Berkshire Income Realty, Inc. (NYSE MKT: BIR_pa)(NYSE MKT: BIRPRA)(NYSE MKT: BIR-A)(NYSE MKT: BIR.PR.A)("Berkshire" or the "Company") reported its results for the three months ended March 31, 2015. Financial highlights for the three months ended March 31, 2015 include:
- Same Property Net Operating Income ("Same Property NOI") increased 7.6% for the three months ended March 31, 2015 - Same Property NOI, a non-GAAP financial measure, increased as a result of growth in revenue for properties acquired or placed in service prior to January 1, 2014. The Same Property Portfolio had a total revenue increase of approximately 5.1% for the three months ended March 31, 2015 compared to the same period a year ago primarily driven by increase in average monthly rental rates from $1,308 to $1,361. Average physical occupancy for the Same Property Portfolio improved slightly to 95.5% for the year ended March 31, 2015 from 94.5% for the three months ended March 31, 2014. A reconciliation of accounting principles generally accepted in the United States of America ("GAAP") net income to Same Property NOI is included in the financial data accompanying this release.
- The Company's Funds From Operations ("FFO") increased approximately $1.1 million for the three months ended March 31, 2015 - The Company's FFO, a non-GAAP financial measure, for the three months ended March 31, 2015 was $2,595,962 compared with $1,541,563 for the three months ended March 31, 2014. The increase in FFO is mainly attributable to reduced interest expenses and lower acquisition costs related to the Gatehouse 75 apartment community expensed during the three-month period ended March 31, 2015 as compared to acquisition costs related to Pavilion Townplace and EON at Lindbergh expensed in the same period in 2014. The increase was partially offset by loss of operating income from ten assets that were sold in 2014 and added operations from three assets acquired in 2014 and one acquired in the first quarter of 2015. A reconciliation of GAAP net income to FFO is included in the financial data accompanying this release.
- A presentation and reconciliation of net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP, to FFO and Same Property NOI is set forth on pages 3 and 4 of this press release. For the three months ended March 31, 2015 and 2014, the Company's net loss was $(4,229,029) and $(3,383,780), respectively.
- Development activities - During the three months ended March 31, 2015, the Company owned interests in two joint venture development projects. Acquired in the first quarter of 2014, the Company continued construction activities on the Aura Prestonwood development project located in Dallas, Texas with the clubhouse and first units delivered during the first quarter of 2015. Construction activities on the Walnut Creek development project, located in Walnut Creek, California, continued during the first quarter of 2015.
- Acquisition of properties - During the three months ended March 31, 2015, the Company acquired Gatehouse 75, a 99-unit property located in the Charlestown neighborhood of Boston, Massachusetts. The purchase price for Gatehouse 75 was $54,125,000.
Chuck Leitner, President and Chairman of the Company, commented: "Strong revenue and operating income extended the Company's quarterly trend of positive operating results. First quarter Same Property Portfolio revenue increased 5.1% over the comparable period of 2014 which was primarily driven by increased rental rates. Our investment strategy to improve the quality of the portfolio continued in the first quarter with the acquisition of Gatehouse 75, a Class A property located in Boston, Massachusetts. Additionally, development activities continue to be a focus with construction of the Walnut Creek, California development project moving forward and the Aura Prestonwood development in Dallas, Texas delivering its first units in March 2015.”
Funds From Operations
The Company has adopted the revised definition of FFO adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). FFO falls within the definition of a "non-GAAP financial measure" as stated in Item 10(e) of Regulation S-K promulgated by the Securities and Exchange Commission (the "SEC"). Management considers FFO to be an appropriate measure of performance for an equity Real Estate Investment Trust ("REIT"). We calculate FFO by adjusting net income (loss) (computed in accordance with GAAP, including non-recurring items), for gains (or losses) from sales of properties, impairments, real estate related depreciation and amortization, and adjustment for unconsolidated partnerships and ventures. Management believes that in order to facilitate a clear understanding of the historical operating results of the Company, FFO should be considered in conjunction with net income (loss) as presented in the consolidated financial statements included elsewhere herein. Management considers FFO to be a useful measure for reviewing the comparative operating and financial performance of the Company because, by excluding gains and losses related to sales of previously depreciated operating real estate assets and excluding real estate asset depreciation and amortization (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help one compare the operating performance of a company's real estate between periods or as compared to different companies.
The Company's calculation of FFO may not be directly comparable to FFO reported by other REITs or similar real estate companies that have not adopted the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. FFO is not a GAAP financial measure and should not be considered as an alternative to net income (loss), the most directly comparable financial measure of our performance calculated and presented in accordance with GAAP, as an indication of our performance. FFO does not represent cash generated from operating activities determined in accordance with GAAP and is not a measure of liquidity or an indicator of our ability to make cash distributions. We believe that to further understand our performance; FFO should be compared with our reported net income and considered in addition to cash flows in accordance with GAAP, as presented in our consolidated financial statements.
The following table presents a reconciliation of net loss to FFO for the three months ended March 31, 2015 and 2014:
|
For the three months ended
March 31, | ||||||||||||
| 2015 | 2014 | |||||||||||
| Net loss | $ | (4,229,029 | ) | $ | (3,383,780 | ) | ||||||
| Add: | ||||||||||||
| Depreciation of real property | 5,681,530 | 5,456,981 | ||||||||||
| Amortization of acquired in-place leases and tenant relationships | 622,231 | — | ||||||||||
| Funds from operations of unconsolidated multifamily entities, net of impairments | 577,666 | 378,237 | ||||||||||
| Less: | ||||||||||||
| Funds from operations of noncontrolling interest in properties | (30,804 | ) | (227,383 | ) | ||||||||
| Equity in income of unconsolidated multifamily entities | (25,632 | ) | (682,492 | ) | ||||||||
| Funds from Operations | $ | 2,595,962 | $ | 1,541,563 | ||||||||
FFO increased for the three-month period ended March 31, 2015 as compared to the same period in 2014. The increase in FFO is mainly attributable to reduced interest expenses and operating expenses as a result of assets that were sold in 2014, and lower acquisition costs related to Gatehouse 75 expensed during the three-month period ended March 31, 2015 as compared to the acquisition costs related to Pavilion Townplace and EON at Lindbergh expensed in the same period in 2014. The increase was partially offset by loss of operating income from assets that were sold in 2014 and added operations from assets acquired in 2014 and first quarter of 2015.
Other Non-GAAP Measures
The Company believes that the use of certain other non-GAAP measures for comparative presentation between reporting periods allows for more meaningful comparisons of the periods presented.
Same Property NOI falls within the definition of a "non-GAAP financial measure" as stated in Item 10(e) of Regulation S-K promulgated by the SEC and should not be considered as an alternative to net income (loss), the most directly comparable financial measure of our performance calculated and presented in accordance with GAAP. The Company believes Same Property NOI is a measure of operating results that is useful to investors to analyze the performance of a real estate company because it provides a direct measure of the operating results of the Company's multifamily apartment communities. The Company also believes it is a useful measure to facilitate the comparison of operating performance among competitors. The calculation of Same Property NOI requires classification of income statement items between operating and non-operating expenses, where operating items include only those items of revenue and expense which are directly related to the income producing activities of the properties. We believe that to achieve a more complete understanding of the Company's performance, Same Property NOI should be compared with our reported net income. Management uses Same Property NOI to evaluate the operating results of its properties without reflecting investing and financing activities such as mortgage debt and capital expenditures, which have an impact on interest expense and depreciation and amortization. The Same Property portfolio consists of 9 properties acquired or placed in service on or prior to January 1, 2014 and owned through March 31, 2015.
