Press Release

Bluerock Residential Growth REIT Announces Second Quarter 2019 Results

- Total Revenues Grew 16.6% to $52.4 Million -

- Increases Midpoint of Full Year 2019 CFFO Guidance -

Company Release - 8/6/2019 8:30 AM ET

NEW YORK, Aug. 6, 2019 /PRNewswire/ -- Bluerock Residential Growth REIT, Inc. (NYSE American: BRG) ("the Company"), an owner of highly amenitized multi-family apartment communities, announced today its financial results for the quarter ended June 30, 2019.

(PRNewsfoto/Bluerock Residential Growth REI)

Highlights 

  • Total revenues grew 16.6% to $52.4 million for the quarter from $45.0 million in the prior year period.
  • Net loss attributable to common stockholders for the second quarter of 2019 was ($0.50) per share, as compared to net loss attributable to common stockholders of ($0.44) per share in the prior year period.
  • Property Net Operating Income ("NOI") grew 22.9% to $27.6 million, from $22.5 million in the prior year period.
  • Same store revenue and NOI increased 5.3% and 9.0% respectively, as compared to the prior year period.
  • Core funds from operations attributable to common shares and units ("CFFO") grew 12.4% to $6.7 million, from $5.9 million in the prior year period. CFFO per share is $0.22 for the quarter as compared to $0.19 in second quarter 2018.
  • Paid quarterly common stock dividend of $0.1625, a 74% payout on a CFFO basis.
  • Consolidated real estate investments, at cost, increased approximately $119.4 million to $1.9 billion, from year end.
  • Including activity completed subsequent to quarter end, invested approximately $108.0 million, comprising $106.1 million in four multifamily communities totaling 1,499 units with total purchase prices of $303.3 million, and $1.9 million to buy out minority ownership interests in two assets. The four new acquisitions are projected to yield a year one economic cap rate of 4.9%.
  • Completed the sale of four assets subsequent to quarter end, with an additional property expected to close in August, totaling approximately $274 million and an economic cap rate of 4.5%.
  • Completed 232 value-add unit upgrades during the quarter achieving a 23.8% ROI.
  • Repurchased 749,648 shares of stock during the second quarter at an average price of $11.13 per share, for a total cost of approximately $8.3 million.
  • Increased the midpoint of its full year 2019 CFFO guidance by narrowing it to a range of $0.81 to $0.84 per share from the prior range of $0.80 to $0.84 per share.

"We continued to produce strong operating results in the second quarter with property NOI up 23%, same store NOI that increased 9.0% and CFFO increasingly exceeding our dividend payment," said Ramin Kamfar, Company Chairman and CEO. "Subsequent to quarter end, we executed an accretive portfolio sale and recycled the proceeds into attractive assets with a stronger long-term growth profile and immediate value-add renovation opportunity.  We remain focused on ongoing operational improvements and creating value through our value-add unit upgrade programs. Furthermore, with access to accretive capital with our Series B redeemable preferred stock issuance, we continue to identify attractive investments to grow our portfolio of highly amenitized communities in targeted growth markets."

Financial Results

Net loss attributable to common stockholders for the second quarter of 2019 was $11.0 million, compared to a net loss of $10.2 million in the prior year period.  Net loss attributable to common stockholders included non-cash expenses of $15.9 million or $0.72 per share in the second quarter of 2019 compared to $14.4 million or $0.62 per share for the prior year period.

CFFO for the second quarter of 2019 was $6.7 million, or $0.22 per diluted share, compared to $5.9 million, or $0.19 per diluted share in the prior year period.  CFFO was primarily driven by growth in property NOI of $5.1 million and interest income of $0.3 million arising from investment activity. This was primarily offset by a year-over-year rise in interest expense of $2.2 million and preferred stock dividends of $2.4 million.

Total Portfolio Performance

$ In thousands, except average rental rates

2Q19


2Q18


Variance


YTD19


YTD18


Variance


Total Revenues (1)

$ 52,437


$ 44,959


16.6%


$103,902


$   86,828


19.7%


Property Operating Expenses

$ 18,868


$ 16,874


11.8%


$ 37,470


$   32,533


15.2%


NOI

$ 27,596


$ 22,450


22.9%


$ 54,683


$   43,465


25.8%


Operating Margin

59.4%


57.1%


230

bps

59.3%


57.2%


210

bps

Occupancy Percentage

93.8%


93.9%


(10)

bps

93.8%


93.7%


10

bps

Average Rental Rate

$    1,312


$    1,239


5.9%


$    1,306


$     1,233


5.9%


(1) Including interest income from related parties









For the second quarter of 2019, property revenues increased by 16.6% compared to the same prior year period primarily attributable to the increased size of the portfolio.  Total portfolio NOI was $27.6 million, an increase of $5.1 million, or 22.9%, compared to the same period in the prior year. 

Property NOI margins were 59.4% of revenue for the quarter, compared to 57.1% of revenue in the prior year quarter.  Property operating expenses were up primarily due to the increased size of the portfolio.

Same Store Portfolio Performance

$ In thousands, except average rental rates

2Q19


2Q18


Variance


YTD19


YTD18


Variance


Revenues

$   40,441


$   38,414


5.3%


$   78,023


$   73,908


5.6%


Property Operating Expenses

$   16,597


$   16,535


0.4%


$   32,059


$   31,825


0.7%


NOI

$   23,844


$   21,879


9.0%


$   45,964


$   42,083


9.2%


Operating Margin

59.0%


57.0%


200

bps

58.9%


56.9%


200

bps

Occupancy Percentage

93.9%


93.8%


10

bps

94.0%


93.7%


30

bps

Average Rental Rate

$     1,305


$     1,237


5.5%


$     1,296


$     1,229


5.5%


The Company's same store portfolio for the quarter ended June 30, 2019 included 29 properties.  For the second quarter of 2019, same store NOI was $23.8 million, an increase of $2.0 million, or 9.0%, compared to the same period in the prior year. Same store property revenues increased by 5.3% compared to the same prior year period, primarily attributable to a 5.5% increase in average rental rates and average occupancy increasing 10 basis points to 93.9%.  Same store expenses increased $0.06 million primarily due to increased real estate taxes due to higher valuations by municipalities.

Renovation Activity

The Company completed 232 value-add unit upgrades during the second quarter achieving a 23.8% ROI. 

Since inception within the existing portfolio, the Company has completed 2,171 value-add unit upgrades at an average cost of $4,944 per unit and achieved an average monthly rental rate increase of $107 per unit, equating to a 26.1% ROI on all unit upgrades leased as of June 30, 2019.  The Company has identified approximately 4,567 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. 

Portfolio Activity

During and subsequent to quarter end, the Company completed investments totaling $305.2 million.  These investments include the following:

  • On June 25, 2019, invested approximately $1.9 million to increase our ownership stake to 100% in each of our Sorrel and Sovereign properties.
  • On June 27, 2019, acquired a 100% interest in a 200-unit apartment community located in Las Vegas, Nevada, known as Element. The total purchase price was approximately $41.8 million, funded in part by a $29.3 million mortgage loan secured by the Element property.
  • On June 27, 2019, acquired a 100% interest in a 334-unit apartment community located in Mount Juliet, Tennessee, known as Providence Trail. The total purchase price was approximately $68.5 million, funded in part by a $48.0 million mortgage loan secured by the Providence Trail property.
  • Subsequent to quarter end, on July 24, 2019, acquired a 100% interest in a 645-unit apartment community located in Scottsdale, Arizona, known as Denim. The total purchase price was approximately $141.3 million, funded in part by a $91.6 million mortgage loan secured by the Denim property.
  • Also subsequent to quarter end, on July 31, 2019, acquired a 100% interest in a 320-unit apartment community located in Las Vegas, Nevada, known as The Sanctuary. The total purchase price was approximately $51.8 million, funded in part by a $33.7 million mortgage loan secured by the Sanctuary property.

Subsequent to quarter end, the Company completed the following dispositions:

  • On July 15, 2019, closed on the portfolio sale of its investments in Sorrel, Sovereign, Preston View and Leigh House, for approximately $226.9 million. ARIUM Palms, the fifth property in the portfolio, is expected to close in August 2019 for approximately $46.8 million.

Balance Sheet

During the second quarter, the Company raised gross proceeds of approximately $51.1 million through the issuance of 51,137 shares of Series B preferred stock with associated warrants at $1,000 per unit.

As of June 30, 2019, the Company had $28.5 million of unrestricted cash on its balance sheet, approximately $29.9 million available among its revolving credit facilities, and $1.4 billion of debt outstanding.

Dividend Details

The Board of Directors authorized, and the Company declared, a quarterly dividend for the second quarter of 2019 equal to a quarterly rate of $0.1625 per share on its Class A common stock, payable to the stockholders of record as of June 25, 2019, which was paid in cash on July 5, 2019. A portion of each dividend may constitute a return of capital for tax purposes. There is no assurance that the Company will continue to declare dividends or at this rate.

The Board of Directors authorized, and the Company declared a quarterly cash dividend on its 8.250% Series A Cumulative Redeemable Preferred Stock for the second quarter of 2019, in the amount of $0.515625 per share. In addition, the Company declared a quarterly cash dividend on its 7.625% Series C Cumulative Redeemable Preferred Stock for the second quarter of 2019, in the amount of $0.4765625 per share. Further, the Company declared a quarterly cash dividend on its 7.125% Series D Cumulative Preferred Stock for the second quarter of 2019, in the amount of $0.4453125 per share.  The dividends were payable to the stockholders of record on June 25, 2019, and were paid on July 5, 2019.

On July 12, 2019, 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, 2019, which was paid in cash on August 5, 2019, and as of August 23, 2019, and September 25, 2019, which will be paid in cash on September 5, 2019 and October 4, 2019, respectively.

2019 Guidance

Based on the Company's current outlook and market conditions, the Company is increasing the midpoint of its 2019 CFFO guidance by narrowing it to a range of $0.81 to $0.84 per share from the prior range of $0.80 to $0.84 per share.  For additional guidance details, please see page 31 of Company's Second Quarter 2019 Earnings Supplement available under Investors 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 Tuesday, August 6, 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 September 6, 2019 at http://services.choruscall.com/links/brg190806.html, as well as by dialing +1 (877) 344-7529 in the U.S., or +1 (412) 317-0088 internationally, and requesting conference number 10133456.

The full text of this Earnings Release and additional Supplemental Information is available in the Investors 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 February 27, 2019, 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 June 30, 2019:

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%


$    1,319


96%

ARIUM Glenridge


Atlanta, GA


480


1990


90%


1,241


94%

ARIUM Grandewood


Orlando, FL


306


2005


100%


1,416


94%

ARIUM Gulfshore


Naples, FL


368


2016


100%


1,324


90%

ARIUM Hunter's Creek


Orlando, FL


532


1999


100%


1,409


97%

ARIUM Metrowest


Orlando, FL


510


2001


100%


1,392


94%

ARIUM Palms


Orlando, FL


252


2008


100%


1,359


97%

ARIUM Pine Lakes


Port St. Lucie, FL


320


2003


100%


1,307


92%

ARIUM Westside


Atlanta, GA


336


2008


90%


1,530


87%

Ashford Belmar


Lakewood, CO


512


 1988/1993


85%


1,627


92%

Ashton Reserve


Charlotte, NC


473


2015


100%


1,121


96%

Citrus Tower


Orlando, FL


336


2006


97%


1,330


92%

Element


Las Vegas, NV


200


1995


100%


1,233


94%

Enders Place at Baldwin Park


Orlando, FL


220


2003


92%


1,768


98%

James on South First


Austin, TX


250


2016


90%


1,277


98%

Marquis at Crown Ridge


San Antonio, TX


352


2009


90%


1,026


92%

Marquis at Stone Oak


San Antonio, TX


335


2007


90%


1,460


95%

Marquis at The Cascades


Tyler, TX


582


2009


90%


1,219


91%

Marquis at TPC


San Antonio, TX


139


2008


90%


1,499


96%

Outlook at Greystone


Birmingham, AL


300


2007


100%


991


95%

Park & Kingston


Charlotte, NC


168


2015


100%


1,304


96%

Plantation Park


Lake Jackson, TX


238


2016


80%


1,400


89%

Preston View


Morrisville, NC


382


2000


100%


1,124


96%

Providence Trail


Mount Juliet, TN


334


2007


100%


1,219


94%

Roswell City Walk


Roswell, GA


320


2015


98%


1,542


96%

Sands Parc


Daytona Beach, FL


264


2017


100%


1,370


96%

Sorrel


Frisco, TX


352


2015


100%


1,196


90%

Sovereign


Fort Worth, TX


322


2015


100%


1,391


92%

The Brodie


Austin, TX


324


2001


93%


1,277


98%

The Links at Plum Creek


Castle Rock, CO


264


2000


88%


1,433


93%

The Mills


Greenville, SC


304


2013


100%


1,048


94%

The Preserve at Henderson Beach


Destin, FL


340


2009


100%


1,440


97%

Veranda at Centerfield


Houston, TX


400


1999


93%


945


94%

Villages at Cypress Creek


Houston, TX


384


2001


80%


1,137


93%

Wesley Village


Charlotte, NC


301


2010


100%


1,378


94%

Consolidated Operating Properties Subtotal/Average


11,820






$    1,312


94%














Mezzanine/Preferred
Investments


Location


Actual/
Planned
Number
of Units






Pro
Forma
Average
Rent




Alexan CityCentre


Houston, TX


340






$    1,747

(2)



Alexan Southside Place


Houston, TX


270






1,660

(2)



Arlo


Charlotte, NC


286






1,507




Cade Boca Raton


Boca Raton, FL


90






2,549




Domain at The One Forty


Garland, TX


299






1,469




Flagler Village


Fort Lauderdale, FL


385






2,352




Helios


Atlanta, GA


282






1,458

(2)



Leigh House


Raleigh, NC


245






1,291

(2)



North Creek Apartments


Leander, TX


259






1,358




Novel Perimeter


Atlanta, GA


320






1,749




Riverside Apartments


Austin, TX


222






1,408




The Park at Chapel Hill


Chapel Hill, SC


     *






              *




Vickers Historic Roswell


Roswell, GA


79






3,176




Wayforth at Concord


Concord, NC


150






1,707




Whetstone Apartments


Durham, NC


204






1,294

(2)



Mezzanine and Preferred Investments Subtotal/Average


3,431






$    1,682


















Portfolio Properties Total/Average


15,251






$    1,398



















(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 June 30, 2019.
(3) Percent occupied is calculated as (i) the number of units occupied as of June 30, 2019, divided by (ii) total number of units, expressed as a percentage.
* The development is in the planning phase, project specifications are in process.

 

Consolidated Statement of Operations

For the Three and Six Months Ended June 30, 2019 and 2018

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




Three Months Ended



Six Months Ended




June 30,



June 30,




2019



2018



2019



2018


Revenues

















Rental and other property revenues


$

46,464



$

39,324



$

92,153



$

75,998


Interest income from related parties



5,973




5,635




11,749




10,830


Total revenues



52,437




44,959




103,902




86,828


Expenses

















Property operating



18,868




16,874




37,470




32,533


Property management fees



1,235




1,074




2,451




2,067


General and administrative



5,046




4,528




10,674




9,197


Acquisition and pursuit costs



70




28




128




71


Weather-related losses, net



291







291




168


Depreciation and amortization



16,226




14,819




33,454




30,460


Total expenses



41,736




37,323




84,468




74,496


Operating income



10,701




7,636




19,434




12,332


Other income (expense)

















Preferred returns on unconsolidated real estate joint ventures



2,492




2,626




4,781




5,088


Gain on sale of non-depreciable real estate investments









679





Loss on extinguishment of debt and debt modification costs






(653)







(653)


Interest expense, net



(15,125)




(13,041)




(31,191)




(23,158)


     Total other expense



(12,633)




(11,068)




(25,731)




(18,723)


Net loss



(1,932)




(3,432)




(6,297)




(6,391)


Preferred stock dividends



(11,019)




(8,643)




(21,403)




(16,890)


Preferred stock accretion



(2,316)




(1,400)




(4,203)




(2,510)


Net loss attributable to noncontrolling interests

















Operating Partnership units



(3,887)




(3,010)




(7,938)




(5,685)


Partially owned properties



(390)




(253)




(882)




(468)


Net loss attributable to noncontrolling interests



(4,277)




(3,263)




(8,820)




(6,153)


Net loss attributable to common stockholders


$

(10,990)



$

(10,212)



$

(23,083)



$

(19,638)



















Net loss per common share - Basic


$

(0.50)



$

(0.44)



$

(1.03)



$

(0.83)



















Net loss per common share – Diluted


$

(0.50)



$

(0.44)



$

(1.03)



$

(0.83)



















Weighted average basic common shares outstanding



22,430,619




23,800,770




22,775,203




23,971,129


Weighted average diluted common shares outstanding



22,430,619




23,800,770




22,775,203




23,971,129


 

 

Consolidated Balance Sheets

Second Quarter 2019

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




June 30,
2019



December 31,
2018


ASSETS









Net Real Estate Investments









Land


$

191,192



$

200,385


Buildings and improvements



1,480,761




1,546,244


Furniture, fixtures and equipment



54,148




55,050


Construction in progress



155




989


Total Gross Real Estate Investments



1,726,256




1,802,668


Accumulated depreciation



(117,115)




(108,911)


Total Net Operating Real Estate Investments



1,609,141




1,693,757


Operating real estate held for sale, net



172,555





Total Net Real Estate Investments



1,781,696




1,693,757


Cash and cash equivalents



28,534




24,775


Restricted cash



26,615




27,469


Notes and accrued interest receivable from related parties



175,768




164,084


Due from affiliates



3,542




2,854


Accounts receivable, prepaids and other assets



16,582




14,395


Preferred equity investments and investments in unconsolidated real estate joint ventures



100,704




89,033


In-place lease intangible assets, net



1,786




1,768


Non-real estate assets associated with operating real estate held for sale



481





Total Assets


$

2,135,708



$

2,018,135











LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY









Mortgages payable


$

1,142,635



$

1,206,136


Mortgages payable associated with operating real estate held for sale



137,394





Revolving credit facilities



101,300




82,209


Accounts payable



949




1,486


Other accrued liabilities



27,446




31,690


Due to affiliates



773




726


Distributions payable



12,527




12,073


Liabilities associated with operating real estate held for sale



3,024





Total Liabilities



1,426,048




1,334,320



8.250% Series A Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 10,875,000 shares authorized; 5,721,460 shares issued and outstanding as of June 30, 2019 and December 31, 2018



139,912




139,545



6.000% Series B Redeemable Preferred Stock, liquidation preference $1,000 per share, 1,225,000 shares authorized; 399,502 and 306,009 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively



357,346




272,842



7.625% Series C Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares authorized; 2,323,750 shares issued and outstanding as of June 30, 2019 and December 31, 2018



56,626




56,485


Equity









Stockholders' Equity









Preferred stock, $0.01 par value, 229,900,000 shares authorized; no shares issued and outstanding







7.125% Series D Cumulative Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares authorized; 2,850,602 shares issued and outstanding as of June 30, 2019 and December 31, 2018



68,705




68,705


Common stock - Class A, $0.01 par value, 747,509,582 shares authorized; 22,294,327 and 23,322,211 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively



223




233


Common stock - Class C, $0.01 par value, 76,603 shares authorized; 76,603 shares issued and outstanding as of June 30, 2019 and December 31, 2018



1




1


Additional paid-in-capital



295,444




307,938


Distributions in excess of cumulative earnings



(248,988)




(218,531)


Total Stockholders' Equity



115,385




158,346


Noncontrolling Interests









Operating Partnership units



15,405




27,613


    Partially owned properties



24,986




28,984


Total Noncontrolling Interests



40,391




56,597


Total Equity



155,776




214,943


TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY


$

2,135,708



$

2,018,135













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 and Core Funds from Operations Attributable to Common Shares and Units

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

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 on sales of depreciable real estate 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 acquisition expenses, non-cash interest, unrealized gains or losses on derivatives, losses on extinguishment of debt and debt modification costs (includes prepayment penalties incurred and the write-off of unamortized deferred financing costs and fair market value adjustments of assumed debt), one-time weather-related costs, gains or losses on sales of non-depreciable real estate property, shareholder activism, stock compensation expense 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.

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

Neither FFO nor CFFO is equivalent to net income, including net income attributable to common stockholders, or cash generated from operating activities determined in accordance with GAAP. Furthermore, FFO and CFFO do not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO nor CFFO should be considered as an alternative to net income, 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 four operating properties and four properties held through preferred equity or mezzanine loan investments subsequent to June 30, 2018.  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 and CFFO to net loss, the most directly comparable GAAP financial measure, for the three and six months ended June 30, 2019 and 2018 (in thousands, except per share amounts):


Three Months Ended



Six Months Ended



June 30,



June 30,



2019



2018



2019



2018


Net loss attributable to common shares

$

(10,990)



$

(10,212)



$

(23,083)



$

(19,638)


Add back: Net loss attributable to Operating Partnership units


(3,887)




(3,010)




(7,938)




(5,685)


Net loss attributable to common shares and units


(14,877)




(13,222)




(31,021)




(25,323)


  Common stockholders and Operating Partnership units pro-rata share of:
















Real estate depreciation and amortization (1)


15,290




13,990




31,432




28,821


FFO Attributable to Common Shares and Units


413




768




411




3,498


Common stockholders and Operating Partnership units pro-rata share of:
















