PR Newswire | May 10, 2021 04:17PM EDT

05/10 15:16 CDT

Preferred Apartment Communities, Inc. Reports Results for First Quarter 2021 ATLANTA, May 10, 2021

ATLANTA, May 10, 2021 /PRNewswire/ -- Preferred Apartment Communities, Inc. (NYSE: APTS) ("we," "our," the "Company," "Preferred Apartment Communities" or "PAC") today reported results for the quarter ended March 31, 2021. 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.

"We are very pleased to report another quarter of sound operational performance from our Sunbelt-focused portfolio of assets. We are seeing solid growth and positive trajectory in our top line revenues in our core multifamily business, which is supported by broad positive economic and migration trends. These operational successes have allowed us to continue to advance our strategic goals of simplifying our business platform to focus on our Class A suburban Sunbelt multifamily business, complimented by our 100% grocery anchored retail investments, and to continue realigning our balance sheet by reducing our preferred shares outstanding. Subsequent to quarter end, we signed an agreement for the sale of a substantial majority of our office portfolio, and upon closing, anticipated to be in the third quarter, we look forward to utilizing the net proceeds to redeem additional Series A preferred shares while also continuing to leverage our deep Sunbelt relationships to grow our investment in our core multifamily business. We expect these efforts to result in meaningful long-term stockholder value creation," stated Joel Murphy, Preferred Apartment Communities' President and Chief Executive Officer.

Our operating results are presented below.



Three months ended March 31,

2021 2020 % change



Revenues (in thousands)$ 115,700 $ 130,882 (11.6)%



Per share data:

Net income (loss) ^(1) $ (0.73) $ (4.44) -

FFO ^(2) $ 0.16 $ (3.42) -

Core FFO ^(2) $ 0.25 $ 0.29 (13.8)%

AFFO ^(2) $ 0.18 $ 0.47 (61.7)%

Dividends ^(3) $ 0.175 $ 0.2625 (33.3)%



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

^(2) FFO, Core FFO and AFFO results are presented per basic weighted averageshare of Common Stock and Class A Unit in our Operating Partnership outstandingfor the periods indicated. See Reconciliations of FFO Attributable to CommonStockholders 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.

Financial

* Our total revenues for the quarter ended March 31, 2021 decreased 11.6% to approximately $115.7 million from the quarter ended March 31, 2020, primarily due to the sale on November 3, 2020 of our eight student housing properties, as well as from lower interest revenue from our portfolio of real estate loan investments. The student housing properties contributed approximately $12.4 million, or 9.5% of our total revenues and interest revenue from our real estate loan investments contributed approximately $15.0 million, or 11.5% of our total revenues for the quarter ended March 31, 2020. * Our net loss per share was $(0.73) and $(4.44) for the three-month periods ended March 31, 2021 and 2020, respectively. Funds From Operations, or FFO, was $0.16 and $(3.42) per weighted average share of Common Stock and Class A Unit outstanding for the three months ended March 31, 2021 and 2020, respectively. The increase in FFO per share was driven by: * a reduction in charges related to the closing of the Internalization Transaction (as defined below) in the first quarter 2020 of $3.79 per share; * cost savings from Internalization of $0.02 per share; * a lower allowance for current expected credit losses of $0.10 per share; * lower preferred stock dividends of $0.06 per share; * lower FFO from the sale of our student housing properties in the fourth quarter 2020 of ($0.07) per share; * lower amortization of purchase option termination fees of ($0.06) per share; * lower interest revenue from our smaller real estate loan portfolio of ($0.06) per share; * lower revenues from earnest money forfeitures of ($0.06) per share; and * deemed dividends from the call of preferred stock of ($0.03) per share.

* Our Core FFO per share (B) decreased to $0.25 for the first quarter 2021 from $0.29 for the first quarter 2020, primarily due to: * a lower allowance for current expected credit losses of $0.10 per share; * lower preferred stock dividends of $0.06 per share; * cost savings from Internalization of $0.02 per share; * lower FFO from the sale of our student housing properties in the fourth quarter 2020 of ($0.07) per share; * lower interest revenue from our smaller real estate loan portfolio of ($0.06) per share; * lower amortization of purchase option termination fees of ($0.06) per share; and * higher equity compensation expense and absence of gain on land condemnation of ($0.02) per share.

* Our AFFO per share decreased to $0.18 for the first quarter 2021 from $0.47 for the first quarter 2020, primarily due to the aforementioned decline in FFO from the sale of our student housing properties in the fourth quarter 2020, net of savings from preferred dividends and expenses related to the call of the preferred, as well as the following: * a decrease in accrued interest collected of ($0.12) per share; * lower revenues from earnest money forfeitures of ($0.06) per share; * lower interest revenue from our smaller real estate loan portfolio of ($0.04) per share; and * higher recurring capital expenditures of ($0.04) per share.

* Our Core FFO payout ratio to Common Stockholders and Unitholders was approximately 71.8% and our Core FFO payout ratio to our preferred stockholders was approximately 72.8% for the first quarter 2021. (A) * Our AFFO payout ratio to Common Stockholders and Unitholders was approximately 101.6% and our AFFO payout ratio to our preferred stockholders was approximately 79.1% for the first quarter 2021. * As of March 31, 2021, our total assets were approximately $4.2 billion, a decrease from our total assets of approximately $4.8 billion at March 31, 2020, that primarily resulted from the sale of our student housing portfolio during the fourth quarter 2020 for approximately $478.7 million.

^(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) Our Core FFO result for the three-month period ended March 31, 2020 has been amended to reflect the movement of the adjustment for expense for current expected credit losses from an adjustment for Core FFO to an adjustment for AFFO.

Operational

* Our multifamily communities' same-store rental and other property revenues increased 0.9% for the quarter ended March 31, 2021 versus 2020. Our multifamily communities' same-store net operating income decreased 1.1% for the quarter ended March 31, 2021 versus 2020, driven by a collective increase of 7% in real estate taxes and insurance costs. Our same-store multifamily communities include all our multifamily communities except Artisan at Viera, The Menlo, The Blake, Parkside at the Beach, and Horizon at Wiregrass, all of which were acquired in the last 20 months. * As of March 31, 2021, the average age of our multifamily communities was approximately 6.5 years, which is the youngest in the public multifamily REIT industry. * As of March 31, 2021, all of our owned multifamily communities had achieved stabilization except for one fourth quarter 2020 acquisition. We define stabilization as reaching 93% for all three consecutive months within a single quarter. * The average physical occupancy for the three-month period ended March 31, 2021 increased to 95.8% from 95.6% and 95.7% for the three-month periods ended March 31, 2020 and December 31, 2020, respectively. * Our average recurring rental revenue collections before and after any effect of rent deferrals for the first quarter 2021 were approximately 99.1% and 99.2% for multifamily communities, 98.4% and 98.4% for grocery-anchored retail properties and 99.8% and 99.9% for office properties, respectively. Rent deferments provided to our residents and tenants are limited and are primarily related to a change of timing of rent payments with no significant changes to total payments or term. * We granted an additional $28,000 of deferred rent during the first quarter 2021, raising the total deferred rent granted to approximately $1.9 million, or approximately 2.0% cumulatively over the last four quarters. Including this deferred rent, our average recurring rental revenue collections were 98.4%, 98.4%, 97.8% and 96.9% for first quarter 2021, fourth quarter 2020, third quarter 2020 and second quarter 2020, respectively. In addition to the deferrals, we granted approximately $676,000 of Covid-related rental abatements to retail tenants only, or approximately 0.7% of our retail portfolio's recurring rental revenues cumulatively over the last four quarters. These rental abatements were generally accompanied by an increase in the tenant's lease term or the lease terms were amended to be more favorable to us. We reserved $99,000, or 0.4% of total retail revenue (inclusive of straight-line rent adjustments) in the first quarter 2021, that is 0.1% of our consolidated rental and other property revenues. Our retail portfolio's total rent reserves over the last four quarters were approximately $2.3 million, or approximately 2.4% of our retail portfolio's recurring rental revenues cumulatively over the same period.

Financing and Capital Markets

* As of March 31, 2021, approximately 97.4% of our permanent property-level mortgage debt has fixed interest rates and approximately 0.8% 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 3.5% for multifamily communities, 4.1% for office properties, 3.9% for grocery-anchored retail properties and 3.8% in the aggregate. * At March 31, 2021, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 55.9%. * At March 31, 2021, we had $160.0 million available to be drawn on our revolving line of credit and approximately $32.3 million of cash. * During the first quarter 2021, we issued and sold an aggregate of 37,898 shares of Preferred Stock and redeemed an aggregate of 44,220 shares of Preferred Stock, resulting in a net redemption of 6,322 shares of Preferred Stock, for a net redemption cost of $9.5 million.

Significant Transactions

* During the first quarter 2021, we received the full principal amounts totaling approximately $17.9 million from the repayment of two real estate loan investments, plus a purchase option termination fee of approximately $1.5 million and $4.3 million of accrued interest from these loan payoffs. These transactions collectively returned approximately $23.7 million of capital to us for investment, preferred redemptions, or other corporate purposes during the first quarter. * During the first quarter 2021, we originated one real estate investment loan with a total commitment of $16.8 million, in support of a 320-unit multifamily community in Orlando, Florida. We also originated a land acquisition bridge loan of approximately $7.7 million in support of a proposed multifamily community to be located in suburban Atlanta, Georgia.

Subsequent to Quarter End

* On April 16, 2021, we entered into a series of transactions with Highwoods Properties in order to dispose of seven of our office properties and one office real estate loan investment for an aggregate purchase price of $717.5 million, including the assumption of debt. * On May 4, 2021, we amended our revolving line of credit agreement to extend the maturity date to May 4, 2024 and, among other things, modified certain covenants, reduced certain rates and fees and prepared for LIBOR transitioning. * On May 6, 2021, our board of directors declared a quarterly dividend on our Common Stock of $0.175 per share, payable on July 15, 2021 to stockholders of record on June 15, 2021.

2021 Guidance:

Net income (loss) per share -We are continuing to add 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.

Core FFO -Our initial guidance for 2021 did not contemplate a transaction like the office portfolio sale we have previously announced. A transaction of this magnitude will have a material effect on earnings and the impact will be felt throughout our financials. In an effort to clarify some of these impacts, we offer the following revised guidance. We expect Core FFO per weighted average share of Common Stock and Class A Unit to be in the range of $0.73 to $0.83 for the full year.

Underpinning this guidance are the following assumptions

* Multifamily Same-Store NOI growth of 2.0% to 3.0%, an increase in the lower end of the range from initial guidance * New real estate loan investment originations of $50-$100 million * Closing date of the office transaction of August 1, 2021 * Multifamily acquisition volume of between $300 million and $400 million

This guidance also includes the impact of purchase option terminations revenues and the reversal of expected credit loss reserves related to increased loan payoffs, which should materially offset the dilution of the office portfolio sale in the short term. These one time items represent a declining number of purchase option termination revenue opportunities. We do not believe that the level of purchase option termination revenue will be replicable going forward. We believe the dilution from the office transaction will be more fully felt in 2022.

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-months ended March 31, 2021 and 2020 appear in the attached report, as well as on our website using the following link:

https://investors.pacapts.com/q1-2021-quarterly-supplemental-financial-data

Real Estate Assets

At March 31, 2021, 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 additions from March 31, 2021 ^(1)real estate loan Potential total investment portfolio ^(2) (3)

Residential properties:

Properties 37 13 50

Units 11,143 3,782 14,925

Grocery-anchored shopping centers:

Properties 54 - 54

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

Office buildings: ^(4)

Properties 9 1 10

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

Development properties 2 - 2

Rentable square feet 35,000 - 35,000



^(1) One multifamily community, two grocery-anchored shopping centers and two office buildings are owned through consolidated joint ventures. One grocery-anchored shopping center is an investment in an unconsolidated joint venture.

^(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) Seven of our office properties and the real estate loan investment supporting the 8West office building are under contract to be sold to Highwoods Properties, an unrelated party, pursuant to purchase and sale agreements as of April 16, 2021.

The following chart details monthly cash collections of rental revenues before and after the effect of rent deferrals across all our operating business lines as of May 6, 2021:

Cash Collections of Recurring Rental Revenues ^(1)

2020 2021

Unadjusted for rent deferrals:First Second Third Fourth JanuaryFebruaryMarch quarterquarterquarterquarter



Multifamily 99.9% 98.8% 99.0 %99.1% 99.1% 99.2 % 99.2%

Office 99.9% 98.1% 99.7 %99.7% 99.9% 99.9 % 99.6%

Grocery-anchored retail ^(2) 99.6% 91.9% 96.1 %97.6% 98.4% 98.2 % 98.5%





Cash Collections of Recurring Rental Revenues ^(1)

2020 2021

Adjusted for rent deferrals: First Second Third Fourth JanuaryFebruaryMarch quarterquarterquarterquarter



Multifamily 99.9% 99.4% 99.0 %99.1% 99.1% 99.2 % 99.2%

Office 99.9% 99.9% 100.0%99.7% 99.9% 99.9 % 99.9%

Grocery-anchored retail ^(2) 99.6% 96.9% 97.8 %98.4% 98.5% 98.2 % 98.5%



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

^(2) Includes an investment in an unconsolidated joint venture that is notprorated for our ownership percentage.

The following chart details monthly occupancy and percent leased rates across all our operating business lines:

Monthly Occupancy and Percentages Leased

2020 2021

First Second Third Fourth quarterquarter quarterJanuaryFebruaryMarch quarter



Occupancy:

Multifamily (stabilized)^ (1)95.5% 94.7% 95.6% 95.6% 95.4% 95.6 %96.3%

Percent leased:^ (2)

Office 96.7% 96.2% 95.5% 94.7% 94.9% 94.7 %91.0%

Grocery-anchored retail ^(3) 92.6% 92.7% 92.5% 91.0% 90.8% 90.8 %90.8%

^(1) For quarterly periods, calculated as the average of the number ofoccupied units on the 20th day of each of the trailing three months from theperiod end date.

^(2) Percent of total area leased as of the period end date.

^(3) Includes an investment in an unconsolidated joint venture that is notprorated for our ownership percentage.

Same-Store Financial Data

The following charts present 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 multifamily communities listed below, comprising an aggregate 9,591 units, or 86.1% of our multifamily units.

Same-store net operating income is a non-GAAP measure that is most directly comparable to net income (loss), as shown in the reconciliation below. See Definitions of Non-GAAP Measures.

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



Three months ended:

(in thousands) 3/31/2021 3/31/2020



Net income (loss) $(2,709)$(179,523)

Add:

Equity stock compensation 574 230

Depreciation and amortization 45,827 49,509

Interest expense 26,991 29,593

Management fees - 3,099

Corporate G&A and other 7,539 5,948

(Income) loss from unconsolidated joint venture 194 -

Management Internalization 245 178,793

Allowance for expected credit losses 522 5,133

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

Less:

Interest revenue on notes receivable 10,512 13,439

Interest revenue on related party notes receivable 405 2,537

Miscellaneous revenues 324 3,040

Gains on sales of real estate and land condemnation, net 798 479



Property net operating income 67,144 72,151

Less:

Non same-store property revenues (61,825) (69,601)

Add:

Non same-store property operating expenses 19,228 22,266



Same-store net operating income, multifamily communities and

grocery-anchored shopping centers combined $24,547 $24,816



Multifamily Communities' Same-Store NOI



Three months ended:

(in thousands) 3/31/2021 3/31/2020 $ change% change

Revenues:

Rental and other property revenues $42,634 $42,252 $382 0.9 %



Operating expenses:

Property operating and maintenance 7,092 7,095 (3) - %

Payroll 3,264 3,118 146 4.7 %

Real estate taxes and insurance 7,731 7,223 508 7.0 %

Total operating expenses 18,087 17,436 651 3.7 %



Same-store net operating income $24,547 $24,816 $(269)(1.1) %



Same-store average physical occupancy95.8 %95.6 %



Corporate level expenses related to the management and operations of the multifamily portfolio are allocated on a per unit basis to property NOI and areincluded in Multifamily Same-Store NOI.

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

On February 24, 2021, our board of directors declared a quarterly dividend on our Common Stock of $0.175 per share, which was paid on April 15, 2021 to stockholders of record on March 15, 2021. In conjunction with the Common Stock dividend, our operating partnership declared a distribution on its Class A Units of $0.175 per unit for the first quarter 2021, which was paid on April 15, 2021 to all Class A Unit holders of record on March 15, 2021.

Monthly Dividends on Preferred Stock

We declared monthly dividends of $5.00 per share on our Series A Redeemable Preferred Stock, which totaled approximately $29.4 million for the first quarter 2021 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 $2.6 million for the first quarter 2021 and also represents a 6% annual yield. We declared dividends totaling approximately $1.5 million on our Series M Redeemable Preferred Stock, or mShares, for the first quarter 2021. 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 $343,000 on our Series M1 Redeemable Preferred Stock for the first quarter 2021. 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.

Conference Call and Supplemental Data

We will hold our quarterly conference call on Tuesday, May 11, 2021 at 11:00 a.m. Eastern Time to discuss our first quarter 2021 results. To participate in the conference call, please dial in to the following:

Live Conference Call DetailsDial-in Number: 1-877-883-0383International Dial-in Number: 1-412-902-6506Company: Preferred Apartment Communities, Inc.Date: Tuesday, May 11, 2021Time: 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time)Passcode: 5239504

The live broadcast of PAC's first quarter 2021 conference call will be available online on a listen-only basis at the company's website, www.pacapts.com, under "Investors" and then click on the "News and Events" heading.

A replay of the call will be archived on PAC's' website under Investors/News and Events/Events.

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; (c) the closing of the sale of seven of our office properties and one real estate loan investment and (d) 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; 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, 2020 that was filed with the SEC on March 1, 2021, 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.

COVID-19

Our percentages of rent collected remained stabilized at or near pre-pandemic levels during the first quarter 2021. While the impacts of COVID-19 are continuing, the effects on our operations have been manageable and we believe this condition will persist, barring a dramatic change in the trajectory of the pandemic.

Additional Information

The SEC has declared effective the registration statement filed by the Company for each of our public offerings. 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. 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. 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 March 31,

(In thousands, except per-share figures) 2021 2020

Revenues:

Rental and other property revenues $104,459 $111,866

Interest income on loans and notes receivable 10,512 13,439

Interest income from related parties 405 2,537

Miscellaneous revenues 324 3,040



Total revenues 115,700 130,882



Operating expenses:

Property operating and maintenance 15,249 16,846

Property salary and benefits 4,821 5,191

Property management costs 1,105 2,003

Real estate taxes and insurance 16,140 15,675

General and administrative 7,539 5,948

Equity compensation to directors and executives 574 230

Depreciation and amortization 45,827 49,509

Asset management and general and administrative expense

fees to related party - 3,099

Allowance for expected credit losses 522 5,133

Management Internalization expense 245 178,793



Total operating expenses 92,022 282,427

Waived asset management and general and administrative

expense fees - (1,136)



Net operating expenses 92,022 281,291

Operating income (loss) before loss from unconsolidated joint venture

and gain on sale of real estate 23,678 (150,409)

Loss from unconsolidated joint venture (194) -

Gain on sale of real estate, net 798 -

Operating income (loss) 24,282 (150,409)

Interest expense 26,991 29,593

Gain on land condemnation - 479



Net loss (2,709) (179,523)

Net loss attributable to non-controlling interests 62 3,141



Net loss attributable to the Company (2,647) (176,382)



Dividends declared to preferred stockholders (33,820) (33,068)

Earnings attributable to unvested restricted stock (142) (2)



Net loss attributable to common stockholders $(36,609) $(209,452)



Net loss per share of Common Stock available to

common stockholders, basic and diluted $(0.73) $(4.44)



Weighted average number of shares of Common Stock outstanding,

basic and diluted 50,033 47,129

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 March 31,

(In thousands, except per-share figures) 2021 2020



Net loss attributable to common stockholders (See note 1) $(36,609) $(209,452)



Add: Depreciation of real estate assets 36,832 39,775

Amortization of acquired intangible assets and deferred leasing costs 8,710 8,982

Gain on sale of real estate (798) -

Net loss attributable to Class A Unitholders (See note 2) (33) (3,094)

FFO attributable to common stockholders and unitholders 8,102 (163,789)



Acquisition and pursuit costs 4 246

Loan cost amortization on acquisition term notes and loan coordination fees 424 678 (See note 3)

Internalization costs (See note 4) 245 178,793

Deemed dividends for redemptions of and non-cash dividends on preferred stock 3,827 544

Expenses related to the COVID-19 global pandemic (See note 5) 54 29

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

Core FFO attributable to common stockholders and unitholders ^(A) 12,656 13,751



Add: Non-cash equity compensation to directors and executives 574 230

Noncash (income) expense for current expected credit losses (See note 6) 117 4,530

Amortization of loan closing costs (See note 7) 1,212 1,166

Depreciation/amortization of non-real estate assets 444 556

Net loan origination fees received (See note 8) 817 267

Deferred interest income received (See note 9) 2,917 8,277

Amortization of lease inducements (See note 10) 448 439

Earnest money forfeited by prospective asset purchaser - 2,750

Less:Cash received in excess of amortization of purchase option termination revenues 250 760 (See note 11)

Non-cash loan interest income (See note 9) (2,874) (3,019)

Cash paid for loan closing costs (10) -

Amortization of acquired real estate intangible liabilities and SLR (See note (3,315) (4,653) 12)

Amortization of deferred revenues (See note 13) (940) (940)

Normally recurring capital expenditures (See note 14) (3,353) (1,418)



AFFO attributable to common stockholders and Unitholders $8,943 $22,696



Common Stock dividends and distributions to Unitholders declared:

Common Stock dividends $8,991 $12,491

Distributions to Unitholders (See note 2) 96 203

Total $9,087 $12,694



Common Stock dividends and Unitholder distributions per share $0.1750 $0.2625



FFO per weighted average basic share of Common Stock and Unit outstanding $0.16 $(3.42)

Core FFO per weighted average basic share of Common Stock and Unit outstanding $0.25 $0.29

AFFO per weighted average basic share of Common Stock and Unit outstanding $0.18 $0.47



Weighted average shares of Common Stock and Units outstanding:

Basic:

Common Stock 50,033 47,129

Class A Units 610 827

Common Stock and Class A Units 50,643 47,956



Diluted Common Stock and Class A Units (See note 15) 50,971 47,957



Actual shares of Common Stock outstanding, including 809 and 7 unvested shares

of restricted Common Stock at March 31, 2021 and 2020, respectively. 50,904 47,585

Actual Class A Units outstanding at March 31, 2021 and 2020, respectively. 548 775

Total 51,452 48,360





^(A) Our Core FFO result for the three-month period ended March 31, 2020 has been amended to reflect the movement of the adjustment for expense for current expected credit losses from an adjustment for Core FFO to an adjustment for AFFO.



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 andUnitholders, Core FFO and AFFO to

Net Loss Attributable to Common Stockholders

Rental and other property revenues and property operating expenses for the three months ended March 31, 2021 include activity for the properties acquired 1) since March 31, 2020. Rental and other property revenues and expenses for the three months ended March 31, 2020 include activity for the acquisitions made during that period only from their respective dates of acquisition.

Non-controlling interests in our Operating Partnership, consisted of a total of 548,369 Class A Units as of March 31, 2021. 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 29, 2016 of the 2) 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 1.20% and 1.72% for the three-month periods ended March 31, 2021 and 2020, respectively.

We paid loan coordination fees to Preferred Apartment Advisors, LLC, (our "Former Manager") to reflect the administrative effort involved in arranging debt financing for acquired properties prior to the Internalization Transaction. The fees were calculated as 0.6% of the amount of any mortgage 3) 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 March 31, 2021, aggregate unamortized loan coordination fees were approximately $11.3 million, which will be amortized over a weighted average remaining loan life of approximately 10.3 years.

This adjustment reflects the add-back of (i) consideration paid to the owners of the Former Manager and NMP Advisors, LLC (our "Former Sub-Manager"), (ii) 4) accretion of the discount on the 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 (the "Internalization Transaction").

This additive adjustment to FFO consists of non-recurring costs for signage, cleaning and supplies necessary to create and maintain work environments 5) 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.

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 our loans and 6) 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. More information on our expected credit loss reserves may be found in note 4 of our consolidated financial statements.

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. 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 of AFFO. Neither we nor the Operating Partnership 7) 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 March 31, 2021, unamortized loan costs on all the Company's indebtedness were approximately $30.0 million, which will be amortized over a weighted average remaining loan life of approximately 8.9 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 non-cash income is a 8) 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 10).

This adjustment reflects the receipt during the periods presented of additional 9) interest income (described in note 8 above) which was earned and accrued on various real estate loans prior to those periods and previously deducted in our calculation of AFFO.

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

Occasionally we receive fees in exchange for the termination of our purchase options related to certain multifamily communities. These fees are recorded as revenue over the period beginning on the date of termination 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 11) 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 periods in which recognized termination fee revenues exceeded the amount of cash received, a negative adjustment is shown to Core FFO in our calculation of AFFO; for periods in which cash received exceeded the amount of recognized termination fee revenues, an additive adjustment is shown 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 from the acquisition date for 12) multifamily communities and over the remaining lease terms for grocery-anchored shopping center assets and office buildings. At March 31, 2021, the balance of unamortized below-market lease intangibles was approximately $49.9 million, which will be recognized over a weighted average remaining lease period of approximately 8.6 years.

This adjustment removes the non-cash amortization of deferred revenue recorded 13) 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 14) shopping centers and office buildings. This adjustment includes approximately $18,000 of recurring capitalized expenditures incurred at our corporate offices during the three months ended March 31, 2021. No adjustment is made in the calculation of AFFO for nonrecurring capital expenditures. See Capital Expenditures, Grocery-Anchored Shopping Center Portfolio, and Office Building Portfolio sections for definitions of these terms.

Since our AFFO results are positive for the periods reflected, 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, 15) 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 Definitions of Non-GAAP Measures.

Preferred Apartment Communities, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except per-share par values) March 31, December 31, 2021 2020

Assets

Real estate

Land $605,282 $605,282

Building and improvements 3,039,783 3,034,727

Tenant improvements 186,843 184,288

Furniture, fixtures, and equipment 308,222 306,725

Construction in progress 11,649 12,269

Gross real estate 4,151,779 4,143,291

Less: accumulated depreciation (546,634) (509,547)

Net real estate 3,605,145 3,633,744

Real estate loan investments, net 280,938 279,895

Total real estate and real estate loan investments, net 3,886,083 3,913,639



Cash and cash equivalents 32,322 28,657

Restricted cash 45,052 47,059

Notes receivable 1,784 1,863

Note receivable and revolving line of credit due from related party 9,011 9,011

Accrued interest receivable on real estate loans 22,241 22,528

Acquired intangible assets, net of amortization 118,388 127,138

Tenant lease inducements, net 17,803 18,206

Investment in unconsolidated joint venture 6,463 6,657

Tenant receivables and other assets 95,821 106,321



Total assets $4,234,968$4,281,079



Liabilities and equity

Liabilities

Mortgage notes payable, net of deferred loan costs and mark-to-market $2,587,660$2,594,464adjustment

Revolving line of credit 40,000 22,000

Unearned purchase option termination fees 473 723

Deferred revenue 35,070 36,010

Accounts payable and accrued expenses 37,237 41,912

Deferred liability to Former Manager 23,512 23,335

Contingent liability due to Former Manager 14,755 14,814

Accrued interest payable 7,997 7,877

Dividends and partnership distributions payable 20,410 20,137

Acquired below market lease intangibles, net of amortization 49,879 51,934

Prepaid rent, security deposits and other liabilities 31,122 29,425

Total liabilities 2,848,115 2,842,631



Commitments and contingencies

Equity

Stockholders' equity

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

issued; 1,694 and 1,735 shares outstanding at March 31, 2021 and December 31, 17 17 2020, respectively

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

184 and 149 shares issued and outstanding at March 31, 2021 and December 31, 1 1 2020, respectively

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

issued; 87 and 89 shares outstanding at March 31, 2021 and December 31, 2020, 1 1 respectively

Series M1 Redeemable Preferred Stock, $0.01 par value per share; up to 1,000 shares authorized; 22 and 19

shares issued; 21 and 19 shares outstanding at March 31, 2021 and December - - 31, 2020, respectively

Common Stock, $0.01 par value per share; 400,067 shares authorized; 50,095 and 49,994 shares issued

and outstanding at March 31, 2021 and December 31, 2020, respectively 501 500

Additional paid-in capital 1,582,193 1,631,646

Accumulated (deficit) earnings (195,093) (192,446)

Total stockholders' equity 1,387,620 1,439,719

Non-controlling interest (767) (1,271)

Total equity 1,386,853 1,438,448



Total liabilities and equity $4,234,968$4,281,079

Preferred Apartment Communities, Inc.

Consolidated Statements of Cash Flows

(Unaudited)



Three months ended March 31,

(In thousands) 2021 2020

Operating activities:

Net loss $(2,709) $(179,523)

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

Depreciation and amortization expense 45,827 49,509

Amortization of above and below market leases (1,399) (1,705)

Amortization of deferred revenues and other non-cash revenues (1,195) (1,269)

Amortization of purchase option termination fees (1,229) (4,040)

Amortization of equity compensation, lease incentives and other non-cash 1,229 849 expenses

Deferred loan cost amortization 1,609 1,781

Non-cash accrued interest income on real estate loan investments (2,822) (3,296)

Receipt of accrued interest income on real estate loan investments 3,109 8,865

Gains on sale of real estate and land condemnation, net (798) (479)

Loss from unconsolidated joint venture 194 -

Cash received for purchase option terminations 1,479 4,800

Increase in allowance for expected credit losses 522 5,133

Changes in operating assets and liabilities:

Decrease (increase) in tenant receivables and other assets 4,788 (10,775)

(Increase) in tenant lease incentives (22) -

(Decrease) increase in accounts payable and accrued expenses (2,787) 24,190

Increase in deferred liability to Former Manager - 22,851

Increase in contingent liability - 15,000

Increase (decrease) in accrued interest, prepaid rents and other liabilities 2,589 (1,282)

Net cash provided by (used in) operating activities 48,385 (69,391)



Investing activities:

Investments in real estate loans (19,657) (11,631)

Repayments of real estate loans 17,925 53,896

Notes receivable issued (64) (249)

Notes receivable repaid 143 10,041

Notes receivable issued to and draws on line of credit by related parties - (9,624)

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

Origination fees received on real estate loan investments 817 267

Acquisition of properties - (125,107)

Disposition of properties, net 4,798 -

Proceeds from land condemnation - 738

Capital improvements to real estate assets (10,263) (12,817)

Deposits paid on acquisitions (289) (915)

Net cash used in investing activities (6,590) (90,855)





Financing activities:

Proceeds from mortgage notes payable 2,152 81,413

Repayments of mortgage notes payable (10,340) (42,252)

Payments for deposits and other mortgage loan costs (285) (1,694)

Proceeds from lines of credit 105,000 284,000

Payments on lines of credit (87,000) (92,500)

Repayment of Term Loan - (70,000)

Proceeds from sales of preferred stock and Units, net of offering costs and 34,109 89,398 redemptions

Proceeds from exercises of Warrants - 44

Payments for redemptions of preferred stock (40,018) (9,890)

Common Stock dividends paid (8,829) (12,156)

Preferred stock dividends and Class A Unit distributions paid (33,840) (32,732)

Payments for deferred offering costs (1,030) (7,042)

Distributions to non-controlling interests (56) -

Contributions from non-controlling interests - 197

Net cash (used in) provided by financing activities (40,137) 186,786



Net increase in cash, cash equivalents and restricted cash 1,658 26,540

Cash, cash equivalents and restricted cash, beginning of year 75,716 137,253

Cash, cash equivalents and restricted cash, end of period $77,374 $163,793

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 ofCurrent / Project/Property Location Maturity extension Total loan deferred date date commitments March 31, December 31,interest % 2021 2020 per annum



Residential properties: (in thousands)

Berryessa San Jose, CA 2/13/2022 2/13/2023 $137,616 $129,260 $126,237 8.5 / 3

The Anson Nashville, TN 11/24/2021 11/24/2023 6,240 6,240 6,240 8.5 / 4.5

The Anson Capital Nashville, TN 11/24/2021 11/24/2023 5,659 4,943 4,839 8.5 / 4.5

V & Three Charlotte, NC 8/15/2021 8/15/2022 10,336 10,335 10,335 8.5 / 5

V & Three Capital Charlotte, NC 8/18/2021 8/18/2022 7,338 7,315 7,162 8.5 / 5

Cameron Square Alexandria, VA 10/11/2021 10/11/2023 21,340 21,298 20,874 8.5 / 3

Cameron Square Capital Alexandria, VA 10/11/2021 10/11/2023 8,850 8,850 8,850 8.5 / 3

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

Southpoint Capital Fredericksburg, VA 2/28/2022 2/28/2024 4,962 4,725 4,626 8.5 / 4

Vintage Destin Destin, FL 3/24/2022 3/24/2024 10,763 9,944 9,736 8.5 / 4

Hidden River II Tampa, FL 10/11/2022 10/11/2024 4,462 4,462 4,462 8.5 / 3.5

Hidden River II Capital Tampa, FL 10/11/2022 10/11/2024 2,763 2,514 2,461 8.5 / 3.5

Kennesaw Crossing Atlanta, GA 9/1/2023 9/1/2024 14,810 13,304 13,025 8.5 / 5.5

Vintage Horizon West Orlando, FL 10/11/2022 10/11/2024 10,900 9,212 9,019 8.5 / 5.5

Chestnut Farms Charlotte, NC 2/28/2025 N/A 13,372 11,921 11,671 8.5 / 5.5

Vintage Jones Franklin Raleigh, NC 11/14/2023 5/14/2025 10,000 8,426 7,904 8.5 / 5.5

Solis Cumming Town

Center Atlanta, GA 9/3/2024 9/3/2026 20,681 8,393 5,584 8.5 / 5.5

Hudson at Metro West Orlando, FL 9/1/2024 3/1/2026 16,791 3,504 - 8.5 / 4.5

Oxford Club Drive Atlanta, GA 3/30/2022 N/A 7,744 7,744 - 13

Newbergh Atlanta, GA N/A N/A N/A - 11,749 ^(2)

Newbergh Capital Atlanta, GA N/A N/A N/A - 6,176 ^(2)



Office property:

8West Atlanta, GA 11/29/2022 11/29/2024 19,193 12,150 11,858 8.5 / 5



$341,168 291,888 290,156

Unamortized loan origination fees (1,766) (1,194)

Allowances for expected credit losses and doubtful accounts (9,184) (9,067)



Carrying amount $280,938 $279,895





^(1) Carrying amounts presented per loan are amounts drawn.

^(2) On March 12, 2021, we received approximately $23.7 million in full satisfaction of the principal and all interest due on the loans.

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 may be 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, with discounts up to 15 basis points (if any), depending on the loan. As of March 31, 2021, potential property acquisitions and units from projects in our real estate loan investment portfolio consisted of:

Total units uponPurchase option window

Project/Property Location completion^ (1) Begin End



Multifamily communities:

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)

Vintage Destin Destin, FL 282 ^(3) ^(3)

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

Cameron Square Alexandria, VA 302 ^(4) ^(4)

Kennesaw Crossing Atlanta, GA 250 ^(4) ^(4)

Vintage Horizon West Orlando, FL 340 ^(3) ^(3)

Solis Chestnut Farm Charlotte, NC 256 ^(4) ^(4)

Vintage Jones Franklin Raleigh, NC 277 ^(3) ^(3)

Solis Cumming Town CenterAtlanta, GA 320 ^(4) ^(4)

Hudson at Metro West Orlando, FL 320 S + 90 days^ (2)S + 150 days^ (2)

Club Drive Atlanta, GA 352 ^(5) ^(5)



Office property:

8West Atlanta, GA - ^(6) ^(6)



3,782



^(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.

^(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 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.

^(4) We hold a right of first offer on the property.

^(5) The underlying loan is a land acquisition bridge loan that is anticipated to be converted to a real estate loan investment in the future with a purchase option or right of first offer.

^(6) The real estate loan investment supporting the 8West office building and seven of our office properties are under contract to be sold pursuant to a purchase and sale agreement to Highwoods Properties, an unrelated party, as of April 16, 2021.

Mortgage Indebtedness

The following table and chart summarizes the future maturities of our mortgage notes payable:

(in thousands) Total



Maturity dates occurring in:



2021 $93,360

2022 72,728

2023 116,473

2024 289,868

2025 57,922

2026 255,389

2027 280,200

2028 338,848

2029 321,689

2030 359,141

Thereafter 446,898



Totals $2,632,516

Multifamily Communities

As of March 31, 2021, our multifamily community portfolio consisted of the following properties:

Three months ended March 31, 2021

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



Same-Store Communities:

Aldridge at Town Village Atlanta, GA 300 969 96.3 % $ 1,431

Green Park Atlanta, GA 310 985 97.8 % $ 1,509

Overton Rise Atlanta, GA 294 1,018 95.9 % $ 1,586

Summit Crossing I Atlanta, GA 345 1,034 97.1 % $ 1,260

Summit Crossing II Atlanta, GA 140 1,100 96.7 % $ 1,367

The Reserve at Summit Crossing Atlanta, GA 172 1,002 95.9 % $ 1,347

Avenues at Cypress Houston, TX 240 1,170 95.7 % $ 1,462

Avenues at Northpointe Houston, TX 280 1,167 95.7 % $ 1,393

Stone Creek Houston, TX 246 852 94.6 % $ 1,185

Vineyards Houston, TX 369 1,122 96.4 % $ 1,196

Aster at Lely Resort Naples, FL 308 1,071 97.0 % $ 1,448

Sorrel Jacksonville, FL 290 1,048 95.3 % $ 1,329

Lux at Sorrel Jacksonville, FL 265 1,025 94.3 % $ 1,399

525 Avalon Park Orlando, FL 487 1,394 94.7 % $ 1,512

Citi Lakes Orlando, FL 346 984 94.3 % $ 1,456

Village at Baldwin Park Orlando, FL 528 1,069 94.9 % $ 1,667

Luxe at Lakewood Ranch Sarasota, FL 280 1,105 96.3 % $ 1,486

Venue at Lakewood Ranch Sarasota, FL 237 1,001 96.2 % $ 1,541

Crosstown Walk Tampa, FL 342 1,070 95.2 % $ 1,355

Overlook at Crosstown Walk Tampa, FL 180 986 95.6 % $ 1,431

Citrus Village Tampa, FL 296 980 96.2 % $ 1,370

Five Oaks at Westchase Tampa, FL 218 983 97.6 % $ 1,492

Lodge at Hidden River Tampa, FL 300 980 96.0 % $ 1,407

Lenox Village Nashville, TN 273 906 96.9 % $ 1,295

Regent at Lenox Nashville, TN 18 1,072 96.3 % $ 1,380

Retreat at Lenox Nashville, TN 183 773 95.8 % $ 1,253

CityPark View Charlotte, NC 284 948 95.7 % $ 1,159

CityPark View South Charlotte, NC 200 1,005 95.0 % $ 1,277

Colony at Centerpointe Richmond, VA 255 1,149 96.3 % $ 1,412

Founders Village Williamsburg, VA 247 1,070 97.2 % $ 1,419

Retreat at Greystone Birmingham, AL 312 1,100 95.7 % $ 1,398

Vestavia Reserve Birmingham, AL 272 1,113 95.7 % $ 1,557

Adara Overland Park Kansas City, KS 260 1,116 95.8 % $ 1,349

Claiborne Crossing Louisville, KY 242 1,204 96.7 % $ 1,364

City Vista Pittsburgh, PA 272 1,023 93.4 % $ 1,455



Total/Average Same-Store Communities 9,591 95.8 %



Stabilized Communities:

Artisan at Viera Melbourne, FL 259 1,070 94.1 % $ 1,664

The Menlo Jacksonville, FL 332 966 - $ 1,502

The Blake Orlando, FL 281 908 93.5 % $ 1,467

Parkside at the Beach Panama City Beach, FL288 1,041 96.6 % $ 1,397

Horizon at Wiregrass Tampa, FL 392 973 96.7 % $ 1,515



Total/Average Stabilized Communities 1,552 95.8 %



Total multifamily community units 11,143



For the three-month period ended March 31, 2021, our average same-store multifamily communities' physical occupancy was 95.8%. We calculate average same-store physical occupancy for quarterly periods as the average of the 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 March 31, 2021, our average stabilized physical occupancy was 95.8%. 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. All of our multifamily communities were stabilized for the three-month period ended March 31, 2021 except The Menlo.

For the three-month period ended March 31, 2021, our average economic occupancy was 95.5%. 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), properties which are owned for less than the entire reporting period and properties which are undergoing significant capital projects, have sustained significant casualty losses or are adding additional phases. We also exclude properties which are currently being marketed for sale, of which we had none at March 31, 2021. 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.

Capital Expenditures

We regularly incur capital expenditures related to our owned multifamily communities. 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 the COVID-19 pandemic, all nonrecurring and discretionary capital expenditures have been reviewed individually and approved on an as-needed basis. Certain recurring safety-related operational capital expenditures have continued without interruption as they remain necessary for the continued normal operation of our properties.

For the three-month period ended March 31, 2021, 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 $173$15.55$- $- $173 $15.55

Carpets 471 42.26 - - 471 42.26

Wood / vinyl flooring 84 7.49 96 8.63 180 16.12

Mini blinds and ceiling fans 44 3.92 - - 44 3.92

Fire safety - - 142 12.72 142 12.72

HVAC 111 10.00 - - 111 10.00

Computers, equipment, misc. 10 0.89 78 6.97 88 7.86

Elevators - - 10 0.90 10 0.90

Exterior painting and lighting - - 1,247 111.94 1,247 111.94

Leasing office and other common amenities 19 1.70 270 24.18 289 25.88

Major structural projects - - 626 56.17 626 56.17

Cabinets, countertops and unit upgrades - - 103 9.27 103 9.27

Landscaping and fencing - - 119 10.68 119 10.68

Parking lots and sidewalks - - 131 11.80 131 11.80

Signage and sanitation - - 25 2.20 25 2.20

Totals $912$81.81$2,847$255.46$3,759$337.27

Grocery-Anchored Shopping Center Portfolio

As of March 31, 2021, our grocery-anchored shopping center portfolio consisted of the following properties:

Property name Location Year builtGLA ^(1) PercentGrocery anchor leased tenant



Castleberry-Southard Atlanta, GA 2006 80,018 100.0% Publix

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

Governors Towne Square Atlanta, GA 2004 68,658 95.9 % Publix

Lakeland Plaza Atlanta, GA 1990 301,711 95.8 %Sprouts

Powder Springs Atlanta, GA 1999 77,853 96.7 % Publix

Rockbridge Village Atlanta, GA 2005 102,432 84.4 % Kroger

Roswell Wieuca Shopping Center Atlanta, GA 2007 74,370 97.8 %The Fresh Market

Royal Lakes Marketplace Atlanta, GA 2008 119,493 92.2 % Kroger

Sandy Plains Exchange Atlanta, GA 1997 72,784 100.0%Publix

Summit Point Atlanta, GA 2004 111,970 82.2 % Publix

Thompson Bridge Commons Atlanta, GA 2001 92,587 96.2 %Kroger

Wade Green Village Atlanta, GA 1993 74,978 94.5 % Publix

Woodmont Village Atlanta, GA 2002 85,639 96.3 %Kroger

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

East Gate Shopping Center Augusta, GA 1995 75,716 90.4 % 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 98.2 % Publix

The Market at Salem Cove Nashville, TN 2010 62,356 97.8 % 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 145,720 100.0%BJ's Wholesale Club

Crossroads Market Naples, FL 1993 126,895 98.4 %Publix

Neapolitan Way ^(2) Naples, FL 1985 137,580 91.5 %Publix

Berry Town Center Orlando, FL 2003 99,441 85.4 %Publix

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

University Palms Orlando, FL 1993 99,172 98.9 %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 97.3 %Publix

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

Independence Square Dallas, TX 1977 140,218 86.6 %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.

Irmo Station Columbia, SC 1980 99,384 90.8 %Kroger

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

Anderson Central Greenville Spartanburg, SC1999 223,211 94.2 % Walmart

Fairview Market Greenville Spartanburg, SC1998 46,303 94.0 %Aldi

Brawley Commons Charlotte, NC 1997 122,028 100.0% Publix

West Town Market Charlotte, NC 2004 67,883 100.0%Harris Teeter

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

Maynard Crossing Raleigh, NC 1996 122,781 93.9 %Harris Teeter

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

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

Hollymead Town Center Charlottesville, VA 2005 158,807 88.4 %Harris Teeter

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



4,922,612 95.5 %

Redevelopment properties:

Champions Village Houston, TX 1973 383,346 68.3 %Randalls

Sweetgrass Corner Charleston, SC 1999 89,124 29.1 %^(3)

Conway Plaza Orlando, FL 1966 117,705 76.3 %Publix

Hanover Center ^(4) Wilmington, NC 1954 305,346 81.1 %Harris Teeter

Gayton Crossing Richmond, VA 1983 158,316 ^(5)74.0 %Kroger

Fairfield Shopping Center ^(4)Virginia Beach, VA 1985 231,829 83.6 %Food Lion



1,285,666 72.8 %

Grand total/weighted average 6,208,278 90.8 %

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

^(2) Investment in an unconsolidated joint venture that is not prorated forour ownership percentage.

^(3) 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.

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

^(5) The GLA figure shown excludes the GLA of the Kroger store, which is ownedby others.

As of March 31, 2021, our grocery-anchored shopping center portfolio was 90.8% leased (95.5% excluding redevelopment properties). We define percent leased as the percentage of gross leasable area that is leased as of the period end date, 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 March 31, 2021 were:

Totals

Number Leased Percent of of leasesGLA leased GLA



Month to month11 17,872 0.2 %

2021 109 301,830 5.4 %

2022 182 628,480 11.2 %

2023 145 639,007 11.3 %

2024 133 1,190,22421.1 %

2025 126 994,588 17.7 %

2026 78 477,586 8.5 %

2027 31 200,704 3.6 %

2028 28 357,227 6.3 %

2029 25 151,566 2.7 %

2030 16 114,687 2.0 %

2031 + 25 562,433 10.0 %



Total 909 5,636,204100.0 %

The Company's grocery-anchored shopping center portfolio contained the following anchor tenants as of March 31, 2021:

Tenant GLA Percent of total GLA

Publix 1,179,03019.0 %

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 2,732,15744.1 %



The Company's Quarterly Report on Form 10-Q for the period ended March 31, 2021 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 first quarter 2021 totaled approximately $2.1 million. 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 March 31, 2021, our office building portfolio consisted of the following properties:

Property Name Location GLA Percent leased

Three Ravinia Atlanta, GA 814,000 79 %

150 Fayetteville Raleigh, NC 560,000 89 %

Capitol Towers Charlotte, NC 479,000 98 %

CAPTRUST Tower Raleigh, NC 300,000 97 %

Morrocroft Centre Charlotte, NC 291,000 98 %

Westridge at La CanteraSan Antonio, TX258,000 100 %

Armour Yards Atlanta, GA 187,000 93 %

Brookwood Center Birmingham, AL 169,000 100 %

Galleria 75 Atlanta, GA 111,000 82 %



Total/Average 3,169,00091 %



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

Rentable squarePercent of Annual Base footage Annual BaseRent (in Rent thousands)

InterContinental Hotels Group493,000 13.9 %$11,828

Albemarle 162,000 6.9 %5,870

CapFinancial 105,000 4.4 %3,767

USAA 129,000 3.8 %3,276

Vericast 129,000 3.6 %3,027



Total 1,018,000 32.6 %$27,768

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:

Percent of

Year of Rented squarerented lease expiration feet square feet

2021 63,000 2.2 %

2022 131,000 4.6 %

2023 124,000 4.4 %

2024 279,000 9.8 %

2025 270,000 9.5 %

2026 270,000 9.5 %

2027 328,000 11.5 %

2028 249,000 8.8 %

2029 57,000 2.0 %

2030 178,000 6.2 %

2031 + 896,000 31.5 %



Total 2,845,000 100.0 %

The Company recognized second-generation capital expenditures within its office building portfolio of approximately $360,000 during the first quarter 2021.

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; * expenses incurred on calls of preferred stock; * deemed dividends for redemptions of and non-cash dividends on preferred stock; * 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; * non-cash (income) expense for current expected credit losses; * amortization of loan closing costs; * weather-related property operating losses; * depreciation and amortization of non-real estate assets; * net loan origination fees received; * deferred interest income received; * amortization of lease inducements; * cash received in excess of (exceeded by) amortization of purchase option termination revenues; * non-cash dividends on Series M Preferred Stock and mShares; and * earnest money forfeiture from prospective asset purchaser;

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.

Same-Store Net Operating Income ("NOI")

We use same-store net operating income as an operational metric for our same-store multifamily 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 multifamily 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 and Class A office buildings. 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. As of March 31, 2021, the Company owned or was invested in 117 properties in 13 states, predominantly in the Southeast region of the United States.

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