Berkshire Income Realty Announces First Quarter Funds from Operations of $2,793,605 Business Wire BOSTON -- May 22, 2013 Berkshire Income Realty, Inc. (NYSE MKT: BIR_pa),( NYSE MKT: BIRPRA), (NYSE MKT: BIR-A), (NYSE MKT: BIR.PR.A) ("Berkshire" or the "Company") reported its results for the quarter ended March31, 2013. Financial highlights for the three month period ended March31, 2013 include: - The Company's Funds From Operations ("FFO") grew approximately 220.5% for the three months ended March31, 2013 - The Company's FFO, a non-GAAP financial measure, for the three months ended March31, 2013 was $2,793,605 compared to $871,537 for the comparable three months ended March31, 2012. The growth in the Company's FFO is due to increases in revenue, including market rents and utility reimbursements and lower expenses, including lower incentive advisory fees. - Same Property Net Operating Income ("Same Property NOI") increased approximately 8.0% - Same Property NOI, a non-GAAP financial measure, increased primarily as a result of growth in comparative revenue for properties acquired or placed in service prior to January 1, 2012 and owned through March 31, 2013 ("Same Property") . The Same Property Portfolio had total revenue increases of approximately 4.7% for the three months ended March31, 2013 as compared to the same period a year ago. Continued growth in market rents and increases in utility recoveries pursuant to a utility reimbursement program were the main factors contributing to higher revenue. Expenses decreased due to maintenance expenses, comprised mainly of lower landscaping and repairs costs, which were partially offset by increased property management fees driven by higher revenue. - 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 three months ended March31, 2013 and 2012, the net income (loss) was $(3,996,676) and $2,011,956, respectively. - Development Activities - The Company owns interests in three development joint ventures. Construction of the 2020 Lawrence project, a mid-rise 231-unit LEED-gold certified multifamily building, located in downtown Denver, Colorado, was completed during the quarter ended March 31, 2013 and has been well received by the Denver rental market. Move-in of residents began in December 2012 with current physical occupancy approximating 39% and leased units totaling 52%. The Trilogy NoMa development project, a three-building multifamily community in downtown Washington, DC., is nearing completion. Current physical occupancy is approximately 20% and total leased units are approximately 28%. The Walnut Creek development project, located in Walnut Creek, California, is nearing the completion of the regulatory and environmental entitlement processes. Construction activities are anticipated to begin in late 2013. - Economic Conditions - During 2013, 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 and reduced home ownership rates have driven demand in the apartment sector which 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 continues to implement its operating model and to grow rental rates. David Quade, President of the Company, comments: "We are continuing to benefit from growth in market rents in our various rental markets. This has resulted in strong first quarter operating results. Rental rate increases averaging 4.7% fueled an increase in Same Property NOI of approximately 8%. In addition, development activities continued to be a focus for the Company with one of two active construction projects, 2020 Lawrence, located in downtown Denver, Colorado, completing construction during the current quarter. The project was completed on schedule and within budget and is currently 52% leased. The other project, Trilogy NoMa, located in downtown Washington, D.C., is nearing completion and is approximately 28% leased. Completion of the remaining construction activities is ahead of schedule and also within budget. Overall we are pleased with the Company's first quarter operating results as positive trends in the multifamily apartment sector continue to benefit 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 sales 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 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 income (loss) to FFO for the three months ended March31, 2013 and 2012: Three months ended March 31, 2013 2012 Net income (loss) (3,996,676 ) 2,011,956 Add: Depreciation of real property 5,816,785 6,058,425 Depreciation of real property included — 539,841 in results of discontinued operations Amortization of acquired in-place 5,377 19,968 leases and tenant relationships Equity in loss of unconsolidated 775,967 — multifamily entities Funds from operations of unconsolidated multifamily entities, net of 368,701 265,448 impairments Less: Funds from operations of noncontrolling (176,549 ) (311,967 ) interest in properties Gain on disposition of real estate — (6,589,323 ) assets Equity in income of unconsolidated — (1,122,811 ) multifamily entities Funds from Operations $ 2,793,605 $ 871,537 FFO for the three months ended March31, 2013 increased as compared to the three-month period ended March31, 2012. The growth in the Company's FFO is due to increases in revenue, including market rents and utility reimbursements, and lower expenses, including lower incentive advisory fees for the three months ended March31, 2013 compared to the same period ended March31, 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 Same Property portfolio consists of 21 properties acquired or placed in service on or prior to January 1, 2012 and owned