PR Newswire | Aug 10, 2020 04:49PM EDT

08/10 15:47 CDT

Preferred Apartment Communities, Inc. Reports Results for Second Quarter 2020 ATLANTA, Aug. 10, 2020

ATLANTA, Aug. 10, 2020 /PRNewswire/ -- Preferred Apartment Communities, Inc. (NYSE: APTS) ("we," "our," the "Company", "Preferred Apartment Communities" or "PAC") today reported results for the quarter ended June 30, 2020. Unless otherwise indicated, all per share results are reported based on the basic weighted average shares of Common Stock and Class A Units ("Class A Units") of the Preferred Apartment Communities Operating Partnership (our "Operating Partnership") outstanding. See Definitions of Non-GAAP Measures.

Our operating results are presented below.

Three months ended June 30, Six months ended June 30,

2020 2019 % change2020 2019 % change



Revenues (in thousands)$123,277 $113,852 8.3 %$ 254,379 $ 225,358 12.9 %



Per share data:

Net income (loss) ^(1) $(1.06) $(0.66) - $ (5.47) $ (1.32) -

FFO ^(2) $(0.01) $0.36 - $ (3.39) $ 0.75 -

Core FFO ^(2) $0.21 $0.36 (41.7)%$ 0.59 $ 0.77 (23.4)%

AFFO ^(2) $0.05 $0.22 (77.3)%$ 0.52 $ 0.55 (5.5) %

Dividends ^(3) $0.175 $0.2625 (33.3)%$ 0.4375 $ 0.5225 (16.3)%



^(1) Per weighted average share of Common Stock outstanding for the periods indicated.

^(2) FFO, Core FFO and AFFO results are presented per basic weighted average share of Common Stock and Class A Unit in our Operating Partnership outstanding for the periods indicated. See Reconciliations of FFO Attributable to Common Stockholders and Unitholders, Core FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders and Definitions of Non-GAAP Measures.

^(3) Per share of Common Stock and Class A Unit outstanding.

"We are pleased with PAC's second quarter operational results, which include year-over-year same store NOI growth of .1% in our core multifamily business, as we successfully navigated the still-evolving COVID-19 pandemic and its widespread impact on the economy. We were particularly pleased with our collections of recurring rental revenues for the second quarter, which were in excess of 99%, 92%, and 99% for our multi-housing, grocery anchored retail, and office portfolios, respectively, adjusted for deferrals. This, and other operational successes we achieved during the quarter, is a testament to the quality of our assets, the positioning of our assets in quality markets and submarkets, the resiliency of our resident and tenant base, and the hard and effective work of our team that executed a well-considered game plan.

As we look ahead, we believe our Sunbelt markets and suburban focus provide a strong foundation for cash flow stability and growth, with continued business and job growth as well as new household formation. Further, our scale and diverse portfolio mix provides us some distinct competitive advantages, with high quality multi-housing combined with essential, grocery-anchored retail and market specific Class A office. Our management team is aligned and focused on enhancing our liquidity and capital structure as we seek to create long term shareholder value in 2020 and beyond," stated Joel Murphy, Preferred Apartment Communities' President and Chief Executive Officer.

Financial

* Our net loss per share was $(1.06) and $(0.66) for the three-month periods ended June 30, 2020 and 2019, respectively. Funds From Operations, or FFO, for the three months ended June 30, 2020 was $(0.01) per weighted average share and Class A Unit outstanding and reflects lower purchase option termination revenues, as well as costs associated with the acquisition of Preferred Apartment Advisors, LLC (our "Former Manager") and NMP Advisors, LLC (our "Former Submanager"). Core FFO was $0.21 for the three months ended June 30, 2020, as compared to $0.36 for the three months ended June 30, 2019. Our decline in Core FFO was driven primarily by lower interest income from our real estate loan investments by virtue of the lower balance, lower income from purchase option amortization, higher interest expense and reduced income at the property level related to COVID. * For the second quarter 2020, our declared dividends to preferred and Common Stockholders and distributions to Unitholders exceeded our NAREIT-defined FFO result for the period, which was negative. Our Core FFO payout ratio to Common Stockholders and Unitholders was approximately 83.8% and our Core FFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 77.3%.(A) * Our AFFO payout ratio to Common Stockholders and Unitholders was approximately 367.1% for the second quarter 2020. Our AFFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 93.7% for the second quarter 2020. (A) Our higher AFFO payout ratio was driven largely by the reduced level of accrued interest received on our real estate loan investment portfolio, the higher operational expenses previously mentioned and a normalized level of recurring capital expenditures at the property level, which are difficult to curtail and allow us to operate our properties at the level we expect. We have approximately $23.0 million of accrued interest revenue on our real estate loan investment portfolio, which will positively impact AFFO once received. * As of June 30, 2020, our total assets were approximately $4.8 billion. Our total assets at June 30, 2019 of approximately $5.0 billion, included approximately $572.0 million of VIE mortgage pool assets attributable to other mortgage pool participants that were consolidated due to our investments in the Freddie Mac K Program. During the fourth quarter 2019, we sold our K Program investments, realizing an internal rate of return of approximately 18%. Excluding the consolidated VIE mortgage pool assets from the June 30, 2019 total, our total assets grew approximately $410.8 million, or 9.3%.

The following chart details monthly cash collections of rental revenues before and after the effect of rent deferrals across all our verticals as of August 6, 2020:

2020 Cash Collections of Recurring Rental Revenues ^(1)

JanuaryFebruaryMarch April May June July



Unadjusted for rent deferrals:

Multifamily 100.0%99.9 %99.8%98.8%98.8%98.8%98.1%

Student housing 100.0%100.0 %99.7%97.9%97.0%97.4%97.0%

Office 99.7 %99.5 %99.6%98.5%96.9%96.8%98.3%

Grocery-anchored retail 99.4 %99.4 %98.9%90.0%87.6%89.2%92.0%



Adjusted for rent deferrals:

Multifamily 100.0%99.9 %99.8%99.7%99.5%98.9%98.1%

Student housing 100.0%100.0 %99.7%98.4%97.4%97.4%97.0%

Office 99.7 %99.5 %99.6%99.5%99.4%99.0%99.2%

Grocery-anchored retail 99.4 %99.4 %98.9%93.6%91.8%92.2%93.2%



^(1) Percent of revenue billed includes recurring charges for base rent, operating expense escalations, pet, garage, parking and storage rent, as well as receivables from U.S. Government tenants, from which collection is reasonably assured.

The following chart details monthly occupancy and percent leased rates across all our verticals:

2020 Monthly Occupancy and Percentages Leased

JanuaryFebruaryMarch April May June July





Occupancy:

Multifamily (stabilized)95.3% 95.6 %95.7%94.4%94.4%95.2%95.1%

Student housing 96.0% 96.2 %96.1%96.0%95.8%95.8%95.8%

Percent leased:

Office 96.3% 96.3 %96.7%95.9%96.2%96.2%96.1%

Grocery-anchored retail 92.9% 92.6 %92.6%92.5%92.5%92.7%92.8%

Operational

* Our average recurring rental revenue collections before and after any effect of rent deferrals for the second quarter 2020 were approximately 96.0% and 97.6% respectively. Rent deferments provided to our residents/tenants primarily related to a change of timing of rent payments with no significant changes to total payments or term. * For the quarter, we reserved 4.77% of rental revenues of our retail portfolio against potential bad debt. Our retail division had nominal write offs and rental abatements. * As of June 30, 2020, the average age of our multifamily communities was approximately 6.1 years, which is the youngest in the public multifamily REIT industry.

Financing and Capital Markets

* Between June 25 and July 10, 2020, we refinanced mortgage loans supporting eight multifamily communities, seven of which carry fixed interest rates below 3.0% per annum. As a result, we collected approximately $72.1 million of aggregate refinancing proceeds inclusive of COVID reserves, and thereby reduced our average interest rate on these assets to approximately 2.91% per annum.

The mortgages we refinanced during the second quarter 2020 on certain of our multifamily communities were as shown in the following table:

Property Loan amountMaturity date Rate Interest only (millions) period (years)



Summit Crossing II $20.7 7/1/2030 ^(1) 2

Avenues at Northpointe 33.5 7/1/2027 2.79 % 2

Avenues at Cypress 28.4 7/1/2027 2.96 % 2

CityPark View 29.0 7/1/2030 2.75 % 3

Venue at Lakewood Ranch 36.6 7/1/2030 2.99 % 2

Crosstown Walk 46.5 7/1/2027 2.92 % 2

Aster at Lely 50.4 7/1/2030 2.95 % 2



$245.1



^(1) The new mortgage bears interest at a variable rate of 1 Month LIBOR plus 278 basis points.

* As of June 30, 2020, approximately 94.1% of our permanent property-level mortgage debt has fixed interest rates and approximately 4.2% has variable interest rates which are capped. We believe we are well protected against potential increases in market interest rates. Our overall weighted average interest rate for our mortgage debt portfolio was 3.86%. * At June 30, 2020, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 54.6%. * On September 27, 2019, our registration statement on Form S-3 (Registration No. 333-233576) (the "Series A1/M1 Registration Statement") was declared effective by the Securities and Exchange Commission (the "SEC"). The Series A1/M1 Registration Statement allows us to offer up to a maximum of 1,000,000 shares of Series A1 Redeemable Preferred Stock, Series M1 Redeemable Preferred Stock or a combination of both (the "Series A1/M1 Offering"). The stated price per share is $1,000, subject to adjustment under certain conditions. The shares are being offered by our affiliate, Preferred Capital Securities, LLC ("PCS"), on a "reasonable best efforts" basis and we intend to invest substantially all the net proceeds of the Series A1/M1 Offering in connection with the acquisition of multifamily communities, grocery-anchored shopping centers, office buildings, real estate loans and mortgages, other real estate-related investments and general working capital purposes. * During the second quarter 2020, we issued and sold an aggregate of 31,337 shares of Series A1 Redeemable Preferred Stock, resulting in net proceeds of approximately $28.2 million after commissions and other fees. During the second quarter 2020, we issued and sold an aggregate of 3,286 shares of Series M1 Redeemable Preferred Stock, resulting in net proceeds of approximately $3.2 million after dealer manager fees. * Our Offering of up to 1,500,000 Series A Units expired during the first quarter 2020. * In addition, during the second quarter 2020, we issued approximately 1.67 million shares of Common Stock for redemptions of 11,651 shares of Redeemable Preferred Stock and paid out $41.0 million in cash for redemptions of 42,209 shares of Redeemable Preferred Stock.

Acquisitions and Originations

* On April 30, 2020, we closed on the acquisition of Parkside at the Beach, a 288-unit multifamily community located in Panama City Beach, Florida. * On May 14, 2020, we closed on a real estate loan investment of up to $10.0 million to partially finance the development and construction of a 277-unit multifamily community to be located in Raleigh, North Carolina. The aggregate carrying amount of our real estate loan investment portfolio was approximately $308.6 million at June 30, 2020.

^(A) We calculate the Core FFO and AFFO payout ratios to Common Stockholders as the ratio of Common Stock dividends and distributions to Core FFO and AFFO. We calculate the Core FFO and AFFO payout ratios to preferred stockholders as the ratio of Preferred Stock dividends to the sum of Preferred Stock dividends and Core FFO and AFFO. Since our operations resulted in a net loss from continuing operations for the periods presented, a payout ratio based on net loss is not calculable. See Definitions of Non-GAAP Measures.



^(B) Same store net operating income is a non-GAAP measure. See Definitions of non-GAAP Measures.

Business Update Related to COVID-19

Since the onset of COVID-19, the Company has taken various actions in response to the pandemic. We continue to adjust our business operations to address the needs of our residents, tenants and associates. Our property management and asset management teams continuously respond and adapt appropriately to any onsite, tenant and/or property management request, while following all applicable safety and social distancing guidelines as the situation continues to evolve and change. All of our multifamily communities, student housing properties, grocery-anchored shopping centers and office buildings have operated throughout the pandemic and in compliance with government-imposed COVID-19 guidelines and mandates. We have released a more comprehensive business update regarding the Company's operations and the impact of COVID-19 on our website at http://investors.pacapts.com/presentations.

