Berkshire Income Realty Announces Year End Funds from Operations of $10,443,094 Business Wire BOSTON -- April 9, 2013 Berkshire Income Realty, Inc. (NYSE Amex Equities: "BIR_pa"), (NYSE Amex Equities: "BIRPRA"), (NYSE Amex Equities: "BIR-A"), (NYSE Amex Equities: "BIR.PR.A") ("Berkshire" or the "Company") reported its results for the year ended December31, 2012. Financial highlights for the year ended December31, 2012 include: - The Company's Funds From Operations ("FFO") grew approximately 6.9% for the year ended December31, 2012 - The Company's FFO, a non-GAAP financial measure, for the year ended December31, 2012 was $10,443,094 compared to $9,766,693 for the year ended December31, 2011. Solid gains in rental revenue and lower interest expenses helped drive the Company's FFO growth. - Same Property Net Operating Income ("Same Property NOI") increased approximately 6.7% - Same Property NOI, a non-GAAP financial measure, increased as a result of growth in revenue for properties acquired or placed in service prior to January 1, 2011 ("Same Property"). The Same Property portfolio had a total revenue increase of approximately 4.7% for the year ended December31, 2012 compared to the same period a year ago. Strong revenue growth outpaced increases in operating expenses for the Same Property portfolio. - A presentation and reconciliation of net income (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 years ended December31, 2012, 2011 and 2010, the net income (loss) was $29,021,154, $1,922,299 and $(25,726,511), respectively. - Development Activities - The Company owns interests in three development joint ventures, of which two were nearing completion at the end of 2012 and the third was progressing through the regulatory entitlement process. The 2020 Lawrence development, a mid-rise, 231-unit LEED-gold certified multifamily building, located in downtown Denver, Colorado, has been well received by the market and leased its first units in late December 2012. The Trilogy NoMa development is a three building multifamily community in downtown Washington, DC, and also leased units as of the end of 2012. The lease up of both projects is ongoing and substantially in line with operational forecasts. The Walnut Creek development, located in Walnut Creek, California, is nearing the completion of the regulatory and environmental entitlement processes. Start of construction activities is anticipated to begin in late 2013. - Economic Conditions - During 2012, on a national basis, the multifamily sector continued 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, as well as reduced home ownership rates driving demand in the apartment sector have contributed to a 10-year low in the national vacancy rate. 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. With the continued improvement in the economy, the Company was able to continue to implement its operating model and continue to grow rental rates in select sub markets that exhibited positive indicators. President David Quade comments: "The fourth quarter was highlighted by strong operating results, successful sales and related gains, as well as the continued progress of the Company's ongoing development projects. Gains from the sale of five assets contributed significantly to the positive results of Berkshire in 2012, which included nearly a 7% increase in net operating income for the Same Property portfolio. The success of 2012 has positioned the Company for future growth as the development projects continue to lease up and contribute to the operations of the Company." 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 dispositions of properties, impairments, real estate related depreciation and amortization, and adjustment for unconsolidated partnerships and ventures. Management believes that in order to facilitate a clear understanding of the historical operating results of the Company, FFO should be considered in conjunction with net income (loss) as presented in the consolidated financial statements included elsewhere herein. Management considers FFO to be a useful measure for reviewing the comparative operating and financial performance of the Company because, by excluding gains and losses related to sales of previously depreciated operating real estate assets and excluding real estate asset depreciation and amortization (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help one compare the operating performance of a company's real estate between periods or to different companies. The Company's calculation of FFO may not be directly comparable to FFO reported by other REITs or similar real estate companies that have not adopted the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. FFO is not a GAAP financial measure and should not be considered as an alternative to net income (loss), the most directly comparable financial measure of our performance calculated and presented in accordance with GAAP, as an indication of our performance. FFO does not represent cash generated from operating activities determined in accordance with GAAP and is not a measure of liquidity or an indicator of our ability to make cash distributions. We believe that to further understand our performance; FFO should be compared with our reported net income (loss) and considered in addition to operating cash flows determined in accordance with GAAP, as presented in our consolidated financial statements. The following table presents a reconciliation of net income (loss) to FFO for the years ended December31, 2012, 2011 and 2010: Year ended December 31, 2012 2011 2010 Net income (loss) $ 29,021,154 $ 1,922,299 $ (25,726,511 ) Add: Depreciation of real 23,165,635 24,819,898 24,615,373 property Depreciation of real property included in results of 1,575,979 3,006,646 3,449,495 discontinued operations Amortization of acquired in-place 68,280 531,422 44,550 leases and tenant relationships Amortization of acquired in-place leases and tenant relationships — 8,916 73,298 included in results of discontinued operations Equity in loss of unconsolidated 268,921 3,430,015 4,080,225 multifamily entities Funds from operations of unconsolidated 941,789 1,286,493 860,673 multifamily entities, net of impairments Less: Funds from operations of noncontrolling (1,015,799 ) (1,322,049 ) (1,044,553 ) interest in properties Gain on disposition (43,582,865 ) (23,916,947 ) — of real estate assets Funds from Operations $ 10,443,094 $ 9,766,693 $ 6,352,550 FFO for the year ended December31, 2012 increased as compared to FFO for the year ended December31, 2011. The increase in FFO is due primarily to the increased revenue, lower interest expenses as a result of reduced revolving credit facility balance outstanding, and transaction costs for the acquisition of Estancia Townhomes of $620,779 incurred during the year ended December31, 2011 for which there was no comparative expense recorded in 2012. The increase was partially offset by higher incentive advisory fees and losses from discontinued operations during the year ended December31, 2012 compared to the same period in 2011. 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 Same Property portfolio consist of 20 properties acquired or placed in service on or prior to January 1, 2011 and owned through December 31, 2012. The following table represents the reconciliation of GAAP net income (loss) to the other non-GAAP measures presented for the years ended December31, 2012, 2011 and 2010: Year ended December 31, 2012 2011 2010 Net income (loss) $ 29,021,154 $ 1,922,299 $ (25,726,511 ) Add: Depreciation 25,642,064 27,694,551 27,321,332 Interest, inclusive of amortization of 24,716,864 26,827,061 24,604,555 deferred financing fees Amortization of acquired in-place 68,280 531,422 44,550 leases and tenant relationships Net income (loss) from discontinued (42,068,782 ) (24,519,249 ) 482,755 operations Equity in loss of unconsolidated 268,921 3,430,015 4,080,225 multifamily entities Net operating income 37,648,501 35,886,099 30,806,906 Add: Net operating income related to properties acquired or placed in 4,653,148 3,740,976 7,178,832 service after January 1, 2011 and non-property activities Same Property net $ 42,301,649 $ 39,627,075 $ 37,985,738 operating income The Company The Company is a Real Estate Investment Trust ("REIT") whose objective is to acquire, own, operate, develop and rehabilitate multifamily apartment communities. The Company owns interests in twenty-one multifamily apartment communities and two multifamily development projects, of which six are located in the Baltimore/Washington, D.C. metropolitan area; four are Houston, Texas; three are located in Dallas, Texas; three are located in Virginia; 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, including statements about prospects for the Company's ongoing development projects, apartment rental demand and fundamentals, involve a number of risks, uncertainties or other factors beyond the Company's control, which may cause material differences in actual results, performance or other expectations. These factors include, but are not limited to, changes in economic conditions generally and the real estate and bond markets specifically, especially as they may affect rental markets, legislative/regulatory changes (including changes to laws governing the taxation of REITs), possible sales of assets, the acquisition restrictions placed on the Company by 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 December31, 2012 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 December 31, December 31, 2012 2011 ASSETS Multifamily apartment communities, net of accumulated depreciation of $ 402,999,104 $ 422,662,237 $235,825,752 and $227,600,092, respectively Cash and cash equivalents 12,224,361 9,645,420 Cash restricted for tenant security 1,332,178 1,455,751 deposits Replacement reserve escrow 986,790 1,361,997 Prepaid expenses and other assets 9,545,966 11,786,836 Investments in unconsolidated 16,873,924 17,721,959 multifamily entities Acquired in-place leases and tenant relationships, net of accumulated 5,377 73,657 amortization of $599,702 and $531,422, respectively Deferred expenses, net of accumulated amortization of $3,096,284 and 3,210,510 4,041,785 $2,840,437, respectively Total assets $ 447,178,210 $ 468,749,642 LIABILITIES AND DEFICIT Liabilities: Mortgage notes payable $ 478,185,998 $ 484,748,358 Revolving credit facility - affiliate — 8,349,422 Note payable - other 1,250,000 — Due to affiliates, net 3,446,460 1,245,147 Due to affiliate, incentive advisory 6,634,261 3,904,280 fees Dividend and distributions payable 1,137,607 837,607 Accrued expenses and other liabilities 15,081,550 16,030,287 Tenant security deposits 1,475,298 1,651,665 Total liabilities 507,211,174 516,766,766 Commitments and contingencies — — Deficit: Noncontrolling interest in properties 1,527,431 346,524 Noncontrolling interest in Operating (89,708,267 ) (76,785,818 ) Partnership Series A 9% Cumulative Redeemable Preferred Stock, no par value, $25 stated value, 5,000,000 shares authorized, 70,210,830 70,210,830 2,978,110 shares issued and outstanding at December 31, 2012 and 2011, respectively Class A common stock, $.01 par value, 5,000,000 shares authorized, 0 shares — — issued and outstanding at December 31, 2012 and 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 December 31, 2012 and 2011, respectively Excess stock, $.01 par value, 15,000,000 shares authorized, 0 shares issued and — — outstanding at December 31, 2012 and 2011, respectively Accumulated deficit (42,077,020 ) (41,802,722 ) Total deficit (60,032,964 ) (48,017,124 ) Total liabilities and deficit $ 447,178,210 $ 468,749,642 BERKSHIRE INCOME REALTY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, 2012 2011 2010 Revenue: Rental $ 72,491,955 $ 68,980,213 $ 62,822,629 Utility reimbursement 3,254,552 2,974,858 2,370,379 Other 3,209,041 2,908,823 2,672,364 Total revenue 78,955,548 74,863,894 67,865,372 Expenses: Operating 19,874,491 19,246,976 18,170,277 Maintenance 4,626,525 4,681,091 4,283,240 Real estate taxes 7,335,118 7,103,137 6,207,346 General and 1,538,889 1,686,985 1,859,034 administrative Management fees 4,818,924 4,563,121 4,330,774 Incentive advisory 3,113,100 1,696,485 2,207,795 fees Depreciation 25,642,064 27,694,551 27,321,332 Interest, inclusive of amortization of 24,716,864 26,827,061 24,604,555 deferred financing fees Amortization of acquired in-place 68,280 531,422 44,550 leases and tenant relationships Total expenses 91,734,255 94,030,829 89,028,903 Loss before equity in loss of (12,778,707 ) (19,166,935 ) (21,163,531 ) unconsolidated multifamily entities Equity in loss of unconsolidated (268,921 ) (3,430,015 ) (4,080,225 ) multifamily entities Loss from continuing (13,047,628 ) (22,596,950 ) (25,243,756 ) operations Discontinued operations: Income (loss) from discontinued (1,514,083 ) 602,302 (482,755 ) operations Gain on disposition of real estate 43,582,865 23,916,947 — assets, net Net income (loss) from discontinued 42,068,782 24,519,249 (482,755 ) operations Net income (loss) 29,021,154 1,922,299 (25,726,511 ) Net (income) loss attributable to noncontrolling (9,797,304 ) (6,306,178 ) 18,981 interest in properties Net (income) loss attributable to noncontrolling (12,223,771 ) 10,819,718 31,633,734 interest in Operating Partnership Net income attributable to the 7,000,079 6,435,839 5,926,204 Company Preferred dividend (6,700,777 ) (6,700,763 ) (6,700,765 ) Net income (loss) available to common $ 299,302 $ (264,924 ) $ (774,561 ) shareholders Net loss from continuing operations attributable to the (29.71 ) (17.63 ) (0.21 ) Company per common share, basic and diluted Net income (loss) from discontinued operations attributable to the 29.92 17.44 (0.34 ) Company per common share, basic and diluted Net income (loss) available to common shareholders per 0.21 (0.19 ) (0.55 ) common share, basic and diluted Weighted average number of common 1,406,196 1,406,196 1,406,196 shares outstanding, basic and diluted Contact: Berkshire Income Realty, Inc. Stephen Lyons, 1-617-574-8367 firstname.lastname@example.org Facsimile: 1-617-574-8312
Berkshire Income Realty Announces Year End Funds from Operations of $10,443,094
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