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 Bluerock Residential Growth REIT Announces Fourth Quarter and Full Year 2017 Results
   Wednesday, February 14, 2018 8:34:00 AM ET

Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG) ("the Company"), an owner of highly amenitized multi-family apartment communities, announced today its financial results for the quarter and year ended December 31, 2017.

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Fourth Quarter Highlights

-- Total revenues grew 54% to $36.5 million for the quarter from $23.7 million in the prior year period. Net loss attributable to common stockholders for the fourth quarter of 2017 was ($1.87) per share, as compared to net loss attributable to common stockholders of ($0.34) per share in the prior year period. The Company’s performance during the fourth quarter was impacted by the timing of its investment activity and the utilization of the cash on its balance sheet late in the quarter.

-- Adjusted funds from operations ("AFFO") per share is $0.13 for the quarter as compared to $0.18 in fourth quarter 2016, and exceeded guidance of $0.03 to $0.06 per share.

-- Property Net Operating Income ("NOI") grew 37.6% to $20.2 million, from $14.7 million in the prior year period.

-- Same store NOI decreased 0.6%, as compared to the prior year period, primarily due to two properties located in Dallas, Texas. Same store revenue and NOI growth were 4.6% and 1.4%, respectively, excluding two Dallas, Texas properties.

-- Consolidated real estate investments, at cost, increased 41% to $1.5 billion at December 31, 2017 from $1.0 billion at December 31, 2016.

-- Invested approximately $189 million of equity into approximately $509 million of real estate transactions, including four operating properties, the origination of three development mezzanine loans, and the buyouts of minority ownership interests in five assets.

-- Entered into a $150 million credit agreement, with an accordion borrowing feature up to $250 million.

-- Successfully became a self-managed real estate investment trust with the internalization of management.

Management Commentary

"2017 was a significant year in the Company’s evolution as we accomplished a number of milestones which position us well for 2018 and beyond," said Ramin Kamfar, Chairman and CEO. "Importantly, we achieved one of our key IPO goals and completed the internalization of our management function, creating further alignment of management with our shareholders. During the year we also completed more than $788 million in investments, including $353 million in the fourth quarter, in operating properties, mezzanine loans and increases in already existing property ownership. While we did not fully benefit from these investments in our fourth quarter due to their timing, we are pleased with our ability to deploy our cash into attractive assets and are well-positioned to demonstrate the earnings potential of our portfolio in 2018 and beyond. Finally, we established our first revolving credit facility, entering into a $150 million bank line of credit, which along with our ongoing opportunistic use of our 6% Series B Preferred Stock Offering, provides us with flexibility and access to cost effective capital. We remain focused on our strategy of owning highly amenitized communities in targeted knowledge-economy growth markets, and with a robust pipeline of compelling investment opportunities we are confident in our outlook."

Fourth Quarter Acquisition Activity

During the fourth quarter of 2017, the Company deployed approximately $189 million of equity into approximately $509 million of real estate transactions. These transactions are comprised of the acquisition of 1,646 units across four properties, the origination of three mezzanine loans for development properties totaling 784 units, and the buyouts of minority ownership interests in five assets totaling 1,377 units. The Company expects a full-quarter AFFO contribution from these assets in the first quarter of 2018.

October:

-- Acquired a 100% interest in a 300-unit apartment community located in Birmingham, Alabama, known as Springs at Greystone, which was rebranded as Outlook at Greystone. The total purchase price was approximately $36.3 million, funded in part with the Company’s senior secured credit facility.

-- Acquired a 100% interest in two properties, ARIUM Hunter’s Creek, a 532-unit apartment community, and ARIUM Metrowest, a 510-unit apartment community, both located in Orlando, Florida. The total purchase price for the two properties was approximately $182.9 million, funded in part with a $72.3 million mortgage loan on ARIUM Hunter’s Creek and in part with the Company’s senior secured credit facility.

November:

-- Acquired a 100% interest in a 304-unit apartment community located in Greenville, South Carolina, known as Springs at Greenville, which was rebranded as The Mills. The total purchase price was approximately $40.3 million, funded in part with the assumption of a $26.8 million senior mortgage loan.

December:

-- Substantially redeemed its equity interest in the Flagler Village development, and in exchange provided an approximately $54 million mezzanine loan for the development.