Acquisition and pursuit costs


70




28




128




71


 Non-cash interest expense


786




1,602




1,561




2,062


Unrealized loss on derivatives


652







2,287





Loss on extinguishment of debt and debt modification costs





653







653


Weather-related losses, net


249







249




165


Non-real estate depreciation and amortization


84




75




170




139


Gain on sale of non-depreciable real estate investments








(679)





Shareholder activism


55







393





Non-cash preferred returns on unconsolidated real estate joint ventures


(386)




(233)




(598)




(464)


Non-cash equity compensation


2,427




1,638




4,819




3,418


Preferred stock accretion


2,316




1,400




4,203




2,510


CFFO Attributable to Common Shares and Units

$

6,666



$

5,931



$

12,944



$

12,052


















Per Share and Unit Information:
















FFO Attributable to Common Shares and Units - diluted

$

0.01



$

0.02



$

0.01



$

0.11


CFFO Attributable to Common Shares and Units - diluted

$

0.22



$

0.19



$

0.42



$

0.39


















Weighted average common shares and units outstanding - diluted


30,550,863




30,814,839




30,704,271




30,873,023


















(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


Six Months Ended




June 30,


June 30,




2019


2018


2019


2018

Net loss attributable to common stockholders


$

(10,990)



$

(10,212)



$

(23,083)



$

(19,638)



Net loss income attributable to noncontrolling interests



(4,277)




(3,263)




(8,820)




(6,153)



Preferred stock dividends



11,019




8,643




21,403




16,890



Preferred stock accretion



2,316




1,400




4,203




2,510



Interest expense, net



15,125




13,041




31,191




23,158



Depreciation and amortization



16,142




14,744




33,284




30,321



Loss on extinguishment of debt and debt modification costs



-




653




-




653


EBITDAre


$

29,335



$

25,006



$

58,178



$

47,741



Acquisition and pursuit costs



70




28




128




71



Non-real estate depreciation and amortization



84




75




170




139



Weather-related losses, net



291




-




291




168



Gain on sale of non-depreciable real estate investments



-




-




(679)




-



Shareholder activism



55




-




393




-



Non-cash equity compensation



2,427




1,638




4,819




3,418



Non-cash preferred returns on unconsolidated real estate joint ventures



(386)




(233)




(598)




(464)


Adjusted EBITDAre


$

31,876



$

26,514



$

62,702



$

51,073




















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 rental and other 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.

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


Six Months Ended




June 30, 


June 30, 




2019



2018



2019



2018


Net loss attributable to common shares


$

(10,990)



$

(10,212)



$

(23,083)



$

(19,638)



Add back: Net loss attributable to Operating Partnership units



(3,887)




(3,010)




(7,938)




(5,685)


Net loss attributable to common shares and units



(14,877)




(13,222)




(31,021)




(25,323)


Add common stockholders and Operating Partnership units pro-rata share of:


















Depreciation and amortization



15,290




13,990




31,432




28,821



Non-real estate depreciation and amortization



84




75




170




139



Non-cash interest expense



786




1,602




1,561




2,062



Unrealized loss on derivatives



652







2,287






Loss on extinguishment of debt and debt modification costs






653







653



Property management fees



1,170




1,017




2,318




1,956



Acquisition and pursuit costs



70




28




128




71



Corporate operating expenses



4,975




4,528




10,529




9,197



Weather-related losses, net



249







249




165



Preferred dividends



11,019




8,643




21,403




16,890



Preferred stock accretion



2,316




1,400




4,203




2,510


Less common stockholders and Operating Partnership units pro-rata share of:


















Preferred returns on unconsolidated real estate joint ventures



2,492




2,626




4,781




5,088



Interest income from related parties



5,973




5,635




11,749




10,830



Gain on sale of non-depreciable real estate investments









679





Pro-rata share of properties' income



13,269




10,453




26,050




21,223


Add:


















Noncontrolling interest pro-rata share of partially owned property income



690




542




1,418




1,152


Total property income



13,959




10,995




27,468




22,375


Add:


















Interest expense



13,637




11,455




27,215




21,090


Net operating income



27,596




22,450




54,683




43,465


Less:


















Non-same store net operating income



3,752




571




8,719




1,382


Same store net operating income (1)


$

23,844



$

21,879



$

45,964



$

42,083


(1) Same store portfolio for the three months ended June 30, 2019 consists of 29 properties, which represent 9,872 units.  Same store portfolio for the six months ended June 30, 2019 consists of 28 properties, which represent 9,608 units.

 

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SOURCE Bluerock Real Estate