | ||||||||||||
Cash restricted for tenant security deposits | 1,499,541 | 1,321,895 | ||||||||||||
Cash held in escrow for 1031 exchange | 40,835,011 | — | ||||||||||||
Replacement reserve escrow | 1,394,116 | 1,121,258 | ||||||||||||
Prepaid expenses and other assets | 9,326,085 | 10,675,302 | ||||||||||||
Investments in unconsolidated multifamily entities | 14,689,566 | 14,294,474 | ||||||||||||
Acquired in-place leases and tenant relationships, net of
accumulated |
896,895 | — | ||||||||||||
Deferred expenses, net of accumulated amortization of $2,989,868 and $2,953,066, respectively | 6,765,645 | 2,977,939 | ||||||||||||
Total assets | $ | 579,122,797 | $ | 427,308,914 | ||||||||||
LIABILITIES AND DEFICIT | ||||||||||||||
Liabilities: | ||||||||||||||
Mortgage notes payable | $ | 517,873,498 | $ | 475,525,480 | ||||||||||
Credit Facility | 80,000,000 | — | ||||||||||||
Note payable - other | 1,250,000 | 1,250,000 | ||||||||||||
Due to affiliates, net | 2,166,157 | 2,454,167 | ||||||||||||
Due to affiliate, incentive advisory fees | 10,566,401 | 8,289,617 | ||||||||||||
Dividend and distributions payable | 837,607 | 837,607 | ||||||||||||
Accrued expenses and other liabilities | 11,623,784 | 10,968,053 | ||||||||||||
Tenant security deposits | 1,720,489 | 1,531,472 | ||||||||||||
Total liabilities | 626,037,936 | 500,856,396 | ||||||||||||
Commitments and contingencies | — | — | ||||||||||||
Deficit: | ||||||||||||||
Noncontrolling interest in properties | 695,975 | 879,785 | ||||||||||||
Noncontrolling interest in Operating Partnership | (76,130,378 | ) | (102,297,937 | ) | ||||||||||
Series A 9% Cumulative Redeemable Preferred Stock, no par value,
$25 stated |
70,210,830 | 70,210,830 | ||||||||||||
Class A common stock, $.01 par value, 5,000,000 shares authorized,
0 shares |
— | — | ||||||||||||
Class B common stock, $.01 par value, 5,000,000 shares authorized,
1,406,196 |
14,062 | 14,062 | ||||||||||||
Excess stock, $.01 par value, 15,000,000 shares authorized, 0
shares issued |
— | — | ||||||||||||
Accumulated deficit | (41,705,628 | ) | (42,354,222 | ) | ||||||||||
Total deficit | (46,915,139 | ) | (73,547,482 | ) | ||||||||||
Total liabilities and deficit | $ | 579,122,797 | $ | 427,308,914 | ||||||||||
BERKSHIRE INCOME REALTY, INC.
|
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Three months ended June 30, |
Six months ended June 30, |
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2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||
Rental | $ | 21,167,877 | $ | 18,154,499 | $ | 40,457,163 | $ | 35,929,035 | ||||||||||||||||||
Utility reimbursement | 1,108,411 | 852,825 | 2,027,248 | 1,690,499 | ||||||||||||||||||||||
Other | 1,129,850 | 843,754 | 2,098,392 | 1,651,633 | ||||||||||||||||||||||
Total revenue | 23,406,138 | 19,851,078 | 44,582,803 | 39,271,167 | ||||||||||||||||||||||
Expenses: | ||||||||||||||||||||||||||
Operating | 4,995,317 | 4,425,981 | 11,316,545 | 9,075,223 | ||||||||||||||||||||||
Maintenance | 1,440,932 | 1,230,171 | 2,573,755 | 2,113,072 | ||||||||||||||||||||||
Real estate taxes | 2,550,600 | 2,024,714 | 4,733,781 | 3,835,212 | ||||||||||||||||||||||
General and administrative | 721,624 | 507,809 | 1,342,785 | 1,237,899 | ||||||||||||||||||||||
Management fees | 1,339,036 | 1,203,974 | 2,565,289 | 2,396,786 | ||||||||||||||||||||||
Incentive advisory fees | 2,409,374 | 622,908 | 2,673,419 | 1,373,780 | ||||||||||||||||||||||
Depreciation | 7,243,111 | 6,432,388 | 13,529,323 | 12,759,624 | ||||||||||||||||||||||
Interest, inclusive of amortization of deferred financing fees | 7,967,522 | 6,647,682 | 15,061,340 | 13,057,302 | ||||||||||||||||||||||
Loss on extinguishment of debt | 1,743,652 | — | 1,743,652 | — | ||||||||||||||||||||||
Amortization of acquired in-place leases and tenant relationships | 745,203 | — | 745,203 | 5,377 | ||||||||||||||||||||||
Total expenses | 31,156,371 | 23,095,627 | 56,285,092 | 45,854,275 | ||||||||||||||||||||||
Loss before equity in income (loss) of unconsolidated multifamily entities | (7,750,233 | ) | (3,244,549 | ) | (11,702,289 | ) | (6,583,108 | ) | ||||||||||||||||||
Equity in income (loss) of unconsolidated multifamily entities | 12,292,944 | (855,136 | ) | 12,975,436 | (1,631,103 | ) | ||||||||||||||||||||
Gain on disposition of real estate assets | 49,519,992 | — | 49,519,992 | — | ||||||||||||||||||||||
Income (loss) from continuing operations | 54,062,703 | (4,099,685 | ) | 50,793,139 | (8,214,211 | ) | ||||||||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||||
Income (loss) from discontinued operations | — | (58,070 | ) | (114,216 | ) | 59,780 | ||||||||||||||||||||
Gain on disposition of real estate assets, net | — | 18,689,058 | — | 18,689,058 | ||||||||||||||||||||||
Net income (loss) from discontinued operations | — | 18,630,988 | (114,216 | ) | 18,748,838 | |||||||||||||||||||||
Net income | 54,062,703 | 14,531,303 | 50,678,923 | 10,534,627 | ||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interest in properties | (125,887 | ) | 4,724 | (190,723 | ) | (14,808 | ) | |||||||||||||||||||
Net income attributable to noncontrolling interest in Operating Partnership | (51,012,570 | ) | (12,553,460 | ) | (46,011,219 | ) | (6,998,082 | ) | ||||||||||||||||||
Net income attributable to the Company | 2,924,246 | 1,982,567 | 4,476,981 | 3,521,737 | ||||||||||||||||||||||
Preferred dividend | (1,675,193 | ) | (1,675,194 | ) | (3,350,387 | ) | (3,350,388 | ) | ||||||||||||||||||
Net income available to common shareholders | $ | 1,249,053 | $ | 307,373 | $ | 1,126,594 | $ | 171,349 | ||||||||||||||||||
Net income (loss) from continuing operations attributable to the Company per common share, basic and diluted | 0.89 | (13.03 | ) | 0.88 | (13.21 | ) | ||||||||||||||||||||
Net income (loss) from discontinued operations attributable to the Company per common share, basic and diluted | — | 13.25 | (0.08 | ) | 13.33 | |||||||||||||||||||||
Net income available to common shareholders per common share, basic and diluted | 0.89 | 0.22 | 0.80 | 0.12 | ||||||||||||||||||||||
Weighted average number of common shares outstanding, basic and diluted | 1,406,196 | 1,406,196 | 1,406,196 | 1,406,196 |