-- Substantially redeemed its equity interest in the Crescent Perimeter development, and in exchange provided an approximately $21 million mezzanine loan for the development.

-- Substantially redeemed its equity interest in the Vickers Village development, and in exchange provided an approximately $10 million mezzanine loan for the development.

-- As part of an effort to further simplify its structure, the Company also invested approximately $8 million to increase its ownership stake to 100% in each of its Preston View, Wesley Village, ARIUM Grandewood and Park & Kingston properties, and to 92% in its Enders Place at Baldwin Park property.

Financial Results

Net loss attributable to common stockholders for the fourth quarter of 2017 was $46.2 million, compared to a net loss of $7.3 million in the prior year period. The quarter’s results include the costs related to the internalization of the Company’s management function. Net loss attributable to common stockholders included non-cash expenses of $2.02 per share in the fourth quarter of 2017 compared to $0.51 per share for the prior year period. The Company’s performance during the fourth quarter was also impacted by the timing of its investment activity and the utilization of the cash on its balance sheet late in the quarter.

AFFO for the fourth quarter of 2017 was $3.1 million, or $0.13 per diluted share, compared to $3.7 million, or $0.18 per diluted share in the prior year period. AFFO was primarily impacted by increases in property NOI of $5.5 million and interest income of $2.2 million arising from significant investment activity, and offset by interest expense of $3.2 million, lower income from preferred returns and equity in income from unconsolidated real estate joint ventures of $0.8 million, and an increase in preferred stock dividends of $2.6 million.

Total Portfolio Performance
$ In thousands, except average rental rates 4Q17                4Q16                Variance     FY17       FY16      Variance
Total Revenues (1)                          $         36,451    $         23,652    54.1%        $  123,184 $  81,041 52.0%
Property Operating Expenses                 $         14,019    $         8,928     57.0%        $  47,954  $  31,521 52.1%
NOI                                         $         20,243    $         14,707    37.6%        $  67,300  $  49,503 36.0%
Operating Margin                            59.1%               62.2%               (310)    bps 58.4%      61.1%     (270)    bps
Occupancy Percentage                        94.1%               94.0%               10       bps 94.3%      94.0%     30       bps
Average Rental Rate                         $         1,222     $         1,267     (3.6)%       $  1,220   $  1,255  (2.8)%
(1)Including interest income from related parties

For the fourth quarter of 2017, total portfolio NOI was $20.2 million, an increase of $5.5 million, or 37.6%, compared to the same period in the prior year. Property revenues increased by 45.0% compared to the same prior year period primarily attributable to the increased size of the portfolio.

Property NOI margins were 59.1% of revenue for the quarter, compared to 62.2% of revenue in the prior year quarter. Property NOI margins were impacted by the sales of more stabilized assets with proceeds being recycled into replacement properties with higher growth opportunities, which require time to realize margin improvement. Property operating expenses increased 57.0% primarily the result of the increased size of the portfolio.

Same Store Portfolio Performance
$ In thousands, except average rental rates 4Q17      4Q16      Variance     FY17      FY16      Variance
Revenues                                    $  13,796 $  13,414 2.8%         $  37,329 $  35,995 3.7%
Property Operating Expenses                 $  5,418  $  4,988  8.6%         $  14,582 $  14,038 3.9%
NOI                                         $  8,378  $  8,426  (0.6)%       $  22,747 $  21,957 3.6%
Operating Margin                            60.7%     62.8%     (210)    bps 60.9%     61.0%     (10)     bps
Occupancy Percentage                        94.3%     94.5%     (20)     bps 94.8%     95.3%     (50)     bps
Average Rental Rate                         $  1,290  $  1,256  2.7%         $  1,242  $  1,197  3.8%

The Company’s same store portfolio for the quarter and year ended December 31, 2017 include only 11 and 8 properties, respectively. Because of the limited number of same store properties compared to the number of properties in our portfolio in 2017 and 2016, respectively, the Company’s same store performance measures may be of limited usefulness.

For the fourth quarter of 2017, same store NOI was $8.4 million, a decrease of $48,000, or 0.6%, compared to the same period in the prior year. Same store property revenues increased by 2.8% compared to the same prior year period, primarily attributable to a 2.7% increase in average rental rates. Same store expenses increased 8.6% primarily as the result of an approximate $280,000 increase in real estate taxes due to higher valuations by municipalities and $70,000 increase in wages. The same store results were also disproportionately impacted by performance of two assets in the Dallas Fort Worth MSA, particularly our Frisco asset which remains challenged from new supply. Excluding the two Dallas assets, year-over-year same store revenue and NOI increased 4.6% and 1.4%, respectively.

Balance Sheet

On October 4, 2017, the Company, through its operating partnership, entered into a credit agreement (the "Credit Facility") with KeyBank National Association and other lenders. The Credit Facility provides for an initial loan commitment amount of $150 million, with an accordion borrowing feature up to $250 million. The Credit Facility matures in October 2020 and has a one-year extension option. Borrowings under the Credit Facility bear interest, at the Company’s option, at LIBOR plus 1.80% to 2.45%, or the base rate plus 0.80% to 1.45%, depending on the Company’s leverage ratio.

As of December 31, 2017, the Company had $35.0 million of unrestricted cash on its balance sheet, approximately $4.0 million available on its revolving credit facility, and $1.0 billion of debt outstanding.

Management Internalization

As previously disclosed, on October 31, 2017, the Company successfully completed the internalization of the external management function provided by the former Manager and became a self-managed real estate investment trust.

Dividend Details

On December 20, 2017, the Board of Directors announced that it had revised the Company’s dividend policy for the Company’s Class A common stock and set an annual dividend rate of $0.65 per share. The Board of Directors considered a number of factors in setting the new dividend rate, including but not limited to achieving a sustainable dividend covered by current recurring AFFO (vs. pro forma AFFO), multifamily and small cap peer dividend rates and payout ratios, providing financial flexibility for the Company, and achieving an appropriate balance between the retention of capital to invest and grow net asset value and the importance of current distributions.

The Board of Directors authorized, and the Company declared, a quarterly dividend for the first 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 March 23, 2018, which will be paid in cash on April 5, 2018. Holders of OP and LTIP Units are entitled to receive "distribution equivalents" at the same time as dividends are paid to holders of our Class A common stock. A portion of each dividend may constitute a return of capital for tax purposes. There is no assurance that we will continue to declare dividends or at this rate.

On January 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 January 25, 2018, which was paid in cash on February 5, 2018, and as of February 23, 2018, and March 23, 2018, which will be paid in cash on March 5, 2018 and April 5, 2018, respectively.

2018 Guidance

Based on the Company’s current outlook and market conditions, the Company anticipates 2018 AFFO in the range of $0.65 to $0.70 per share. For additional guidance details underlying earnings guidance, please see page 30 of Company’s Fourth Quarter 2017 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 Wednesday, February 14, 2018 by dialing +1 (866) 843-0890 within the U.S., or +1 (412) 317-6597, and requesting the "Bluerock Residential Conference."

For those who are not available to listen to the live call, the conference call will be available for replay on the Company’s website two hours after the call concludes, and will remain available until March 14, 2018 at http://services.choruscall.com/links/brg180214.html, as well as by dialing +1 (877) 344-7529 in the U.S., or +1 (412) 317-0088 internationally, and requesting conference number 10116771.

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 Core+ 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 22, 2017, 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 development properties as of December 31, 2017:

Consolidated Operating                                  Location                                                Number of Units                                         Year Built/                                             Ownership Interest                                      Average Rent (2)                                        % Occupied (3)
Properties                                                                                                                                                              Renovated (1)
ARIUM at Palmer Ranch                                   Sarasota, FL                                            320                                                     2016                                                    95%                                                     $    1,251                                              97%
ARIUM Glenridge                                         Atlanta, GA                                             480                                                     1990                                                    90%                                                     1,120                                                   94%
ARIUM Grandewood                                        Orlando, FL                                             306                                                     2005                                                    100%                                                    1,298                                                   97%
ARIUM Gulfshore                                         Naples, FL                                              368                                                     2016                                                    95%                                                     1,272                                                   99%
ARIUM Hunter’s Creek                                    Orlando, FL                                             532                                                     1999                                                    100%                                                    1,310                                                   98%
ARIUM Metrowest                                         Orlando, FL                                             510                                                     2001                                                    100%                                                    1,273                                                   98%
ARIUM Palms                                             Orlando, FL                                             252                                                     2008                                                    95%                                                     1,306                                                   97%
ARIUM Pine Lakes                                        Port St. Lucie, FL                                      320                                                     2003                                                    85%                                                     1,182                                                   96%
ARIUM Westside                                          Atlanta, GA                                             336                                                     2008                                                    90%                                                     1,500                                                   94%
Ashton Reserve                                          Charlotte, NC                                           473                                                     2015                                                    100%                                                    1,062                                                   93%
Citrus Tower                                            Orlando, FL                                             336                                                     2006                                                    97%                                                     1,225                                                   93%
Enders Place at Baldwin Park                            Orlando, FL                                             220                                                     2003                                                    92%                                                     1,643                                                   97%
James on South First                                    Austin, TX                                              250                                                     2016                                                    90%                                                     1,228                                                   92%
Marquis at Crown Ridge                                  San Antonio, TX                                         352                                                     2009                                                    90%                                                     946                                                     92%
Marquis at Stone Oak                                    San Antonio, TX                                         335                                                     2007                                                    90%                                                     1,352                                                   94%
Marquis at The Cascades                                 Tyler, TX                                               582                                                     2009                                                    90%                                                     1,075                                                   92%
Marquis at TPC                                          San Antonio, TX                                         139                                                     2008                                                    90%                                                     1,308                                                   95%
Outlook at Greystone                                    Birmingham, AL                                          300                                                     2007                                                    100%                                                    936                                                     90%
Park & Kingston                                         Charlotte, NC                                           168                                                     2015                                                    100%                                                    1,234                                                   94%
Preston View                                            Morrisville, NC                                         382                                                     2000                                                    100%                                                    1,068                                                   93%
Roswell City Walk                                       Roswell, GA                                             320                                                     2015                                                    98%                                                     1,482                                                   95%
Sorrel                                                  Frisco, TX                                              352                                                     2015                                                    95%                                                     1,175                                                   95%
Sovereign                                               Fort Worth, TX                                          322                                                     2015                                                    95%                                                     1,308                                                   93%
The Brodie                                              Austin, TX                                              324                                                     2001                                                    93%                                                     1,218                                                   91%
The Mills                                               Greenville, SC                                          304                                                     2013                                                    100%                                                    1,085                                                   89%
The Preserve at Henderson Beach                         Destin, FL                                              340                                                     2009                                                    100%                                                    1,338                                                   91%
Villages at Cypress Creek                               Houston, TX                                             384                                                     2001                                                    80%                                                     1,056                                                   95%
Wesley Village                                          Charlotte, NC                                           301                                                     2010                                                    100%                                                    1,285                                                   90%
Consolidated Operating Properties Subtotal/Average                                                              9,608                                                                                                                                                                   $    1,222                                              94%
Mezzanine/Preferred                                     Location                                                Planned Number of Units                                                                                                                                                 Pro Forma Average Rent (4)
Investments
Alexan CityCentre                                       Houston, TX                                             340                                                                                                                                                                     $    2,144
Alexan Southside Place                                  Houston, TX                                             270                                                                                                                                                                     2,012
APOK Townhomes                                          Boca Raton, FL                                          90                                                                                                                                                                      2,549
Crescent Perimeter                                      Atlanta, GA                                             320                                                                                                                                                                     1,749
Domain                                                  Garland, TX                                             299                                                                                                                                                                     1,469
Flagler Village                                         Fort Lauderdale, FL                                     385                                                                                                                                                                     2,352
Helios                                                  Atlanta, GA                                             282                                                                                                                                                                     1,486
Lake Boone Trail                                        Raleigh, NC                                             245                                                                                                                                                                     1,271
Vickers Village                                         Roswell, GA                                             79                                                                                                                                                                      3,176
West Morehead                                           Charlotte, NC                                           286                                                                                                                                                                     1,507
Whetstone                                               Durham, NC                                              204                                                                                                                                                                     1,260
Mezzanine and Preferred Investments Subtotal/Average                                                            2,800                                                                                                                                                                   $    1,815
Portfolio Properties Total/Average                                                                              12,408                                                                                                                                                                  $    1,362
(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 all occupied units for the three months ended December 31, 2017.
(3) Percent occupied is calculated as (i) the number of units occupied as of December 31, 2017, divided by (ii) total number of units, expressed as a percentage.
(4) The properties are under development.  Alexan CityCentre, Alexan Southside Place, Helios, and Lake Boone Trail are preferred equity investments with an option to convert into partial ownership upon stabilization.  APOK Townhomes, Crescent Perimeter, Domain, Flagler Village, Vickers Village, and West Morehead are mezzanine loan investments. Additionally, APOK Townhomes, Domain, and West Morehead have an option to purchase an indirect property interest upon maturity.  Whetstone is currently a preferred equity investment providing a stated investment return. Pro forma average rent represents the average pro forma effective monthly rent per occupied unit for all expected occupied units upon stabilization.
Consolidated Statement of Operations
For the Three and Twelve Months Ended December 31, 2017 and 2016
(Unaudited and dollars in thousands except for share and per share data)
                                                                      Three Months Ended                  Year Ended
                                                                      December 31,                        December 31,
                                                                      2017              2016              2017              2016
Revenues
Net rental income                                                     $    30,621       $    21,353       $    102,974      $    73,366
Other property revenues                                                    3,641             2,282             12,280            7,658
Interest income from related parties                                       2,189             17                7,930             17
Total revenues                                                             36,451            23,652            123,184           81,041
Expenses
Property operating                                                         14,019            8,928             47,954            31,521
Property management fees                                                   934               680               3,185             2,339
General and administrative                                                 3,292             1,709             7,541             5,863
Management fees                                                            993               2,015             12,726            6,510
Acquisition and pursuit costs                                              19                2,444             3,233             4,590
Management internalization                                                 41,907            63                43,554            63
Weather-related losses, net                                                336               --                1,014             --
Depreciation and amortization                                              15,530            8,725             48,624            31,187
Total expenses                                                             77,030            24,564            167,831           82,073
Operating loss                                                             (40,579)          (912)             (44,647)          (1,032)
Other income (expense)
Other income                                                               --                --                17                26
Preferred returns and equity in income of unconsolidated real estate       2,472             3,015             10,336            11,632
joint ventures
Gain on sale of real estate investments                                    123               --                50,163            4,947
Gain on sale of real estate joint venture interest, net                    24                --                10,262            --
Gain on revaluation of equity of business combination                      --                3,761             --                3,761
Loss on early extinguishment of debt                                       --                --                (1,639)           (2,393)
Interest expense, net                                                      (9,181)           (5,824)           (31,520)          (19,915)
Total other (expense) income                                               (6,562)           952               37,619            (1,942)
Net (loss) income                                                          (47,141)          40                (7,028)           (2,974)
Preferred stock dividends                                                  (7,753)           (5,373)           (27,023)          (13,763)
Preferred stock accretion                                                  (1,123)           (324)             (3,011)           (893)
Net loss (income) attributable to noncontrolling interests
Operating partnership units                                                (9,376)           (102)             (9,372)           (276)
Partially-owned properties                                                 (400)             1,704             17,989            1,631
Net (loss) income attributable to noncontrolling interests                 (9,776)           1,602             8,617             1,355
Net loss attributable to common stockholders                          $    (46,241)     $    (7,259)      $    (45,679)     $    (18,985)
Net loss per common share - Basic                                     $    (1.87)       $    (0.34)       $    (1.79)       $    (0.91)
Net loss per common share - Diluted                                   $    (1.87)       $    (0.34)       $    (1.79)       $    (0.91)
Weighted average basic common shares outstanding                           24,701,535        21,102,233        25,561,673        20,805,852
Weighted average diluted common shares outstanding                         24,701,535        21,102,233        25,561,673        20,805,852
Consolidated Balance Sheets
Fourth Quarter 2017
(Unaudited and dollars in thousands except for share and per share amounts)
                                                                                                                                                                                                               December 31,        December 31,
                                                                                                                                                                                                               2017                2016
ASSETS
Net Real Estate Investments
Land                                                                                                                                                                                                           $       169,135     $       142,274
Buildings and improvements                                                                                                                                                                                             1,244,193           848,445
Furniture, fixtures and equipment                                                                                                                                                                                      38,446              27,617
Construction in progress                                                                                                                                                                                               985                 10,878
Total Gross Real Estate Investments                                                                                                                                                                                    1,452,759           1,029,214
Accumulated depreciation                                                                                                                                                                                               (55,177)            (42,137)
Total Net Real Estate Investments                                                                                                                                                                                      1,397,582           987,077
Cash and cash equivalents                                                                                                                                                                                              35,015              82,047
Restricted cash                                                                                                                                                                                                        29,575              45,402
Notes and accrued interest receivable from related parties                                                                                                                                                             140,903             21,267
Due from affiliates                                                                                                                                                                                                    2,003               948
Accounts receivable, prepaid and other assets                                                                                                                                                                          9,689               8,610
Preferred equity investments and investments in unconsolidated real estate joint ventures                                                                                                                              71,145              91,132
In-place lease intangible assets, net                                                                                                                                                                                  4,635               4,839
Total Assets                                                                                                                                                                                                   $       1,690,547   $       1,241,322
LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY
Mortgages payable                                                                                                                                                                                              $       939,494     $       710,575
Revolving credit facility                                                                                                                                                                                              67,670              --
Accounts payable                                                                                                                                                                                                       1,652               1,669
Other accrued liabilities                                                                                                                                                                                              22,952              13,431
Due to affiliates                                                                                                                                                                                                      1,575               2,409
Distributions payable                                                                                                                                                                                                  14,287              7,328
Total Liabilities                                                                                                                                                                                                      1,047,630           735,412
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, 2017 and 2016                    138,801             138,316
Series B Redeemable Preferred Stock, liquidation preference $1,000 per share, 725,000 and 150,000 shares authorized, 184,130 and 21,482 issued and outstanding as of December 31, 2017 and 2016, respectively          161,742             18,938
7.6250% Series C Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares authorized, 2,323,750 issued and outstanding as of December 31, 2017
and December 31, 2016                                                                                                                                                                                                  56,196              56,095
Equity
Stockholders’ Equity
Preferred stock, $0.01 par value, 230,400,000 and 246,975,000 shares authorized; none issued and outstanding as of December 31, 2017 and 2016, 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 as of December 31, 2017 and 2016                                    68,705              68,760
Common stock - Class A, $0.01 par value, 747,509,582 and 747,586,185 shares authorized; 24,218,359 and 19,567,506 shares issued and outstanding as of December 31, 2017 and 2016, respectively                         242                 196
Common stock - Class C, $0.01 par value, 76,603 and no shares authorized; 76,603 and no shares issued and outstanding as of December 31, 2017 and 2016, respectively                                                   1                   --
Additional paid-in-capital                                                                                                                                                                                             318,170             257,403
Distributions in excess of cumulative earnings                                                                                                                                                                         (164,286)           (84,631)
Total Stockholders’ Equity                                                                                                                                                                                             222,832             241,728
Noncontrolling Interests
Operating partnership units                                                                                                                                                                                            42,999              2,216
Partially owned properties                                                                                                                                                                                             20,347              48,617
Total Noncontrolling Interests                                                                                                                                                                                         63,346              50,833
Total Equity                                                                                                                                                                                                           286,178             292,561
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY                                                                                                                                                       $       1,690,547   $       1,241,322

