Business Wire | Aug 9, 2021 04:20PM EDT

Preferred Apartment Communities, Inc. Reports Results for Second Quarter 2021

Aug. 09, 2021

ATLANTA--(BUSINESS WIRE)--Aug. 09, 2021--Preferred Apartment Communities, Inc. (NYSE: APTS) ("we," "our," the "Company," "Preferred Apartment Communities" or "PAC") today reported results for the quarter ended June 30, 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.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20210809005756/en/

(Photo: Business Wire)

"During the second quarter, our high quality Sunbelt multifamily portfolio continued to produce strong results, with top-line same store revenue growth of 5.5% and same store NOI growth of 6.4%. The rent growth we saw in the second quarter has continued into July as our new leases are up 21.3% and our renewals have increased 7.5%. In-migration and employment trends in our markets remain robust, driving strong demand for our well-located multifamily and grocery-anchored retail assets. With our portfolio producing at a high level we have continued to execute against our strategic plan to simplify our business and enhance the flexibility of our capital structure. To that end, on July 29th, we completed the disposition of five office assets and our sole office real estate investment loan to Highwoods Properties, with one additional smaller office portfolio now under contract to Northwoods Investors. At the same time, we announced the call of approximately $221 million of our Preferred Series A stock, which represented the entire amount available to call at the time. As we look ahead, we have a robust pipeline of potential investments, providing a strong foundation for organic and external growth and value creation into 2022 and beyond," stated Joel Murphy, Preferred Apartment Communities Chairman and Chief Executive Officer.

Conference Call and Supplemental Data

We will hold our quarterly conference call on Tuesday, August 10, 2021 at 11:00 a.m. Eastern Time to discuss our second quarter 2021 results. To participate in the conference call, please dial in to the following:

Live Conference Call Details

Dial-in Number: 1-877-883-0383 International Dial-in Number: 1-412-902-6506 Company: Preferred Apartment Communities, Inc. Date: Tuesday, August 10, 2021 Time: 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time) Passcode: 5239504

The live broadcast of PAC's second 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.

For Further Information

Paul Cullen Executive Vice President-Investor Relations Chief Marketing Officer investorrelations@pacapts.com 770-818-4144

Operating Results

Our operating results are presented below.



Three months ended June Six months ended June 30, 30, % % change change 2021 2020 2021 2020



Revenues (in $ 118,706 $ 122,980 (3.5) % $ 234,406 $ 253,862 (7.7) % thousands)



Per share data:

Net income (loss) ^ $ (0.64) $ (1.06) - $ (1.38) $ (5.47) - (1)

FFO ^(2) $ 0.23 $ (0.01) - $ 0.39 $ (3.39) -

Core FFO ^ $ 0.33 $ 0.22 50.0 % $ 0.58 $ 0.50 16.0 % (2)

AFFO ^(2) $ 0.17 $ 0.05 240.0 % $ 0.34 $ 0.52 (34.6) %

Dividends $ 0.175 $ 0.175 - $ 0.35 $ 0.4375 (20.0) % ^(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.

Financial

* Our total revenues for the quarter ended June 30, 2021 decreased approximately $4.3 million, or 3.5%, to $118.7 million from the quarter ended June 30, 2020, due to the absence of revenues from the eight student housing properties that we sold on November 3, 2020. The student housing properties contributed approximately $12.0 million, or 9.8% of our total revenues for the quarter ended June 30, 2020. Excluding the student housing properties' contributions to the second quarter 2020, our total revenues would have increased $7.7 million, or 7.0%.

* Our net loss per share was $(0.64) and $(1.06) for the three-month periods ended June 30, 2021 and 2020, respectively. Funds From Operations, or FFO, was $0.23 and $(0.01) per weighted average share of Common Stock and Class A Unit outstanding for the three months ended June 30, 2021 and 2020, respectively. The increase in FFO per share was driven by:

? the absence of the loss on extinguishment of debt that was incurred in second quarter 2020 of $0.13 per share;

? lower preferred stock dividends of $0.10 per share;

? purchase option termination revenue from the repayment of our Vintage Destin loan of $0.05 per share;

? lower interest expense of $0.05 per share;

? improved property results and increases from acquired properties of $0.03 per share;

? lower FFO resulting from the sale of our student housing properties in the fourth quarter 2020 of ($0.08) per share; and

? lower current interest from our real estate loan investment portfolio of ($0.02).

* Our Core FFO per share (A) increased to $0.33 for the second quarter 2021 from $0.22 for the second quarter 2020, due to:

? lower preferred stock dividends of $0.10 per share;

? purchase option termination revenue from the repayment of our Vintage Destin loan of $0.05 per share;

? lower interest expense of $0.05 per share;

? improved property results and increases from acquired properties of $0.03 per share;

? lower Core FFO resulting from the sale of our student housing properties in the fourth quarter 2020 of ($0.08) per share; and

? lower current interest from our real estate loan investment portfolio of ($0.02).

* Our AFFO per share increased to $0.17 for the second quarter 2021 from $0.05 for the second quarter 2020 due to:

? lower preferred stock dividends of $0.10 per share;

? cash received from purchase option terminations of $0.06 per share;

? lower interest expense of $0.05 per share;

? improved property results and increases from acquired properties of $0.03 per share;

? accrued interest received of $0.03 per share;

? lower AFFO resulting from the sale of our student housing properties in the fourth quarter 2020 of ($0.08) per share;

? cash paid for closing costs for our renewed revolving line of credit of ($0.04) per share;

? lower current interest from our real estate loan investment portfolio of ($0.02); and

? higher recurring capital expenditures of ($0.01) per share.

* Our Core FFO payout ratio to Common Stockholders and Unitholders was approximately 55.3% and our Core FFO payout ratio to our preferred stockholders was approximately 66.8% for the second quarter 2021. (B)

* Our AFFO payout ratio to Common Stockholders and Unitholders was approximately 110.3% and our AFFO payout ratio to our preferred stockholders was approximately 80.0% for the second quarter 2021.

* As of June 30, 2021, our total assets were approximately $4.3 billion, a decrease from our total assets of approximately $4.8 billion at June 30, 2020, that primarily resulted from the sale of our student housing portfolio during the fourth quarter 2020 for approximately $478.7 million.

(A) Our Core FFO result for the three-month period ended June 30, 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.

(B) 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.

Operational

* Our multifamily communities' same-store rental and other property revenues increased 5.5% for the quarter ended June 30, 2021 versus 2020. Our multifamily communities' same-store net operating income increased 6.4% for the quarter ended June 30, 2021 versus 2020. Our same-store multifamily communities include all our multifamily communities except Artisan at Viera, The Menlo, The Blake, Parkside at the Beach, Horizon at Wiregrass and The Ellison, all of which were acquired in the last 23 months.

* Our rental rates for our multifamily same-store properties for new and renewal leases increased 11.6% and 5.3% respectively for second quarter 2021 as compared to the expiring leases, excluding shorter-term leases.

* Our rental rates for our multifamily same-store properties for new and renewal leases increased 21.3% and 7.5% respectively for July 2021 as compared to the expiring leases, excluding shorter-term leases.

* As of June 30, 2021, the average age of our multifamily communities was approximately 6.6 years, which is the youngest in the public multifamily REIT industry.

* As of June 30, 2021, all of our owned multifamily communities had achieved stabilization except for one second quarter 2021 acquisition. We define stabilization as reaching 93% for all three consecutive months within a single quarter.

* The average physical occupancy of our same-store multifamily communities increased to 96.9% for the three-month period ended June 30, 2021 from 94.7% for the three-month period ended June 30, 2020 and 95.8% for the three-month period ended March 31, 2021.

* Our average recurring rental revenue collections before and after any effect of rent deferrals for the second quarter 2021 were approximately 99.3% and 99.3% for multifamily communities, 98.9% and 98.9% for grocery-anchored retail properties and 99.7% 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 $78,000 of deferred retail rent during the second quarter 2021, raising the total deferred retail rent granted to approximately $2.0 million, or approximately 1.7% of recurring retail rental revenue cumulatively over the last five quarters. Including this deferred rent, our average recurring retail rental revenue collections were 98.9%, 98.7%, 98.7% and 97.9% for second quarter 2021, first quarter 2021, fourth quarter 2020 and third quarter 2020, respectively. As of June 30, 2021, $1.2 million of the $2.0 million of deferred retail rent was in repayment, of which 93.7% has been collected. In addition to the deferrals, we granted an additional $200,000 of COVID-related abatements to retail tenants, raising the total abatement granted to $876,000, or approximately 0.7% of our retail portfolio's recurring rental revenues cumulatively over the last five 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 reduced our reserve by $216,000, or 0.8% of total retail revenue in the second quarter 2021, or 0.1% of our consolidated rental and other property revenues. Our retail portfolio's total rent reserves over the last five quarters were approximately $2.1 million, or approximately 1.8% of our retail portfolio's recurring rental revenues cumulatively over the same period.

Financing and Capital Markets

* As of June 30, 2021, approximately 95.7% 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 3.47% for multifamily communities, 4.13% for office properties, 3.89% for grocery-anchored retail properties and 3.72% in the aggregate.

* At June 30, 2021, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 56.4%.

* At June 30, 2021, we had $143.5 million available to be drawn on our revolving line of credit and approximately $37.1 million of cash on hand.

* During the second quarter 2021, we issued and sold an aggregate of 37,872 shares of preferred stock and redeemed or called an aggregate of 47,986 shares of preferred stock, resulting in a net reduction of 10,114 outstanding shares of preferred stock, for a net redemption cost of approximately $12.9 million. For the period of November 1, 2020 through August 3, 2021, we issued and sold an aggregate of 143,498 shares of preferred stock and redeemed or called an aggregate of 558,190 shares of preferred stock, resulting in a net reduction of 414,692 outstanding shares of preferred stock, for a net redemption cost of approximately $425.0 million.

* During the second quarter 2021, we issued and sold an aggregate of 1,442,214 shares of Common Stock under our 2019 ATM Offering, generating gross proceeds of approximately $15.1 million and, after deducting commissions and other costs, net proceeds of approximately $14.9 million.

Significant Transactions

* During the second quarter 2021, we closed on the acquisition of The Ellison, a 250-unit multifamily community located in suburban Atlanta, Georgia.

* During the second quarter 2021, we received the full principal amounts totaling approximately $23.5 million from the repayment of two real estate loan investments, plus a purchase option termination fee of approximately $3.0 million and $1.8 million of accrued interest from these loan payoffs. These transactions collectively returned approximately $28.3 million of capital to us during the second quarter for investment, preferred stock redemptions, or other corporate purposes.

* During the second quarter 2021, we originated two real estate loan investments with a combined commitment amount of $17.1 million, in support of the development of a 316-unit multifamily community in Savannah, Georgia.

Subsequent to Quarter End

* On July 29, 2021, we sold five office properties (Galleria 75, 150 Fayetteville, Capitol Towers, CapTrust and Morrocroft) and our 8West real estate loan investment in a single transaction, for a gross sales price of approximately $645.5 million. Based on estimated closing costs, the sale will result in a loss on sale of between $20.0 million and $21.0 million in the third quarter. We utilized a significant portion of the net proceeds to call approximately $221.6 million of our outstanding Series A Redeemable Preferred Stock on August 3, 2021.

* Between July 1, 2021 and July 31, 2021, we issued 532,917 shares of Common Stock under the 2019 ATM Offering, for aggregate gross proceeds of approximately $5.5 million at an average price of $10.30 per share.

* On July 8, 2021, we completed the acquisition of Alleia at Presidio, a 231-unit multifamily community located in Ft. Worth, Texas.

* On July 19, 2021, we closed on the sale of Vineyards, a 369-unit multifamily community located in Houston, Texas.

* On July 22, 2021, we entered into an agreement to sell two office properties, Armour Yards and 251 Armour Yards (the "Armour Yards Portfolio"), to Northwood Investors.

* On August 6, 2021, our board of directors declared a quarterly dividend on our Common Stock of $0.175 per share, payable on October 15, 2021 to stockholders of record on September 15,2021.

* Between July 1, 2021 and July 31, 2021, we issued 29,552 shares of Series A1 Preferred Stock and collected net proceeds of approximately $26.6 million after commissions and fees and issued 2,743 shares of Series M1 Preferred Stock and collected net proceeds of approximately $2.7 million after commissions and fees. During the same period, we redeemed 9,735 shares of Series A Preferred Stock, 871 mShares, 70 shares of Series A1 Preferred Stock, and 52 shares of Series M1 Preferred Stock.

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 - We are revising our guidance to reflect the impact of the call of Series A Preferred Stock, the improving trends in our multifamily and retail portfolios, and the earlier payoffs of some of our real estate loan investment assets. With these variables factored in, we now expect Core FFO per share in the range of $0.90 to $1.00 for the full year 2021.

Underpinning this revised guidance are the following assumptions:

Multifamily Same-Store NOI growth of 5.0% to 7.0% for the full year, an increase from our previous full year guidance of 2.0% to 3.0%;

Multifamily acquisition volume of between $300 million and $400 million for the full year, unchanged; and

New real estate loan investment originations of $50-$100 million for the full year, unchanged.

This guidance continues to include the impact of purchase option termination revenues and CECL reserve reversals as a result of real estate investment loans being repaid, which in combination with the accelerating growth in the multifamily portfolio, is helping to offset the dilution of the office portfolio sale in the short term. The increases in purchase option revenue represents a significant acceleration of payoffs and acquisitions of properties that were contemplated in 2022. This acceleration will have a material benefit to our results in 2021, to the detriment of the results in 2022. These one-time items will be very difficult to replace going forward, as we have fewer purchase option termination revenue opportunities in our current portfolio. We expect the dilution from the office transaction will be more impactful 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-month and six-month periods ended June 30, 2021 and 2020 appear in the attached report, as well as on our website using the following link:

https://investors.pacapts.com/q2-2021-quarterly-supplemental-financial-data

Real Estate Assets

At June 30, 2021, our portfolio of owned real estate assets and potential additions from purchase options we held from our real estate loan investments consisted of:

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

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(2) Attributable to Common Stockholders and Unitholders, Core FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders and Definitions of Non-GAAP Measures.

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

Financial

* Our total revenues for the quarter ended June 30, 2021 decreased approximately $4.3 million, or 3.5%, to $118.7 million from the quarter ended June 30, 2020, due to the absence of revenues from the eight student housing properties that we sold on November 3, 2020. The student housing properties contributed approximately $12.0 million, or 9.8% of our total revenues for the quarter ended June 30, 2020. Excluding the student housing properties' contributions to the second quarter 2020, our total revenues would have increased $7.7 million, or 7.0%.

* Our net loss per share was $(0.64) and $(1.06) for the three-month periods ended June 30, 2021 and 2020, respectively. Funds From Operations, or FFO, was $0.23 and $(0.01) per weighted average share of Common Stock and Class A Unit outstanding for the three months ended June 30, 2021 and 2020, respectively. The increase in FFO per share was driven by:

? the absence of the loss on extinguishment of debt that was incurred in second quarter 2020 of $0.13 per share;

? lower preferred stock dividends of $0.10 per share;

? purchase option termination revenue from the repayment of our Vintage Destin loan of $0.05 per share;

? lower interest expense of $0.05 per share;

? improved property results and increases from acquired properties of $0.03 per share;

? lower FFO resulting from the sale of our student housing properties in the fourth quarter 2020 of ($0.08) per share; and

? lower current interest from our real estate loan investment portfolio of ($0.02).

* Our Core FFO per share (A) increased to $0.33 for the second quarter 2021 from $0.22 for the second quarter 2020, due to:

? lower preferred stock dividends of $0.10 per share;

? purchase option termination revenue from the repayment of our Vintage Destin loan of $0.05 per share;

? lower interest expense of $0.05 per share;

? improved property results and increases from acquired properties of $0.03 per share;

? lower Core FFO resulting from the sale of our student housing properties in the fourth quarter 2020 of ($0.08) per share; and

? lower current interest from our real estate loan investment portfolio of ($0.02).

* Our AFFO per share increased to $0.17 for the second quarter 2021 from $0.05 for the second quarter 2020 due to:

? lower preferred stock dividends of $0.10 per share;

? cash received from purchase option terminations of $0.06 per share;

? lower interest expense of $0.05 per share;

? improved property results and increases from acquired properties of $0.03 per share;

? accrued interest received of $0.03 per share;

? lower AFFO resulting from the sale of our student housing properties in the fourth quarter 2020 of ($0.08) per share;

? cash paid for closing costs for our renewed revolving line of credit of ($0.04) per share;

? lower current interest from our real estate loan investment portfolio of ($0.02); and

? higher recurring capital expenditures of ($0.01) per share.

* Our Core FFO payout ratio to Common Stockholders and Unitholders was approximately 55.3% and our Core FFO payout ratio to our preferred stockholders was approximately 66.8% for the second quarter 2021. (B)

* Our AFFO payout ratio to Common Stockholders and Unitholders was approximately 110.3% and our AFFO payout ratio to our preferred stockholders was approximately 80.0% for the second quarter 2021.

* As of June 30, 2021, our total assets were approximately $4.3 billion, a decrease from our total assets of approximately $4.8 billion at June 30, 2020, that primarily resulted from the sale of our student housing portfolio during the fourth quarter 2020 for approximately $478.7 million.

(A) Our Core FFO result for the three-month period ended June 30, 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.

(B) 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.

Operational

* Our multifamily communities' same-store rental and other property revenues increased 5.5% for the quarter ended June 30, 2021 versus 2020. Our multifamily communities' same-store net operating income increased 6.4% for the quarter ended June 30, 2021 versus 2020. Our same-store multifamily communities include all our multifamily communities except Artisan at Viera, The Menlo, The Blake, Parkside at the Beach, Horizon at Wiregrass and The Ellison, all of which were acquired in the last 23 months.

* Our rental rates for our multifamily same-store properties for new and renewal leases increased 11.6% and 5.3% respectively for second quarter 2021 as compared to the expiring leases, excluding shorter-term leases.

* Our rental rates for our multifamily same-store properties for new and renewal leases increased 21.3% and 7.5% respectively for July 2021 as compared to the expiring leases, excluding shorter-term leases.

* As of June 30, 2021, the average age of our multifamily communities was approximately 6.6 years, which is the youngest in the public multifamily REIT industry.

* As of June 30, 2021, all of our owned multifamily communities had achieved stabilization except for one second quarter 2021 acquisition. We define stabilization as reaching 93% for all three consecutive months within a single quarter.

* The average physical occupancy of our same-store multifamily communities increased to 96.9% for the three-month period ended June 30, 2021 from 94.7% for the three-month period ended June 30, 2020 and 95.8% for the three-month period ended March 31, 2021.

* Our average recurring rental revenue collections before and after any effect of rent deferrals for the second quarter 2021 were approximately 99.3% and 99.3% for multifamily communities, 98.9% and 98.9% for grocery-anchored retail properties and 99.7% 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 $78,000 of deferred retail rent during the second quarter 2021, raising the total deferred retail rent granted to approximately $2.0 million, or approximately 1.7% of recurring retail rental revenue cumulatively over the last five quarters. Including this deferred rent, our average recurring retail rental revenue collections were 98.9%, 98.7%, 98.7% and 97.9% for second quarter 2021, first quarter 2021, fourth quarter 2020 and third quarter 2020, respectively. As of June 30, 2021, $1.2 million of the $2.0 million of deferred retail rent was in repayment, of which 93.7% has been collected. In addition to the deferrals, we granted an additional $200,000 of COVID-related abatements to retail tenants, raising the total abatement granted to $876,000, or approximately 0.7% of our retail portfolio's recurring rental revenues cumulatively over the last five 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 reduced our reserve by $216,000, or 0.8% of total retail revenue in the second quarter 2021, or 0.1% of our consolidated rental and other property revenues. Our retail portfolio's total rent reserves over the last five quarters were approximately $2.1 million, or approximately 1.8% of our retail portfolio's recurring rental revenues cumulatively over the same period.

Financing and Capital Markets

* As of June 30, 2021, approximately 95.7% 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 3.47% for multifamily communities, 4.13% for office properties, 3.89% for grocery-anchored retail properties and 3.72% in the aggregate.

* At June 30, 2021, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 56.4%.

* At June 30, 2021, we had $143.5 million available to be drawn on our revolving line of credit and approximately $37.1 million of cash on hand.

* During the second quarter 2021, we issued and sold an aggregate of 37,872 shares of preferred stock and redeemed or called an aggregate of 47,986 shares of preferred stock, resulting in a net reduction of 10,114 outstanding shares of preferred stock, for a net redemption cost of approximately $12.9 million. For the period of November 1, 2020 through August 3, 2021, we issued and sold an aggregate of 143,498 shares of preferred stock and redeemed or called an aggregate of 558,190 shares of preferred stock, resulting in a net reduction of 414,692 outstanding shares of preferred stock, for a net redemption cost of approximately $425.0 million.

* During the second quarter 2021, we issued and sold an aggregate of 1,442,214 shares of Common Stock under our 2019 ATM Offering, generating gross proceeds of approximately $15.1 million and, after deducting commissions and other costs, net proceeds of approximately $14.9 million.

Significant Transactions

* During the second quarter 2021, we closed on the acquisition of The Ellison, a 250-unit multifamily community located in suburban Atlanta, Georgia.

* During the second quarter 2021, we received the full principal amounts totaling approximately $23.5 million from the repayment of two real estate loan investments, plus a purchase option termination fee of approximately $3.0 million and $1.8 million of accrued interest from these loan payoffs. These transactions collectively returned approximately $28.3 million of capital to us during the second quarter for investment, preferred stock redemptions, or other corporate purposes.

* During the second quarter 2021, we originated two real estate loan investments with a combined commitment amount of $17.1 million, in support of the development of a 316-unit multifamily community in Savannah, Georgia.

Subsequent to Quarter End

* On July 29, 2021, we sold five office properties (Galleria 75, 150 Fayetteville, Capitol Towers, CapTrust and Morrocroft) and our 8West real estate loan investment in a single transaction, for a gross sales price of approximately $645.5 million. Based on estimated closing costs, the sale will result in a loss on sale of between $20.0 million and $21.0 million in the third quarter. We utilized a significant portion of the net proceeds to call approximately $221.6 million of our outstanding Series A Redeemable Preferred Stock on August 3, 2021.

* Between July 1, 2021 and July 31, 2021, we issued 532,917 shares of Common Stock under the 2019 ATM Offering, for aggregate gross proceeds of approximately $5.5 million at an average price of $10.30 per share.

* On July 8, 2021, we completed the acquisition of Alleia at Presidio, a 231-unit multifamily community located in Ft. Worth, Texas.

* On July 19, 2021, we closed on the sale of Vineyards, a 369-unit multifamily community located in Houston, Texas.

* On July 22, 2021, we entered into an agreement to sell two office properties, Armour Yards and 251 Armour Yards (the "Armour Yards Portfolio"), to Northwood Investors.

* On August 6, 2021, our board of directors declared a quarterly dividend on our Common Stock of $0.175 per share, payable on October 15, 2021 to stockholders of record on September 15,2021.

* Between July 1, 2021 and July 31, 2021, we issued 29,552 shares of Series A1 Preferred Stock and collected net proceeds of approximately $26.6 million after commissions and fees and issued 2,743 shares of Series M1 Preferred Stock and collected net proceeds of approximately $2.7 million after commissions and fees. During the same period, we redeemed 9,735 shares of Series A Preferred Stock, 871 mShares, 70 shares of Series A1 Preferred Stock, and 52 shares of Series M1 Preferred Stock.

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 - We are revising our guidance to reflect the impact of the call of Series A Preferred Stock, the improving trends in our multifamily and retail portfolios, and the earlier payoffs of some of our real estate loan investment assets. With these variables factored in, we now expect Core FFO per share in the range of $0.90 to $1.00 for the full year 2021.

Underpinning this revised guidance are the following assumptions:

Multifamily Same-Store NOI growth of 5.0% to 7.0% for the full year, an increase from our previous full year guidance of 2.0% to 3.0%;

Multifamily acquisition volume of between $300 million and $400 million for the full year, unchanged; and

New real estate loan investment originations of $50-$100 million for the full year, unchanged.

This guidance continues to include the impact of purchase option termination revenues and CECL reserve reversals as a result of real estate investment loans being repaid, which in combination with the accelerating growth in the multifamily portfolio, is helping to offset the dilution of the office portfolio sale in the short term. The increases in purchase option revenue represents a significant acceleration of payoffs and acquisitions of properties that were contemplated in 2022. This acceleration will have a material benefit to our results in 2021, to the detriment of the results in 2022. These one-time items will be very difficult to replace going forward, as we have fewer purchase option termination revenue opportunities in our current portfolio. We expect the dilution from the office transaction will be more impactful 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-month and six-month periods ended June 30, 2021 and 2020 appear in the attached report, as well as on our website using the following link:

https://investors.pacapts.com/q2-2021-quarterly-supplemental-financial-data

Real Estate Assets

At June 30, 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 additions from Owned as of real Potential June 30, estate total 2021 ^(1) loan investment portfolio ^(2)

Residential properties:

Properties 38 13 51

Units 11,393 3,566 14,959

Grocery-anchored shopping centers:

Properties 54 - 54

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

Office buildings: ^(3)

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) Five of our office properties and the real estate loan investment supporting the 8West office building were sold to Highwoods Realty Limited Partnership, an unrelated party, on July 29, 2021.

The following chart details quarterly cash collections of recurring rental revenues before and after the effect of rent deferrals across all our operating business lines as of August 5, 2021:

Cash Collections of Recurring Rental Revenues ^(1)

2020 2021

Unadjusted for First Second Third Fourth First Secondrent deferrals: quarter quarter quarter quarter quarter quarter



Multifamily 99.9 % 98.8 % 99.0 % 99.1 % 99.1 % 99.3 %

Office 99.9 % 98.1 % 99.7 % 99.7 % 99.8 % 99.7 %

Grocery-anchored 99.6 % 91.9 % 96.1 % 97.8 % 98.7 % 98.9 %retail ^(2)



Cash Collections of Recurring Rental Revenues (1)

2020

2021

Adjusted for rent deferrals:

First quarter

Second quarter

Third quarter

Fourth quarter

First quarter

Second quarter

Multifamily

99.9

%

99.4

%

99.0

%

99.1

%

99.2

%

99.3

%

Office

99.9

%

99.9

%

100.0

%

99.7

%

99.9

%

99.9

%

Grocery-anchored retail (2)

99.6

%

97.0

%

97.9

%

98.7

%

98.7

%

98.9

%

Cash Collections of Recurring Rental Revenues ^(1)

2020 2021

Adjusted for First Second Third Fourth First Secondrent deferrals: quarter quarter quarter quarter quarter quarter



Multifamily 99.9 % 99.4 % 99.0 % 99.1 % 99.2 % 99.3 %

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

Grocery-anchored 99.6 % 97.0 % 97.9 % 98.7 % 98.7 % 98.9 %retail ^(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.

(2)

Includes an investment in an unconsolidated joint venture that is not prorated for our ownership percentage.

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

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

^ Includes an investment in an unconsolidated joint venture that is not(2) prorated for our ownership percentage.

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

Occupancy and Percentages Leased

2020 2021

Adjusted for rent First Second Third Fourth First Seconddeferrals: quarter quarter quarter quarter quarter quarter



Occupancy:

Multifamily 95.5 % 94.7 % 95.6 % 95.6 % 95.8 % 96.8 %(stabilized)^ (1)

Percent leased:^ (2)

Office 96.7 % 96.2 % 95.5 % 94.7 % 91.0 % 90.9 %

Grocery-anchored 92.6 % 92.7 % 92.5 % 91.0 % 90.8 % 91.1 %retail ^(3)

(1)

For quarterly periods, calculated as the average of the number of occupied units on the 20th day of each of the trailing three months from the period 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 not prorated 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 84.2% 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.

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

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

^ Includes an investment in an unconsolidated joint venture that is not(3) prorated 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 84.2% 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 NetOperating Income ("NOI")



Three months ended:

(in thousands) 6/30/2021 6/30/2020



Net income (loss) $ 1,557 $ (15,950)

Add:

Equity stock compensation 925 246

Depreciation and amortization 44,732 51,793

Interest expense 27,296 31,136

Corporate G&A and other 7,696 7,827

(Income) loss from unconsolidated joint venture 175 -

Management Internalization 240 458

Allowance for expected credit losses (845) 482

Less:

Interest revenue on notes receivable 12,814 10,407

Interest revenue on related party notes receivable 410 604

Miscellaneous revenues 321 395

Loss on extinguishment of debt - (6,156)



Property net operating income 68,231 70,742

Less:

Non same-store property revenues (61,448) (70,156)

Add:

Non same-store property operating expenses 18,579 23,242



Same-store net operating income $ 25,362 $ 23,828



Multifamily Communities' Same-Store NOI

Three months ended:

(in thousands)

6/30/2021

6/30/2020

$ change

% change

Revenues:

Rental and other property revenues

$

43,712

$

41,418

$

2,294

5.5

%

Operating expenses:

Property operating and maintenance

7,587

6,996

591

8.4

%

Payroll

3,356

3,342

14

0.4

%

Real estate taxes and insurance

7,407

7,252

155

2.1

%

Total operating expenses

18,350

17,590

760

4.3

%

Same-store net operating income

$

25,362

$

23,828

$

1,534

6.4

%

Same-store average physical occupancy

96.9

%

94.7

%

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

Multifamily Communities' Same-Store NOI



Three months ended:

(in thousands) 6/30/2021 6/30/2020 $ change % change

Revenues:

Rental and other property revenues $ 43,712 $ 41,418 $ 2,294 5.5 %



Operating expenses:

Property operating and maintenance 7,587 6,996 591 8.4 %

Payroll 3,356 3,342 14 0.4 %

Real estate taxes and insurance 7,407 7,252 155 2.1 %

Total operating expenses 18,350 17,590 760 4.3 %



Same-store net operating income $ 25,362 $ 23,828 $ 1,534 6.4 %



Same-store average physical 96.9 % 94.7 % occupancy



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

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

Six months ended:

(in thousands)

6/30/2021

6/30/2020

Net income (loss)

$

(1,152)

$

(195,473)

Add:

Equity stock compensation

1,499

476

Depreciation and amortization

90,559

101,302

Interest expense

54,287

60,729

Management fees

-

3,099

Corporate G&A and other

15,235

13,775

(Income) loss from unconsolidated joint venture

369

-

Management Internalization

485

179,251

Allowance for expected credit losses

(323)

5,615

Waived asset management and general and administrative expense fees

-

(1,136)

Less:

Interest revenue on notes receivable

23,326

23,846

Interest revenue on related party notes receivable

815

3,141

Miscellaneous revenues

645

3,435

Gain on sale of real estate, net

798

-

Gain on land sale

-

479

Loss on extinguishment of debt

-

(6,156)

Property net operating income

135,375

142,893

Less:

Non same-store property revenues

(123,273)

(139,770)

Add:

Non same-store property operating expenses

37,807

45,519

Same-store net operating income

$

49,909

$

48,642

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



Six months ended:

(in thousands) 6/30/2021 6/30/2020



Net income (loss) $ (1,152) $ (195,473)

Add:

Equity stock compensation 1,499 476

Depreciation and amortization 90,559 101,302

Interest expense 54,287 60,729

Management fees - 3,099

Corporate G&A and other 15,235 13,775

(Income) loss from unconsolidated joint venture 369 -

Management Internalization 485 179,251

Allowance for expected credit losses (323) 5,615

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

Less:

Interest revenue on notes receivable 23,326 23,846

Interest revenue on related party notes 815 3,141 receivable

Miscellaneous revenues 645 3,435

Gain on sale of real estate, net 798 -

Gain on land sale - 479

Loss on extinguishment of debt - (6,156)



Property net operating income 135,375 142,893

Less:

Non same-store property revenues (123,273) (139,770)

Add:

Non same-store property operating expenses 37,807 45,519



Same-store net operating income $ 49,909 $ 48,642



Multifamily Communities' Same-Store NOI

Six months ended:

(in thousands)

6/30/2021

6/30/2020

$ change

% change

Revenues:

Rental and other property revenues

$

86,346

$

83,668

$

2,678

3.2

%

Operating expenses:

Property operating and maintenance

14,680

14,090

590

4.2

%

Payroll

6,620

6,461

159

2.5

%

Real estate taxes and insurance

15,137

14,475

662

4.6

%

Total operating expenses

36,437

35,026

1,411

4.0

%

Same-store net operating income

$

49,909

$

48,642

$

1,267

2.6

%

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

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

On May 6, 2021, our board of directors declared a quarterly dividend on our Common Stock of $0.175 per share, which was paid on July 15, 2021 to stockholders of record on June 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 second quarter 2021, which was paid on July 15, 2021 to all Class A Unit holders of record on June 15, 2021.

Monthly Dividends on Preferred Stock

We declared monthly dividends of $5.00 per share on our Series A Preferred Stock, which totaled approximately $29.0 million for the second quarter 2021 and represents a 6% annual yield. We declared monthly dividends of $5.00 per share on our Series A1 Preferred Stock, which totaled approximately $3.1 million for the second quarter 2021 and also represents a 6% annual yield. We declared dividends totaling approximately $1.4 million on our Series M Preferred Stock, or mShares, for the second 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 $400,000 on our Series M1 Preferred Stock for the second quarter 2021. The Series M1 Preferred Stock has a dividend rate that escalates from 6.1% in year one of issuance to 7.1% in year ten and thereafter.

Forward-Looking Statements

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Estimates of future earnings, guidance, redemptions of Series A Preferred Stock, potential additions of properties from purchase options and rights of first offer from our real estate loan investments, 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, including any variants, 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 or any variants thereof; 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; 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 second quarter 2021. While the impacts of COVID-19 are continuing, and particularly so the Delta variant, 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. The Company is continuing to monitor the spread and impact of the Delta variant of COVID-19 as well as vaccination rates in its markets.

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

Multifamily Communities' Same-Store NOI



Six months ended:

(in thousands) 6/30/2021 6/30/2020 $ change % change

Revenues:

Rental and other property revenues $ 86,346 $ 83,668 $ 2,678 3.2 %



Operating expenses:

Property operating and maintenance 14,680 14,090 590 4.2 %

Payroll 6,620 6,461 159 2.5 %

Real estate taxes and insurance 15,137 14,475 662 4.6 %

Total operating expenses 36,437 35,026 1,411 4.0 %



Same-store net operating income $ 49,909 $ 48,642 $ 1,267 2.6 %



Corporate level expenses related to the management and operations of themultifamily 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 May 6, 2021, our board of directors declared a quarterly dividend on our Common Stock of $0.175 per share, which was paid on July 15, 2021 to stockholders of record on June 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 second quarter 2021, which was paid on July 15, 2021 to all Class A Unit holders of record on June 15, 2021.

Monthly Dividends on Preferred Stock

We declared monthly dividends of $5.00 per share on our Series A Preferred Stock, which totaled approximately $29.0 million for the second quarter 2021 and represents a 6% annual yield. We declared monthly dividends of $5.00 per share on our Series A1 Preferred Stock, which totaled approximately $3.1 million for the second quarter 2021 and also represents a 6% annual yield. We declared dividends totaling approximately $1.4 million on our Series M Preferred Stock, or mShares, for the second 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 $400,000 on our Series M1 Preferred Stock for the second quarter 2021. The Series M1 Preferred Stock has a dividend rate that escalates from 6.1% in year one of issuance to 7.1% in year ten and thereafter.

Forward-Looking Statements

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Estimates of future earnings, guidance, redemptions of Series A Preferred Stock, potential additions of properties from purchase options and rights of first offer from our real estate loan investments, 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, including any variants, 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 or any variants thereof; 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; 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 second quarter 2021. While the impacts of COVID-19 are continuing, and particularly so the Delta variant, 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. The Company is continuing to monitor the spread and impact of the Delta variant of COVID-19 as well as vaccination rates in its markets.

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 June 30,

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

Revenues:

Rental and other property revenues $ 105,161 $ 111,574

Interest income on loans and notes receivable 12,814 10,407

Interest income from related parties 410 604

Miscellaneous revenues 321 395



Total revenues 118,706 122,980



Operating expenses:

Property operating and maintenance 15,580 17,283

Property salary and benefits 4,914 5,720

Property management costs 927 1,042

Real estate taxes and insurance 15,509 16,787

General and administrative 7,696 7,827

Equity compensation to directors and executives 925 246

Depreciation and amortization 44,732 51,793

Allowance for expected credit losses (845) 482

Management Internalization expense 240 458



Total operating expenses 89,678 101,638



Operating income before loss from unconsolidated 29,028 21,342 joint venture

Loss from unconsolidated joint venture (175) -

Operating income 28,853 21,342

Interest expense 27,296 31,136

Loss on extinguishment of debt - (6,156)



Net income (loss) 1,557 (15,950)

Net (income) loss attributable to non-controlling (3) 266 interests



Net income (loss) attributable to the Company 1,554 (15,684)



Dividends declared to preferred stockholders (33,983) (35,624)

Earnings attributable to unvested restricted stock (138) (11)



Net loss attributable to common stockholders $ (32,567) $ (51,319)



Net loss per share of Common Stock available to

common stockholders, basic and diluted $ (0.64) $ (1.06)



Weighted average number of shares of Common Stock outstanding,

basic and diluted 50,518 48,220

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)

2021

2020

Net loss attributable to common stockholders (See note 1)

$

(32,567)

$

(51,319)

Add:

Depreciation of real estate assets

35,977

40,996

Amortization of acquired intangible assets and deferred leasing costs

8,486

9,973

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

16

(249)

FFO attributable to common stockholders and unitholders

11,912

(599)

Acquisition and pursuit costs

1

132

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

482

528

Payment of costs related to property refinancing

118

6,863

Internalization costs (See note 4)

240

458

Deemed dividends for redemptions of and non-cash dividends on preferred stock

4,110

2,772

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

27

419

Core FFO attributable to common stockholders and unitholders (A)

16,890

10,573

Add:

Non-cash equity compensation to directors and executives

925

246

Amortization of loan closing costs (See note 7)

1,245

1,177

Depreciation/amortization of non-real estate assets

447

616

Net loan origination fees received (See note 8)

386

200

Deferred interest income received (See note 9)

1,569

-

Amortization of lease inducements (See note 10)

452

447

Less:

Amortization of purchase option termination revenues in excess of cash received (See note 11)

(227)

(435)

Non-cash loan interest income (See note 9)

(2,909)

(3,109)

Non-cash (income) expense for current expected credit losses (See note 6)

(1,256)

(122)

Cash paid for loan closing costs

(1,881)

-

Amortization of acquired real estate intangible liabilities and SLR (See note 12)

(3,248)

(4,144)

Amortization of deferred revenues (See note 13)

(941)

(941)

Normally recurring capital expenditures (See note 14)

(2,977)

(2,124)

AFFO attributable to common stockholders and Unitholders

$

8,475

$

2,384

Common Stock dividends and distributions to Unitholders declared:

Common Stock dividends

$

9,259

$

8,624

Distributions to Unitholders (See note 2)

87

130

Total

$

9,346

$

8,754

Common Stock dividends and Unitholder distributions per share

$

0.175

$

0.175

FFO per weighted average basic share of Common Stock and Unit outstanding

$

0.23

$

(0.01)

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

$

0.33

$

0.22

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

$

0.17

$

0.05

Weighted average shares of Common Stock and Units outstanding:

Basic:

Common Stock

50,518

48,220

Class A Units

535

759

Common Stock and Class A Units

51,053

48,979

Diluted Common Stock and Class A Units (See note 15)

51,579

48,980

Actual shares of Common Stock outstanding, including 704 and 548 unvested shares

of restricted Common Stock at June 30, 2021 and 2020, respectively.

52,432

49,831

Actual Class A Units outstanding at June 30, 2021 and 2020, respectively.

497

742

Total

52,929

50,573

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

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

Three months ended June 30,

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



Net loss attributable to common stockholders (See $ (32,567) $ (51,319) note 1)



Add: Depreciation of real estate assets 35,977 40,996

Amortization of acquired intangible 8,486 9,973 assets and deferred leasing costs

Net loss attributable to Class A 16 (249) Unitholders (See note 2)

FFO attributable to common stockholders and 11,912 (599) unitholders



Acquisition and pursuit costs 1 132

Loan cost amortization on acquisition term notes and loan coordination fees 482 528 (See note 3)

Payment of costs related to property 118 6,863 refinancing

Internalization costs (See note 4) 240 458

Deemed dividends for redemptions of and 4,110 2,772 non-cash dividends on preferred stock

Expenses related to the COVID-19 global 27 419 pandemic (See note 5)

Core FFO attributable to common stockholders and 16,890 10,573 unitholders ^(A)



Add: Non-cash equity compensation to 925 246 directors and executives

Amortization of loan closing costs (See 1,245 1,177 note 7)

Depreciation/amortization of non-real 447 616 estate assets

Net loan origination fees received (See 386 200 note 8)

Deferred interest income received (See 1,569 - note 9)

Amortization of lease inducements (See 452 447 note 10)

Amortization of purchase optionLess: termination revenues in excess of cash (227) (435) received (See note 11)

Non-cash loan interest income (See note (2,909) (3,109) 9)

Non-cash (income) expense for current (1,256) (122) expected credit losses (See note 6)

Cash paid for loan closing costs (1,881) -

Amortization of acquired real estate intangible liabilities and SLR (See (3,248) (4,144) note 12)

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

Normally recurring capital expenditures (2,977) (2,124) (See note 14)



AFFO attributable to common stockholders and $ 8,475 $ 2,384 Unitholders



Common Stock dividends and distributions to Unitholders declared:

Common Stock dividends $ 9,259 $ 8,624

Distributions to Unitholders (See note 87 130 2)

Total $ 9,346 $ 8,754



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



FFO per weighted average basic share of Common $ 0.23 $ (0.01) Stock and Unit outstanding

Core FFO per weighted average basic share of Common $ 0.33 $ 0.22 Stock and Unit outstanding

AFFO per weighted average basic share of Common $ 0.17 $ 0.05 Stock and Unit outstanding



Weighted average shares of Common Stock and Units outstanding:

Basic:

Common Stock 50,518 48,220

Class A Units 535 759

Common Stock and Class A Units 51,053 48,979



Diluted Common Stock and Class A Units 51,579 48,980 (See note 15)



Actual shares of Common Stock outstanding, including 704 and 548 unvested shares

of restricted Common Stock at June 30, 2021 and 52,432 49,831 2020, respectively.

Actual Class A Units outstanding at June 30, 2021 497 742 and 2020, respectively.

Total 52,929 50,573



(A)

Our Core FFO result for the three-month period ended June 30, 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.

Our Core FFO result for the three-month period ended June 30, 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(A) AFFO.



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)

2021

2020

Net loss attributable to common stockholders (See note 1)

$

(69,176)

$

(260,771)

Add:

Depreciation of real estate assets

72,809

80,771

Amortization of acquired intangible assets and deferred leasing costs

17,196

18,955

Gain on sale of real estate

(798)

-

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

(17)

(3,343)

FFO attributable to common stockholders and unitholders

20,014

(164,388)

Acquisition and pursuit costs

5

378

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

906

1,206

Payment of costs related to property refinancing

118

6,863

Internalization costs (See note 4)

485

179,251

Deemed dividends for redemptions of and non-cash dividends on preferred stock

7,937

3,316

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

81

448

Earnest money forfeited by prospective asset purchaser

-

(2,750)

Core FFO attributable to common stockholders and unitholders (A)

29,546

24,324

Add:

Non-cash equity compensation to directors and executives

1,499

476

Amortization of loan closing costs (See note 7)

2,457

2,343

Depreciation/amortization of non-real estate assets

891

1,172

Net loan origination fees received (See note 8)

1,203

467

Deferred interest income received (See note 9)

4,486

8,277

Amortization of lease inducements (See note 10)

900

886

Earnest money forfeited by prospective asset purchaser

-

2,750

Cash received in excess of amortization of purchase option termination revenues (See note 11)

23

325

Less:

Non-cash loan interest income (See note 9)

(5,783)

(6,128)

Non-cash (income) expense for current expected credit losses (See note 6)

(1,139)

4,408

Cash paid for loan closing costs

(1,891)

-

Amortization of acquired real estate intangible liabilities and SLR (See note 12)

(6,563)

(8,797)

Amortization of deferred revenues (See note 13)

(1,881)

(1,881)

Normally recurring capital expenditures (See note 14)

(6,330)

(3,542)

AFFO attributable to common stockholders and Unitholders

$

17,418

$

25,080

Common Stock dividends and distributions to Unitholders declared:

Common Stock dividends

$

18,250

$

21,115

Distributions to Unitholders (See note 2)

183

333

Total

$

18,433

$

21,448

Common Stock dividends and Unitholder distributions per share

$

0.35

$

0.4375

FFO per weighted average basic share of Common Stock and Unit outstanding

$

0.39

$

(3.39)

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

$

0.58

$

0.50

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

$

0.34

$

0.52

Weighted average shares of Common Stock and Units outstanding:

Basic:

Common Stock

50,277

47,674

Class A Units

572

793

Common Stock and Class A Units

50,849

48,467

Diluted Common Stock and Class A Units (See note 15)

51,271

48,474

Actual shares of Common Stock outstanding, including 704 and 548 unvested shares

of restricted Common Stock at June 30, 2021 and 2020, respectively.

52,432

49,831

Actual Class A Units outstanding at June 30, 2021 and 2020, respectively.

497

742

Total

52,929

50,573

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

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

Six months ended June 30,

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



Net loss attributable to common stockholders (See $ (69,176) $ (260,771) note 1)



Add: Depreciation of real estate assets 72,809 80,771

Amortization of acquired intangible 17,196 18,955 assets and deferred leasing costs

Gain on sale of real estate (798) -

Net loss attributable to Class A (17) (3,343) Unitholders (See note 2)

FFO attributable to common stockholders and 20,014 (164,388) unitholders

Acquisition and pursuit costs 5 378

Loan cost amortization on acquisition term notes and loan coordination fees 906 1,206 (See note 3)

Payment of costs related to property 118 6,863 refinancing

Internalization costs (See note 4) 485 179,251

Deemed dividends for redemptions of and 7,937 3,316 non-cash dividends on preferred stock

Expenses related to the COVID-19 global 81 448 pandemic (See note 5)

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

Core FFO attributable to common stockholders and 29,546 24,324 unitholders ^(A)



Add: Non-cash equity compensation to directors 1,499 476 and executives

Amortization of loan closing costs (See 2,457 2,343 note 7)

Depreciation/amortization of non-real 891 1,172 estate assets

Net loan origination fees received (See 1,203 467 note 8)

Deferred interest income received (See 4,486 8,277 note 9)

Amortization of lease inducements (See 900 886 note 10)

Earnest money forfeited by prospective - 2,750 asset purchaser

Cash received in excess of amortization of purchase option termination revenues 23 325 (See note 11)

Less: Non-cash loan interest income (See note (5,783) (6,128) 9)

Non-cash (income) expense for current (1,139) 4,408 expected credit losses (See note 6)

Cash paid for loan closing costs (1,891) -

Amortization of acquired real estate intangible liabilities and SLR (See note (6,563) (8,797) 12)

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

Normally recurring capital expenditures (6,330) (3,542) (See note 14)



AFFO attributable to common stockholders and $ 17,418 $ 25,080 Unitholders

Common Stock dividends and distributions to Unitholders declared:

Common Stock dividends $ 18,250 $ 21,115

Distributions to Unitholders (See note 2) 183 333

Total $ 18,433 $ 21,448



Common Stock dividends and Unitholder $ 0.35 $ 0.4375 distributions per share



FFO per weighted average basic share of Common $ 0.39 $ (3.39) Stock and Unit outstanding

Core FFO per weighted average basic share of $ 0.58 $ 0.50 Common Stock and Unit outstanding

AFFO per weighted average basic share of Common $ 0.34 $ 0.52 Stock and Unit outstanding

Weighted average shares of Common Stock and Units outstanding:

Basic:

Common Stock 50,277 47,674

Class A Units 572 793

Common Stock and Class A Units 50,849 48,467



Diluted Common Stock and Class A Units 51,271 48,474 (See note 15)



Actual shares of Common Stock outstanding, including 704 and 548 unvested shares

of restricted Common Stock at June 30, 2021 and 52,432 49,831 2020, respectively.

Actual Class A Units outstanding at June 30, 2021 497 742 and 2020, respectively.

Total 52,929 50,573

(A)

Our Core FFO result for the three-month period ended June 30, 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.

Our Core FFO result for the three-month period ended June 30, 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(A) 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 and Unitholders, Core FFO and AFFO to Net Loss Attributable to Common Stockholders

1)

Rental and other property revenues and property operating expenses for the three months ended June 30, 2021 include activity for the properties acquired since June 30, 2020. Rental and other property revenues and expenses for the three-month and six-month periods ended June 30, 2020 include activity for the acquisitions made during that period only from their respective dates of acquisition.

2)

Non-controlling interests in our Operating Partnership, consisted of a total of 497,291 Class A Units as of June 30, 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 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 1.05% and 1.55% for the three-month periods ended June 30, 2021 and 2020, respectively.

3)

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 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, 2021, aggregate unamortized loan coordination fees were approximately $10.9 million, which will be amortized over a weighted average remaining loan life of approximately 10.2 years.

4)

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) 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").

5)

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

6)

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 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 Core FFO in calculating AFFO.

7)

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 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, 2021, unamortized loan costs on all the Company's indebtedness were approximately $30.9 million, which will be amortized over a weighted average remaining loan life of approximately 8.5 years.

8)

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 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.

9)

This adjustment reflects the receipt during the periods presented of additional 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.

10)

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

11)

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 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.

12)

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 multifamily communities and over the remaining lease terms for grocery-anchored shopping center assets and office buildings. At June 30, 2021, the balance of unamortized below-market lease intangibles was approximately $47.8 million, which will be recognized over a weighted average remaining lease period of approximately 8.4 years.

13)

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

14)

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 includes approximately $17,000 and $35,000 of recurring capitalized expenditures incurred at our corporate offices during the three-month and six-month periods ended June 30, 2021, respectively. 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.

15)

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

Rental and other property revenues and property operating expenses for the three months ended June 30, 2021 include activity for the properties1) acquired since June 30, 2020. Rental and other property revenues and expenses for the three-month and six-month periods ended June 30, 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 497,291 Class A Units as of June 30, 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 February2) 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 1.05% and 1.55% for the three-month periods ended June 30, 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 amount3) of any 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, 2021, aggregate unamortized loan coordination fees were approximately $10.9 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 and NMP Advisors, LLC (our "Former Sub-Manager"), (ii) accretion of the discount on the deferred liability4) 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 work5) environments 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 our6) 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 Core FFO in calculating AFFO.



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.7) 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, 2021, unamortized loan costs on all the Company's indebtedness were approximately $30.9 million, which will be amortized over a weighted average remaining loan life of approximately 8.5 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 amortized8) 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.



This adjustment reflects the receipt during the periods presented of9) additional 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 to10) induce 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 of11) 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 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 from12) the acquisition date for multifamily communities and over the remaining lease terms for grocery-anchored shopping center assets and office buildings. At June 30, 2021, the balance of unamortized below-market lease intangibles was approximately $47.8 million, which will be recognized over a weighted average remaining lease period of approximately 8.4 years.



This adjustment removes the non-cash amortization of deferred revenue13) 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 adjustment14) includes approximately $17,000 and $35,000 of recurring capitalized expenditures incurred at our corporate offices during the three-month and six-month periods ended June 30, 2021, respectively. 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 B15) 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 Definitions of Non-GAAP Measures.Preferred Apartment Communities, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

June 30, 2021

December 31, 2020

Assets

Real estate

Land

$

611,966

$

605,282

Building and improvements

3,092,932

3,034,727

Tenant improvements

189,413

184,288

Furniture, fixtures, and equipment

319,328

306,725

Construction in progress

10,980

12,269

Gross real estate

4,224,619

4,143,291

Less: accumulated depreciation

(582,583)

(509,547)

Net real estate

3,642,036

3,633,744

Real estate loan investments, net

269,862

279,895

Total real estate and real estate loan investments, net

3,911,898

3,913,639

Cash and cash equivalents

37,105

28,657

Restricted cash

53,679

47,059

Notes receivable

2,977

1,863

Note receivable and revolving line of credit due from related party

9,011

9,011

Accrued interest receivable on real estate loans

23,183

22,528

Acquired intangible assets, net of amortization

110,656

127,138

Tenant lease inducements, net

17,352

18,206

Investment in unconsolidated joint venture

6,288

6,657

Tenant receivables and other assets

98,050

106,321

Total assets

$

4,270,199

$

4,281,079

Liabilities and equity

Liabilities

Mortgage notes payable, net of deferred loan costs and mark-to-market adjustment

$

2,636,752

$

2,594,464

Revolving line of credit

56,500

22,000

Unearned purchase option termination fees

246

723

Deferred revenue

34,130

36,010

Accounts payable and accrued expenses

47,216

41,912

Deferred liability to Former Manager

23,675

23,335

Contingent liability due to Former Manager

14,725

14,814

Accrued interest payable

7,825

7,877

Dividends and partnership distributions payable

20,811

20,137

Acquired below market lease intangibles, net of amortization

47,820

51,934

Prepaid rent, security deposits and other liabilities

30,119

29,425

Total liabilities

2,919,819

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; 1,647 and 1,735 shares outstanding at June 30, 2021 and December 31, 2020, respectively

16

17

Series A1 Redeemable Preferred Stock, $0.01 par value per share; up to 1,000 shares authorized; 218 and 149 shares issued and 217 and 149 shares outstanding at June 30, 2021 and December 31, 2020, respectively

2

1

Series M Redeemable Preferred Stock, $0.01 par value per share; 500 shares authorized; 106 shares issued; 86 and 89 shares outstanding at June 30, 2021 and December 31, 2020, respectively

1

1

Series M1 Redeemable Preferred Stock, $0.01 par value per share; up to 1,000 shares authorized; 26 and 19 shares issued; 25 and 19 shares outstanding at June 30, 2021 and December 31, 2020, respectively

-

-

Common Stock, $0.01 par value per share; 400,067 shares authorized; 51,728 and 49,994 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

517

500

Additional paid-in capital

1,543,665

1,631,646

Accumulated (deficit) earnings

(193,539)

(192,446)

Total stockholders' equity

1,350,662

1,439,719

Non-controlling interest

(282)

(1,271)

Total equity

1,350,380

1,438,448

Total liabilities and equity

$

4,270,199

$

4,281,079

Preferred Apartment Communities, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

June 30, 2021 December 31, 2020

Assets

Real estate

Land $ 611,966 $ 605,282

Building and improvements 3,092,932 3,034,727

Tenant improvements 189,413 184,288

Furniture, fixtures, and equipment 319,328 306,725

Construction in progress 10,980 12,269

Gross real estate 4,224,619 4,143,291

Less: accumulated depreciation (582,583) (509,547)

Net real estate 3,642,036 3,633,744

Real estate loan investments, net 269,862 279,895

Total real estate and real estate loan 3,911,898 3,913,639 investments, net



Cash and cash equivalents 37,105 28,657

Restricted cash 53,679 47,059

Notes receivable 2,977 1,863

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

Accrued interest receivable on real estate loans 23,183 22,528

Acquired intangible assets, net of amortization 110,656 127,138

Tenant lease inducements, net 17,352 18,206

Investment in unconsolidated joint venture 6,288 6,657

Tenant receivables and other assets 98,050 106,321



Total assets $ 4,270,199 $ 4,281,079



Liabilities and equity

Liabilities

Mortgage notes payable, net of deferred loan $ 2,636,752 $ 2,594,464 costs and mark-to-market adjustment

Revolving line of credit 56,500 22,000

Unearned purchase option termination fees 246 723

Deferred revenue 34,130 36,010

Accounts payable and accrued expenses 47,216 41,912

Deferred liability to Former Manager 23,675 23,335

Contingent liability due to Former Manager 14,725 14,814

Accrued interest payable 7,825 7,877

Dividends and partnership distributions payable 20,811 20,137

Acquired below market lease intangibles, net of 47,820 51,934 amortization

Prepaid rent, security deposits and other 30,119 29,425 liabilities

Total liabilities 2,919,819 2,842,631



Commitments and contingencies

Equity

Stockholders' equity

Series A Redeemable Preferred Stock, $0.01 parvalue per share; 3,050 shares authorized; 2,226shares issued; 1,647 and 1,735 shares outstanding 16 17 at June 30, 2021 and December 31, 2020,respectively

Series A1 Redeemable Preferred Stock, $0.01 parvalue per share; up to 1,000 shares authorized;218 and 149 shares issued and 217 and 149 shares 2 1 outstanding at June 30, 2021 and December 31,2020, respectively

Series M Redeemable Preferred Stock, $0.01 parvalue per share; 500 shares authorized; 106 1 1 shares issued; 86 and 89 shares outstanding atJune 30, 2021 and December 31, 2020, respectively

Series M1 Redeemable Preferred Stock, $0.01 parvalue per share; up to 1,000 shares authorized;26 and 19 shares issued; 25 and 19 shares - - outstanding at June 30, 2021 and December 31,2020, respectively

Common Stock, $0.01 par value per share; 400,067shares authorized; 51,728 and 49,994 shares 517 500 issued and outstanding at June 30, 2021 andDecember 31, 2020, respectively

Additional paid-in capital 1,543,665 1,631,646

Accumulated (deficit) earnings (193,539) (192,446)

Total stockholders' equity 1,350,662 1,439,719

Non-controlling interest (282) (1,271)

Total equity 1,350,380 1,438,448



Total liabilities and equity $ 4,270,199 $ 4,281,079

Preferred Apartment Communities, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

Six months ended June 30,

(In thousands)

2021

2020

Operating activities:

Net loss

$

(1,152)

$

(195,473)

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

Depreciation and amortization expense

90,559

101,302

Amortization of above and below market leases

(2,871)

(3,570)

Amortization of deferred revenues and other non-cash revenues

(2,545)

(2,482)

Amortization of purchase option termination fees

(4,440)

(4,475)

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

2,809

1,781

Deferred loan cost amortization

3,307

3,424

Non-cash accrued interest income on real estate loan investments

(5,585)

(6,156)

Receipt of accrued interest income on real estate loan investments

4,930

8,865

Gains on sale of real estate and land, net

(798)

(479)

Loss from unconsolidated joint venture

369

-

Cash received for purchase option terminations

4,463

4,800

Loss on extinguishment of debt

-

6,156

(Decrease) increase in allowance for expected credit losses

(323)

5,615

Changes in operating assets and liabilities:

Decrease (increase) in tenant receivables and other assets

3,710

(12,112)

(Increase) in tenant lease incentives

(45)

(382)

Increase in accounts payable and accrued expenses

7,476

36,431

Increase in deferred liability to Former Manager

-

22,851

Increase in contingent liability

-

15,004

Increase (decrease) in accrued interest, prepaid rents and other liabilities

2,047

(2,234)

Net cash provided by (used in) operating activities

101,911

(21,134)

Investing activities:

Investments in real estate loans

(30,825)

(24,547)

Repayments of real estate loans

41,435

53,896

Notes receivable issued

(1,257)

(686)

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

1,203

467

Acquisition of properties

(66,772)

(185,970)

Disposition of properties

4,798

-

Proceeds from land sales

259

738

Investment in property development

-

(50)

Capital improvements to real estate assets

(18,278)

(26,422)

Deposits paid on acquisitions

(1,558)

(105)

Net cash used in investing activities

(70,852)

(177,716)

Preferred Apartment Communities, Inc.

Consolidated Statements of Cash Flows - continued

(Unaudited)

Six months ended June 30,

(In thousands)

2021

2020

Financing activities:

Proceeds from mortgage notes payable

60,293

336,849

Repayments of mortgage notes payable

(20,572)

(134,493)

Payments for deposits and other mortgage loan costs

(2,411)

(10,541)

Payments for mortgage prepayment costs

-

(5,919)

Proceeds from lines of credit

225,000

284,000

Payments on lines of credit

(190,500)

(191,500)

Repayment of Term Loan

-

(70,000)

Proceeds from sales of preferred stock and Units, net of offering costs and redemptions

68,283

120,497

Proceeds from exercises of Warrants

-

29

Payments for redemptions of preferred stock

(83,256)

(48,202)

Proceeds from sales of common stock

14,879

-

Common Stock dividends paid

(17,736)

(24,647)

Preferred stock dividends and Class A Unit distributions paid

(67,870)

(68,538)

Payments for deferred offering costs

(2,001)

(9,701)

(Distributions to) contributions from non-controlling interests

(100)

197

Net cash (used in) provided by financing activities

(15,991)

178,031

Net increase in cash, cash equivalents and restricted cash

15,068

(20,819)

Cash, cash equivalents and restricted cash, beginning of year

75,716

137,253

Cash, cash equivalents and restricted cash, end of period

$

90,784

$

116,434

Real Estate Loan Investments

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

Preferred Apartment Communities, Inc.

Consolidated Statements of Cash Flows

(Unaudited)



Six months ended June 30,

(In thousands) 2021 2020

Operating activities:

Net loss $ (1,152) $ (195,473)

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

Depreciation and amortization expense 90,559 101,302

Amortization of above and below market leases (2,871) (3,570)

Amortization of deferred revenues and other (2,545) (2,482) non-cash revenues

Amortization of purchase option termination fees (4,440) (4,475)

Amortization of equity compensation, lease 2,809 1,781 incentives and other non-cash expenses

Deferred loan cost amortization 3,307 3,424

Non-cash accrued interest income on real estate (5,585) (6,156) loan investments

Receipt of accrued interest income on real estate 4,930 8,865 loan investments

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

Loss from unconsolidated joint venture 369 -

Cash received for purchase option terminations 4,463 4,800

Loss on extinguishment of debt - 6,156

(Decrease) increase in allowance for expected (323) 5,615 credit losses

Changes in operating assets and liabilities:

Decrease (increase) in tenant receivables and other 3,710 (12,112) assets

(Increase) in tenant lease incentives (45) (382)

Increase in accounts payable and accrued expenses 7,476 36,431

Increase in deferred liability to Former Manager - 22,851

Increase in contingent liability - 15,004

Increase (decrease) in accrued interest, prepaid 2,047 (2,234) rents and other liabilities

Net cash provided by (used in) operating activities 101,911 (21,134)



Investing activities:

Investments in real estate loans (30,825) (24,547)

Repayments of real estate loans 41,435 53,896

Notes receivable issued (1,257) (686)

Notes receivable repaid 143 10,041

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

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

Origination fees received on real estate loan 1,203 467 investments

Acquisition of properties (66,772) (185,970)

Disposition of properties 4,798 -

Proceeds from land sales 259 738

Investment in property development - (50)

Capital improvements to real estate assets (18,278) (26,422)

Deposits paid on acquisitions (1,558) (105)

Net cash used in investing activities (70,852) (177,716)



Preferred Apartment Communities, Inc.

Consolidated Statements of Cash Flows - continued

(Unaudited)



Six months ended June 30,

(In thousands) 2021 2020



Financing activities:

Proceeds from mortgage notes payable 60,293 336,849

Repayments of mortgage notes payable (20,572) (134,493)

Payments for deposits and other mortgage loan costs (2,411) (10,541)

Payments for mortgage prepayment costs - (5,919)

Proceeds from lines of credit 225,000 284,000

Payments on lines of credit (190,500) (191,500)

Repayment of Term Loan - (70,000)

Proceeds from sales of preferred stock and Units, 68,283 120,497 net of offering costs and redemptions

Proceeds from exercises of Warrants - 29

Payments for redemptions of preferred stock (83,256) (48,202)

Proceeds from sales of common stock 14,879 -

Common Stock dividends paid (17,736) (24,647)

Preferred stock dividends and Class A Unit (67,870) (68,538) distributions paid

Payments for deferred offering costs (2,001) (9,701)

(Distributions to) contributions from (100) 197 non-controlling interests

Net cash (used in) provided by financing activities (15,991) 178,031



Net increase in cash, cash equivalents and 15,068 (20,819) restricted cash

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

Cash, cash equivalents and restricted cash, end of $ 90,784 $ 116,434 period

Real Estate Loan Investments

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

Carrying amount ^(1) as Current of /Project/ Maturity Optional Total loan deferredProperty Location date extension commitments interest date June 30, December % 2021 31, 2020 per annum



Multifamily communities: (in thousands)

Berryessa San Jose, CA 2/13/ 2/13/2023 $ 137,616 $ 132,103 $ 126,237 8.5 / 3 2022

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

The Anson Nashville, TN 11/24/ 11/24/ 5,659 5,050 4,839 8.5 /Capital 2021 2023 4.5

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

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

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

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

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

Southpoint Fredericksburg, 2/28/ 2/28/2024 4,962 4,828 4,626 8.5 / 4Capital VA 2022

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

Hidden 10/11/ 10/11/ 8.5 /River II Tampa, FL 2022 2024 2,763 2,568 2,461 3.5Capital

Vintage 10/11/ 10/11/ 8.5 /Horizon Orlando, FL 2022 2024 10,900 9,412 9,019 5.5West

Chestnut Charlotte, NC 2/28/ N/A 13,372 12,179 11,671 8.5 /Farms 2025 5.5

Vintage 11/14/ 8.5 /Jones Raleigh, NC 2023 5/14/2025 10,000 8,608 7,904 5.5Franklin

SolisCumming Town

Center Atlanta, GA 9/3/2024 9/3/2026 20,681 13,433 5,584 8.5 / 5.5

Hudson at Orlando, FL 9/1/2024 3/1/2026 16,791 5,015 - 8.5 /Metro West 4.5

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

Populus at Savannah, GA 5/27/ 5/27/2026 15,907 - - 8.5 /Pooler 2025 4.25

Populus at 5/27/ 8.5 /Pooler Savannah, GA 2025 5/27/2026 1,169 - - 4.25Capital





Repaid multifamily communities:

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

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

Vintage Destin, FL N/A N/A N/A - 9,736 ^(3)Destin

Kennesaw Atlanta, GA N/A N/A N/A - 13,025 ^(4)Crossing



Office property:

8West ^(5) Atlanta, GA 11/29/ 11/29/ 19,193 12,735 11,858 8.5 / 5 2022 2024



$ 332,671 279,546 290,156

Unamortized loan origination fees (1,755) (1,194)

Allowances for expected credit losses and doubtful accounts (7,929) (9,067)



Carrying amount $ 269,862 $ 279,895





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

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

^(3) On June 1, 2021, we received approximately $13.8 million in fullsatisfaction of the principal and all interest due on the loan.

^(4) On June 30, 2021, we received approximately $14.8 million in fullsatisfaction of the principal and all interest due on the loan.

^(5) This loan was sold at par, plus accrued interest to date, to HighwoodsProperties, an unrelated party, on July 29, 2021.

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 June 30, 2021, 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 Begin End ^ (1)



Multifamily communities

Purchase options at discount to market:

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

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

Southpoint Fredericksburg, 240 S + 90 days S + 150 days VA ^ (2) ^ (2)

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



Purchase options with no discount or rights of first offer:

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

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

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

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

Populus at Pooler Savannah, GA 316 ^(6) ^(6)

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

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

Solis Cumming Town Atlanta, GA 320 ^(4) ^(4) Center



Office property

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



3,566



^(1) We evaluate each project individually and we make no assurance that wewill 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 indicatedbeyond the achievement of a 93% physical occupancy rate by the underlying property.

^(3) The option period window begins on the later of one year followingreceipt of final certificate of occupancy or 90 days beyond the achievement of a 93% physical occupancy rate by the underlying property and ends 60 daysbeyond 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 isanticipated to be converted to a real estate loan investment in the future with a purchase option or right of first offer.

^(6) The option period begins upon the property's achievement of 80%occupancy. If we are unable to reach an agreement on the property's market value, we have a right of first offer.

^(7) The real estate loan investment supporting the 8West office building andfive of our office properties were sold to Highwoods Realty Limited Partnership, an unrelated party, on July 29, 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 $ 83,288

2022 121,001

2023 116,768

2024 290,171

2025 58,234

2026 255,709

2027 280,530

2028 339,189

2029 322,040

2030 359,458

Thereafter 454,038



Totals $ 2,680,426

Future Principal Payments

The Company's estimated future principal payments due on its debt instruments as of June 30, 2021 were:

Future principalPeriod payments (in thousands)

2021 ^(1) $ 139,788

2022 121,001

2023 116,768

2024 290,171

2025 58,234

2026 255,709

2027 280,530

2028 339,189

2029 322,040

2030 359,458

Thereafter 454,038



Total $ 2,736,926



^(1) Includes the principal amount due on ourrevolving line of credit of $56.5 million as ofJune 30, 2021.

Multifamily Communities

As of June 30, 2021, our multifamily community portfolio consisted of the following properties:

Three months ended June 30, 2021

Average Number unit Average AverageProperty Location of size physical rent units (sq. occupancy per unit ft.)



Same-Store Communities:

Aldridge at Town Atlanta, GA 300 969 98.1 % $ 1,451 Village

Green Park Atlanta, GA 310 985 96.7 % $ 1,530

Overton Rise Atlanta, GA 294 1,018 95.4 % $ 1,603

Summit Crossing I Atlanta, GA 345 1,034 98.1 % $ 1,301

Summit Crossing II Atlanta, GA 140 1,100 98.1 % $ 1,401

The Reserve at Atlanta, GA 172 1,002 97.9 % $ 1,381 Summit Crossing

Avenues at Cypress Houston, TX 240 1,170 96.3 % $ 1,488

Avenues at Houston, TX 280 1,167 96.8 % $ 1,429 Northpointe

Stone Creek Houston, TX 246 852 96.9 % $ 1,185

Vineyards Houston, TX 369 1,122 98.2 % $ 1,211

Aster at Lely Naples, FL 308 1,071 97.2 % $ 1,485 Resort

Sorrel Jacksonville, 290 1,048 96.6 % $ 1,360 FL

Lux at Sorrel Jacksonville, 265 1,025 97.0 % $ 1,404 FL

525 Avalon Park Orlando, FL 487 1,394 96.9 % $ 1,526

Citi Lakes Orlando, FL 346 984 96.1 % $ 1,457

Village at Baldwin Orlando, FL 528 1,069 96.1 % $ 1,691 Park

Luxe at Lakewood Sarasota, FL 280 1,105 95.8 % $ 1,517 Ranch

Venue at Lakewood Sarasota, FL 237 1,001 97.5 % $ 1,564 Ranch

Crosstown Walk Tampa, FL 342 1,070 97.3 % $ 1,388

Overlook at Tampa, FL 180 986 96.9 % $ 1,462 Crosstown Walk

Citrus Village Tampa, FL 296 980 96.3 % $ 1,397

Five Oaks at Tampa, FL 218 983 97.4 % $ 1,552 Westchase

Lodge at Hidden Tampa, FL 300 980 96.3 % $ 1,444 River

Lenox Village Nashville, TN 273 906 96.7 % $ 1,319

Regent at Lenox Nashville, TN 18 1,072 100.0 % $ 1,379

Retreat at Lenox Nashville, TN 183 773 97.3 % $ 1,263

CityPark View Charlotte, NC 284 948 95.5 % $ 1,168

CityPark View Charlotte, NC 200 1,005 95.8 % $ 1,290 South

Colony at Richmond, VA 255 1,149 98.2 % $ 1,431 Centerpointe

Founders Village Williamsburg, 247 1,070 96.8 % $ 1,435 VA

Retreat at Birmingham, 312 1,100 97.1 % $ 1,419 Greystone AL

Vestavia Reserve Birmingham, 272 1,113 97.1 % $ 1,562 AL

Adara Overland Kansas City, 260 1,116 96.3 % $ 1,347 Park KS

Claiborne Crossing Louisville, 242 1,204 96.8 % $ 1,394 KY

City Vista Pittsburgh, 272 1,023 96.7 % $ 1,472 PA



Total/AverageSame-Store 9,591 96.9 % Communities



Stabilized Communities:

Artisan at Viera Melbourne, FL 259 1,070 95.9 % $ 1,703

The Menlo Jacksonville, 332 966 95.6 % $ 1,517 FL

The Blake Orlando, FL 281 908 95.5 % $ 1,466

Parkside at the Panama City 288 1,041 98.3 % $ 1,444 Beach Beach, FL

Horizon at Tampa, FL 392 973 97.8 % $ 1,539 Wiregrass



Total/AverageStabilized 1,552 96.8 % Communities



The Ellison Atlanta, GA 250 1,064 - -



Total multifamily 11,393 community units



For the three-month period ended June 30, 2021, our average same-store multifamily communities' physical occupancy was 96.9%. 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 June 30, 2021, our average stabilized physical occupancy was 96.8%. 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 June 30, 2021 except The Ellison.

For the three-month period ended June 30, 2021, our average economic occupancy was 96.5%. 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 June 30, 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. 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 June 30, 2021, our capital expenditures for multifamily communities consisted of:

Capital Expenditures - Multifamily Communities

Recurring Non-recurring Total

(inthousands,except Amount Per Unit Amount Per Unit Amount Per Unitper-unitfigures)

Appliances $ 183 $ 16.37 $ - $ - $ 183 $ 16.37

Carpets 489 43.86 - - 489 43.86

Wood /vinyl 66 5.94 158 14.20 224 20.14 flooring

Mini blindsand ceiling 30 2.74 - - 30 2.74 fans

Fire safety - - 78 6.99 78 6.99

HVAC 220 19.76 - - 220 19.76

Computers,equipment, 15 1.35 47 4.14 62 5.49 misc.

Elevators - - 10 0.92 10 0.92

Exteriorpainting - - 122 10.90 122 10.90 andlighting

Leasingoffice andother 18 1.62 179 16.11 197 17.73 commonamenities^

Majorstructural - - 295 26.51 295 26.51 projects^

Cabinets,countertops - - 287 25.74 287 25.74 and unitupgrades

Landscaping - - 255 22.86 255 22.86 and fencing

Parkinglots and 19 1.72 2 0.19 21 1.91 sidewalks

Signage and - - 6 0.57 6 0.57 sanitation

Totals $ 1,040 $ 93.36 $ 1,439 $ 129.13 $ 2,479 $ 222.49

Grocery-Anchored Shopping Center Portfolio

As of June 30, 2021, our grocery-anchored shopping center portfolio consisted of the following properties:

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



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

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

Governors Towne Atlanta, GA 2004 68,658 100.0 % PublixSquare

Lakeland Plaza Atlanta, GA 1990 301,711 95.3 % Sprouts

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

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

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

Royal Lakes Atlanta, GA 2008 119,493 94.5 % KrogerMarketplace

Sandy Plains Atlanta, GA 1997 72,784 100.0 % PublixExchange

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

Thompson Bridge Atlanta, GA 2001 92,587 96.2 % KrogerCommons

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 Augusta, GA 1995 75,716 95.0 % PublixCenter

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 70,203 100.0 % 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 Nashville, TN 2010 62,356 97.8 % PublixCove

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

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

Miami-Ft. BJ'sShoppes of Parkland Lauderdale, FL 2000 145,720 100.0 % Wholesale Club

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

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

Berry Town Center Orlando, FL 2003 99,441 84.0 % 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. 1954 129,150 96.1 % Publix Petersburg, FL

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

Polo Grounds Mall West Palm Beach, 1966 130,285 97.3 % Publix FL

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

Independence Square Dallas, TX 1977 140,218 87.0 % Tom Thumb

Midway Market Dallas, TX 2002 85,599 94.9 % 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 Columbia, SC 2002 36,887 93.5 % PublixCenter

Anderson Central Greenville 1999 223,211 94.9 % Walmart Spartanburg, SC

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

Brawley Commons Charlotte, NC 1997 122,028 98.6 % 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 Charlottesville, 2005 158,807 88.4 % HarrisCenter VA Teeter

Free State Shopping Washington, DC 1970 264,152 98.0 % GiantCenter



4,922,612 95.8 %

Redevelopment properties:

Champions Village Houston, TX 1973 383,346 67.6 % 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 81.7 % Harris Teeter

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

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



1,285,666 72.7 %

Grand total/weighted 6,208,278 91.1 % average

(1)

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

(2)

Investment in an unconsolidated joint venture that is not prorated for our 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 owned by others.

As of June 30, 2021, our grocery-anchored shopping center portfolio was 91.1% leased (95.8% 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 June 30, 2021 were:

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

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

^ Bi-Lo (the former anchor tenant) had extended their term through April 30,(3) 2019 and had no further right or option to extend their lease.

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

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

As of June 30, 2021, our grocery-anchored shopping center portfolio was 91.1% leased (95.8% 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 June 30, 2021 were:

Totals

Number Leased Percent of of leases GLA leased GLA



Month to month 15 24,197 0.4 %

2021 70 219,502 3.9 %

2022 186 640,619 11.3 %

2023 145 642,239 11.4 %

2024 138 1,197,711 21.2 %

2025 126 981,446 17.4 %

2026 100 522,983 9.3 %

2027 31 200,704 3.6 %

2028 29 358,727 6.4 %

2029 25 151,566 2.7 %

2030 17 129,154 2.3 %

2031 + 33 579,718 10.1 %



Total 915 5,648,566 5648566 100.0 %

Our grocery-anchored shopping center portfolio contained the following anchor tenants as of June 30, 2021:

Tenant GLA Percent of total GLA

Publix 1,179,030 19.0 %

Kroger 581,593 9.4 %

Harris Teeter 273,273 4.4 %

Wal-Mart 183,211 3.0 %

BJ's Wholesale Club 108,532 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 2,732,157 44.1 %



Our Quarterly Report on Form 10-Q for the period ended June 30, 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 second quarter 2021 totaled approximately $1.2 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 June 30, 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 ^(1) Raleigh, NC 560,000 89 %

Capitol Towers^(1) Charlotte, NC 479,000 98 %

CAPTRUST Tower ^(1) Raleigh, NC 300,000 97 %

Morrocroft Centre ^(1) Charlotte, NC 291,000 98 %

Westridge at La Cantera San Antonio, TX 258,000 100 %

Armour Yards Atlanta, GA 187,000 97 %

Brookwood Center Birmingham, AL 169,000 100 %

Galleria 75 ^(1) Atlanta, GA 111,000 70 %



Total/Average 3,169,000 91 %



^(1) Properties were sold to Highwoods Properties, an unrelated third party,on July 29, 2021

As of June 30, 2021, our office building portfolio includes the following significant tenants:

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

InterContinental Hotels 493,000 14.1 % $ 12,064 Group

Albemarle ^(1) 162,000 6.9 % 5,870

CapFinancial ^(1) 105,000 4.4 % 3,767

USAA 129,000 3.8 % 3,276

Vericast 129,000 3.5 % 3,027



Total 1,018,000 32.7 % $ 28,004



^(1) The properties leased to these tenants were sold to Highwoods RealtyLimited Partnership, an unrelated third party, on July 29, 2021.

We define Annual Base Rent as the current monthly base rent annualized under the respective leases.

As of June 30, 2021, the leased square footage of our office building portfolio expires according to the following schedule:

Percent of

Rented square rentedYear of lease expiration feet square feet

2021 39,000 1.4 %

2022 122,000 4.3 %

2023 134,000 4.7 %

2024 279,000 9.8 %

2025 270,000 9.5 %

2026 282,000 9.9 %

2027 328,000 11.5 %

2028 255,000 9.0 %

2029 57,000 2.0 %

2030 178,000 6.3 %

2031 + 896,000 31.6 %



Total 2,840,000 100.0 %

The Company recognized second-generation capital expenditures within its office building portfolio of approximately $714,000 during the second 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; * 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 related to our Revolving Line of Credit; * amortization of straight-line rent adjustments and acquired real estate intangible assets and/or liabilities; * amortization of 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. 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 communities. As of June 30, 2021, the Company owned or was invested in 117 properties in 13 states, predominantly in the Southeast region of the United States.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210809005756/en/

CONTACT: Paul Cullen Executive Vice President-Investor Relations Chief Marketing Officer investorrelations@pacapts.com 770-818-4144