Real Estate Assets

At June 30, 2020, our portfolio of owned real estate assets and potential additions from purchase options we held from our real estate loan investments consisted of:



Potential Owned as of June additions from 30, 2020 ^(1) real estate loan Potential total investment portfolio ^(2) (3)

Residential communities:

Properties 44 11 55

Units 12,936 2,995 15,931

Beds 6,095 543 6,638

Grocery-anchored shopping centers:

Properties 54 - 54

Gross leasable area (square feet) 6,208,278 - 6,208,278

Office buildings:

Properties 9 ^ 1 10 (4)

Rentable square feet 3,169,000 195,000 3,364,000



^(1) One multifamily community, two student housing properties, two grocery-anchored shopping centers and two office buildings are owned through consolidated joint ventures.

^(2) We evaluate each project individually and we make no assurance that we will acquire any of the underlying properties from our real estate loan investment portfolio.

^(3) The Company has terminated various purchase option agreements in exchange for termination fees. These properties are excluded from the potential additions from our real estate loan investment portfolio.

^(4) Excludes our 251 Armour property, comprising 35,000 rentable square feet that is under development.

Same-Store Multifamily Communities Financial Data

The following chart presents same-store operating results for the Company's multifamily communities. We define our population of same-store multifamily communities as those that have achieved occupancy at or above 93% for all three consecutive months within a single quarter (stabilized) before the beginning of the prior year and that have been owned for at least 15 full months as of the end of the first quarter of the current year, enabling comparisons of the current year quarterly and annual reporting periods to the prior year comparative periods. The Company excludes the operating results of properties for which construction of adjacent phases has commenced and properties which are undergoing significant capital projects, have sustained significant casualty losses, or are being marketed for sale as of the end of the reporting period. For the periods presented, same-store operating results consist of the operating results of the following multifamily communities containing an aggregate 8,694 units:

Aster at Lely Resort Avenues at Cypress Avenues at Northpointe

Citi Lakes Lenox Village Retreat at Lenox Village

Overton Rise Sorrel Venue at Lakewood Ranch

Avenues at Creekside 525 Avalon Park Vineyards

Citrus Village Retreat at Greystone City Vista

Founders Village Luxe at Lakewood RanchAdara at Overland Park

Summit Crossing I Summit Crossing II Aldridge at Town Village

City Park View Crosstown Walk Claiborne Crossing

Reserve at Summit CrossingColony at CenterpointeLux at Sorrel

Green Park Vestavia Reserve

Same-store net operating income is a non-GAAP measure that is most directly comparable to net income (loss), as shown in the reconciliations below.

Reconciliation of Net Income (Loss) to Multifamily Communities' Same-Store Net Operating Income (NOI)



Three months ended:

(in thousands) 6/30/2020 6/30/2019



Net (loss) income $(15,950)$(1,677)

Add:

Equity stock compensation 246 306

Depreciation and amortization 51,793 45,663

Interest expense 31,136 27,611

Management fees - 8,209

Corporate G&A and other 8,847 1,388

Management Internalization 458 280

Provision for expected credit losses 482 -

Waived asset management and general and administrative expense fees - (2,795)

Less:

Interest revenue on notes receivable 10,407 12,093

Interest revenue on related party notes receivable 604 1,632

Miscellaneous revenues 692 1,000

Income from consolidated VIEs - 584

Gain on extinguishment of debt (6,156) (52)

Gains on land condemnation and trading investment - 747



Property net operating income 71,465 62,981

Less:

Non-same-store property revenues (74,721) (62,174)

Add:

Non-same-store property operating expenses 24,614 20,537



Same-store net operating income $21,358 $21,344

Multifamily Communities' Same Store Net Operating Income



Three months ended:

(in thousands) 6/30/2020 6/30/2019 $ % change change

Revenues:

Rental and other property revenues $36,854 $36,953 $(99)(0.3)%



Operating expenses:

Property operating and maintenance 6,326 6,883 (557) (8.1)%

Payroll 2,984 2,843 141 5.0 %

Real estate taxes and insurance 6,186 5,883 303 5.2 %

Total operating expenses 15,496 15,609 (113) (0.7)%



Same-store net operating income $21,358 $21,344 $14 0.1 %



Same-store average physical occupancy94.7 %95.4 %



Corporate level expenses related to the management and operations of the Multifamily and Student housing property portfolios are allocated on a per unitbasis to Property NOI and are included in Multifamily Same Store NOI.

Reconciliation of Net Income (Loss) to Multifamily Communities' Same-Store Net Operating Income (NOI)



Six months ended:

(in thousands) 6/30/2020 6/30/2019



Net (loss) income $(195,473)$(3,957)

Add:

Equity stock compensation 476 617

Depreciation and amortization 101,302 90,952

Interest expense 60,729 54,367

Management fees 3,099 16,038

Corporate G&A and other 15,212 2,809

Management Internalization 179,251 325

Provision for expected credit losses 5,615 (5,424)

Waived asset management and general and administrative expense fees (1,136) -

Less:

Interest revenue on notes receivable 23,846 23,381

Interest revenue on related party notes receivable 3,141 7,434

Miscellaneous revenues 3,952 1,023

Income from consolidated VIEs - 725

Gain on extinguishment of debt (6,156) (69)

Gains on land condemnation and trading investment 479 751



Property net operating income 143,813 122,482

Less:

Non-same-store property revenues (148,968) (120,177)

Add:

Non-same-store property operating expenses 48,792 40,407



Same-store net operating income $43,637 $42,712

Multifamily Communities' Same Store Net Operating Income



Six months ended:

(in thousands) 6/30/20206/30/2019$ change % change

Revenues:

Rental and other property revenues$74,472$73,343$1,129 1.5 %



Operating expenses:

Property operating and maintenance12,739 13,221 (482) (3.6) %

Payroll 5,795 5,692 103 1.8 %

Real estate taxes and insurance 12,301 11,718 583 5.0 %

Total operating expenses 30,835 30,631 204 0.7 %



Same-store net operating income $43,637$42,712$925 2.2 %



Corporate level expenses related to the management and operations of the Multifamily and Student housing property portfolios are allocated on a per unit basis to Property NOI and are included in Multifamily Same Store NOI.

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

On May 11, 2020, we declared a quarterly dividend on our Common Stock of $0.175 per share for the second quarter 2020. The second quarter dividend was paid on July 15, 2020 to all stockholders of record on June 15, 2020. In conjunction with the Common Stock dividend, the Company's operating partnership declared a distribution on its Class A Units of $0.175 per unit for the second quarter 2020, which was paid on July 15, 2020 to all Class A Unit holders of record as of June 15, 2020.

Monthly Dividends on Preferred Stock

We declared monthly dividends of $5.00 per share on our Series A Redeemable Preferred Stock, which totaled approximately $33.2 million for the second quarter 2020 and represents a 6% annual yield. We declared monthly dividends of $5.00 per share on our Series A1 Redeemable Preferred Stock, which totaled approximately $756,000 for the second quarter 2020 and also represents a 6% annual yield. We declared dividends totaling approximately $1.6 million on our Series M Redeemable Preferred Stock, or mShares, for the second quarter 2020. The mShares have a dividend rate that escalates from 5.75% in year one of issuance to 7.50% in year eight and thereafter. We declared dividends totaling approximately $50,000 on our Series M1 Redeemable Preferred Stock for the second quarter 2020. The Series M1 Redeemable Preferred Stock has a dividend rate that escalates from 6.1% in year one of issuance to 7.1% in year ten and thereafter.

Subsequent to Quarter End

Between July 1, 2020 and July 31, 2020, we issued 10,421 shares of Series A1 Preferred Stock and collected net proceeds of approximately $9.4 million after commissions and fees and we issued 4,123 shares of Series M1 Preferred Stock and collected net proceeds of approximately $4.0 million after commissions and fees.

On July 10, 2020, we closed on a refinancing of the mortgage on our Citrus Village multifamily community. The new instrument has a principal amount of $40.9 million, bears interest at a fixed 2.95% per annum and matures on August 1, 2027. Monthly interest-only payments are due through August 31, 2022.

On July 31, 2020, we received approximately $18.7 million in full satisfaction of the principal and all interest due on our Palisades real estate loan investment.

On August 6, 2020, our board of directors declared a quarterly dividend on our Common Stock of $0.175 per share, payable on October 15, 2020 to stockholders of record on September 15, 2020.

As a result of the COVID-19 pandemic that resulted in wide spread stay-at-home orders across the country and other restrictions that have led to significant adverse effects on economic activity, some of our multifamily residents and office and retail tenants have requested rent relief from the Company. At this point, the Company's policy is to extend rent deferral options to our residents and tenants with abatements in only certain circumstances.

Conference Call and Supplemental Data

We will hold our quarterly conference call on Tuesday, August 11, 2020 at 11:00 a.m. Eastern Time to discuss our second quarter 2020 results. To participate in the conference call, please dial in to the following:

Live Conference Call DetailsDomestic Dial-in Number: 1-844-890-1791International Dial-in Number: 1-412-380-7408Company: Preferred Apartment Communities, Inc.Date: Tuesday, August 11, 2020Time: 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time)

The live broadcast of our second quarter 2020 conference call will be available online, on a listen-only basis, at our website, www.pacapts.com, under "Investors" and then click on the "Upcoming Events" link. A replay of the call will be archived on under the Investors/Audio Archive section.

2020 Guidance:

Net income (loss) per share -We are actively adding properties and real estate loan investments to our real estate portfolio and the specific timing of the closing of acquisitions is difficult to predict. Acquisition activity by its nature can cause material variation in our reported depreciation and amortization expense and interest income. Since net income (loss) per share is calculated net of depreciation and amortization expense, our net income (loss) results can fluctuate, possibly significantly, depending upon the timing of the closing of acquisitions. For this reason, we are unable to reasonably forecast this measure or provide a reconciliation of our projected FFO per share to this measure.

FFO per share-Due to the inherent uncertainty of the scope, duration and rapidly evolving nature of the economic and social disruption from the COVID-19 pandemic, on April 24, 2020 we withdrew our full year 2020 guidance on FFO per share that we previously included in our February 24, 2020 earnings release.

AFFO, Core FFO and FFO are calculated after deductions for all preferred stock dividends. Reconciliations of net income (loss) attributable to common stockholders to FFO, Core FFO and AFFO for the three-month and six-month periods ended June 30, 2020 and 2019 appear in the attached report, as well as on our website using the following link:

http://investors.pacapts.com/download/2Q20_Earnings_and_Supplemental_Data.pdf

Forward-Looking Statements

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Estimates of future earnings, guidance, goals and performance are, by definition, and certain other statements in this Earnings Release and Supplemental Financial Data Report may constitute, "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, achievements or transactions to be materially different from the results, guidance, goals, performance, achievements or transactions expressed or implied by the forward-looking statements. These statements may be identified by the use of forward-looking terminology such as "may," "trend," "will," "expects," "plans," "estimates," "anticipates," "projects," "intends," "believes," "strategy," "goals," "objectives," "outlook" and similar expressions. These risks, uncertainties and contingencies include, but are not limited to, (a) the impact of the COVID-19 pandemic and related federal, state and local government actions on PAC's business operations and the economic conditions in the markets in which PAC operates; (b) PAC's ability to mitigate the impacts arising from COVID-19 and (c) those disclosed in PAC's filings with the SEC. Factors that impact such forward-looking statements include, among others, our business and investment strategy; legislative or regulatory actions; the state of the U.S. economy generally or in specific geographic areas; economic trends and economic recoveries; changes in operating costs, including real estate taxes, utilities and insurance costs; our ability to obtain and maintain debt or equity financing; financing and advance rates for our target assets; our leverage level; changes in the values of our assets; the occurrence of natural or man-made disasters; availability of attractive investment opportunities in our target markets; our ability to maintain our qualification as a real estate investment trust, or REIT, for U.S. federal income tax purposes; our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended; availability of quality personnel; our understanding of our competition and market trends in our industry; and interest rates, real estate values, the debt securities markets and the general economy.

Except as otherwise required by the federal securities laws, we assume no liability to update the information in this Earnings Release and Supplemental Financial Data Report.

We refer you to the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2019 that was filed with the SEC on March 3, 2020, which discuss various factors that could adversely affect our financial results. Such risk factors and information may be updated or supplemented by our Form 10-K, Form 10-Q and Form 8-K filings and other documents filed from time to time with the SEC.

Additional Information

The SEC has declared effective the registration statement filed by the Company for each of the offerings to which this communication may relate. Before you invest, you should read the final prospectus, and any prospectus supplements, forming a part of the registration statement and other documents the Company has filed with the SEC for more complete information about the Company and the offering to which this communication may relate. In particular, you should carefully read the risk factors described in the final prospectus and in any related prospectus supplement and in the documents incorporated by reference in the final prospectus and any related prospectus supplement to which this communication may relate. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, the Company or its dealer manager, Preferred Capital Securities, LLC, will arrange to send you a prospectus with respect to the Series A1/M1 Offering upon request by contacting John A. Isakson at (770) 818-4109, 3284 Northside Parkway NW, Suite 150, Atlanta, Georgia 30327.

The final prospectus for the Series A1/M1 Offering, dated October 22, 2019, can be accessed through the following link:

https://www.sec.gov/Archives/edgar/data/1481832/000148183219000097/a424b5-2019seriesamshares.htm

Preferred Apartment Communities, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)



Three months ended June 30,

(In thousands, except per-share figures) 2020 2019

Revenues:

Rental and other property revenues $111,574 $99,127

Interest income on loans and notes receivable 10,407 12,093

Interest income from related parties 604 1,632

Miscellaneous revenues 692 1,000



Total revenues 123,277 113,852



Operating expenses:

Property operating and maintenance 16,841 13,864

Property salary and benefits 5,720 4,828

Property management costs 1,042 3,373

Real estate taxes and insurance 16,506 14,081

General and administrative 8,847 1,388

Equity compensation to directors and executives 246 306

Depreciation and amortization 51,793 45,663

Asset management and general and administrative expense

fees to related party - 8,209

Provision for expected credit losses 482 -

Management internalization expense 458 280



Total operating expenses 101,935 91,992

Waived asset management and general and administrative

expense fees - (2,795)



Net operating expenses 101,935 89,197

Operating income 21,342 24,655



Interest expense 31,136 27,611

Change in fair value of net assets of consolidated

VIEs from mortgage-backed pools - 584

Loss on extinguishment of debt (6,156) (52)

Gain on sale of real estate loan investment - 747



Net loss (15,950) (1,677)

Consolidated net loss attributable to non-controlling interests266 571



Net loss attributable to the Company (15,684) (1,106)



Dividends declared to preferred stockholders (35,624) (27,542)

Earnings attributable to unvested restricted stock (11) (7)



Net loss attributable to common stockholders $(51,319) $(28,655)



Net loss per share of Common Stock available to

common stockholders, basic and diluted $(1.06) $(0.66)



Weighted average number of shares of Common Stock outstanding,

basic and diluted 48,220 43,703

Reconciliation of FFO Attributable to Common Stockholders and Unitholders, Core FFO and AFFO

to Net (Loss) Income Attributable to Common Stockholders ^(A)

Three months ended June 30,

(In thousands, except per-share figures) 2020 2019



Net loss attributable to common stockholders (See note 1) $ (51,319)$ (28,655)



Add: Depreciation of real estate assets 40,996 36,310

Depreciation of acquired intangible assets and deferred leasing costs 9,973 8,893

Net loss attributable to Class A Unitholders (See note 2) (249) (571)

FFO attributable to common stockholders and unitholders (599) 15,977



Acquisition and pursuit costs 132 -

Loan cost amortization on acquisition term notes and loan coordination fees 528 493 (See note 3)

Payment of costs related to property refinancing 6,863 369

Internalization costs (See note 4) 458 280

Deemed dividends for redemptions of preferred stock 2,772 123

Noncash (income) expense for current expected credit losses (See note 5) (122) -

Expenses related to the COVID-19 global pandemic (See note 6) 419 -

Earnest money forfeited by prospective asset purchaser $ - (1,000)

Core FFO attributable to common stockholders and unitholders 10,451 16,242



Add: Non-cash equity compensation to directors and executives 246 306

Amortization of loan closing costs (See note 7) 1,177 1,159

Depreciation/amortization of non-real estate assets 616 460

Net loan origination fees received (See note 8) 200 125

Deferred interest income received (See note 9) - 2,318

Amortization of lease inducements (See note 10) 447 432

Non-operating miscellaneous revenues - 1,000

Less:Amortization of purchase option termination revenues in excess of cash received (435) (1,383) (See note 11)

Non-cash loan interest income (See note 9) (3,109) (3,658)

Cash received for sale of K Program securities in excess of noncash revenues - (274)

Cash paid for loan closing costs - (5)

Amortization of acquired real estate intangible liabilities and SLR (See note (4,144) (4,324) 12)

Amortization of deferred revenues (See note 13) (941) (941)

Normally recurring capital expenditures (See note 14) (2,124) (1,563)



AFFO attributable to common stockholders and Unitholders $ 2,384 $ 9,894



Common Stock dividends and distributions to Unitholders declared:

Common Stock dividends $ 8,624 $ 11,581

Distributions to Unitholders (See note 2) 130 229

Total $ 8,754 $ 11,810



Common Stock dividends and Unitholder distributions per share $ 0.175 $ 0.2625



FFO per weighted average basic share of Common Stock and Unit outstanding $ (0.01) $ 0.36

Core FFO per weighted average basic share of Common Stock and Unit outstanding $ 0.21 $ 0.36

AFFO per weighted average basic share of Common Stock and Unit outstanding $ 0.05 $ 0.22



Weighted average shares of Common Stock and Units outstanding: ^(A)

Basic:

Common Stock 48,220 43,703

Class A Units 759 877

Common Stock and Class A Units 48,979 44,580



Diluted Common Stock and Class A Units ^(B) 48,980 45,027



Actual shares of Common Stock outstanding, including 548 and 26 unvested shares

of restricted Common Stock at June 30, 2020 and 2019, respectively. 49,831 44,273

Actual Class A Units outstanding at June 30, 2020 and 2019, respectively. 742 875

Total 50,573 45,148



(A) Units and Unitholders refer to Class A Units in our Operating Partnership (as defined in note 2), or Class A Units, and holders of Class A Units, respectively. Unitholders include recipients of awards of Class B Units in our Operating Partnership, or Class B Units, for annual service which became vested and earned and automatically converted to Class A Units. Unitholders also include the entity that contributed the Wade Green grocery-anchored shopping center. The Class A Units collectively represent an approximate 1.55% weighted average non-controlling interest in the Operating Partnership for the three-month period ended June 30, 2020.

(B) Since our AFFO results are positive for the periods reflected above, we are presenting recalculated diluted weighted average shares of Common Stock and Class A Units for these periods for purposes of this table, which includes the dilutive effect of common stock equivalents from grants of the Class B Units, warrants included in units of Series A Preferred Stock issued, as well as annual grants of restricted Common Stock and restricted stock units. The weighted average shares of Common Stock outstanding presented on the Consolidated Statements of Operations are the same for basic and diluted for any period for which we recorded a net loss available to common stockholders.



See Notes to Reconciliation of FFO, Core FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders.

Reconciliation of FFO Attributable to Common Stockholders and Unitholders, Core FFO and AFFO

to Net (Loss) Income Attributable to Common Stockholders (A)

Six months ended June 30,

(In thousands, except per-share figures) 2020 2019



Net loss attributable to common stockholders (See note 1) $ (260,771) $(56,968)



Add: Depreciation of real estate assets 80,771 72,027

Depreciation of acquired intangible assets and deferred leasing costs 18,955 18,016

Net loss attributable to Class A Unitholders (See note 2) (3,343) (79)

FFO attributable to common stockholders and unitholders (164,388) 32,996



Acquisition and pursuit costs 378 -

Loan cost amortization on acquisition term notes and loan coordination fees 1,206 980 (See note 3)

Payment of costs related to property refinancing 6,863 424

Internalization costs (See note 4) 179,251 325

Deemed dividends for redemptions of preferred stock 3,316 219

Noncash (income) expense for current expected credit losses (See note 5) 4,408 -

Expenses related to the COVID-19 global pandemic (See note 6) 448 -

Earnest money forfeited by prospective asset purchaser (2,750) (1,000)

Core FFO attributable to common stockholders and unitholders 28,732 33,944



Add: Non-cash equity compensation to directors and executives 476 617

Amortization of loan closing costs (See note 7) 2,343 2,290

Depreciation/amortization of non-real estate assets 1,172 909

Net loan origination fees received (See note 8) 467 526

Deferred interest income received (See note 9) 8,277 5,078

Amortization of lease inducements (See note 10) 886 860

Cash received in excess of (exceeded by) amortization of

purchase option termination revenues (See note 11) 325 (1,087)

Non-operating miscellaneous revenues 2,750 1,000

Less:Non-cash loan interest income (See note 9) (6,128) (6,982)

Non-cash revenues from mortgage-backed securities - (415)

Cash paid for loan closing costs - (8)

Amortization of acquired real estate intangible liabilities and SLR (See note (8,797) (8,082) 12)

Amortization of deferred revenues (See note 13) (1,881) (1,881)

Normally recurring capital expenditures (See note 14) (3,542) (2,743)



AFFO attributable to common stockholders and Unitholders $ 25,080 $24,026



Common Stock dividends and distributions to Unitholders declared:

Common Stock dividends 21,115 22,776

Distributions to Unitholders (See note 2) 333 458

Total 21,448 23,234



Common Stock dividends and Unitholder distributions per share $ 0.4375 $0.5225



FFO per weighted average basic share of Common Stock and Unit outstanding $ (3.39) $0.75

Core FFO per weighted average basic share of Common Stock and Unit outstanding $ 0.59 $0.77

AFFO per weighted average basic share of Common Stock and Unit outstanding $ 0.52 $0.55



Weighted average shares of Common Stock and Units outstanding: (A)

Basic: 47,674 43,194

Common Stock 793 879

Class A Units 48,467 44,073

Common Stock and Class A Units



Diluted Common Stock and Class A Units (B) 48,474 44,755



Actual shares of Common Stock outstanding, including 548 and 26 unvested shares

of restricted Common Stock at June 30, 2020 and 2019, respectively. 49,831 44,273

Actual Class A Units outstanding at June 30, 2020 and 2019, respectively. 742 875

Total 50,573 45,148



(A) Units and Unitholders refer to Class A Units in our Operating Partnership (as defined in note 2), or Class A Units, and holders of Class A Units, respectively. Unitholders include recipients of awards of Class B Units in our Operating Partnership, or Class B Units, for annual service which became vested and earned and automatically converted to Class A Units. Unitholders also include the entity that contributed the Wade Green grocery-anchored shopping center. The Class A Units collectively represent an approximate 1.64% weighted average non-controlling interest in the Operating Partnership for the six-month period ended June 30, 2020.

(B) Since our AFFO results are positive for the periods reflected above, we are presenting recalculated diluted weighted average shares of Common Stock and Class A Units for these periods for purposes of this table, which includes the dilutive effect of common stock equivalents from grants of the Class B Units, warrants included in units of Series A Preferred Stock issued, as well as annual grants of restricted Common Stock and restricted stock units. The weighted average shares of Common Stock outstanding presented on the Consolidated Statements of Operations are the same for basic and diluted for any period for which we recorded a net loss available to common stockholders.



See Notes to Reconciliation of FFO, Core FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders.

Notes to Reconciliations of FFO Attributable to Common Stockholders and Unitholders, Core FFO and AFFO toNet Loss Attributable to Common Stockholders

Rental and other property revenues and property operating expenses for the three-month and six-month periods ended June 30, 2020 include activity for the properties acquired during the period only from their 1) respective dates of acquisition. In addition, these periods include activity for the properties acquired since June 30, 2019. Rental and other property revenues and expenses for the three-month and six-month periods ended June 30, 2019 include activity for the acquisitions made during that period only from their respective dates of acquisition.



Non-controlling interests in Preferred Apartment Communities Operating Partnership, L.P., or our Operating Partnership, consisted of a total of 742,413 Class A Units as of June 30, 2020. Included in this total are 419,228 Class A Units which were granted as partial consideration to the seller in conjunction with the seller's contribution to us on February 2) 29, 2016 of the Wade Green grocery-anchored shopping center. The remaining Class A units were awarded primarily to our key executive officers. The Class A Units are apportioned a percentage of our financial results as non-controlling interests. The weighted average ownership percentage of these holders of Class A Units was calculated to be 1.55% and 1.97% for the three-month periods ended June 30, 2020 and 2019, respectively.



We paid loan coordination fees to Preferred Apartment Advisors, LLC, or our Former Manager, to reflect the administrative effort involved in arranging debt financing for acquired properties prior to the Internalization. The fees were calculated as 0.6% of the amount of any 3) mortgage indebtedness on newly-acquired properties or refinancing and are amortized over the lives of the respective mortgage loans. This non-cash amortization expense is an addition to FFO in the calculation of Core FFO and AFFO. At June 30, 2020, aggregate unamortized loan coordination fees were approximately $13.5 million, which will be amortized over a weighted average remaining loan life of approximately 10.2 years.



This adjustment reflects the add-back of (i) consideration paid to the owners of the Former Manager, (ii) accretion of the discount on the 4) deferred liability payable to the owners of the Former Manager and (iii) due diligence and pursuit costs incurred by the Company related to the internalization of the functions performed by the Former Manager.



Effective January 1, 2020, we adopted ASU 2016-03, which requires us to estimate the amount of future credit losses we expect to incur over the lives of our real estate loan investments at the inception of each loan. This loss reserve may be adjusted upward or downward over the lives of 5) our loans and therefore the aggregate net adjustment for each period could be positive (removing the non-cash effect of a net increase in aggregate loss reserves) or negative (removing the non-cash effect of a net decrease in aggregate loss reserves) in these adjustments to FFO in calculating Core FFO.



This additive adjustment to FFO consists of one-time costs for signage, cleaning and supplies necessary to create and maintain work environments 6) necessary to adhere to CDC guidelines during the current COVID-19 pandemic. Since we do not expect to incur similar costs once the COVID-19 pandemic has subsided, we add these costs back to FFO in our calculation of Core FFO.



We incur loan closing costs on our existing mortgage loans, which are secured on a property-by-property basis by each of our acquired real estate assets, and also for occasional amendments to our syndicated revolving line of credit with Key Bank National Association, or our Revolving Line of Credit. Effective April 13, 2018, the maximum borrowing capacity on the Revolving Line of Credit was increased from $150 million to $200 million. These loan closing costs are also amortized over the lives of the respective loans and the Revolving Line of Credit, and this non-cash amortization expense is an addition to FFO in the calculation of7) AFFO. Neither we nor the Operating Partnership have any recourse liability in connection with any of the mortgage loans, nor do we have any cross-collateralization arrangements with respect to the assets securing the mortgage loans, other than security interests in 49% of the equity interests of the subsidiaries owning such assets, granted in connection with our Revolving Line of Credit, which provides for full recourse liability. At June 30, 2020, unamortized loan costs on all the Company's indebtedness were approximately $32.7 million, which will be amortized over a weighted average remaining loan life of approximately 9.0 years.



We receive loan origination fees in conjunction with the origination of certain real estate loan investments. These fees are then recognized as revenue over the lives of the applicable loans as adjustments of yield using the effective interest method. The total fees received are additive adjustments in the calculation of AFFO. Correspondingly, the amortized 8) non-cash income is a deduction in the calculation of AFFO. Over the lives of certain loans, we accrue additional interest amounts that become due to us at the time of repayment of the loan or refinancing of the property, or when the property is sold. This non-cash interest income is subtracted from Core FFO in our calculation of AFFO. The amount of additional accrued interest becomes an additive adjustment to FFO once received from the borrower (see note 8).



This adjustment reflects the receipt during the periods presented of 9) additional interest income (described in note 7 above) which was earned and accrued prior to those periods presented on various real estate loans.



This adjustment removes the non-cash amortization of costs incurred to 10)induce tenants to lease space in our office buildings and grocery-anchored shopping centers.



Effective March 6, 2020, our purchase option on the Falls at Forsyth multifamily community was extinguished in conjunction with the loan repayment; effective January 1, 2019, we terminated our purchase options on the Sanibel Straits, Newbergh, Wiregrass and Cameron Square multifamily communities and the Solis Kennesaw student housing property; on May 7, 2018, we terminated our purchase options on the Bishop Street multifamily community and the Haven Charlotte student housing property, both of which are (or were) partially supported by real estate loan investments held by us. In exchange, we arranged to receive termination fees aggregating approximately $17.2 million from the developers, which are recorded as revenue over the period beginning on the date of election11)until the earlier of (i) the maturity of the real estate loan investment and (ii) the sale of the property. The receipt of the cash termination fees are an additive adjustment in our calculation of AFFO and the removal of non-cash revenue from the recognition of the termination fees are a reduction to Core FFO in our calculation of AFFO; both of these adjustments are presented in a single net number within this line. For the three-month periods ended June 30, 2020 and 2019 and the six-month period ended June 30, 2019, we had recognized termination fee revenues in excess of cash received, resulting in the negative adjustments shown to Core FFO in our calculation of AFFO. For the six-month period ended June 30, 2020, cash received exceeded fee revenue amortization, resulting in a net positive adjustment to Core FFO in our calculation of AFFO.



This adjustment reflects straight-line rent adjustments and the reversal of the non-cash amortization of below-market and above-market lease intangibles, which were recognized in conjunction with our acquisitions and which are amortized over the estimated average remaining lease terms 12)from the acquisition date for multifamily communities and over the remaining lease terms for grocery-anchored shopping center assets and office buildings. At June 30, 2020, the balance of unamortized below-market lease intangibles was approximately $57.8 million, which will be recognized over a weighted average remaining lease period of approximately 8.9 years.



This adjustment removes the non-cash amortization of deferred revenue 13)recorded by us in conjunction with Company-owned lessee-funded tenant improvements in our office buildings.



We deduct from Core FFO normally recurring capital expenditures that are necessary to maintain our assets' revenue streams in the calculation of AFFO. This adjustment also deducts from Core FFO capitalized amounts for third party costs during the period to originate or renew leases in our grocery-anchored shopping centers and office buildings. This adjustment 14)includes approximately $31,000 and $71,000 of recurring capitalized expenditures incurred at our corporate offices during the three-month and six-month periods ended June 30, 2020, respectively. No adjustment is made in the calculation of AFFO for nonrecurring capital expenditures. See Capital Expenditures, Grocery-Anchored Shopping Center Portfolio, and Office Buildings Portfolio sections for definitions of these terms.

See Definitions of Non-GAAP Measures.

Preferred Apartment Communities, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except per-share par values) June 30, 2020December 31, 2019

Assets

Real estate

Land $ 671,687 $ 635,757

Building and improvements 3,375,631 3,256,223

Tenant improvements 174,565 167,275

Furniture, fixtures, and equipment 354,340 323,381

Construction in progress 22,539 11,893

Gross real estate 4,598,762 4,394,529

Less: accumulated depreciation (503,467) (421,551)

Net real estate 4,095,295 3,972,978

Real estate loan investments, net of deferred fee income and allowance for 306,026 325,790 expected loan loss

Real estate loan investments to related parties, net 2,568 23,692

Total real estate and real estate loan investments, net 4,403,889 4,322,460



Cash and cash equivalents 60,101 94,381

Restricted cash 56,333 42,872

Notes receivable 7,758 17,079

Note receivable and revolving lines of credit due from related parties 9,011 24,838

Accrued interest receivable on real estate loans 23,046 25,755

Acquired intangible assets, net of amortization 145,187 154,803

Deferred loan costs on Revolving Line of Credit, net of amortization 950 1,286

Deferred offering costs 4,088 2,147

Tenant lease inducements, net 19,103 19,607

Tenant receivables and other assets 89,817 65,332

Total assets $ 4,819,283$ 4,770,560



Liabilities and equity

Liabilities

Mortgage notes payable, net of deferred loan costs and mark-to-market $ 2,762,291$ 2,567,022 adjustment

Revolving line of credit 92,500 -

Term note payable, net of deferred loan costs - 69,489

Unearned purchase option termination fees 1,585 2,859

Deferred revenue 37,862 39,722

Accounts payable and accrued expenses 56,143 42,191

Deferred liability to Former Manager 23,168 -

Contingent liability due to Former Manager 14,880 -

Accrued interest payable 7,927 8,152

Dividends and partnership distributions payable 20,570 23,519

Acquired below market lease intangibles, net of amortization 57,793 62,611

Prepaid rent, security deposits and other liabilities 34,568 20,879

Total liabilities 3,109,287 2,836,444



Commitments and contingencies

Equity

Stockholders' equity

Series A Redeemable Preferred Stock, $0.01 par value per share; 3,050 shares authorized; 2,226 and 2,161

shares issued; 2,026 and 2,028 shares outstanding at June 30, 2020 and 20 20 December 31, 2019, respectively

Series A1 Redeemable Preferred Stock, $0.01 par value per share; up to 1,000 shares authorized;

68 and 5 shares issued and outstanding at June 30, 2020 and December 31, - - 2019, respectively

Series M Redeemable Preferred Stock, $0.01 par value per share; 500 shares authorized; 106 shares

issued; 93 and 103 shares outstanding at June 30, 2020 and December 31, 2019, 1 1 respectively

Series M1 Redeemable Preferred Stock, $0.01 par value per share; up to 1,000 shares authorized;

5 and zero shares issued and outstanding at June 30, 2020 and December 31, - - 2019, respectively

Common Stock, $0.01 par value per share; 400,067 shares authorized; 49,283 and 46,443 shares issued

and outstanding at June 30, 2020 and December 31, 2019, respectively 493 464

Additional paid-in capital 1,917,212 1,938,057

Accumulated (deficit) earnings (206,724) (7,244)

Total stockholders' equity 1,711,002 1,931,298

Non-controlling interest (1,006) 2,818

Total equity 1,709,996 1,934,116



Total liabilities and equity $ 4,819,283$ 4,770,560

Preferred Apartment Communities, Inc.

Consolidated Statements of Cash Flows

(Unaudited)



Six-month periods ended June 30,

(In thousands) 2020 2019

Operating activities:

Net (loss) income $ (195,473) $ (3,957)

Reconciliation of net (loss) income to net cash provided by operating activities:

Depreciation and amortization expense 101,302 90,952

Amortization of above and below market leases (3,570) (3,179)

Deferred revenues and fee income amortization (2,482) (3,197)

Purchase option termination fee amortization (4,475) (5,617)

Amortization of equity compensation, lease incentives and other non-cash 1,781 1,608 expenses

Deferred loan cost amortization 3,424 3,139

Non-cash accrued interest income on real estate loans (6,156) (6,734)

Receipt of accrued interest income on real estate loans 8,865 2,318

Gains on sales of real estate loan and trading investment (479) (751)

Cash received for purchase option terminations 4,800 1,330

Loss on extinguishment of debt 6,156 69

Increase in provision for expected credit losses 5,615 -

Mortgage interest received from consolidated VIEs - 8,015

Mortgage interest paid to other participants of consolidated VIEs - (8,015)

Changes in operating assets and liabilities:

(Increase) in tenant receivables and other assets (12,112) (11,306)

(Increase) in tenant lease incentives (382) (314)

Increase in accounts payable and accrued expenses 36,431 11,691

Increase in deferred liability to Former Manager 22,851 -

Increase in contingent liability 15,004 -

Decrease in accrued interest, prepaid rents and other liabilities (2,234) (1,416)

Net cash (used in) provided by operating activities (21,134) 74,636



Investing activities:

Investments in real estate loans (24,547) (53,497)

Repayments of real estate loans 53,896 -

Notes receivable issued (686) (4,792)

Notes receivable repaid 10,041 10

Notes receivable issued and draws on lines of credit by related parties (9,624) (22,766)

Repayments of notes receivable and lines of credit by related parties 4,546 16,103

Origination fees received on real estate loan investments 467 1,051

Origination fees paid to Former Manager on real estate loan investments - (526)

Purchases of mortgage backed securities (K program), net of acquisition costs - (30,934)

Mortgage principal received from consolidated VIEs - 2,073

Proceeds from sales of mortgage-backed securities - 53,445

Acquisition of properties (185,970) (154,579)

Receipt of insurance proceeds for capital improvements - 746

Proceeds from land condemnation 738 -

Additions to real estate assets - improvements (26,422) (20,647)

Investment in property development (50) -

Deposits paid on acquisitions (105) (8,202)

Net cash used in investing activities (177,716) (222,515)



Financing activities:

Proceeds from mortgage notes payable 336,849 145,861

Repayments of mortgage notes payable (134,493) (57,318)

Payments for deposits and other mortgage loan costs (10,541) (3,267)

Debt prepayment and other debt extinguishment costs (5,919) -

Payments to real estate loan participants - (5,223)

Proceeds from lines of credit 284,000 162,200

Payments on lines of credit (191,500) (219,200)

Repayment of Term Loan (70,000) -

Mortgage principal paid to other participants of consolidated VIEs - (2,073)

Proceeds from repurchase agreements - 4,857

Payments for repurchase agreements - (4,857)

Proceeds from sales of preferred stock and Units, net of offering costs and 120,497 257,466 redemptions

Proceeds from exercises of Warrants 29 7,433

Payments for redemptions of preferred stock (48,202) (5,115)

Common Stock dividends paid (24,647) (22,036)

Preferred stock dividends and Class A Unit distributions paid (68,538) (52,112)

Payments for deferred offering costs (9,701) (1,868)

Contributions from non-controlling interests 197 -

Net cash provided by financing activities 178,031 204,748



Net (decrease) increase in cash, cash equivalents and restricted cash (20,819) 56,869

Cash, cash equivalents and restricted cash, beginning of year 137,253 87,690

Cash, cash equivalents and restricted cash, end of period $ 116,434 $ 144,559

Real Estate Loan Investments

The following tables present details pertaining to our portfolio of fixed rate, interest-only real estate loan investments.

Optional Carrying amount ^(1) as of Current / Project/Property Location Maturity extension Total loan deferred date date commitmentsJune 30, 2020December 31,interest % 2019 per annum



Multifamily communities: (in thousands)

Palisades Northern VA 5/17/2021 N/A $17,270 $ 17,250 $17,250 8 / 0 ^(2)

Wiregrass Tampa, FL N/A N/A - - 14,976 -

Wiregrass Capital Tampa, FL N/A N/A - - 4,240 -

Berryessa San Jose, CA 2/13/2021 2/13/2023 137,616 120,887 115,819 8.5 / 3

The Anson Nashville, TN 11/24/202111/24/20236,240 6,240 6,240 8.5 / 4.5

The Anson Capital Nashville, TN 11/24/202111/24/20235,659 4,634 4,440 8.5 / 4.5

Sanibel Straights Fort Myers, FL 2/3/2021 2/3/2022 9,416 9,233 8,846 8.5 / 5.5

Sanibel Straights CapitalFort Myers, FL 2/3/2021 2/3/2022 6,193 6,190 5,930 8.5 / 5.5

Falls at Forsyth Atlanta, GA N/A N/A - - 21,513 -

Newbergh Atlanta, GA 1/31/2021 1/31/2022 11,749 11,749 11,699 8.5 / 5.5

Newbergh Capital Atlanta, GA 1/31/2021 1/31/2022 6,176 6,176 5,653 8.5 / 5.5

V & Three Charlotte, NC 8/15/2021 8/15/2022 10,336 10,336 10,336 8.5 / 5

V & Three Capital Charlotte, NC 8/18/2021 8/18/2022 7,338 6,858 6,571 8.5 / 5

Cameron Square Alexandria, VA 10/11/202110/11/202321,340 19,395 18,582 8.5 / 3

Cameron Square Capital Alexandria, VA 10/11/202110/11/20238,850 8,595 8,235 8.5 / 3

Southpoint Fredericksburg, VA2/28/2022 2/28/2024 7,348 7,348 7,348 8.5 / 4

Southpoint Capital Fredericksburg, VA2/28/2022 2/28/2024 4,962 4,430 4,245 8.5 / 4

E-Town Jacksonville, FL 6/14/2022 6/14/2023 16,697 15,187 14,550 8.5 / 3.5

Vintage Destin, FL 3/24/2022 3/24/2024 10,763 9,323 8,932 8.5 / 4

Hidden River II Tampa, FL 10/11/202210/11/20244,462 4,462 3,012 8.5 / 3.5

Hidden River II Capital Tampa, FL 10/11/202210/11/20242,763 2,357 2,258 8.5 / 3.5

Kennesaw Crossing Atlanta, GA 9/1/2023 9/1/2024 14,810 12,473 7,616 8.5 / 5.5

Vintage Horizon West Orlando, FL 10/11/202210/11/202410,900 8,637 8,275 8.5 / 5.5

Chestnut Farms Charlotte, NC 2/28/2025 N/A 13,372 3,554 - 8.5 / 5.5

Vintage Jones Franklin Raleigh, NC 11/14/20235/14/2025 10,000 776 - 8.5 / 5.5



Student housing properties:

Haven 12 Starkville, MS 11/30/2020N/A 6,116 6,116 6,116 8.5 / 0

Solis Kennesaw II Atlanta, GA 5/5/2022 5/5/2024 13,613 13,036 12,489 8.5 / 4



New Market Properties:

Dawson Marketplace Atlanta, GA N/A N/A - - 12,857 -



Preferred Office Properties:

8West Atlanta, GA 11/29/202211/29/202419,193 7,991 4,554 8.5 / 5



$383,182 323,233 352,582

Unamortized loan origination fees (1,416) (1,476)

Allowance for loan losses (13,223) (1,624)



Carrying amount $ 308,594 $349,482





^(1) Carrying amounts presented per loan are amounts drawn, exclusive of deferred fee revenue.

(2) Pursuant to an amendment of the loan agreement, effective January 1, 2019, the loan ceased accruing deferred interest. On July 31, 2020, we received approximately $18.7 million in full satisfaction of the principal and all interest due on the loan.

We hold options or rights of first offer, but not obligations, to purchase some of the properties which are partially financed by our real estate loan investments. Certain option purchase prices are negotiated at the time of the loan closing and are to be calculated based upon market cap rates at the time of exercise of the purchase option, less a discount ranging from between zero and 15 basis points, depending on the loan. As of June 30, 2020, potential property acquisitions and units from projects in our real estate loan investment portfolio consisted of:

Total units Purchase option window upon

Project/Property Location completion^ (1)Begin End



Residential properties:

V & Three Charlotte, NC 338 S + 90 days^ (2) S + 150 days^ (2)

The Anson Nashville, TN 301 S + 90 days^ (2) S + 150 days^ (2)

Southpoint Fredericksburg, VA240 S + 90 days^ (2) S + 150 days^ (2)

E-Town Jacksonville, FL 332 S + 90 days^ (3) S + 150 days^ (3)

Vintage Destin, FL 282 ^(4) ^(4)

Hidden River II Tampa, FL 204 S + 90 days^ (2) S + 150 days^ (2)

Kennesaw Crossing Atlanta, GA 250 ^(5) ^(5)

Vintage Horizon West Orlando, FL 340 ^(4) ^(4)

Solis Chestnut Farm Charlotte, NC 256 ^(5) ^(5)

Vintage Jones Franklin Raleigh, NC 277 ^(4) ^(4)

Solis Kennesaw II Atlanta, GA 175 ^(6) ^(6)



Office property:

8West Atlanta, GA ^(7) ^(7) ^(7)



2,995



^(1) We evaluate each project individually and we make no assurance that we will acquire any of the underlying properties from our real estate loan investment portfolio. The purchase options held by us on the 464 Bishop, Haven Charlotte, Sanibel Straights, Wiregrass, Newbergh, Cameron Square, Solis Kennesaw and Falls at Forsyth projects were terminated, in exchange for an aggregate $17.2 million in termination fees from the developers.

^(2) The option period window begins and ends at the number of days indicated beyond the achievement of a 93% physical occupancy rate by the underlying property.

^(3) The option period window begins on the earlier of June 21, 2024 and the number of days indicated beyond the achievement of a 93% physical occupancy rate by the underlying property.

^(4) The option period window begins on the later of one year following receipt of final certificate of occupancy or 90 days beyond the achievement of a 93% physical occupancy rate by the underlying property and ends 60 days beyond the option period beginning date.

^(5) We hold a right of first offer on the property.

^(6) The option period begins on October 1 of the second academic year following project completion and ends on the following December 31. The developer may elect to expedite the option period to begin December 1, 2020 and end on December 31, 2020.

^(7) The project plans are for the construction of a class A office building consisting of approximately 195,000 rentable square feet; our purchase option window opens 90 days following the achievement of 90% lease commencement and ends on November 30, 2024 (subject to adjustment). Our purchase option is at the to-be-agreed-upon market value. In the event the property is sold to a third party, we would be due a fee based on a minimum multiple of 1.15 times the total commitment amount of the real estate loan investment, less the amounts actually paid by the borrower, up to and including payment of accrued interest and repayment of principal at the time of the sale.

Mortgage Indebtedness

The following table presents certain details regarding our mortgage notes payable:

Principal balance as of Acquisition/ Basis point Interest only refinancing June 30, 2020 December 31, Maturity Interestspread over through date ^(1) date 2019 date rate 1 Month LIBOR



Multifamily communities: (in thousands)

Summit Crossing 10/31/2017 $37,294 $37,651 11/1/2024 3.99 %Fixed rate N/A

Summit Crossing II 6/30/2020 20,700 13,221 7/1/2030 2.94 %278 7/31/2022

Vineyards 9/26/2014 33,046 33,382 10/1/2021 3.68 %Fixed rate N/A

Avenues at Cypress 6/30/2020 28,366 20,704 7/1/2027 2.96 %Fixed rate 7/31/2022

Avenues at Northpointe 6/29/2020 33,546 26,313 7/1/2027 2.79 %Fixed rate 7/31/2022

Venue at Lakewood Ranch 6/30/2020 36,555 28,076 7/1/2030 2.99 %Fixed rate 7/31/2022

Aster at Lely Resort 6/29/2020 50,400 31,094 7/1/2030 2.95 %Fixed rate 7/31/2022

CityPark View 6/25/2020 29,000 20,089 7/1/2030 2.75 %Fixed rate 7/31/2023

Avenues at Creekside 7/31/2015 38,458 38,871 8/1/2024 1.78 %160 ^(2) N/A

Citi Lakes 7/29/2019 40,705 41,079 8/1/2029 3.66 %Fixed rate N/A

Stone Creek 6/22/2017 19,627 19,800 7/1/2052 3.22 %Fixed rate N/A

Lenox Village Town Center 2/28/2019 38,494 38,813 3/1/2029 4.34 %Fixed rate N/A

Retreat at Lenox 12/21/2015 16,935 17,114 1/1/2023 4.04 %Fixed rate N/A

Overton Rise 2/1/2016 38,022 38,428 8/1/2026 3.98 %Fixed rate N/A

Village at Baldwin Park 12/17/2018 70,132 70,607 1/1/2054 4.16 %Fixed rate N/A

Crosstown Walk 6/30/2020 46,500 30,246 7/1/2027 2.92 %Fixed rate 7/31/2022

525 Avalon Park 6/15/2017 63,894 64,519 7/1/2024 3.98 %Fixed rate N/A

City Vista 7/1/2016 33,309 33,674 7/1/2026 3.68 %Fixed rate N/A

Sorrel 8/24/2016 31,098 31,449 9/1/2023 3.44 %Fixed rate N/A

Citrus Village 3/3/2017 28,489 28,796 6/10/2023 3.65 %Fixed rate N/A

Retreat at Greystone 11/21/2017 33,749 34,053 12/1/2024 4.31 %Fixed rate N/A

Founders Village 3/31/2017 29,922 30,202 4/1/2027 4.31 %Fixed rate N/A

Claiborne Crossing 4/26/2017 25,727 25,948 6/1/2054 2.89 %Fixed rate N/A

Luxe at Lakewood Ranch 7/26/2017 37,296 37,662 8/1/2027 3.93 %Fixed rate N/A

Adara at Overland Park 9/27/2017 30,327 30,624 4/1/2028 3.90 %Fixed rate N/A

Aldridge at Town Village 10/31/2017 36,234 36,569 11/1/2024 4.19 %Fixed rate N/A

Reserve at Summit Crossing 9/29/2017 19,088 19,276 10/1/2024 3.87 %Fixed rate N/A

Overlook at Crosstown Walk 11/21/2017 21,246 21,450 12/1/2024 3.95 %Fixed rate N/A

Colony at Centerpointe 12/20/2017 31,785 32,120 10/1/2026 3.68 %Fixed rate N/A

Lux at Sorrel 1/9/2018 30,174 30,474 2/1/2030 3.91 %Fixed rate N/A

Green Park 2/28/2018 38,159 38,525 3/10/2028 4.09 %Fixed rate N/A

The Lodge at Hidden River 9/27/2018 40,557 40,903 10/1/2028 4.32 %Fixed rate N/A

Vestavia Reserve 11/9/2018 36,824 37,130 12/1/2030 4.40 %Fixed rate N/A

CityPark View South 11/15/2018 23,575 23,767 6/1/2029 4.51 %Fixed rate N/A

Artisan at Viera 8/8/2019 39,468 39,824 9/1/2029 3.93 %Fixed rate N/A

Five Oaks at Westchase 10/17/2019 31,136 31,448 11/1/2031 3.27 %Fixed rate N/A

Horizon at Wiregrass Ranch 4/23/2020 51,909 - 5/1/2030 2.90 %Fixed rate N/A

Parkside at the Beach 4/30/2020 45,037 - 5/1/2030 2.95 %Fixed rate N/A



Total multifamily communities 1,336,783 1,173,901



Grocery-anchored shopping centers:

Spring Hill Plaza 9/17/2019 8,066 8,167 10/1/2031 3.72 %Fixed rate N/A

Parkway Town Centre 9/17/2019 7,967 8,067 10/1/2031 3.72 %Fixed rate N/A

Woodstock Crossing 8/8/2014 2,848 2,877 9/1/2021 4.71 %Fixed rate N/A

Deltona Landings 8/16/2019 6,216 6,289 9/1/2029 4.18 %Fixed rate N/A

Powder Springs 8/13/2019 7,851 7,951 9/1/2029 3.65 %Fixed rate ^(3)

Barclay Crossing 8/16/2019 6,161 6,233 9/1/2029 4.18 %Fixed rate N/A

Parkway Centre 8/16/2019 4,477 4,530 9/1/2029 4.18 %Fixed rate N/A

The Market at Salem Cove 10/6/2014 8,983 9,075 11/1/2024 4.21 %Fixed rate N/A

Independence Square 8/27/2015 11,321 11,455 9/1/2022 3.93 %Fixed rate N/A

Royal Lakes Marketplace 4/12/2019 9,460 9,572 5/1/2029 4.29 %Fixed rate N/A

The Overlook at Hamilton Place 12/22/2015 19,301 19,509 1/1/2026 4.19 %Fixed rate N/A

Summit Point 10/30/2015 11,308 11,494 11/1/2022 3.57 %Fixed rate N/A

East Gate Shopping Center 4/29/2016 5,198 5,277 5/1/2026 3.97 %Fixed rate N/A

Fury's Ferry 4/29/2016 6,005 6,096 5/1/2026 3.97 %Fixed rate N/A

Rosewood Shopping Center 4/29/2016 4,033 4,095 5/1/2026 3.97 %Fixed rate N/A

Southgate Village 4/29/2016 7,170 7,279 5/1/2026 3.97 %Fixed rate N/A

The Market at Victory Village 5/16/2016 8,832 8,911 9/11/2024 4.40 %Fixed rate N/A

Wade Green Village 4/7/2016 7,572 7,655 5/1/2026 4.00 %Fixed rate N/A

Lakeland Plaza 7/15/2016 27,050 27,459 8/1/2026 3.85 %Fixed rate N/A

University Palms 8/8/2016 12,227 12,421 9/1/2026 3.45 %Fixed rate N/A

Cherokee Plaza 4/12/2019 24,575 24,867 5/1/2027 4.28 %Fixed rate N/A

Sandy Plains Exchange 8/8/2016 8,541 8,676 9/1/2026 3.45 %Fixed rate N/A

Thompson Bridge Commons 8/8/2016 11,418 11,599 9/1/2026 3.45 %Fixed rate N/A

Heritage Station 8/8/2016 8,451 8,585 9/1/2026 3.45 %Fixed rate N/A

Oak Park Village 8/8/2016 8,721 8,859 9/1/2026 3.45 %Fixed rate N/A

Shoppes of Parkland 8/8/2016 15,560 15,702 9/1/2023 4.67 %Fixed rate N/A

Champions Village 10/18/2016 27,400 27,400 11/1/2021 3.25 %300 ^(4) 11/1/2021

Castleberry-Southard 4/21/2017 10,848 10,959 5/1/2027 3.99 %Fixed rate N/A

Rockbridge Village 6/6/2017 13,455 13,597 7/5/2027 3.73 %Fixed rate N/A

Irmo Station 7/26/2017 9,900 10,038 8/1/2030 3.94 %Fixed rate N/A

Maynard Crossing 8/25/2017 17,204 17,449 9/1/2032 3.74 %Fixed rate N/A

Woodmont Village 9/8/2017 8,209 8,320 10/1/2027 4.13 %Fixed rate N/A

West Town Market 9/22/2017 8,382 8,503 10/1/2025 3.65 %Fixed rate N/A

Crossroads Market 12/5/2017 17,869 18,112 1/1/2030 3.95 %Fixed rate N/A

Anderson Central 3/16/2018 11,394 11,539 4/1/2028 4.32 %Fixed rate N/A

Greensboro Village 5/22/2018 8,146 8,250 6/1/2028 4.20 %Fixed rate N/A

Governors Towne Square 5/22/2018 10,838 10,976 6/1/2028 4.20 %Fixed rate N/A

Conway Plaza 6/29/2018 9,463 9,549 7/5/2028 4.29 %Fixed rate N/A

Brawley Commons 7/6/2018 17,743 17,963 8/1/2028 4.36 %Fixed rate N/A

Hollymead Town Center 12/21/2018 26,452 26,758 1/1/2029 4.64 %Fixed rate N/A

Gayton Crossing 1/17/2019 17,480 17,679 2/1/2029 4.71 %Fixed rate N/A

Free State Shopping Center 5/28/2019 45,974 46,391 6/1/2029 3.99 %Fixed rate N/A

Polo Grounds Mall 6/12/2019 13,108 13,227 7/1/2034 3.93 %Fixed rate N/A

Disston Plaza 6/12/2019 17,743 17,905 7/1/2034 3.93 %Fixed rate N/A

Fairfield Shopping Center 8/16/2019 19,750 19,750 8/16/2026 2.25 %205 8/16/22

Berry Town Center 11/14/2019 11,910 12,025 12/1/2034 3.49 %Fixed rate N/A

Hanover Shopping Center 12/19/2019 31,612 32,000 12/19/2026 3.62 %Fixed rate N/A

Wakefield Crossing 1/29/2020 7,825 - 2/1/2032 3.66 %Fixed rate N/A



Total grocery-anchored shopping centers 622,017 621,090



Student housing properties:

North by Northwest 6/1/2016 30,800 31,209 10/1/2022 4.02 %Fixed rate N/A

SoL 10/31/2018 35,377 35,656 11/1/2028 4.71 %Fixed rate N/A

Stadium Village 10/27/2017 44,784 45,228 11/1/2024 3.80 %Fixed rate N/A

Ursa 12/18/2017 - 31,400 1/5/2020 4.78 %300 N/A

The Tradition 5/10/2018 30,000 30,000 6/6/2021 5.45 %375 ^(5) 6/6/2021

Knightshade 5/31/2018 47,125 47,125 9/1/2025 4.09 %Fixed rate 9/1/2020

The Bloc 6/27/2018 28,966 28,966 7/9/2021 5.25 %355 ^(6) 7/9/2021



Total student housing properties 217,052 249,584



Office buildings:

Brookwood Center 8/29/2016 30,324 30,716 9/10/2031 3.52 %Fixed rate N/A

Galleria 75 11/4/2016 5,236 5,340 7/1/2022 4.25 %Fixed rate N/A

Three Ravinia 12/30/2016 115,500 115,500 1/1/2042 4.46 %Fixed rate 1/31/2022

Westridge at La Cantera 11/13/2017 51,149 51,834 12/10/2028 4.10 %Fixed rate N/A

Armour Yards 1/29/2018 39,772 40,000 2/1/2028 4.10 %Fixed rate N/A

150 Fayetteville 7/31/2018 114,400 114,400 8/10/2028 4.27 %Fixed rate 9/9/2020

CAPTRUST Tower 7/25/2019 82,650 82,650 8/1/2029 3.61 %Fixed rate 7/31/2029

Morrocroft Centre 3/19/2020 70,000 - 4/10/2033 3.40 %Fixed rate 4/10/2025

251 Armour Yards ^(7) 1/22/2020 3,522 - 1/22/2025 4.50 %Fixed rate 1/21/2023



Total office buildings 636,332 565,254

Grand total 2,812,184 2,609,829

Less: deferred loan costs (45,402) (38,185)

Less: below market debt adjustment (4,491) (4,622)

Mortgage notes, net $2,762,291 $2,567,022

Footnotes to Mortgage Notes Table



^(1) Following the indicated interest only period (where applicable), monthly payments of accrued interest and principal are based on a 25 to 35-year amortization period through the maturity date.

^(2) The mortgage instrument was assumed as part of the sales transaction; the 1 Month LIBOR index is capped at 5.0%, resulting in a cap on the combined rate of 6.6%.

^(3) The mortgage has interest-only payment terms for the periods of June 1, 2023 through May 1, 2024 and from June 1, 2028 through May 1, 2029.

^(4) The interest rate has a floor of 3.25%.

^(5) The interest rate has a floor of 5.45%.

^(6) The interest rate has a floor of 5.25%.

^(7) A construction loan financing redevelopment of the property.