through March31, 2013. The following table represents the reconciliation of GAAP net income (loss) to the other non-GAAP measures presented for the three months ended March31, 2013 and 2012: Three months ended March 31, 2013 2012 Net income (loss) $ (3,996,676 ) $ 2,011,956 Add: Depreciation 6,630,073 6,684,951 Interest, inclusive of amortization of 6,598,445 6,408,480 deferred financing fees Amortization of acquired in-place 5,377 19,968 leases and tenant relationships Net income from discontinued (40,265 ) (5,654,477 ) operations Equity in (income) loss of 775,967 (1,122,811 ) unconsolidated multifamily entities Net operating income 9,972,921 8,348,067 Add: Net operating income related to properties acquired or placed in 1,944,424 2,683,833 service after January 1, 2012 and non-property activities Same Property net operating income $ 11,917,345 $ 11,031,900 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-two multifamily apartment communities and one multifamily development project, 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 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 an affiliated entity Berkshire Multifamily Value Fund III, 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 March 31, December 31, 2013 2012 ASSETS Multifamily apartment communities, net of accumulated depreciation of $ 398,052,658 $ 402,999,104 $242,455,812 and $235,825,752, respectively Cash and cash equivalents 9,282,546 12,224,361 Cash restricted for tenant security 1,223,501 1,332,178 deposits Replacement reserve escrow 998,230 986,790 Prepaid expenses and other assets 7,697,006 9,545,966 Investments in unconsolidated 16,308,060 16,873,924 multifamily entities Acquired in-place leases and tenant relationships, net of accumulated — 5,377 amortization of $0 and $599,702, respectively Deferred expenses, net of accumulated amortization of 3,099,818 3,210,510 $3,240,468 and $3,096,284, respectively Total assets $ 436,661,819 $ 447,178,210 LIABILITIES AND DEFICIT Liabilities: Mortgage notes payable $ 477,081,514 $ 478,185,998 Revolving credit facility - 1,627,000 — affiliate Note payable - other 1,250,000 1,250,000 Due to affiliates, net 2,569,174 3,446,460 Due to affiliate, incentive 7,139,667 6,634,261 advisory fees Dividend and distributions payable 837,607 1,137,607 Accrued expenses and other 10,797,658 15,081,550 liabilities Tenant security deposits 1,528,657 1,475,298 Total liabilities 502,831,277 507,211,174 Commitments and contingencies — — Deficit: Noncontrolling interest in 1,718,839 1,527,431 properties Noncontrolling interest in (95,900,145 ) (89,708,267 ) Operating Partnership 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 March 31, 2013 and December 31, 2012, respectively Class A common stock, $.01 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at — — March 31, 2013 and December 31, 2012, respectively Class B common stock, $.01 par value, 5,000,000 shares authorized, 1,406,196 shares issued and 14,062 14,062 outstanding at March 31, 2013 and December 31, 2012, respectively Excess stock, $.01 par value, 15,000,000 shares authorized, 0 shares issued and outstanding at — — March 31, 2013 and December 31, 2012, respectively Accumulated deficit (42,213,044 ) (42,077,020 ) Total deficit (66,169,458 ) (60,032,964 ) Total liabilities and deficit $ 436,661,819 $ 447,178,210 BERKSHIRE INCOME REALTY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Three months ended March 31, 2013 2012 Revenue: Rental $ 18,796,819 $ 17,829,685 Utility reimbursement 922,532 799,747 Other 861,369 784,121 Total revenue 20,580,720 19,413,553 Expenses: Operating 5,000,278 4,698,309 Maintenance 942,510 1,129,622 Real estate taxes 1,944,802 1,838,192 General and administrative 730,090 767,169 Management fees 1,239,247 1,176,600 Incentive advisory fees 750,872 1,455,594 Depreciation 6,630,073 6,684,951 Interest, inclusive of amortization 6,598,445 6,408,480 of deferred financing fees Amortization of acquired in-place 5,377 19,968 leases and tenant relationships Total expenses 23,841,694 24,178,885 Loss before equity in income (loss) of unconsolidated multifamily (3,260,974 ) (4,765,332 ) entities Equity in income (loss) of (775,967 ) 1,122,811 unconsolidated multifamily entities Loss from continuing operations (4,036,941 ) (3,642,521 ) Discontinued operations: Income (loss) from discontinued 40,265 (934,846 ) operations Gain on disposition of real estate — 6,589,323 assets Net income from discontinued 40,265 5,654,477 operations Net income (loss) (3,996,676 ) 2,011,956 Net income attributable to noncontrolling interest in (19,532 ) (88,025 ) properties Net (income) loss attributable to noncontrolling interest in Operating 5,555,378 (242,792 ) Partnership Net income attributable to the 1,539,170 1,681,139 Company Preferred dividend (1,675,194 ) (1,675,194 ) Net income (loss) available to $ (136,024 ) $ 5,945 common shareholders Net loss from continuing operations attributable to the Company per (0.13 ) (4.02 ) common share, basic and diluted Net income from discontinued operations attributable to the 0.03 4.02 Company per common share, basic and diluted Net income (loss) available to common shareholders per common (0.10 ) — share, basic and diluted Weighted average number of common shares outstanding, basic and 1,406,196 1,406,196 diluted Contact: For Berkshire Income Realty, Inc. Stephen Lyons, 1-617-574-8367 firstname.lastname@example.org Facsimile: 1-617-574-8312
Berkshire Income Realty Announces First Quarter Funds from Operations of $2,793,605
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