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 Adjusted Funds from Operations

Funds from operations attributable to common stockholders ("FFO") is a non-GAAP financial measure that is widely recognized as a measure of REIT operating performance. We consider FFO to be an appropriate supplemental measure of our operating performance as it is based on a net income analysis of property portfolio performance that excludes non-cash items such as depreciation. The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time. Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT, using historical accounting for depreciation, could be less informative. We define FFO, consistent with the National Association of Real Estate Investment Trusts, or ("NAREIT’s") definition, as net income, computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus depreciation and amortization of real estate assets, 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.

In addition to FFO, we use adjusted funds from operations attributable to common stockholders ("AFFO"). AFFO is a computation made by analysts and investors to measure a real estate company’s operating performance by removing the effect of items that do not reflect ongoing property operations. To calculate AFFO, we further adjust FFO by adding back certain items that are not added to net income in NAREIT’s definition of FFO, such as acquisition and pursuit costs, equity based compensation expenses, and any other non-recurring or non-cash expenses, which are costs that do not relate to the operating performance of our properties, and subtracting recurring capital expenditures (and when calculating the quarterly incentive fee paid to our former Manager only, we further adjusted FFO to include any realized gains or losses on our real estate investments).

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

Neither FFO nor AFFO is equivalent to net income, including net income attributable to common stockholders, or cash generated from operating activities determined in accordance with GAAP. Furthermore, FFO and AFFO do not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO nor AFFO should be considered as an alternative to net income, 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 twelve additional operating properties subsequent to December 31, 2016 and sold four properties that were owned in 2016. Therefore, the results presented in the table below are not directly comparable and should not be considered an indication of our future operating performance.

                                                                        Three Months Ended                                                 Year Ended
                                                                        December 31,                                                       December 31,
                                                                        2017                              2016                             2017                              2016
Net loss attributable to common stockholders                            $              (46,241)           $              (7,259)           $              (45,679)           $              (18,985)
Common stockholders pro-rata share of:
Real estate depreciation and amortization(1)                                           12,074                            7,527                            41,974                            26,963
Gain on sale of real estate investments                                                (102)                             (1,828)                          (34,048)                          (6,704)
Gain on sale of real estate joint venture interests, net                               (13)                              --                               (6,344)                           --
FFO Attributable to Common Stockholders                                 $              (34,282)           $              (1,560)           $              (44,097)           $              1,274
Common stockholders pro-rata share of:
Amortization of non-cash interest expense                                              356                               171                              1,848                             790
Acquisition and pursuit costs                                                          15                                2,130                            3,055                             4,123
Management internalization process expense                                             34,842                            63                               36,471                            63
Non-real estate depreciation and amortization                                          5                                 --                               5                                 --
Loss on early extinguishment of debt                                                   --                                --                               1,534                             2,269
Weather-related losses, net                                                            264                               --                               899                               --
Non-recurring income                                                                   --                                (23)                             (16)                              (254)
Non-cash tax abatement                                                                 --                                85                               --                                85
Non-cash preferred returns and equity in income of unconsolidated real                 (210)                             --                               (1,190)                           --
estate joint ventures
Normally recurring capital expenditures                                                (431)                             (252)                            (1,443)                           (907)
Preferred stock accretion                                                              934                               320                              2,804                             880
Non-cash equity compensation                                                           1,639                             2,805                            14,551                            9,405
AFFO Attributable to Common Stockholders                                $              3,132              $              3,739             $              14,421             $              17,728
Weighted average common shares outstanding - diluted                                   24,701,535                        21,102,894                       25,562,064                        20,810,134
PER SHARE INFORMATION:
FFO Attributable to Common Stockholders - diluted                       $              (1.39)             $              (0.07)            $              (1.73)             $              0.06
AFFO Attributable to Common Stockholders - diluted                      $              0.13               $              0.18              $              0.56               $              0.85
(1)    The real estate depreciation and amortization amount includes our share of consolidated real estate-related depreciation and amortization of intangibles, less amounts attributable to noncontrolling interests, and our similar estimated share of unconsolidated depreciation and amortization, which is included in earnings of our unconsolidated real estate joint venture investments.

Earnings Before Interest, Income Taxes, Depreciation and Amortization ("EBITDA")

EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, calculated on a consolidated basis. We consider EBITDA to be an appropriate supplemental measure of our performance because it eliminates depreciation and amortization, 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. Below is a reconciliation of net loss attributable to common stockholders to EBITDA (unaudited and dollars in thousands).

                                                          Three Months Ended             Year Ended
                                                          December 31,                   December 31,
                                                          2017              2016         2017         2016
Net loss attributable to common stockholders              $      (46,241)   $   (7,259)  $ (45,679)   $ (18,985)
Net (loss) income attributable to noncontrolling interest (9,776)           1,602        8,617        1,355
Preferred stock dividends                                 7,753             5,373        27,023       13,763
Preferred stock accretion                                 1,123             324          3,011        893
Interest expense, net                                     9,181             5,824        31,520       19,915
Depreciation and amortization                             15,530            8,725        48,624       31,187
EBITDA                                                    $       (22,430)  $    14,589  $    73,116  $    48,128
Acquisition and pursuit costs                             19                2,444        3,233        4,590
Management internalization process expense                41,907            63           43,554       63
Non-real estate depreciation and amortization             6                 -            6            -
Weather-related losses, net                               336               -            1,014        -
Non-cash equity compensation                              1,972             2,844        15,021       9,543
Non-recurring income                                      -                 (24)         (17)         (258)
Non-cash tax abatement                                    -                 96                        96
Gain on sale of real estate investments                   (123)             -            (50,163)     (4,947)
Gain on sale of real estate joint venture interest, net   (24)              -            (10,262)     -
Gain on revaluation of equity on business combination     -                 (3,761)                   (3,761)
Loss on early extinguishment of debt                      -                 -            1,639        2,393
Non-cash preferred returns and equity in income of        (253)             -            (1,243)      -
unconsolidated real estate joint ventures
Adjusted EBITDA                                           $        21,410   $    16,251  $    75,898  $    55,847

Recurring Capital Expenditures

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

Non-Recurring Capital Expenditures

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

Same Store Properties

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

Property Net Operating Income ("Property NOI")

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

Certain amounts in prior periods, related to tenant reimbursements for utility expenses amounting to $1.2 million and $4.0 million for the three months and year ended December 31, 2016, have been reclassified to other property revenues from property operating expenses, to conform to the current period presentation which includes tenant reimbursements for utility expenses amounting to $1.9 million and $6.5 million for the three months and year ended December 31, 2017. 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 (1)                                                                              Year Ended (2)
                                                                                                                   December 31,                                                                                        December 31,
                                                                                                                   2017                                                          2016                                  2017                                                          2016
Net loss attributable to common stockholders                                                                       $                              (46,241)                       $      (7,259)                        $                              (45,679)                       $      (18,985)
Add pro-rata share:
                               Depreciation and amortization                                                       12,074                                                        7,527                                 41,974                                                        26,963
                               Non-real estate depreciation and amortization                                       5                                                             -                                     5                                                             -
                               Amortization of non-cash interest expense                                           356                                                           171                                   1,848                                                         790
                               Property management fees                                                            726                                                           580                                   2,745                                                         1,959
                               Management fees                                                                     825                                                           1,987                                 12,434                                                        6,417
                               Acquisition and pursuit costs                                                       16                                                            2,130                                 3,055                                                         4,123
                               Loss on early extinguishment of debt                                                -                                                             -                                     1,534                                                         2,269
                               Corporate operating expenses                                                        2,737                                                         1,680                                 6,940                                                         5,779
                               Management internalization process expense                                          34,842                                                        63                                    36,471                                                        63
                               Weather-related losses, net                                                         264                                                           -                                     899                                                           -
                               Preferred dividends                                                                 6,446                                                         5,298                                 25,512                                                        13,567
                               Preferred stock accretion                                                           934                                                           320                                   2,804                                                         880
Less pro-rata share:
                               Other income                                                                        -                                                             -                                     16                                                            26
                               Preferred returns and equity in income of unconsolidated real estate joint ventures 2,055                                                         2,973                                 9,838                                                         11,464
                               Interest income from related parties                                                1,820                                                         17                                    7,500                                                         17
                               Gain on sale of real estate joint venture interest, net                             13                                                            -                                     6,344                                                         -
                               Gain on sale of real estate investments                                             102                                                           1,828                                 34,048                                                        6,704
Pro-rata share of properties’ income                                                                               8,994                                                         7,679                                 32,796                                                        25,614
Add:
                               Noncontrolling interest pro-rata share of property income                           2,526                                                         1,400                                 5,187                                                         4,880
Total property income                                                                                              11,520                                                        9,079                                 37,983                                                        30,494
Add:
                               Interest expense, net                                                               8,723                                                         5,628                                 29,317                                                        19,009
Net operating income                                                                                               20,243                                                        14,707                                67,300                                                        49,503
Less:
                               Non-same store net operating income                                                 11,865                                                        6,281                                 44,553                                                        27,546
Same store net operating income                                                                                    $                              8,378                          $      8,426                          $                              22,747                         $      21,957
(1) Same Store sales for the three months ended December 31, 2017 related to the following properties: Enders Place at Baldwin Park, ARIUM Grandewood, Park & Kingston, ARIUM Palms, Ashton Reserve, Sorrel, Sovereign, ARIUM at Palmer Ranch, ARIUM Gulfshore, The Preserve at Henderson Beach and ARIUM Westside.
(2) Same Store sales for the year ended December 31, 2017 related to the following properties: Enders Place at Baldwin Park, ARIUM Grandewood, Park & Kingston, ARIUM Palms, Ashton Reserve, Sovereign, ARIUM at Palmer Ranch, and ARIUM Gulfshore.

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SOURCE Bluerock Residential Growth REIT, Inc.

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