Multifamily Communities

As of June 30, 2020, our multifamily community portfolio consisted of the following properties:

Three months ended June 30, 2020

Number ofAverage unit Average Average rentProperty Location units size (sq. ft.)physical per unit occupancy



Same-Store Communities:

Aldridge at Town Village Atlanta, GA 300 969 96.3 % $1,397

Green Park Atlanta, GA 310 985 95.9 % $1,498

Overton Rise Atlanta, GA 294 1,018 95.9 % $1,590

Summit Crossing I Atlanta, GA 345 1,034 95.2 % $1,223

Summit Crossing II Atlanta, GA 140 1,100 95.7 % $1,334

The Reserve at Summit Crossing Atlanta, GA 172 1,002 94.8 % $1,353

Avenues at Cypress Houston, TX 240 1,170 96.0 % $1,451

Avenues at Northpointe Houston, TX 280 1,167 95.5 % $1,416

Vineyards Houston, TX 369 1,122 97.1 % $1,194

Avenues at Creekside San Antonio, TX 395 974 94.7 % $1,196

Aster at Lely Resort Naples, FL 308 1,071 92.1 % $1,455

Sorrel Jacksonville, FL 290 1,048 94.0 % $1,328

Lux at Sorrel Jacksonville, FL 265 1,025 94.6 % $1,391

525 Avalon Park Orlando, FL 487 1,394 93.8 % $1,505

Citi Lakes Orlando, FL 346 984 92.3 % $1,506

Luxe at Lakewood Ranch Sarasota, FL 280 1,105 91.1 % $1,522

Venue at Lakewood Ranch Sarasota, FL 237 1,001 90.3 % $1,556

Crosstown Walk Tampa, FL 342 1,070 96.8 % $1,329

Overlook at Crosstown Walk Tampa, FL 180 986 95.0 % $1,406

Citrus Village Tampa, FL 296 980 94.6 % $1,337

Lenox Village Nashville, TN 273 906 95.6 % $1,325

Regent at Lenox Nashville, TN 18 1,072 98.1 % $1,406

Retreat at Lenox Nashville, TN 183 773 95.1 % $1,263

CityPark View Charlotte, NC 284 948 96.5 % $1,155

CityPark View South Charlotte, NC 200 1,005 95.5 % $1,280

Colony at Centerpointe Richmond, VA 255 1,149 94.9 % $1,390

Founders Village Williamsburg, VA 247 1,070 92.8 % $1,416

Retreat at Greystone Birmingham, AL 312 1,100 95.4 % $1,346

Vestavia Reserve Birmingham, AL 272 1,113 96.0 % $1,560

Adara Overland Park Kansas City, KS 260 1,116 94.9 % $1,397

Claiborne Crossing Louisville, KY 242 1,204 95.0 % $1,353

City Vista Pittsburgh, PA 272 1,023 92.9 % $1,449



Total/Average Same-Store Communities 8,694



Stone Creek Houston, TX 246 852 95.5 % $1,179

Village at Baldwin Park Orlando, FL 528 1,069 94.0 % $1,689

Lodge at Hidden River Tampa, FL 300 980 94.4 % $1,394

Five Oaks at Westchase Tampa, FL 218 983 93.6 % $1,519



Total/Average Stabilized Communities 9,986



Artisan at Viera Melbourne, FL 259 1,070 N/A $1,717

Wiregrass Ranch Tampa, FL 392 973 N/A $1,500

Parkside at the Beach Panama City Beach, FL288 1,041 N/A -



Total PAC Non-Stabilized Communities 939



Total multifamily community units 10,925

For the three-month period ended June 30, 2020, our average same-store multifamily communities' physical occupancy was 94.7%. We calculate average same-store physical occupancy for quarterly periods as the average number of occupied units on the 20th day of each of the trailing three months from the reporting period end date and that have been owned for at least 15 full months as of the end of the first quarter of each year. We exclude the operating results of properties for which construction of adjacent phases has commenced, properties which are undergoing significant capital projects, have sustained significant casualty losses, or are being marketed for sale as of the end of the reporting period. We believe "Same Property" information is useful as it allows both management and investors to gauge our management effectiveness via comparisons of financial and operational results between interim and annual periods for those subsets of multifamily communities owned for current and prior comparative periods.

For the three-month period ended June 30, 2020, our average stabilized physical occupancy was 94.7%. We calculate average stabilized physical occupancy for quarterly periods as the average number of occupied units on the 20th day of each of the trailing three months from the reporting period end date.

For the three-month period ended June 30, 2020, our average economic occupancy was 94.5%. We define average economic occupancy as market rent reduced by vacancy losses, expressed as a percentage. All of our multifamily properties are included in these calculations except for properties which are not yet stabilized (which we define as properties having first achieved 93% physical occupancy for three full months in a quarter; includes Artisan at Viera and Wiregrass Ranch), properties which are owned for less than the entire reporting period (Parkside at the Beach) and properties which are undergoing significant capital projects, have sustained significant casualty losses (Stone Creek) or are adding additional phases (Lodge at Hidden River). We also exclude properties which are currently being marketed for sale, of which we had none at June 30, 2020. Average economic occupancy is useful both to management and investors as a gauge of our effectiveness in realizing the full revenue generating potential of our multifamily communities given market rents and occupancy rates.

Student Housing Properties

As of June 30, 2020, our student housing portfolio consisted of the following properties:

Three months ended June 30, 2020

Number Number Average unit Average Average rentProperty Location of units of beds size (sq. ft.) physical per bed occupancy

Student housing properties:

North by Northwest Tallahassee, FL 219 679 1,250 86.8 % $ 701

SoL ^ Tempe, AZ 224 639 1,296 98.9 % $ 718

Stadium Village ^(1) Atlanta, GA 198 792 1,466 97.6 % $ 721

Ursa ^(1) Waco, TX 250 840 1,634 97.3 % $ 605

The Tradition College Station, TX 427 808 539 97.7 % $ 606

Knightshade Orlando, FL 221 894 2,036 98.4 % $ 769

The Bloc Lubbock, TX 140 556 1,394 88.9 % $ 514

Rush Charlotte, NC 332 887 1,224 97.8 % $ 752



Total/Average 2,011 6,095 95.9 % $ 680



^(1) The Company acquired and owns an approximate 99% equity interest in a joint venture which owns both Stadium Village and Ursa.

Capital Expenditures

We regularly incur capital expenditures related to our owned multifamily communities and student housing properties. Capital expenditures may be nonrecurring and discretionary, as part of a strategic plan intended to increase a property's value and corresponding revenue-generating ability, or may be normally recurring and necessary to maintain the income streams and present value of a property. Certain capital expenditures may be budgeted and reserved for upon acquiring a property as initial expenditures necessary to bring a property up to our standards or to add features or amenities that we believe make the property a compelling value to prospective residents in its individual market. These budgeted nonrecurring capital expenditures in connection with an acquisition are funded from the capital source(s) for the acquisition and are not dependent upon subsequent property operating cash flows for funding. Since the onset of COVID, all nonrecurring and discretionary capital expenditures have been reviewed individually and approved on as needed basis. There are regular recurring and life safety/operational capital expenditures which remain necessary for the continued normal operation of our properties. These have continued without interruption.

For the three-month period ended June 30, 2020, our capital expenditures for multifamily communities consisted of:

Capital Expenditures - Multifamily Communities

Recurring Non-recurring Total

(in thousands, except per-unit figures) AmountPer UnitAmount Per Unit Amount Per Unit

Appliances $198$18.62$- $- $198 $18.62

Carpets 410 38.70 - - 410 38.70

Wood / vinyl flooring 27 2.47 137 12.92 164 15.39

Mini blinds and ceiling fans 55 5.12 - - 55 5.12

Fire safety - - 147 13.95 147 13.95

HVAC 167 15.84 - - 167 15.84

Computers, equipment, misc. 64 6.08 15 1.38 79 7.46

Elevators - - 34 3.20 34 3.20

Exterior painting - - - - - -

Leasing office and other common amenities 37 3.48 115 10.21 152 13.69

Major structural projects - - 273 25.57 273 25.57

Cabinets and countertop upgrades - - 315 29.79 315 29.79

Landscaping and fencing - - 132 12.37 132 12.37

Parking lot - - 27 2.60 27 2.60

Signage and sanitation - - 23 2.14 23 2.14

Totals $958$90.31$1,218$114.13$2,176$204.44

For the three-month period ended June 30, 2020, our capital expenditures for student housing properties consisted of:

Capital Expenditures - Student Housing Properties

Recurring Non-recurring Total

(in thousands, except per-bed figures) AmountPer Bed AmountPer Bed AmountPer Bed

Appliances $15 $2.35 $- $- $15 $2.35

Carpets 2 0.42 - - 2 0.42

Wood / vinyl flooring - - - - - -

Mini blinds and ceiling fans 1 0.17 - - 1 0.17

Fire safety - - 27 4.37 27 4.37

HVAC 22 3.73 - - 22 3.73

Computers, equipment, misc. 4 0.65 19 3.05 23 3.70

Elevators - - 10 1.67 10 1.67

Exterior painting - - - - - -

Leasing office and other common amenities 75 12.23 59 9.63 134 21.86

Major structural projects - - 69 11.44 69 11.44

Cabinets and counter top upgrades - - 1 0.21 1 0.21

Landscaping and fencing - - - - - -

Parking lot - - - - - -

Signage and sanitation - - 26 4.19 26 4.19

Unit furniture 105 17.24 - - 105 17.24

Totals $224$36.79$211$34.56$435$71.35

Grocery-Anchored Shopping Center Portfolio

As of June 30, 2020, our grocery-anchored shopping center portfolio consisted of the following properties:

Property name Location Year built GLA ^(1) Percent Grocery anchor leased tenant



Castleberry-Southard Atlanta, GA 2006 80,018 98.3 % Publix

Cherokee Plaza Atlanta, GA 1958 102,864 100.0 %Kroger

Governors Towne Square Atlanta, GA 2004 68,658 93.9 % Publix

Lakeland Plaza Atlanta, GA 1990 301,711 93.1 %Sprouts

Powder Springs Atlanta, GA 1999 77,853 89.3 % Publix

Rockbridge Village Atlanta, GA 2005 102,432 85.4 % Kroger

Roswell Wieuca Shopping Center Atlanta, GA 2007 74,370 100.0 % The Fresh Market

Royal Lakes Marketplace Atlanta, GA 2008 119,493 93.9 % Kroger

Sandy Plains Exchange Atlanta, GA 1997 72,784 93.8 %Publix

Summit Point Atlanta, GA 2004 111,970 89.8 % Publix

Thompson Bridge Commons Atlanta, GA 2001 92,587 97.5 %Kroger

Wade Green Village Atlanta, GA 1993 74,978 88.7 % Publix

Woodmont Village Atlanta, GA 2002 85,639 97.2 %Kroger

Woodstock Crossing Atlanta, GA 1994 66,122 100.0 % Kroger

East Gate Shopping Center Augusta, GA 1995 75,716 92.2 % Publix

Fury's Ferry Augusta, GA 1996 70,458 98.0 % Publix

Parkway Centre Columbus, GA 1999 53,088 97.7 % Publix

Greensboro Village Nashville, TN 2005 70,203 98.3 % Publix

Spring Hill Plaza Nashville, TN 2005 66,693 100.0 % Publix

Parkway Town Centre Nashville, TN 2005 65,587 100.0 % Publix

The Market at Salem Cove Nashville, TN 2010 62,356 100.0 % Publix

The Market at Victory Village Nashville, TN 2007 71,300 100.0 % Publix

The Overlook at Hamilton Place Chattanooga, TN 1992 213,095 100.0 % The Fresh Market

Shoppes of Parkland Miami-Ft. Lauderdale, FL 2000 145,720 98.9 %BJ's Wholesale Club

Crossroads Market Naples, FL 1993 126,895 100.0 %Publix

Neapolitan Way Naples, FL 1985 137,580 88.0 %Publix

Berry Town Center Orlando, FL 2003 99,441 84.2 %Publix

Conway Plaza Orlando, FL 1966 117,705 83.4 %Publix

Deltona Landings Orlando, FL 1999 59,966 98.4 % Publix

University Palms Orlando, FL 1993 99,172 100.0 %Publix

Disston Plaza Tampa-St. Petersburg, FL 1954 129,150 97.5 %Publix

Barclay Crossing Tampa, FL 1998 54,958 100.0 % Publix

Polo Grounds Mall West Palm Beach, FL 1966 130,285 100.0 %Publix

Champions Village Houston, TX 1973 383,346 78.7 %Randalls

Kingwood Glen Houston, TX 1998 103,397 97.1 % Kroger

Independence Square Dallas, TX 1977 140,218 86.1 % Tom Thumb

Midway Market Dallas, TX 2002 85,599 90.3 %Kroger

Oak Park Village San Antonio, TX 1970 64,855 100.0 %H.E.B.

Sweetgrass Corner Charleston, SC 1999 89,124 29.1 %(2)

Irmo Station Columbia, SC 1980 99,384 95.3 %Kroger

Rosewood Shopping Center Columbia, SC 2002 36,887 93.5 % Publix

Anderson Central Greenville Spartanburg, SC 1999 223,211 95.9 % Walmart

Fairview Market Greenville Spartanburg, SC 1998 46,303 97.0 %Aldi

Brawley Commons Charlotte, NC 1997 122,028 99.2 % Publix

West Town Market Charlotte, NC 2004 67,883 97.7 %Harris Teeter

Heritage Station Raleigh, NC 2004 72,946 100.0 %Harris Teeter

Maynard Crossing Raleigh, NC 1996 122,781 93.4 %Harris Teeter

Wakefield Crossing Raleigh, NC 2001 75,927 98.2 %Food Lion

Hanover Center ^(4) Wilmington, NC 1954 305,346 97.1 %Harris Teeter

Southgate Village Birmingham, AL 1988 75,092 96.8 % Publix

Hollymead Town Center Charlottesville, VA 2005 158,807 91.9 %Harris Teeter

Gayton Crossing Richmond, VA 1983 158,316 ^(3) 81.9 %Kroger

Fairfield Shopping Center ^(4) Virginia Beach, VA 1985 231,829 84.7 %Food Lion

Free State Shopping Center Washington, DC 1970 264,152 97.3 %Giant



Grand total/weighted average 6,208,278 92.7 %



^(1) Gross leasable area, or GLA, represents the total amount of property square footage that can be leased to tenants.

^(2) Bi-Lo (the former anchor tenant) had extended their term through April 30, 2019 and had no further right or option to extend their lease.

^(3) The GLA figure shown excludes the GLA of the Kroger store, which is owned by others.

^(4) Property is owned through a consolidated joint venture.

As of June 30, 2020, our grocery-anchored shopping center portfolio was 92.7% leased. We define percent leased as the percentage of gross leasable area that is leased, including non-cancelable lease agreements that have been signed which have not yet commenced. This metric is used by management to gauge the extent to which our grocery-anchored shopping centers are delivering their total potential rental and other revenues.

Details regarding lease expirations (assuming no exercises of tenant renewal options) within our grocery-anchored shopping center portfolio as of June 30, 2020 were:

Totals

Number ofLeased Percent of leases GLA leased GLA



Month to month13 24,943 0.4 %

2020 68 160,459 2.8 %

2021 171 626,991 10.9 %

2022 178 621,742 10.8 %

2023 138 668,782 11.6 %

2024 127 1,158,784 20.2 %

2025 98 927,521 16.1 %

2026 26 257,858 4.5 %

2027 27 192,685 3.4 %

2028 30 361,751 6.3 %

2029 26 183,596 3.2 %

2030 + 24 566,562 9.8 %



Total 926 5,751,6745751674100.0 %

The Company's grocery-anchored shopping center portfolio contained the following anchor tenants as of June 30, 2020:

Tenant GLA Percent of total GLA

Publix 1,175,43018.9%

Kroger 581,593 9.4%

Harris Teeter 273,273 4.4%

Wal-Mart 183,211 3.0%

BJ's Wholesale Club108,532 1.7%

Food Lion 76,523 1.2%

Giant 73,149 1.2%

Randall's 61,604 1.0%

H.E.B 54,844 0.9%

Tom Thumb 43,600 0.7%

The Fresh Market 43,321 0.7%

Sprouts 29,855 0.5%

Aldi 23,622 0.4%



Total 2,728,55744.0%



The Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 will present income statements of New Market Properties, LLC within the Results of Operations section of Management's Discussion and Analysis of Financial Condition and Results of Operations.

Second-generation capital expenditures within our grocery-anchored shopping center portfolio by property for the second quarter 2020 totaled approximately $484,000. Second-generation capital expenditures exclude those expenditures made in our grocery-anchored shopping center and office building portfolios (i) to lease space to "first generation" tenants (i.e. leasing capital for existing vacancies and known move-outs at the time of acquisition), (ii) to bring recently acquired properties up to our ownership standards, and (iii) for property redevelopments and repositioning.

Office Building Portfolio

As of June 30, 2020, our office building portfolio consisted of the following properties:

Property Name Location GLA Percent leased

Three Ravinia Atlanta, GA 814,000 95 %

150 Fayetteville Raleigh, NC 560,000 91 %

Capitol Towers Charlotte, NC 479,000 100 %

CAPTRUST Tower Raleigh, NC 300,000 100 %

Westridge at La CanteraSan Antonio, TX258,000 100 %

Morrocroft Centre Charlotte, NC 291,000 93 %

Armour Yards Atlanta, GA 187,000 96 %

Brookwood Center Birmingham, AL 169,000 100 %

Galleria 75 Atlanta, GA 111,000 97 %



Total/Average 3,169,00096 %

The Company's office building portfolio includes the following significant tenants:

Rentable square Percent of Annual Base footage Annual BaseRent (in Rent thousands)

InterContinental Hotels Group 520,000 14.2 % $12,275

Albemarle 162,000 6.6 % 5,727

CapFinancial 105,000 4.3 % 3,680

USAA 129,000 3.7 % 3,195

Vericast 129,000 3.4 % 2,953



Total 1,045,000 32.2 % $27,830

The Company defines Annual Base Rent as the current monthly base rent annualized under the respective leases.

The Company's leased square footage of its office building portfolio expires according to the following schedule:

Office building portfolio

Percent of

Year of leaseRented squarerented expiration feet square feet

2020 56,000 1.9 %

2021 241,000 8.0 %

2022 115,000 3.8 %

2023 128,000 4.3 %

2024 266,000 8.8 %

2025 254,000 8.5 %

2026 266,000 8.8 %

2027 335,000 11.1 %

2028 239,000 8.0 %

2029 57,000 1.9 %

2030+ 1,050,000 34.9 %



Total 3,007,000 100.0 %

The Company recognized second-generation capital expenditures within its office building portfolio of approximately $427,000 during the second quarter 2020.

Definitions of Non-GAAP Measures

We disclose FFO, Core FFO, AFFO and NOI, each of which meet the definition of a "non-GAAP financial measure", as set forth in Item 10(e) of Regulation S-K promulgated by the SEC. As a result we are required to include in this filing a statement of why the Company believes that presentation of these measures provides useful information to investors. The non-GAAP measures of FFO, Core FFO, AFFO and NOI should be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, and we believe that to understand our performance further FFO, Core FFO, AFFO and NOI should be compared with our reported net income or net loss and considered in addition to cash flows in accordance with GAAP, as presented in our consolidated financial statements. FFO, Core FFO and AFFO are not considered measures of liquidity and are not alternatives to measures calculated under GAAP.

Funds From Operations Attributable to Common Stockholders and Unitholders ("FFO")

FFO is one of the most commonly utilized Non-GAAP measures currently in practice. In its 2002 "White Paper on Funds From Operations," which was restated in 2018, the National Association of Real Estate Investment Trusts, or NAREIT, standardized the definition of how Net income/loss should be adjusted to arrive at FFO, in the interests of uniformity and comparability. We have adopted the NAREIT definition for computing FFO as a meaningful supplemental gauge of our operating results, and as is most often presented by other REIT industry participants.

The NAREIT definition of FFO (and the one reported by the Company) is:

Net income/loss, excluding:

* depreciation and amortization related to real estate; * gains and losses from the sale of certain real estate assets; * gains and losses from change in control and * impairment writedowns of certain real estate assets and investments in entities where the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.

Not all companies necessarily utilize the standardized NAREIT definition of FFO, so caution should be taken in comparing the Company's reported FFO results to those of other companies. The Company's FFO results are comparable to the FFO results of other companies that follow the NAREIT definition of FFO and report these figures on that basis. FFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders.

Core Funds From Operations Attributable to Common Stockholders and Unitholders ("Core FFO")

The Company makes adjustments to FFO to remove costs incurred and revenues recorded that are singular in nature and outside the normal operations of the Company and portray its primary operational results. The Company calculates Core FFO as:

FFO, plus:

* acquisition and pursuit (dead deal) costs; * Loan cost amortization on acquisition term notes and loan coordination fees; * losses on debt extinguishments or refinancing costs; * internalization costs; * non-cash dividends on preferred stock; * non-cash (income) expense for current expected credit losses; * Expenses related to the COVID-19 global pandemic; and

Less:

* earnest money forfeitures by prospective asset purchasers.

Core FFO figures reported by us may not be comparable to Core FFO figures reported by other companies. We utilize Core FFO as a supplemental measure of the operating performance of our portfolio of real estate assets. We believe Core FFO is useful to investors as a supplemental gauge of our operating performance and may be useful in comparing our operating performance with other real estate companies. Since our calculation of Core FFO removes costs incurred and revenues recorded that are often singular in nature and outside the normal operations of the Company, we believe it improves comparability to investors in assessing our core operating results across periods. Core FFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders.

Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders ("AFFO")

AFFO makes further adjustments to Core FFO results in order to arrive at a more refined measure of operating and financial performance. There is no industry standard definition of AFFO and practice is divergent across the industry. The Company calculates AFFO as:

Core FFO, plus:

* non-cash equity compensation to directors and executives; * amortization of loan closing costs; * weather-related property operating losses; * amortization of loan coordination fees paid to the Manager; * depreciation and amortization of non-real estate assets; * net loan origination fees received; * accrued interest income received; * cash received for purchase option terminations; * deemed dividends on preferred stock redemptions; * non-operating miscellaneous revenues; * non-cash dividends on Series M Preferred Stock and mShares; and * amortization of lease inducements;

Less:

* non-cash loan interest income; * cash paid for loan closing costs; * amortization of acquired real estate intangible liabilities; * amortization of straight line rent adjustments and deferred revenues; and * normally-recurring capital expenditures and capitalized second generation leasing costs.

AFFO figures reported by us may not be comparable to those AFFO figures reported by other companies. We utilize AFFO as another measure of the operating performance of our portfolio of real estate assets. We believe AFFO is useful to investors as a supplemental gauge of our operating performance and may be useful in comparing our operating performance with other real estate companies. Since our calculation of AFFO removes other significant non-cash charges and revenues and other costs which are not representative of our ongoing business operations, we believe it improves comparability to investors in assessing our core operating results across periods. AFFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders. FFO, Core FFO and AFFO are not considered measures of liquidity and are not alternatives to measures calculated under GAAP.

Multifamily Communities' Same-Store Net Operating Income ("NOI")

We use same store net operating income as an operational metric for our same-store communities, enabling comparisons of those properties' operating results between the current reporting period and the prior year comparative period. We define our population of same-store communities as those that are stabilized and that have been owned for at least 15 full months, as of the end of the first quarter of each year, and exclude the operating results of properties for which construction of adjacent phases has commenced, and properties which are undergoing significant capital projects, have sustained significant casualty losses, or are being marketed for sale as of the end of the reporting period. We define net operating income as rental and other property revenues, less total property and maintenance expenses, property management fees, real estate taxes, general and administrative expenses, and property insurance. We believe that net operating income is an important supplemental measure of operating performance for REITs because it provides measures of core operations, rather than factoring in depreciation and amortization, financing costs, acquisition costs, and other corporate expenses. Net operating income is a widely utilized measure of comparative operating performance in the REIT industry, but is not a substitute for the most comparable GAAP-compliant measure, net income/loss.

About Preferred Apartment Communities, Inc.

Preferred Apartment Communities, Inc. (NYSE: APTS) is a real estate investment trust engaged primarily in the ownership and operation of Class A multifamily properties, with select investments in grocery anchored shopping centers, Class A office buildings, and student housing properties. Preferred Apartment Communities' investment objective is to generate attractive, stable returns for stockholders by investing in income-producing properties and acquiring or originating real estate loans for multifamily properties. As of June 30, 2020, the Company owned or was invested in 125 properties in 15 states, predominantly in the Southeast region of the United States.

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