The following table represents the reconciliation of GAAP net loss to the other non-GAAP measures presented for the three months ended March 31, 2015 and 2014:
|
For the three months ended
March 31, | ||||||||||||
| 2015 | 2014 | |||||||||||
| Net loss | $ | (4,229,029 | ) | $ | (3,383,780 | ) | ||||||
| Add: | ||||||||||||
| Depreciation | 6,486,256 | 6,286,212 | ||||||||||
| Interest, inclusive of amortization of deferred financing fees | 5,796,484 | 7,093,818 | ||||||||||
| Amortization of acquired in-place leases and tenant relationships | 622,231 | — | ||||||||||
| Net loss from discontinued operations | — | 114,216 | ||||||||||
| Equity in income loss of unconsolidated multifamily entities | (25,632 | ) | (682,492 | ) | ||||||||
| Net operating income | 8,650,310 | 9,427,974 | ||||||||||
| Add: | ||||||||||||
| Net operating income related to properties acquired or placed in service after January 1, 2014 and non-property activities | (78,894 | ) | (1,460,101 | ) | ||||||||
| Same Property net operating income | $ | 8,571,416 | $ | 7,967,873 | ||||||||
The Company
The Company is a Real Estate Investment Trust ("REIT") whose objective is to acquire, own, operate, develop and rehabilitate multifamily apartment communities. The Company owns interests in fourteen multifamily apartment communities and two multifamily development projects, of which three are located in the Baltimore/Washington, D.C. metropolitan area; three are located in Dallas, Texas; two are located in Atlanta, Georgia; and one is located in each of Houston, Texas; Sherwood, Oregon; Tampa, Florida; Philadelphia, Pennsylvania; Walnut Creek, California; Denver, Colorado; Redmond, Washington; and Boston, Massachusetts. The Company also owns interests in two unconsolidated multifamily entities.
Forward Looking Statements
With the exception of the historical information contained in this release, the matters described herein may contain forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, including statements about apartment rental demand and fundamentals, involve a number of risks, uncertainties or other factors beyond the Company's control, which may cause material differences in actual results, performance or other expectations. These factors include, but are not limited to, changes in economic conditions generally and the real estate and bond markets specifically, especially as they may affect rental markets, legislative/regulatory changes (including changes to laws governing the taxation of REITs), possible sales of assets, the acquisition restrictions placed on the Company by an affiliated entity, Berkshire Multifamily Value Plus Fund III, LP, availability of capital, interest rates and interest rate spreads, changes in accounting principles generally accepted in the United States of America and policies and guidelines applicable to REITs, those set forth in Part I, Item 1A - Risk Factors of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and other risks and uncertainties as may be detailed from time to time in the Company's public announcements and SEC filings. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company assumes no obligation to update such information.
BERKSHIRE INCOME REALTY, INC. CONSOLIDATED BALANCE SHEETS | ||||||||||||
|
March 31, 2015 |
December 31, 2014 | |||||||||||
| ASSETS | ||||||||||||
| Multifamily apartment communities, net of accumulated depreciation of $197,479,523 and $190,993,267, respectively | $ | 533,856,962 | $ | 472,942,656 | ||||||||
| Cash and cash equivalents | 12,922,191 | 4,369,626 | ||||||||||
| Cash restricted for tenant security deposits | 1,230,356 | 1,202,884 | ||||||||||
| Cash held in escrow for 1031 exchange | — | 11,920,578 | ||||||||||
| Replacement reserve escrow | 1,492,548 | 1,425,007 | ||||||||||
| Prepaid expenses and other assets | 7,349,357 | 8,807,199 | ||||||||||
| Investments in unconsolidated multifamily entities | 12,770,521 | 14,078,222 | ||||||||||
| Acquired in-place leases and tenant relationships, net of accumulated amortization of $2,141,202 and $1,518,971, respectively | 1,236,437 | 1,219,543 | ||||||||||
| Deferred expenses, net of accumulated amortization of $2,643,498 and $2,239,550, respectively | 5,757,368 | 5,706,855 | ||||||||||
| Total assets | $ | 576,615,740 | $ | 521,672,570 | ||||||||
| LIABILITIES AND DEFICIT | ||||||||||||
