Preferred Apartment Communities, Inc. Reports Results for First Quarter 2022

Total Revenues

$104.9 million for Q1 2022; down 9.4% from Q1 2021 due primarily to absence of $18.7 million of office property revenues

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Net Loss per Share

$(0.62) per share for Q1 2022; $0.11 per share improvement over Q1 2021

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Core FFO per Share*

$0.19 per share for Q1 2022 versus $0.25 per share for Q1 2021

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AFFO per Share*

$0.15 per share for Q1 2022 versus $0.18 per share for Q1 2021

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Multifamily Same Store Results*

Same-store rental and other property revenues increased 11.9% and same-store net operating income increased 15.9% for Q1 2022 versus Q1 2021

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Two Real Estate Loans and One Preferred Equity Investment Closed During First Quarter 2022

Aggregate commitment amount of $48.1 million

780 multifamily units added to PAC's acquisition pipeline

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One Multifamily Community Acquired During First Quarter 2022

Lirio at Rafina, a 280-unit community located in Orlando, Florida

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PAC Enters Multifamily Development Space

PAC to develop a 262-unit community in Wilmington, North Carolina, will invest $14.8 million in equity to capitalize the project

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PAC Enters into a Definitive Agreement with Blackstone Real Estate Income Trust, Inc.

Cash transaction of $25 per share of Common Stock Closing expected during Q2 2022

*Core FFO and AFFO results are per weighted-average share and Class A OP Unit outstanding. Core FFO, AFFO and same-store net operating income are non-GAAP measures that are defined herein.

Preferred Apartment Communities, Inc. (NYSE:APTS) ("we," "our," the "Company," "Preferred Apartment Communities" or "PAC") today reported results for the quarter ended March 31, 2022. Unless otherwise indicated, all per share results are reported based on the basic weighted average shares of our common stock, par value $0.01 per share ("Common Stock"), Class A Units ("Class A Units") of the Preferred Apartment Communities Operating Partnership (our "Operating Partnership") outstanding. See Definitions of Non-GAAP Measures.

Conference Call

As a result of our entering into a definitive merger agreement with affiliates of Blackstone Real Estate Income Trust, Inc. ("BREIT"), we will not have a conference call to discuss our first quarter ended 2022 earnings. For more details on the merger, see our 8-K filed on February 16, 2022.

For Further Information

Paul Cullen

Executive Vice President-Investor Relations

Chief Marketing Officer

[email protected]

770-818-4144

Operating Results

Our operating results are presented below.

Financial

• Our total revenues for the quarter ended March 31, 2022 decreased approximately $10.8 million, or 9.4%, to $104.9 million from the quarter ended March 31, 2021, due primarily to the absence of revenues from the eight office properties and one real estate loan investment that we sold during the third and fourth quarters of 2021. The disposed office properties contributed approximately $18.7 million, or 16.1% of our total revenues for the quarter ended March 31, 2021.

• Our net loss per share was $(0.62) and $(0.73) for the three-month periods ended March 31, 2022 and 2021, respectively. Funds From Operations, or FFO, was $0.05 and $0.16 per weighted average share of Common Stock and Class A Unit outstanding for the three months ended March 31, 2022 and 2021, respectively. The decline in FFO per share was driven by:

* Lower operating results following the sale of our office properties of $(0.17) per share;

* Lower cash dividend requirements on our preferred stock of $0.14 per share;

* Lower revenues from our real estate loan portfolio of $(0.10) per share;

* Merger-related costs incurred of $(0.09) per share;

* Improved property operating performance, lower interest expense and other items of $0.06 per share; and

* Deemed dividends due to calls and cash redemptions of our preferred stock of $0.05 per share.

• Our Core FFO per share decreased to $0.19 for the first quarter 2022 from $0.25 for the first quarter 2021, due to:

* Lower operating results following the sale of our office properties of $(0.17) per share;

* Lower cash dividend requirements on our preferred stock of $0.14 per share;

* Lower revenues from our real estate loan portfolio of $(0.10) per share; and

* Improved property operating performance, lower interest expense and other items of $0.06 per share.

• Our AFFO per share decreased to $0.15 for the first quarter 2022, from $0.18 for the first quarter 2021, due to:

* Lower operating results following the sale of our office properties of $(0.17) per share;

* Lower cash dividend requirements on our preferred stock of $0.14 per share;

* Lower revenues from our real estate loan portfolio of $(0.10) per share;

* Improved property operating performance, lower interest expense and other items of $0.06 per share; and

* Lower recurring capital expenditures of $0.03 per share.

• Our Core FFO payout ratio to Common Stockholders and Unitholders was approximately 102.1% and our Core FFO payout ratio to our preferred stockholders was approximately 71.4% for the first quarter 2022. ^(A)

• Our AFFO payout ratio to Common Stockholders and Unitholders was approximately 126.9% and our AFFO payout ratio to our preferred stockholders was approximately 75.6% for the first quarter 2022.

Operational

• Our multifamily communities' same-store rental and other property revenues increased 11.9%, same-store property operating expenses increased 6.3% and same-store net operating income increased 15.9% for the quarter ended March 31, 2022 versus 2021. Our same-store multifamily communities include 10,442 units, or 84.7% of our aggregate 12,322 units in our multifamily community portfolio.

• Our rental rates for our multifamily same-store properties for new and renewal leases increased 16.6% and 11.9%, respectively, and 14.1% blended for first quarter 2022 as compared to the expiring leases, excluding shorter-term leases of two months or less.

• Our rental rates for our multifamily same-store properties for new and renewal leases increased 15.7% and 11.9%, respectively, and 13.7% blended for April 2022 as compared to the expiring leases, excluding shorter-term leases of two months or less.

• As of March 31, 2022, the average age of our multifamily communities was approximately 6.6 years, which we believe is the youngest in the public multifamily REIT industry.

• As of March 31, 2022, all of our owned multifamily communities had achieved stabilization except for Lirio at Rafina, which was acquired during the first quarter 2022. We define stabilization as reaching 93% occupancy for all three months within a single quarter.

• The average physical occupancy of our same-store multifamily communities increased to 96.3% for the three-month period ended March 31, 2022 from 95.8% for the three-month period ended March 31, 2021 but was unchanged from the three-month period ended December 31, 2021.

Financing and Capital Markets

• As of March 31, 2022, approximately 98.3% of our permanent property-level mortgage debt had fixed interest rates and approximately 0.9% had 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 3.37% for multifamily communities, 4.35% for our remaining office properties, 3.91% for grocery-anchored retail properties and 3.57% in the aggregate.

• During the first quarter 2022, we issued and sold an aggregate of 3,167 shares of preferred stock prior to February 10, 2022, when we ceased issuing new shares of preferred stock. We redeemed or called an aggregate of 21,189 shares of preferred stock, resulting in a net reduction of 18,022 outstanding shares of preferred stock, for a net cash outflow of approximately $17.7 million.

• During the first quarter 2022, warrants were exercised by the holders at a weighted average price of $19.68 per share and, as a result, we collected approximately $194.0 million from the issuance of an aggregate of 9,858,480 shares of Common Stock. We issued no shares of Common Stock under the 2019 ATM Offering during the first quarter 2022.

• At March 31, 2022, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 55.8%.

• At March 31, 2022, we had no outstanding balance and $200.0 million available to be drawn on our revolving line of credit.

• Our outstanding shares of preferred stock have decreased since January 1, 2019, as summarized in the following chart:

Significant Transactions

• On February 10, 2022, we amended our real estate loan investment supporting The Platform, a 551-unit multifamily community located in San Jose, California. The maturity date of the instrument was extended to August 13, 2022 and a second extension option of December 31, 2022 was added. The all-in interest rate was reduced to 9.5% per annum beginning on the original maturity date of February 13, 2022 and increases in steps each three-month period up to 11.0% per annum on November 14, 2022. As of April 30, 2022, the property's physical occupancy was 92.6%.

• On February 11, 2022, we closed on a real estate loan investment of up to approximately $16.7 million supporting a 286-unit multifamily community in the Orlando, Florida MSA.

• On February 15, 2022, we refinanced our Chestnut Farm multifamily community with permanent mortgage financing in the amount of approximately $52.3 million, which bears interest at a rate of 3.25% and matures on March 1, 2032.

• As previously announced, on February 16, 2022, we entered into an agreement and plan of merger (the "Merger Agreement") with Pike Parent LLC ("Parent"), Pike Merger Sub I LLC ("Merger Sub I"), Pike Merger Sub II LLC ("Merger Sub II"), Pike Merger Sub III LLC ("Merger Sub III" and, together with Parent, Merger Sub I and Merger Sub II, the "Parent Parties"), the Operating Partnership and PAC Operations, LLC ("Operations"). The Parent Parties are affiliates of BREIT, which is an affiliate of Blackstone Inc. Pursuant to the Merger Agreement, (i) Merger Sub II will merge with and into the Operating Partnership (the "Partnership Merger") with the Operating Partnership being the surviving entity and immediately following the consummation of the Partnership Merger, (ii) Operations will merge with and into Merger Sub III (the "Operations Merger") with Merger Sub III being the surviving entity and immediately following the Operations Merger, (iii) the Company will merge with and into Merger Sub I (the "Company Merger" and, together with the Partnership Merger and the Operations Merger, the "Mergers") with Merger Sub I being the surviving entity. Pursuant to the Merger Agreement, (i) each share of Common Stock that is issued and outstanding immediately prior to the Mergers will be automatically cancelled and converted into the right to receive $25.00 in cash and (ii) each share of preferred stock that is issued and outstanding immediately prior to the Mergers will be automatically cancelled and converted into the right to receive $1,000 in cash, plus any accrued but unpaid dividends, if any, to and including the closing date of the Mergers. Notwithstanding the forgoing, any shares of Common Stock or preferred stock held by the Company or any subsidiary of the Company or by the Parent Parties or any of their respective subsidiaries, if any, will no longer be outstanding and will automatically be retired and will cease to exist, and no consideration will be paid in connection with the Mergers.

