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Berkshire Income Realty Announces Operating Results and Funds from Operations for the Quarter Ended September 30, 2012



  Berkshire Income Realty Announces Operating Results and Funds from
  Operations for the Quarter Ended September 30, 2012

Business Wire

BOSTON -- November 17, 2012

Berkshire Income Realty, Inc. (NYSE AMEX: BIR_pa), (NYSE AMEX: BIRPRA), (NYSE
AMEX: BIR-A), (NYSE AMEX: BIR.PR.A) (“Berkshire” or the “Company”) reported
its results for the periods ended September 30, 2012. Financial highlights for
the three- and nine-month period ended September 30, 2012 include:

- Funds From Operations ("FFO") increased by 59.3% for the three months ended
September 30, 2012 - The Company's FFO, a non-GAAP financial measure, for the
three months ended September 30, 2012, was $4,026,058, an increase of
$1,498,466 or 59.3%, as compared to $2,527,592 for the three months ended
September 30, 2011. The increase in FFO is due primarily to increased rental
revenue across the portfolio, lower interest expenses as a result of reduced
revolving credit facility balance outstanding during the comparative periods,
and lower incentive advisory fees recorded during the three months ended
September 30, 2012, compared to the same period ended September 30, 2011. FFO
for the nine months ended September 30, 2012, was $8,508,686 compared to
$7,071,264 for the comparable nine-month period ended September 30, 2011.

- Same Property Net Operating Income (“Same Property NOI”) increased by 8.3%
for the three months ended September 30, 2012 - Same Property NOI, a non-GAAP
financial measure, increased as a result of growth in comparative revenues of
properties acquired or placed in service prior to January 1, 2011 (“Same
Property”), which had total revenue increases of approximately 4.5% for the
three months ended September 30, 2012, as compared to the same period a year
ago due mainly to increases in average monthly rental rates which were offset
by slight reduction in comparative average occupancy levels. Overall operating
expenses were consistent with the comparative three-month period ended
September 30, 2011, with increases in insurance, advertising, maintenance and
management fees offset by reductions in payroll and utilities and to a lesser
degree, real estate taxes.

A presentation and reconciliation of net loss, the most directly comparable
financial measure calculated and presented in accordance with accounting
principles generally accepted in the United States of America (“GAAP”), to FFO
and Same Property NOI is set forth on pages 2 and 3 of this press release. For
the three-month periods ended September 30, 2012 and 2011, the net loss was
$(2,702,352) and $(5,390,296), respectively. For the nine months ended
September 30, 2012 and 2011, the net loss was $(3,973,000) and $(16,945,447),
respectively.

On a national basis, the multifamily sector continues to exhibit strong
fundamentals and improved performance due to sustained increases in rents and
stable occupancies resulting from continued favorable apartment unit supply
and demand dynamics. Decreased levels of new units constructed and weakened
home ownership have contributed to a 10-year low in the national vacancy rate
and continuing demand for the apartment sector. Capital markets improvements
have had a favorable impact on sales of multifamily assets with transaction
volumes reaching five-year highs in the third quarter of 2012.

David Quade, President of Berkshire, comments: "We continue to see improvement
in BIR’s real estate portfolio and operating results. The strong operating
results for the third quarter were largely due to revenue increases, a
continued high level of occupancy, and strength of the property sub-market
locations. Despite the slow economic recovery, the multifamily markets
nationally continue to exhibit strong fundamentals.

Strategically, we are looking to improve the quality of the real estate
portfolio by selectively selling some older assets, while adding Class A
properties through new developments. In that regard, BIR has two developments
that are progressing well, with both beginning their early leasing stage. Our
development in downtown Denver has model units complete, its leasing is being
well received, and the first tenants are expected to take occupancy by year
end. The second development is located in downtown Washington, D.C.,
construction of its first phase is substantially complete and pre-leasing is
underway. Overall, we feel very good about the progress of these developments
and the strength of the overall portfolio. "

Funds From Operations

The Company has adopted the revised definition of FFO adopted by the Board of
Governors of the National Association of Real Estate Investment Trusts
(“NAREIT”). FFO falls within the definition of a “non-GAAP financial measure”
as stated in Item 10(e) of Regulation S-K promulgated by the Securities and
Exchange Commission (the “SEC”). Management considers FFO to be an appropriate
measure of performance of an equity Real Estate Investment Trust (“REIT”). We
calculate FFO by adjusting net income (loss) (computed in accordance with
GAAP, including non-recurring items), for gains (or losses) from sales of
properties, real estate related depreciation and amortization, and adjustment
for unconsolidated partnerships and ventures. Management believes that in
order to facilitate a clear understanding of the historical operating results
of the Company, FFO should be considered in conjunction with net income (loss)
as presented in the consolidated financial statements included elsewhere
herein. Management considers FFO to be a useful measure for reviewing the
comparative operating and financial performance of the Company because, by
excluding gains and losses related to sales of previously depreciated
operating real estate assets and excluding real estate asset depreciation and
amortization (which can vary among owners of identical assets in similar
condition based on historical cost accounting and useful life estimates), FFO
can help one compare the operating performance of a company’s real estate
between periods or as compared to different companies.

The Company’s calculation of FFO may not be directly comparable to FFO
reported by other REITs or similar real estate companies that have not adopted
the term in accordance with the current NAREIT definition or that interpret
the current NAREIT definition differently. FFO is not a GAAP financial measure
and should not be considered as an alternative to net income (loss), the most
directly comparable financial measure of our performance calculated and
presented in accordance with GAAP, as an indication of our performance. FFO
does not represent cash generated from operating activities determined in
accordance with GAAP and is not a measure of liquidity or an indicator of our
ability to make cash distributions. We believe that to further understand our
performance, FFO should be compared with our reported net loss and considered
in addition to cash flows in accordance with GAAP, as presented in our
consolidated financial statements.

The following table presents a reconciliation of net loss to FFO for the three
and nine months ended September 30, 2012 and 2011:

                   Three months ended                Nine months ended
                   September 30,                     September 30,
                   2012             2011             2012             2011
Net loss           $ (2,702,352 )   $ (5,390,296 )   $ (3,973,000 )   $ (16,945,447 )
Add:
Depreciation
of real            6,086,677        6,602,044        18,799,193       19,931,403
property
Depreciation
of real
property
included in        —                393,388          121,438          990,435
results of
discontinued
operations
Amortization
of acquired
in-place           16,104           95,950           52,176           476,900
leases and
tenant
relationships
Amortization
of acquired
in-place
leases and
tenant             —                —                —                8,916
relationships
included in
discontinued
operations
Equity in loss
of Multifamily
Venture            588,242          768,597          73,472           2,554,451
Limited
Partnership
Equity in loss
of Multifamily
Limited            64,868           33,420           172,399          80,144
Liability
Company
Funds from
operations of
Multifamily
Venture
Limited
Partnership        315,832          365,905          893,487          928,266
and
Multifamily
Limited
Liability
Company, net
of impairments
Less:
Equity in
income of
Multifamily        —                —                —                —
Venture
Limited
Partnership
Noncontrolling
interest in
properties         (343,313     )   (341,416     )   (1,008,269   )   (953,804      )
share of funds
from
operations
Gain on
disposition of     —                —                (6,622,210   )   —              
real estate
assets
Funds from         $ 4,026,058      $ 2,527,592      $ 8,508,686      $ 7,071,264    
Operations
                                                                                     

FFO for the three and nine months ended September 30, 2012, increased as
compared to FFO for the three and nine months ended September 30, 2011. The
increase in FFO is due primarily to increased revenue and lower interest
expenses as a result of reduced revolving credit facility balance outstanding
partially offset by higher incentive advisory fees and losses from
discontinued operations during the nine months ended September 30, 2012,
compared to the same period ended September 30, 2011. Also, offsetting the
increases were transaction costs of $620,779 for the acquisition of the
Estancia property incurred during the nine months ended September 30, 2011,
for which there was no comparative expense recorded in 2012.

Other Non-GAAP Measures

The Company believes that the use of certain other non-GAAP measures for
comparative presentation between reporting periods allows for more meaningful
comparisons of the periods presented.

Same Property NOI falls within the definition of a “non-GAAP financial
measure” as stated in Item 10(e) of Regulation S-K promulgated by the SEC and
should not be considered as an alternative to net income (loss), the most
directly comparable financial measure of our performance calculated and
presented in accordance with GAAP. The Company believes Same Property NOI is a
measure of operating results that is useful to investors to analyze the
performance of a real estate company because it provides a direct measure of
the operating results of the Company’s multifamily apartment communities. The
Company also believes it is a useful measure to facilitate the comparison of
operating performance among competitors. The calculation of Same Property NOI
requires classification of income statement items between operating and
non-operating expenses, where operating items include only those items of
revenue and expense which are directly related to the income producing
activities of the properties. We believe that to achieve a more complete
understanding of the Company’s performance, Same Property NOI should be
compared with our reported net income (loss). Management uses Same Property
NOI to evaluate the operating results of properties without reflecting the
effect of capital decisions such as the issuance of mortgage debt and
investments in capital items; in turn, these capital decisions have an impact
on interest expense and depreciation and amortization.

The following table represents the reconciliation of GAAP net income (loss) to
the other non-GAAP measures presented for the three and nine months ended
September 30, 2012 and 2011:

                 Three months ended                Nine months ended
                 September 30,                     September 30,
                 2012             2011             2012             2011
Net loss         $ (2,702,352 )   $ (5,390,296 )   $ (3,973,000 )   $ (16,945,447 )
Adjust:
Depreciation     6,769,117        7,423,920        20,851,711       22,354,424
Interest         6,230,659        7,102,022        19,636,029       21,124,847
Amortization
of               16,104           95,950           52,176           476,900
intangible
assets
Net (income)
loss in
equity           653,110          802,017          245,871          2,634,595
method
investments
Discontinued     30,772           (63,786      )   (5,537,000   )   (437,776      )
operations
Net
operating        10,997,410       9,969,827        31,275,787       29,207,543
income
Add:
Net
operating
loss related
to
properties
acquired         582,135          725,247          3,344,562        2,862,792      
after
January 1,
2011, and
non-property
activities
Same
property net     $ 11,579,545     $ 10,695,074     $ 34,620,349     $ 32,070,335   
operating
income
                                                                                   

The Company

The Company is a REIT whose objective is to acquire, own, operate, develop and
rehabilitate multifamily apartment communities. The Company owns interests in
23 multifamily apartment communities and two multifamily development projects,
of which six are located in the Baltimore/Washington, D.C. metropolitan area;
three are located in Virginia; four are located in Houston, Texas; three are
located in Dallas, Texas; two are located in the Chicago, Illinois area; and
one is located in each of Austin, Texas, Atlanta, Georgia, Sherwood, Oregon,
Tampa, Florida, Philadelphia, Pennsylvania, Walnut Creek, California, and
Denver, Colorado.

Forward Looking Statements

With the exception of the historical information contained in this release,
the matters described herein may contain forward-looking statements that are
made pursuant to the Safe Harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve a number of
risks, uncertainties or other factors beyond the Company’s control, which may
cause material differences in actual results, performance or other
expectations. These factors include, but are not limited to, changes in
economic conditions generally and the real estate and bond markets
specifically, especially as they may affect rental markets,
legislative/regulatory changes (including changes to laws governing the
taxation of REITs), possible sales of assets, the acquisition restrictions
placed on the Company by its investment in Berkshire Multifamily Equity Fund,
LP, availability of capital, interest rates and interest rate spreads, changes
in accounting principles generally accepted in the United States of America
and policies and guidelines applicable to REITs, those set forth in Part I,
Item 1A - Risk Factors of the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2011, and other risks and uncertainties as may
be detailed from time to time in the Company’s public announcements and SEC
filings. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The
Company assumes no obligation to update such information.

BERKSHIRE INCOME REALTY, INC.
CONSOLIDATED BALANCE SHEETS
 
                                             September 30,     December 31,   
                                             2012              2011
                                             (unaudited)       (audited)
ASSETS
Multifamily apartment communities, net
of accumulated depreciation of               $ 425,911,439     $ 422,662,237
$244,530,688 and $227,600,092,
respectively
Cash and cash equivalents                      7,067,186         9,645,420
Cash restricted for tenant security            1,361,563         1,455,751
deposits
Replacement reserve escrow                     1,496,201         1,361,997
Prepaid expenses and other assets              10,364,222        11,786,836
Investment in Multifamily Venture
Limited Partnership and Multifamily            17,357,043        17,721,959
Limited Liability Company
Acquired in-place leases and tenant
relationships, net of accumulated              21,481            73,657
amortization of $583,598 and $531,422,
respectively
Deferred expenses, net of accumulated
amortization of $3,245,143 and                 3,755,156         4,041,785    
$2,840,437, respectively
Total assets                                 $ 467,334,291     $ 468,749,642  
                                                                              
LIABILITIES AND DEFICIT
                                                                              
Liabilities:
Mortgage notes payable                       $ 497,840,041     $ 484,748,358
Note payable, affiliate                        2,691,000         8,349,422
Due to affiliates, net                         2,779,809         1,245,147
Due to affiliate - incentive advisory          5,494,356         3,904,280
fees
Dividend and distributions payable             837,607           837,607
Accrued expenses and other liabilities         15,711,370        16,030,287
Tenant security deposits                       1,685,092         1,651,665    
Total liabilities                              527,039,275       516,766,766  
                                                                              
Commitments and contingencies (Note 9)         —                 —
                                                                              
Deficit:
Noncontrolling interest in properties          (310,967    )     346,524
Noncontrolling interest in Operating           (85,907,056 )     (76,785,818 )
Partnership (Note 10)
Series A 9% Cumulative Redeemable
Preferred Stock, no par value, $25
stated value, 5,000,000 shares                 70,210,830        70,210,830
authorized, 2,978,110 shares issued and
outstanding at September 30, 2012, and
December 31, 2011, respectively
Class A common stock, $.01 par value,
5,000,000 shares authorized, 0 shares
issued and outstanding at September 30,        —                 —
2012, and December 31, 2011,
respectively
Class B common stock, $.01 par value,
5,000,000 shares authorized, 1,406,196
shares issued and outstanding at               14,062            14,062
September 30, 2012, and December 31,
2011, respectively
Excess stock, $.01 par value, 15,000,000
shares authorized, 0 shares issued and         —                 —
outstanding at September 30, 2012, and
December 31, 2011, respectively
Accumulated deficit                            (43,711,853 )     (41,802,722 )
Total deficit                                  (59,704,984 )     (48,017,124 )
                                                                              
Total liabilities and deficit                $ 467,334,291     $ 468,749,642  
                                                                              

BERKSHIRE INCOME REALTY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
                   Three months ended                Nine months ended
                   September 30,                     September 30,                  
                   2012               2011           2012             2011          
Revenue:
Rental             $ 20,206,463     $ 19,340,273     $ 59,912,660     $ 57,042,054
Utility            881,874            806,196        2,617,014        2,402,474
reimbursement
Other              909,052            849,508        2,702,976        2,442,074     
Total revenue      21,997,389         20,995,977     65,232,650       61,886,602    
Expenses:
Operating          5,613,721          5,591,808      16,564,374       16,911,084
Maintenance        1,581,412          1,540,424      4,248,516        4,158,187
Real estate        2,011,232          2,034,067      6,172,981        5,921,199
taxes
General and        321,690            311,500        1,159,853        1,336,714
administrative
Management         1,298,707          1,229,277      3,837,944        3,645,135
fees
Incentive          173,217            319,074        1,973,195        706,740
advisory fees
Depreciation       6,769,117          7,423,920      20,851,711       22,354,424
Interest,
inclusive of
amortization       6,230,659          7,102,022      19,636,029       21,124,847
of deferred
financing fees
Amortization
of acquired
in-place           16,104             95,950         52,176           476,900       
leases and
tenant
relationships
Total expenses     24,015,859         25,648,042     74,496,779       76,635,230    
Loss before
loss in equity     (2,018,470   )     (4,652,065 )   (9,264,129   )   (14,748,628  )
method
investments
Loss in equity
method
investments:
Equity in loss
of Multifamily
Venture            (588,242     )     (768,597   )   (73,472      )   (2,554,451   )
Limited
Partnership
Equity in loss
of Multifamily
Limited            (64,868      )     (33,420    )   (172,399     )   (80,144      )
Liability
Company
Net loss from
equity method      (653,110     )     (802,017   )   (245,871     )   (2,634,595   )
investments
Loss from
continuing         (2,671,580   )     (5,454,082 )   (9,510,000   )   (17,383,223  )
operations
Discontinued
operations:
Income (loss)
from               $ (30,772    )   $ 63,786         $ (1,085,210 )   $ 437,776
discontinued
operations
Gain on
disposition of     —                  —              6,622,210        —             
real estate
assets
Net income
(loss) from        (30,772      )     63,786         5,537,000        437,776       
discontinued
operations
Net loss           (2,702,352   )     (5,390,296 )   (3,973,000   )   (16,945,447  )
Net income
attributable
to                 (127,684     )     (88,216    )   (345,990     )   (207,050     )
noncontrolling
interest in
properties
Net loss
attributable
to
noncontrolling     4,397,555          6,982,733      9,121,238        21,648,009    
interest in
Operating
Partnership
(Note 10)
Net income
attributable       1,567,519          1,504,221      4,802,248        4,495,512
to Parent
Company
Preferred          (1,675,194   )     (1,675,195 )   (5,025,583   )   (5,025,569   )
dividend
Net loss
available to       $ (107,675   )   $ (170,974   )   $ (223,335   )   $ (530,057   )
common
shareholders
Net loss from
continuing
operations
attributable
to Parent          $ (0.06      )   $ (0.17      )   $ (4.10      )   $ (0.69      )
Company per
common share,
basic and
diluted
Net income
(loss) from
discontinued
operations
attributable       $ (0.02      )   $ 0.05           $ 3.94           $ 0.31        
to Parent
Company per
common share,
basic and
diluted
Net loss
available to
common
shareholders       $ (0.08      )   $ (0.12      )   $ (0.16      )   $ (0.38      )
per common
share, basic
and diluted
Weighted
average number
of common
shares             1,406,196          1,406,196      1,406,196        1,406,196     
outstanding,
basic and
diluted

Contact:

For Berkshire Income Realty, Inc.
Stephen Lyons, 1-617-574-8367
stephen.lyons@bpadv.com
Facsimile: 1-617-423-8919
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