| Liabilities: | ||||||||||||
| Mortgage notes payable | $ | 511,538,866 | $ | 436,785,408 | ||||||||
| Credit Facility | 19,000,000 | 41,000,000 | ||||||||||
| Note payable - affiliate | 5,800,000 | — | ||||||||||
| Note payable - other | 1,250,000 | 1,250,000 | ||||||||||
| Due to affiliates, net | 3,148,517 | 3,085,668 | ||||||||||
| Due to affiliate, incentive advisory fees | 13,868,578 | 13,698,562 | ||||||||||
| Dividend and distributions payable | 1,462,907 | 837,607 | ||||||||||
| Accrued expenses and other liabilities | 14,810,192 | 12,889,999 | ||||||||||
| Tenant security deposits | 1,608,731 | 1,451,751 | ||||||||||
| Total liabilities | 572,487,791 | 510,998,995 | ||||||||||
| Commitments and contingencies | — | — | ||||||||||
| Equity: | ||||||||||||
| Noncontrolling interest in properties | (58,498 | ) | (25,658 | ) | ||||||||
| Noncontrolling interest in Operating Partnership | (25,589,851 | ) | (19,217,779 | ) | ||||||||
| Series A 9% Cumulative Redeemable Preferred Stock, no par value, $25 stated value, 5,000,000 shares authorized, 2,978,110 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively | 70,210,830 | 70,210,830 | ||||||||||
| Class A common stock, $.01 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively | — | — | ||||||||||
| Class B common stock, $.01 par value, 5,000,000 shares authorized, 1,406,196 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively | 14,062 | 14,062 | ||||||||||
| Excess stock, $.01 par value, 15,000,000 shares authorized, 0 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively | — | — | ||||||||||
| Accumulated deficit | (40,448,594 | ) | (40,307,880 | ) | ||||||||
| Total equity | 4,127,949 | 10,673,575 | ||||||||||
| Total liabilities and equity | $ | 576,615,740 | $ | 521,672,570 | ||||||||
BERKSHIRE INCOME REALTY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||
|
For the three months ended
March 31, | ||||||||||||
| 2015 | 2014 | |||||||||||
| Revenue: | ||||||||||||
| Rental | $ | 16,928,674 | $ | 19,289,286 | ||||||||
| Utility reimbursement | 752,397 | 918,837 | ||||||||||
| Other | 984,582 | 968,542 | ||||||||||
| Total revenue | 18,665,653 | 21,176,665 | ||||||||||
| Expenses: | ||||||||||||
| Operating | 4,772,734 | 6,321,228 | ||||||||||
| Maintenance | 921,638 | 1,132,823 | ||||||||||
| Real estate taxes | 2,114,675 | 2,183,181 | ||||||||||
| General and administrative | 715,228 | 621,161 | ||||||||||
| Management fees | 1,152,463 | 1,226,253 | ||||||||||
| Incentive advisory fees | 338,605 | 264,045 | ||||||||||
| Depreciation | 6,486,256 | 6,286,212 | ||||||||||
| Interest, inclusive of amortization of deferred financing fees | 5,796,484 | 7,093,818 | ||||||||||
| Amortization of acquired in-place leases and tenant relationships | 622,231 | — | ||||||||||
| Total expenses | 22,920,314 | 25,128,721 | ||||||||||
| Loss before equity in income of unconsolidated multifamily entities | (4,254,661 | ) | (3,952,056 | ) | ||||||||
| Equity in income of unconsolidated multifamily entities | 25,632 | 682,492 | ||||||||||
| Loss from continuing operations | (4,229,029 | ) | (3,269,564 | ) | ||||||||
| Net loss from discontinued operations | — | (114,216 | ) | |||||||||
| Net loss | (4,229,029 | ) | (3,383,780 | ) | ||||||||
| Net (income) loss attributable to noncontrolling interest in properties | 16,736 | (64,836 | ) | |||||||||
| Net loss attributable to noncontrolling interest in Operating Partnership | 5,746,772 | 5,001,351 | ||||||||||
| Net income attributable to the Company | 1,534,479 | 1,552,735 | ||||||||||
| Preferred dividend | (1,675,193 | ) | (1,675,194 | ) | ||||||||
| Net loss available to common shareholders | $ | (140,714 | ) | $ | (122,459 | ) | ||||||
| Net loss from continuing operations attributable to the Company per common share, basic and diluted | $ | (0.10 | ) | $ | (0.09 | ) | ||||||
| Net loss from discontinued operations attributable to the Company per common share, basic and diluted | $ | — | $ | — | ||||||||
| Net loss available to common shareholders per common share, basic and diluted | $ | (0.10 | ) | $ | (0.09 | ) | ||||||
| Weighted average number of common shares outstanding, basic and diluted | 1,406,196 | 1,406,196 | ||||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20150522005818/en/
Contacts:
Stephen Lyons, 1-617-574-8367
stephen.lyons@berkshire-group.com
Facsimile:
1-617-574-8312
