BOSTON--(BUSINESS WIRE)--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 year ended December 31, 2013. Financial highlights for the year ended December 31, 2013 include:
- Same Property Net Operating Income ("Same Property NOI") increased approximately 5.4% - 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, 2012 ("Same Property"). The Same Property portfolio had a total revenue increase of approximately 4.1% for the year ended December 31, 2013 compared to the same period a year ago. The strong revenue growth outpaced the increase in operating expenses for the Same Property portfolio. Average physical occupancy for the 2013 Same Property Portfolio was 95.87%, which was substantially unchanged from the 95.44% average in 2012. A reconciliation of accounting principles generally accepted in the United States of America ("GAAP") net income to Same Property NOI is included in the financial data accompanying this release.
- The Company's Funds From Operations ("FFO") grew approximately 2.9% for the year ended December 31, 2013 - The Company's FFO, a non-GAAP financial measure, for the year ended December 31, 2013 was $10,907,025 compared to $10,601,772 for the year ended December 31, 2012. Solid gains in rental revenue and incremental operations from 2020 Lawrence, on which construction was completed in the first quarter of 2013, helped drive the Company's FFO growth. The growth was partially offset by both higher interest expense, resulting from less capitalized interest as two developments were completed in 2013, and the loss of operating income provided by properties sold in the comparative periods. A reconciliation of GAAP net income to FFO is included in the financial data accompanying this release.
- A presentation and reconciliation of net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to FFO and Same Property NOI is set forth on pages 2 and 3 of this press release. For the years ended December 31, 2013, 2012, and 2011, the Company's net income was $7,209,633, $29,021,154 and $1,922,299, respectively.
- Development Activities - During the year ended December 31, 2013, the Company owned or had interests in three development joint ventures, two of which have completed construction and are currently completing lease up. Construction of 2020 Lawrence, a 231-unit LEED-gold certified, mid-rise multifamily building, located in downtown Denver, Colorado, was completed early in 2013 and is in lease up as the property continues to be well-received in the Denver rental market. Current physical occupancy is approximately 91% with total leased units of approximately 98%. Construction of the Trilogy NoMa development project, a 603-unit multifamily community in downtown Washington, D.C., was completed in the middle of 2013 and current physical occupancy is approximately 65% with leased units of approximately 69%. Regulatory and environmental entitlement approvals are complete for the Walnut Creek development project, located in Walnut Creek, California, and construction plans and budgets continue to be reviewed and finalized.
- Sale of properties - During the year ended December 31, 2013, the Company sold two properties located in Houston, Texas, Walden Pond and Gables of Texas. The Company recognized gains of approximately $18,700,000 on an aggregate sales price of $31,500,000. Cash from the transaction was used both to pay down the outstanding revolving credit facility debt related to funding ongoing development activities and to fund distributions to common shareholders.
- Economic Conditions - In 2013, the multifamily sector continued to exhibit improved performance and strong fundamentals on a national basis due to sustained higher rent levels and continued stable occupancies due to ongoing favorable apartment unit supply and demand mix. Continued reduced levels of new unit construction and home ownership rates in the apartment sector have driven demand in recent years to a 10-year low national vacancy rate. Improved capital markets have had a favorable impact on the sale of multifamily assets with transaction volumes reaching five-year highs in recent years.
David Quade, President of the Company, commented: "We were pleased with the Company's strong fourth quarter operating results, which contributed to the increase in net operating income for the year. The positive results can be attributed to revenue growth and our continued focus on controlling operating expenses. In addition, Same Property revenue increased 4.1%, which resulted in the Same Property NOI increase of 5.4%. The Company's financial position remains strong as we head into 2014, with a continued focus on improving the quality of the real estate portfolio through acquisitions, development, and dispositions. In the first quarter of 2014, we acquired two Class-A properties, Pavilion Townplace, located in Dallas, Texas, and Eon of Lindbergh, located in Atlanta, Georgia, and invested in a joint venture to develop Aura Prestonwood, a 322-unit multifamily apartment property located in Dallas, Texas."
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 income (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 to FFO for the years ended December 31, 2013, 2012 and 2011:
| Year ended | ||||||||||||||||
| December 31, | ||||||||||||||||
| 2013 | 2012 | 2011 | ||||||||||||||
| Net income | $ | 7,209,633 | $ | 29,021,154 | $ | 1,922,299 | ||||||||||
| Add: | ||||||||||||||||
| Depreciation of real property | 22,207,591 | 22,127,308 | 23,782,722 | |||||||||||||
|
Depreciation of real property included in results of discontinued operations |
472,807 | 2,614,306 | 4,043,822 | |||||||||||||
| Amortization of acquired in-place leases and tenant relationships | 5,377 | 68,280 | 531,422 | |||||||||||||
| Amortization of acquired in-place leases and tenant relationships included in discontinued operations | — | — | 8,916 | |||||||||||||
| Equity in loss of unconsolidated multifamily entities | — | 268,921 | 3,430,015 | |||||||||||||
|
Funds from operations of unconsolidated multifamily entities, net of impairments |
1,304,723 | 1,100,467 | 1,124,125 | |||||||||||||
| Less: | ||||||||||||||||
| Noncontrolling interest in properties' share of funds from operations | (755,803 | ) | (1,015,799 | ) | (1,322,049 | ) | ||||||||||
| Gain on disposition of real estate assets | (18,648,525 | ) | (43,582,865 | ) | (23,916,947 | ) | ||||||||||
|
Equity in income of unconsolidated multifamily entities |
(888,778 | ) | — | — | ||||||||||||
| Funds from Operations | $ | 10,907,025 | $ | 10,601,772 | $ | 9,604,325 | ||||||||||
FFO for the year ended December 31, 2013 increased 2.9% as compared to FFO for the year ended December 31, 2012. The increase in FFO is due primarily to growth in net operating income driven by higher rental revenue, incremental operating income from 2020 Lawrence, which completed construction in the first quarter of 2013, as well as lower incentive advisory fees. The increase was partially offset by higher interest expense, resulting from less capitalized interest for 2020 Lawrence and NoMa, as construction was completed in 2013, and the loss of operating income provided by assets sold during 2012 and the second quarter of 2013.
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 investing and financing activities such as mortgage debt and capital expenditures which, have an impact on interest expense and depreciation and amortization. The Same Property portfolio consists of 19 properties acquired or placed in service on or prior to January 1, 2012 and owned through December 31, 2013.
The following table represents the reconciliation of GAAP net income (loss) to the other non-GAAP measures presented for the years ended December 31, 2013, 2012 and 2011:
| Year ended | ||||||||||||||||
| December 31, | ||||||||||||||||
| 2013 | 2012 | 2011 | ||||||||||||||
| Net income | $ | 7,209,633 | $ | 29,021,154 | $ | 1,922,299 | ||||||||||
|
Add: |
||||||||||||||||
| Depreciation | 25,481,041 | 24,421,521 | 26,460,715 | |||||||||||||
| Interest, inclusive of amortization of deferred financing fees | 26,459,722 | 23,937,305 | 26,030,877 | |||||||||||||
| Amortization of acquired in-place leases and tenant relationships | 5,377 | 68,280 | 531,422 | |||||||||||||
| Net income from discontinued operations | (18,684,966 | ) | (42,210,823 | ) | (24,541,499 | ) | ||||||||||
| Equity in (income) loss of unconsolidated multifamily entities | (888,778 | ) | 268,921 | 3,430,015 | ||||||||||||
| Net operating income | 39,582,029 | 35,506,358 | 33,833,829 | |||||||||||||
| Add: | ||||||||||||||||
|
Net operating income related to properties acquired or placed in service after January 1, 2012 and non-property activities |
5,811,875 | 7,545,214 | 3,740,979 | |||||||||||||
| Same Property net operating income | $ | 45,393,904 | $ | 43,051,572 | $ | 37,574,808 | ||||||||||
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 multifamily apartment communities and two multifamily development projects, of which six are located in the Baltimore/Washington, D.C. metropolitan area; four are located in Dallas, Texas; three are located in Virginia; two are located in Houston, Texas; and one is located in each of Austin, Texas; Atlanta, Georgia; Sherwood, Oregon; Tampa, Florida; Philadelphia, Pennsylvania; Walnut Creek, California; and Denver, Colorado. The Company also own interests in two unconsolidated multifamily entities.
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 Plus 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 December 31, 2013 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.
- tables to follow-
| BERKSHIRE INCOME REALTY, INC. | |||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||
|
December 31, |
December 31, |
||||||||||
|
2013 |
2012 |
||||||||||
| ASSETS | |||||||||||
|
Multifamily apartment communities, net of accumulated depreciation of $242,291,624 and $235,825,752, respectively |
$ | 381,663,433 | $ | 402,999,104 | |||||||
| Cash and cash equivalents | 15,254,613 | 12,224,361 | |||||||||
| Cash restricted for tenant security deposits | 1,321,895 | 1,332,178 | |||||||||
| Replacement reserve escrow | 1,121,258 | 986,790 | |||||||||
| Prepaid expenses and other assets | 10,675,302 | 9,545,966 | |||||||||
| Investments in unconsolidated multifamily entities | 14,294,474 | 16,873,924 | |||||||||
| Acquired in-place leases and tenant relationships, net of accumulated amortization of $0 and $599,702, respectively | — | 5,377 | |||||||||
| Deferred expenses, net of accumulated amortization of $2,953,066 and $3,096,284, respectively | 2,977,939 | 3,210,510 | |||||||||
| Total assets | $ | 427,308,914 | $ | 447,178,210 | |||||||
| LIABILITIES AND DEFICIT | |||||||||||
| Liabilities: | |||||||||||
| Mortgage notes payable | $ | 475,525,480 | $ | 478,185,998 | |||||||
| Revolving credit facility - affiliate | — | — | |||||||||
| Note payable - other | 1,250,000 | 1,250,000 | |||||||||
| Due to affiliates, net | 2,454,167 | 3,446,460 | |||||||||
| Due to affiliate, incentive advisory fees | 8,289,617 | 6,634,261 | |||||||||
| Dividend and distributions payable | 837,607 | 1,137,607 | |||||||||
| Accrued expenses and other liabilities | 10,968,053 | 15,081,550 | |||||||||
| Tenant security deposits | 1,531,472 | 1,475,298 | |||||||||
| Total liabilities | 500,856,396 | 507,211,174 | |||||||||
| Commitments and contingencies | — | — | |||||||||
| Deficit: | |||||||||||
| Noncontrolling interest in properties | 879,785 | 1,527,431 | |||||||||
| Noncontrolling interest in Operating Partnership | (102,297,937 | ) | (89,708,267 | ) | |||||||
| Series A 9% Cumulative Redeemable Preferred Stock, no par value, $25 stated value, 5,000,000 shares authorized, 2,978,110 shares issued and outstanding at December 31, 2013 and 2012, respectively | 70,210,830 | 70,210,830 | |||||||||
|
Class A common stock, $.01 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at December 31, 2013 and 2012, respectively |
— | — | |||||||||
|
Class B common stock, $.01 par value, 5,000,000 shares authorized, 1,406,196 shares issued and outstanding at December 31, 2013 and 2012, respectively |
14,062 | 14,062 | |||||||||
|
Excess stock, $.01 par value, 15,000,000 shares authorized, 0 shares issued and outstanding at December 31, 2013 and 2012, respectively |
— | — | |||||||||
| Accumulated deficit | (42,354,222 | ) | (42,077,020 | ) | |||||||
| Total deficit | (73,547,482 | ) | (60,032,964 | ) | |||||||
| Total liabilities and deficit | $ | 427,308,914 | $ | 447,178,210 | |||||||
| BERKSHIRE INCOME REALTY, INC. | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| Year ended | ||||||||||||||||
| December 31, | ||||||||||||||||
| 2013 | 2012 | 2011 | ||||||||||||||
| Revenue: | ||||||||||||||||
| Rental | $ | 73,191,622 | $ | 68,545,521 | $ | 65,240,687 | ||||||||||
| Utility reimbursement | 3,441,604 | 2,954,366 | 2,714,358 | |||||||||||||
| Other | 3,398,904 | 3,013,758 | 2,732,821 | |||||||||||||
| Total revenue | 80,032,130 | 74,513,645 | 70,687,866 | |||||||||||||
| Expenses: | ||||||||||||||||
| Operating | 18,433,143 | 17,585,096 | 17,268,329 | |||||||||||||
| Maintenance | 4,516,367 | 4,396,133 | 4,456,806 | |||||||||||||
| Real estate taxes | 7,677,392 | 6,845,669 | 6,688,309 | |||||||||||||
| General and administrative | 2,504,227 | 2,424,966 | 2,337,435 | |||||||||||||
| Management fees | 4,824,959 | 4,642,323 | 4,406,673 | |||||||||||||
| Incentive advisory fees | 2,494,013 | 3,113,100 | 1,696,485 | |||||||||||||
| Depreciation | 25,481,041 | 24,421,521 | 26,460,715 | |||||||||||||
| Interest, inclusive of amortization of deferred financing fees | 26,459,722 | 23,937,305 | 26,030,877 | |||||||||||||
| Amortization of acquired in-place leases and tenant relationships | 5,377 | 68,280 | 531,422 | |||||||||||||
| Total expenses | 92,396,241 | 87,434,393 | 89,877,051 | |||||||||||||
| Loss before equity in income (loss) of unconsolidated multifamily entities | (12,364,111 | ) | (12,920,748 | ) | (19,189,185 | ) | ||||||||||
| Equity in income (loss) of unconsolidated multifamily entities | 888,778 | (268,921 | ) | (3,430,015 | ) | |||||||||||
| Loss from continuing operations | (11,475,333 | ) | (13,189,669 | ) | (22,619,200 | ) | ||||||||||
| Discontinued operations: | ||||||||||||||||
| Income (loss) from discontinued operations | 36,441 | (1,372,042 | ) | 624,552 | ||||||||||||
| Gain on disposition of real estate assets, net | 18,648,525 | 43,582,865 | 23,916,947 | |||||||||||||
| Net income from discontinued operations | 18,684,966 | 42,210,823 | 24,541,499 | |||||||||||||
| Net income | 7,209,633 | 29,021,154 | 1,922,299 | |||||||||||||
| Net income attributable to noncontrolling interest in properties | (107,292 | ) | (9,797,304 | ) | (6,306,178 | ) | ||||||||||
| Net (income) loss attributable to noncontrolling interest in Operating Partnership | (391,968 | ) | (12,223,771 | ) | 10,819,718 | |||||||||||
| Net income attributable to the Company | 6,710,373 | 7,000,079 | 6,435,839 | |||||||||||||
| Preferred dividend | (6,700,775 | ) | (6,700,777 | ) | (6,700,763 | ) | ||||||||||
| Net income (loss) available to common shareholders | $ | 9,598 | $ | 299,302 | $ | (264,924 | ) | |||||||||
| Net loss from continuing operations attributable to the Company per common share, basic and diluted | (13.28 | ) | (29.81 | ) | (17.64 | ) | ||||||||||
| Net income from discontinued operations attributable to the Company per common share, basic and diluted | 13.29 | 30.02 | 17.45 | |||||||||||||
| Net income (loss) available to common shareholders per common share, basic and diluted | 0.01 | 0.21 | (0.19 | ) | ||||||||||||
| Weighted average number of common shares outstanding, basic and diluted | 1,406,196 | 1,406,196 | 1,406,196 | |||||||||||||