The Mergers are subject to customary closing conditions, including approval by the Company's common stockholders at a special meeting to be held on June 7, 2022. The Mergers are expected to close on the third business day after the conditions to closing are satisfied or waived, including approval of the Company's stockholders of the Mergers. The Company can provide no assurances regarding whether the Mergers will close as expected during the second quarter of 2022, or at all. The board of directors of the Company has unanimously approved the Merger Agreement and has recommended approval of the Mergers by the Company's common stockholders.

• On February 25, 2022, we closed on the acquisition of Lirio at Rafina, a 280-unit multifamily community located in the Orlando, Florida MSA.

• On February 28, 2022, we closed on a real estate loan investment of up to approximately $17.2 million supporting a 242-unit multifamily community in Naples, Florida.

• On March 2, 2022, we closed on a 65% interest in a $65.0 million joint venture project to develop The Helmsman, a 262-unit multifamily community to be located in Wilmington, North Carolina. This transaction represents our entry into the multifamily development space.

• On March 31, 2022, we closed on a preferred equity investment of up to approximately $14.3 million supporting The Shoals, a 252-unit multifamily community in Greenville, South Carolina. The investment will pay a fixed return of 12.0% per annum and has a term of 42 months, with a one-year extension option.

Subsequent to Quarter End

• On April 5, 2022, we sold our Champions Village grocery-anchored shopping center in Houston, Texas for $45.0 million and recorded a gain on the sale of approximately $1.9 million.

• On April 20, 2022, we sold our Sweetgrass Corner grocery-anchored shopping center in Charleston, South Carolina for $17.0 million and recorded a gain on the sale of approximately $4.3 million.

• Between April 1, 2022 and April 30, 2022, the Company issued 1,451,700 shares of Common Stock at an average price of $19.70 per share from exercises of Warrants and collected approximately $28.6 million.

• On April 12, 2022, our Vintage Horizon West real estate loan investment was repaid in full.

2022 Guidance

Due to the pending merger with affiliates of BREIT, we are not issuing guidance at this time with respect to our 2022 financial outlook.

Real Estate Assets

At March 31, 2022, our portfolio of owned real estate assets and potential additions from purchase options we held from our real estate loan investments (and one multifamily development project currently under construction) consisted of:

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 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 held for sale as of the end of the reporting period.

For the periods presented, same-store operating results consist of the operating results of our multifamily communities, comprising an aggregate 10,442 units, or 84.7% of our multifamily units.

Same-store net operating income is a non-GAAP measure that is most directly comparable to net loss, as shown in the reconciliation below. See Definitions of Non-GAAP Measures.

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

On February 24, 2022, our board of directors declared a quarterly dividend on our Common Stock of $0.175 per share, that was paid on April 14, 2022 to stockholders of record on March 15, 2022. 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 first quarter 2022, which was paid on April 14, 2022 to all Class A Unit holders of record as of March 15, 2022. The Merger Agreement prohibits us from declaring additional dividends on our Common Stock prior to the closing of the Mergers.

Monthly Dividends on Preferred Stock

We declared monthly dividends of $5.00 per share on our Series A Preferred Stock, which totaled approximately $21.2 million for the first quarter 2022 and represents a 6% annual yield. We declared monthly dividends of $5.00 per share on our Series A1 Preferred Stock, which totaled approximately $3.7 million for the first quarter 2022 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 first quarter 2022. 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 $723,000 on our Series M1 Preferred Stock for the first quarter 2022. 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: redemptions of Series A Preferred Stock, potential additions of properties from purchase options and rights of first offer from our real estate loan investments, development properties, 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; (c) risks related to the proposed acquisition by BREIT, including the possibility that the consummation of the transaction could be delayed or not completed, and the effect of the announcement or pendency of the transaction on our business; (d) PAC's ability to make distributions to its stockholders in the future and (e) 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, 2021 that was filed with the SEC on February 28, 2022, which includes a discussion of 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 first quarter 2022. While the impacts of COVID-19 and its variants are continuing, 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. We are continuing to monitor the spread and impact of the variants of COVID-19 as well as vaccination rates in our markets.

Real Estate Loan Investments

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

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. Option purchase prices are generally the market value of the property, as negotiated and agreed upon by the purchasing and selling parties and are derived utilizing market cap rates. As of March 31, 2022, potential property acquisitions and units from projects in our real estate loan investment portfolio consisted of:

Mortgage Indebtedness

As of March 31, 2022, our mortgage note principal repayment obligations were:

Multifamily Communities

As of March 31, 2022, our multifamily community portfolio consisted of the following properties: