Preferred Apartment Communities, Inc. Reports Results for Fourth Quarter 2021

Total Revenues

$105.7 million for Q4 2021; $451.1 million for the year ended December 31, 2021

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Net Loss Per Share

$(0.31) per share for Q4 2021; $(2.59) per share for the year ended December 31, 2021

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Core FFO per Share*

$0.24 per share for Q4 2021; $1.10 per share for the year ended December 31, 2021

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AFFO Per Share*

$0.18 per share for Q4 2021; $0.93 per share for the year ended December 31, 2021

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Multifamily Same Store Results*

Same-store rental and other property revenues increased 9.6% and same-store net operating income increased 14.8% for Q4 year over year;

Same-store rental and other property revenues increased 5.9% and same-store net operating income increased 7.2% for the full year 2021 over 2020

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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 second quarter 2022

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Two Real Estate Loans and One Land Loan Closed During Fourth Quarter 2021

Aggregate commitment amount of $32.0 million

934 multifamily units added to PAC's acquisition pipeline

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Brookwood Center Office Sale Closed During Fourth Quarter 2021

Total consideration of $55.0 million, net proceeds of $25.1 million

Realized gain on sale of $12.4 million

*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 below.

Preferred Apartment Communities, Inc. (NYSE:APTS) ("we," "our," the "Company," "Preferred Apartment Communities" or "PAC") today reported results for the quarter and year ended December 31, 2021. Unless otherwise indicated, all per share results are reported based on the basic weighted average shares of Common Stock and Class A Units ("Class A Units") of the Preferred Apartment Communities Operating Partnership (our "Operating Partnership") outstanding. See Definitions of Non-GAAP Measures.

"The fourth quarter marked a continuation of our solid operating performance throughout the entirety of 2021 and capped off an exciting and transformational year. For 2021 as a whole, we continued to grow our high quality apartment portfolio and real estate investment loan book while population, job, and income growth across our Sunbelt markets provided an excellent fundamental backdrop for our business. These fundamentals and the quality and vintage of our multifamily portfolio produced strong fourth quarter results, with top line year over year same store revenue growth of 9.6% and year over year same store NOI growth of 14.8%.   Also for the fourth quarter, our same store properties had 22.0% rent growth for new leases and 12.5% for renewals for a blended 17.0% increase. These solid results caused us to end the year at 7.2% same store NOI growth for the full year, above the high end of our full year guidance. This rent growth has continued into January as our new leases are up 17.4% and renewals have increased 12.1% for a blended 14.3% increase," stated Joel Murphy, Preferred Apartment Communities Chairman and Chief Executive Officer.

"Importantly, we achieved key milestones in our corporate simplification efforts that began two years ago, ending 2021 as a focused owner and operator of high quality multifamily and grocery anchored retail properties in suburban Sunbelt markets, operated by our best in class team. Additionally, I'm proud to say we furthered our commitment to the principles of ESG, ensuring that we are responsible partners for our community, the environment and all stakeholders.  Finally, I want to thank our entire team for their hard work and dedication this past year, their collective contributions produced our excellent results."

Conference Call

As announced in a press release on February 22, 2022, as a result of our entering into a definitive agreement with Blackstone Real Estate Income Trust, Inc. ("BREIT"), we have canceled our conference call to discuss our fourth quarter and year ended 2021 earnings.

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 December 31, 2021 decreased approximately $15.1 million, or 12.5%, to $105.7 million from the quarter ended December 31, 2020, due to the absence of revenues from the eight student housing properties that we sold on November 3, 2020 and the eight office properties and one real estate loan investment that we sold during the third and fourth quarters of 2021. The student housing properties contributed approximately $4.5 million, or 3.7% of our total revenues and the disposed office properties and real estate loan investment contributed approximately $18.8 million, or 15.6% of our total revenues for the quarter ended December 31, 2020.

• Our net loss per share was $(0.31) and $(0.77) for the three-month periods ended December 31, 2021 and 2020, respectively. Funds From Operations, or FFO, was $0.19 and $(0.20) per weighted average share of Common Stock and Class A Unit outstanding for the three months ended December 31, 2021 and 2020, respectively. The improvement in FFO per share was driven by:

* Lower deemed dividends due to a lower volume of calls and cash redemptions of our preferred stock during the fourth quarter 2021 versus the fourth quarter 2020 of $0.45 per share;

* Lower operating results as a result of the sale of our student housing and office properties of $(0.21) per share;

* Lower cash dividend requirements on our preferred stock of $0.15 per share;

* Lower revenues from the real estate loan portfolio of $(0.07) per share; and

* Improved multifamily same-store results of $0.04 per share.

• Our Core FFO per share decreased to $0.24 for the fourth quarter 2021 from $0.31 for the fourth quarter 2020, due to:

* Lower operating results as a result of the sale of our student housing and office properties of $(0.21) per share;

* Reduced cash dividend requirements on our preferred stock of $0.15 per share;

* Lower revenues from the real estate loan portfolio of $(0.07) per share; and

* Improved multifamily same-store results of $0.04 per share.

• Our AFFO per share decreased to $0.18 for the fourth quarter 2021 from $0.25 for the fourth quarter 2020 due to the four factors above driving the Core FFO decrease, and also:

* Lower accrued interest income received on real estate loans of $(0.07);

* Lower noncash loan interest income of $0.02; and

* Decreased noncash amortization of deferred revenues, straight-line rent adjustments, above and below market leases and tenant lease inducements of $0.05.

• Our Core FFO payout ratio to Common Stockholders and Unitholders was approximately 65.3% and our Core FFO payout ratio to our preferred stockholders was approximately 72.8% for the full year 2021. Our Core FFO payout ratio to Common Stockholders and Unitholders was approximately 74.0% and our Core FFO payout ratio to our preferred stockholders was approximately 68.3% for the fourth quarter 2021. ^(A)

• Our AFFO payout ratio to Common Stockholders and Unitholders was approximately 77.6% and our AFFO payout ratio to our preferred stockholders was approximately 76.0% for the full year 2021. Our AFFO payout ratio to Common Stockholders and Unitholders was approximately 99.6% and our AFFO payout ratio to our preferred stockholders was approximately 74.3% for the fourth quarter 2021.

• As of December 31, 2021, our total assets were approximately $3.6 billion, a decrease from our total assets of approximately $4.3 billion at December 31, 2020, that resulted primarily from the sale of eight office properties and one real estate loan investment that sold for approximately $780 million during the third and fourth quarter 2021.

^(A) We calculate the Core FFO and AFFO payout ratios to Common Stockholders as the ratio of Common Stock dividends and distributions to Core FFO and AFFO. We calculate the Core FFO and AFFO payout ratios to preferred stockholders as the ratio of Preferred Stock dividends to the sum of Preferred Stock dividends and Core FFO and AFFO. Since our operations resulted in a net loss from continuing operations for the periods presented, a payout ratio based on net loss is not calculable. See Definitions of Non-GAAP Measures.

Operational

• Our multifamily communities' same-store rental and other property revenues increased 9.6%, same-store property operating expenses increased 2.7% and same-store net operating income increased 14.8% for the quarter ended December 31, 2021 versus 2020. Our same-store multifamily communities include all our multifamily communities except Artisan at Viera, The Menlo, The Blake, Parkside at the Beach, Horizon at Wiregrass, The Ellison, Alleia at Presidio, The Anson, The Kingson, and Chestnut Farm, all of which were acquired in the last 29 months. For the year ended December 31, 2021, same-store rental and other property revenues increased 5.9%, same-store property operating expenses increased 4.2% and same-store net operating income increased 7.2% versus 2020.

• Our rental rates for our multifamily same-store properties for new and renewal leases increased 22.0% and 12.5% respectively and 17.0% blended for fourth quarter 2021 as compared to the expiring leases, excluding shorter-term leases of six months or less.

• Our rental rates for our multifamily same-store properties for new and renewal leases increased 17.4% and 12.1% respectively and 14.3% blended for January 2022 as compared to the expiring leases, excluding shorter-term leases of two months or less.

• As of December 31, 2021, the average age of our multifamily communities was approximately 6.3 years, which we believe is the youngest in the public multifamily REIT industry.

• As of December 31, 2021, all of our owned multifamily communities had achieved stabilization except for The Kingson and Chestnut Farm, which were acquired during the third quarter 2021. 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 96.2% for the three-month period ended December 31, 2021 from 95.7% for the three-month period ended December 31, 2020 but decreased from 97.1% for the three-month period ended September 30, 2021.

• Our average recurring rental revenue collections were approximately 99.0% for multifamily communities and 99.0% for grocery-anchored retail properties for the fourth quarter 2021.

• Effective December 10, 2021, we elected Daphne Bryson Jackson as an additional independent member of our board of directors.

Financing and Capital Markets

• As of December 31, 2021, approximately 96.1% of our permanent property-level mortgage debt has fixed interest rates and approximately 0.9% has 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 3.32% for multifamily communities, 4.35% for office properties, 3.90% for grocery-anchored retail properties and 3.54% in the aggregate.
  
   
• During the fourth quarter 2021, we issued and sold an aggregate of 9,518 shares of preferred stock and redeemed or called an aggregate of 23,684 shares of preferred stock, resulting in a net reduction of 14,166 outstanding shares of preferred stock, for a net redemption of approximately $14.2 million.
  
   
• During the fourth quarter 2021, we issued and sold an aggregate of 49,049 shares of common stock at an average price of $12.43 under the 2019 ATM Offering.
  
   
• At December 31, 2021, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 57.5%.
  
   
• At December 31, 2021, we had $200.0 million available to be drawn on our revolving line of credit.
  
   
• Our outstanding shares of Preferred Stock have decreased over the last three years, as summarized in the following chart:

Significant Transactions

• On October 14, 2021, we closed on a real estate loan investment of up to approximately $16.6 million supporting a 337-unit second phase of The Menlo multifamily community in Jacksonville, Florida.

• On October 21, 2021, we completed a supplemental financing on (i) our Retreat at Greystone multifamily community in the amount of approximately $7.3 million, that bears interest of 3.47% per annum and matures on December 1, 2024, and (ii) our Aldridge at Town Village multifamily community in the amount of approximately $3.7 million, that bears interest of 3.46% per annum and matures on November 1, 2024.

• On November 1, 2021, we repaid the mortgage debt in the amount of $27.4 million supporting our Champions Village grocery-anchored shopping center, and on November 2, 2021, we financed our Woodstock Crossing grocery-anchored shopping center with a $5.3 million mortgage bearing interest at a fixed rate of 2.89% per annum that matures on December 1, 2026.

• On November 3, 2021, we closed on a real estate loan investment of up to $9.1 million, in support of a 246-unit multifamily community located in the Atlanta, Georgia MSA.

• On November 12, 2021, we closed on the sale of our Brookwood Center office building located in Birmingham, Alabama and in doing so, recognized a gain of $12.4 million and collected net proceeds of approximately $25.1 million.

• On December 8, 2021, we financed our Fairview Market grocery-anchored shopping center with a $7.1 million mortgage bearing interest at a fixed rate of 2.87% per annum that matures on December 15, 2028.

• On December 17, 2021, we closed on a land acquisition bridge loan of up to $6.3 million, in support of a 351-unit multifamily community located in the Charleston, South Carolina MSA.

• Effective December 21, 2021, we entered into a $2.0 million equity commitment to partially finance the development and construction of a grocery-anchored shopping center to be located in the Charleston, South Carolina MSA. We will earn a fixed return of 12% per annum over an anticipated investment life of between 24 and 36 months from the development project and we will have a five year right of first offer to purchase the interests of the other investors in the project.

Subsequent to Quarter End

• On February 11, 2022, we closed on a real estate loan investment of up to $16.7 million, in support of a 286-unit multifamily community located in the Orlando, Florida MSA.
  
   
• On February 24, 2022, our board of directors declared a quarterly dividend on our Common Stock of $0.175 per share, payable on April 14, 2022 to stockholders of record on March 15, 2022.
  
   
• Between January 1, 2022 and February 25, 2022, we issued no shares of Common Stock under the 2019 ATM Offering.
  
   
• Between January 1, 2022 and February 10, 2022, we issued 3,167 shares of Series M1 Preferred Stock and collected net proceeds of approximately $3.1 million after commissions and fees. During the same period, we redeemed 9,453 shares of Series A Preferred Stock, 204 mShares, 212 shares of Series A1 Preferred Stock, and 267 shares of Series M1 Preferred Stock.
  
   
• 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 it increases in steps each three-month period up to 11.0% per annum. As of January 31, 2022, the property's physical occupancy was 91.1%.
  
   
• On February 15, 2022, we refinanced our Chestnut Farm multifamily community with permanent mortgage financing in the amount of approximately $52.3 million, that bears interest at a rate of 3.25% and matures on March 1, 2032.
  
   
• On February 16, 2022, we entered into a definitive agreement by which Blackstone Real Estate Income Trust, Inc. ("BREIT") will acquire all our outstanding shares of our common stock for $25.00 in cash. Once and if the acquisition is completed, the Company will cease to be a publicly-traded company on the New York Stock Exchange. The holders of each series of our shares of preferred stock will receive the $1,000 per share liquidation preference for each share plus accrued but unpaid dividends. The transaction has been unanimously approved by our Board of Directors and is expected to close in the second quarter of 2022, although there is no guarantee that it will occur by that date, or at all, and the transaction is subject to approval by our stockholders and other customary closing conditions.
  
   
• On February 25, 2022, the Company 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 $17.2 million, in support of a 242-unit multifamily community located in the Naples, Florida MSA.
  
   
• Between January 1, 2022 and February 25, 2022, we issued 3,358,780 shares of Common Stock from exercises of our outstanding Warrants.

2022 Guidance

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

Real Estate Assets

At December 31, 2021, our portfolio of owned real estate assets and potential additions from purchase options we held from our real estate loan investments 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 the multifamily communities listed below, comprising an aggregate 9,222 units, or 76.5% of our multifamily units.

Same-store net operating income is a non-GAAP measure that is most directly comparable to net income (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 October 28, 2021, our board of directors declared a quarterly dividend on our Common Stock of $0.175 per share, which was paid on January 14, 2022 to stockholders of record as of December 15, 2021. 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 fourth quarter 2021, which was paid on January 14, 2022 to all Class A Unit holders of record as of December 15, 2021.

Monthly Dividends on Preferred Stock

We declared monthly dividends of $5.00 per share on our Series A Preferred Stock, which totaled approximately $22.1 million for the fourth quarter 2021 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 fourth quarter 2021 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 fourth quarter 2021. 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 $605,000 on our Series M1 Preferred Stock for the fourth quarter 2021. 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, 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 discuss 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 fourth quarter 2021. 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.

See Notes to Reconciliation of FFO, Core FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders.