Berkshire Income Realty Announces Operating Results and FFO for the Period Ended September 30, 2009
http://www.businesswire.com/news/home/20091116006667/en
BOSTON--(Business Wire)--
Berkshire Income Realty, Inc. (AMEX:"BIR_pa"), (AMEX:"BIRPRA"), (AMEX:"BIR-A"),
(AMEX:"BIR.PR.A") ("Berkshire" or the "Company") reported its results for the
periods ended September 30, 2009. Financial highlights for the three and
nine-month periods include:
The Company`s Funds from Operations ("FFO") for the three and nine months ended
September 30, 2009 were $2,151,361 and $2,123,610, respectively, as compared to
$2,071,467 and $5,411,032, respectively, for the three and nine months ended
September 30, 2008. While FFO for the three months ended September 30, 2009 were
slightly higher than the FFO for the three months ended September 30, 2008, FFO
for the nine months ended September 30, 2009 decreased by $3,287,422 from the
comparable nine-month period of 2008. The decrease in FFO is due primarily to
the Company`s impairment adjustment on its investment in the Leggat McCall
Hingham Mezzanine Loan LLC (the "Mezzanine Loan LLC") pursuant to the FASB
Accounting Standards Codification ("ASC") 325-20 (Equity Method of Accounting)
and changes proscribed by ASC 805-10, (Business Combinations), which alters the
way the Company is required to account for transaction costs associated with the
acquisition of a property and the payment of damages resulting from a
contractual dispute. During the nine months ended September 30, 2009, the
Company recorded an impairment loss of $1,075,192 on its investment in the
Mezzanine Loan LLC, expensed $1,183,299 in transaction costs related to the
acquisition of Glo Apartments which are required to be expensed under ASC
805-10, when historically these type of costs would have been capitalized and
recorded damages of $747,992 related to the unsuccessful appeal of a contractual
dispute in which the lower court ruled against the Company. There were no
comparable impairment adjustments, transaction cost expenses or damages recorded
in the nine-month period ended September 30, 2008. Adjusted Net Operating
Income, which excludes these acquisition costs ("Adjusted NOI"), for the three
months ended September 30, 2009 was $9,828,439 as compared to $7,888,347 for the
same period ended September 30, 2008, an increase of $1,940,092 or approximately
24.6%. Adjusted NOI for the nine months ended September 30, 2009 was $26,929,481
as compared to $23,712,418 for the nine months ended September 30, 2008, an
increase of $3,217,063 or approximately 13.6%. The increase was due to growth in
rental revenue during the period from newly acquired or developed properties as
well as net gains in rental revenue from existing properties in the portfolio.
These gains were partially offset by operating expenses of the newly acquired
properties as well as the unusual items previously discussed.
- For the three and nine months ended September 30, 2009, Berkshire reported net
income, before depreciation (including depreciation reported as part of
discontinued operations) and gain on sale of real estate assets ("Adjusted Net
Income (Loss)") of $1,937,550 and $938,278, respectively, as compared to
Adjusted Net Income (Loss) of $1,822,878 and $5,668,488, respectively, for the
three and nine months ended September 30, 2008. The decrease in Adjusted Net
Income (Loss) for the nine months ended September 30, 2009 was due primarily to
changes in the accounting for acquisition transaction costs, increased losses
from equity investments and increases in interest expense due to increased debt
levels in the comparative periods.
- 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, adjusted net income (loss) before depreciation (including
depreciation reported as part of discontinued operations) and gain on sale of
real estate assets, and Adjusted NOI is set forth on pages 2 and 3 of this press
release.
- During this challenging economic period, in which the national economy has
felt the effects of a prolonged recession, the Company has attempted to maintain
an investment strategy focused on the renovation and rehabilitation of
properties previously acquired and to identify assets for acquisition which the
Company believes possess the potential to realize incremental gains in value
from significant renovations. Two properties currently undergoing rehabilitation
continue to realize improved operating results derived from increased rent
levels from both new tenants as well as existing tenants who choose to move into
a newly renovated unit on the same property. Due to the challenges of the
economic climate, the Company evaluated previously approved renovation projects
and in some cases decided to slow or delay those projects in an effort to
maintain a high level of occupancy and maximize rental revenues at those
properties. The Company`s efforts have been successful, as year-to-date
occupancy averaged over 93% for the year-to-date period ended September 30,
2009. When economic conditions improve, the Company will reevaluate
rehabilitation projects currently on hold and will continue to consider
additional properties contemplated in the Company`s acquisition strategy.
David Quade, President and Chief Financial Officer of the Company, comments,
"The efforts of the Company during the nine months ended September 30, 2009,
which saw a continuation of challenging economic operating conditions, have been
focused on managing property operations to maximize operating margins and
maintain property values. Management has emphasized resident retention in an
effort to maintain high occupancy levels at properties throughout the portfolio
while maximizing rental revenue. Additionally, operating expenses have been
analyzed in an effort to reduce operating expense levels and to supplement the
benefits realized from the elevated occupancy levels which averaged over 93%
during the period. These operating initiatives have been successful to date and
we are confident that with continued improvement in the national economy, will
contribute to the Company`s continued success in the future."
Non-GAAP Financial Measures
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 Rule 101 of Regulation G and Item 10(e) of Regulation S-K promulgated
by the Securities and Exchange Commission. 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, 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 (loss) determined in
accordance with GAAP to FFO, a non-GAAP financial measure, for the three and
nine months ended September 30, 2009 and 2008:
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
Net income (loss) $ (6,143,768 ) $ (5,961,188 ) $ (23,145,399 ) $ 8,343,087
Add:
Depreciation of real property 7,077,324 6,745,306 21,089,283 20,022,211
Depreciation of real property included - - - 797,039
in results of discontinued operations
Amortization of acquired in-place 113,416 128,987 757,732 245,468
leases and tenant relationships
Equity in loss of Multifamily Venture 1,046,676 1,066,063 3,257,561 2,615,887
Limited Partnership
Funds from operations of Multifamily 299,612 275,457 752,287 1,043,066
Venture Limited Partnership
Less:
Noncontrolling interest in properties (241,899 ) (179,567 ) (587,854 ) (620,237 )
share of funds from operations
Gain on disposition of real estate assets - (3,591 ) - (27,035,489 )
Funds from Operations $ 2,151,361 $ 2,071,467 $ 2,123,610 $ 5,411,032
FFO for the nine months ended September 30, 2009 decreased as compared to FFO
for the nine-month period ended September 30, 2008. The decrease in FFO is due
primarily to changes in the accounting for transaction costs under ASC 805-10
and the write-off of the Company`s investment in the Mezzanine Loan LLC in the
amount of $1,075,192. ASC 805-10 requires that costs associated with acquisition
transactions be expensed in the period incurred. Prior to the implementation of
ASC 805-10, transaction costs were capitalized and included in the depreciable
basis of acquired properties. Transaction costs for the acquisition of Glo
Apartments totaled $1,183,299, which were included in General and Administrative
expense on the Consolidated Statement of Operations. Additionally, payment of a
judgment against the Company of $747,992, also contributed to the decrease in
FFO in the comparable nine month periods.
Other Non-GAAP Financial 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. Net income (loss), prior to charges for
depreciation and gain on the sale of real estate assets, allows for comparison
of operating results absent the significant non-cash charge included in net
income determined in accordance with GAAP, and Adjusted NOI provides a direct
measure of the operating results of the Company`s multifamily apartment
communities.
The following table represents the reconciliation of net income (loss)
determined in accordance with GAAP to net income (loss), before depreciation
(including depreciation reported as part of discontinued operations) and gain on
disposition of real estate assets, a non-GAAP financial measure, presented for
the three and nine months ended September 30, 2009 and 2008:
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
Net income (loss) $ (6,143,768 ) $ (5,961,188 ) $ (23,145,399 ) $ 8,343,087
Add:
Depreciation 8,081,318 6,945,770 24,083,677 20,798,984
Depreciation - Included in discontinued operations - 841,887 - 3,561,906
Less:
Gain on disposition of real estate assets - (3,591 ) - (27,035,489 )
Adjusted net income (loss), before depreciation (including depreciation reported as part of discontinued operations) and gain on sale of real estate assets $ 1,937,550 $ 1,822,878 $ 938,278 $ 5,668,488
The following table represents the reconciliation of net income (loss)
determined in accordance with GAAP to Adjusted NOI, a non-GAAP financial
measure, for the three and nine months ended September 30, 2009 and 2008:
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
Net income (loss) $ (6,143,768 ) $ (5,961,188 ) $ (23,145,399 ) $ 8,343,087
Add:
Depreciation 8,081,318 6,945,770 24,083,677 20,798,984
Interest 6,732,894 5,640,983 19,684,864 17,036,620
Discontinued operations (2,097 ) 114,424 160,454 1,757,053
Amortization of acquired in-place leases and tenant relationships 113,416 128,987 757,732 245,468
Equity in loss of Multifamily Venture Limited Partnership 1,046,676 1,066,063 3,257,561 2,615,887
Equity in loss (income) of Mezzanine Loan Limited Liability Company - (43,101 ) 947,293 (49,192 )
Less:
Gain on disposition of real estate assets - (3,591 ) - (27,035,489 )
Net operating income 9,828,439 7,888,347 25,746,182 23,712,418
Add:
Acquisition transaction costs expensed pursuant to ASC 805-10 (SFAS 141R) - - 1,183,299 -
Adjusted net operating income $ 9,828,439 $ 7,888,347 $ 26,929,481 $ 23,712,418
The Company
The Company is a REIT whose objective is to acquire, operate, and rehabilitate
multifamily apartment communities. The Company owns interests in twenty-six such
multifamily apartment communities, of which six are located in the
Baltimore/Washington, D.C. metropolitan area, five are located in Virginia, four
are located in Houston, Texas, two are located in Dallas, Texas, two are located
in the Chicago, Illinois area and one is located in each of Austin, Texas,
Charlotte, North Carolina, Atlanta, Georgia, Sherwood, Oregon, Tampa, Florida,
Philadelphia, Pennsylvania and Los Angeles, California.
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 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,
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 Value Fund II, 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, 2008 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 follow--
BERKSHIRE INCOME REALTY, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30, December 31,
2009 2008
ASSETS
Multifamily apartment communities, net of accumulated depreciation of $160,666,556 and $136,678,464, respectively $ 446,954,992 $ 419,002,572
Cash and cash equivalents 10,660,889 24,227,615
Cash restricted for tenant security deposits 1,876,309 1,851,400
Cash restricted other 12,621,013 -
Replacement reserve escrow 2,855,457 5,952,952
Prepaid expenses and other assets 10,963,039 9,314,446
Investment in Multifamily Venture Limited Partnership 12,167,849 15,425,410
Investment in Mezzanine Loan Limited Liability Company - 947,293
Acquired in place leases and tenant relationships, net of accumulated amortization of $1,038,071 and $888,254, respectively 232,008 388,935
Deferred expenses, net of accumulated amortization of $1,772,593 and $1,244,326, respectively 3,572,591 3,306,807
Total assets $ 501,904,147 $ 480,417,430
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable $ 482,369,963 $ 432,013,999
Due to affiliates, net 2,117,453 2,291,250
Dividend and distributions payable 837,607 837,607
Accrued expenses and other liabilities 10,414,556 11,724,250
Tenant security deposits 1,898,230 1,800,105
Total liabilities 497,637,809 448,667,211
Commitments and contingencies (Note 9) - -
Equity:
Noncontrolling interest in properties 707,292 293,650
Noncontrolling interest in Operating Partnership (27,230,771 ) -
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 September 30, 2009 and December 31, 2008, 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 September 30, 2009 and December 31, 2008, respectively - -
Class B common stock, $.01 par value, 5,000,000 shares authorized, 1,406,196 issued and outstanding at September 30, 2009 and December 31, 2008, respectively 14,062 14,062
Excess stock, $.01 par value, 15,000,000 shares authorized, 0 shares issued and outstanding at September 30, 2009 and December 31, 2008, respectively - -
Accumulated deficit (39,435,075 ) (38,768,323 )
Total equity 4,266,338 31,750,219
Total liabilities and equity $ 501,904,147 $ 480,417,430
BERKSHIRE INCOME REALTY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
Revenue:
Rental $ 18,978,189 $ 16,329,406 $ 55,152,551 $ 47,991,601
Interest 10,347 144,809 92,019 507,891
Utility reimbursement 430,504 333,257 1,215,602 1,016,519
Other 1,028,281 652,291 2,658,964 2,022,667
Total revenue 20,447,321 17,459,763 59,119,136 51,538,678
Expenses:
Operating 4,941,356 4,357,738 14,944,595 13,122,757
Maintenance 1,358,994 1,253,946 3,643,027 3,600,259
Real estate taxes 2,133,677 2,050,884 6,651,627 5,648,965
General and administrative 990,714 812,956 4,576,468 2,198,568
Management fees 1,194,141 1,095,892 3,557,237 3,255,711
Depreciation 8,081,318 6,945,770 24,083,677 20,798,984
Interest 6,732,894 5,640,983 19,684,864 17,036,620
Amortization of acquired in-place leases and tenant relationships 113,416 128,987 757,732 245,468
Total expenses 25,546,510 22,287,156 77,899,227 65,907,332
Loss before equity in loss of Multifamily Venture Limited Partnership, Mezzanine Loan Limited Liability Company and loss from discontinued operations (5,099,189 ) (4,827,393 ) (18,780,091 ) (14,368,654 )
Equity in loss of Multifamily Venture Limited Partnership (1,046,676 ) (1,066,063 ) (3,257,561 ) (2,615,887 )
Equity in income (loss) of Mezzanine Loan Limited Liability Company - 43,101 (947,293 ) 49,192
Loss from continuing operations (6,145,865 ) (5,850,355 ) (22,984,945 ) (16,935,349 )
Discontinued operations:
Income (loss) from discontinued operations 2,097 (114,424 ) (160,454 ) (1,757,053 )
Gain on disposition of real estate estates - 3,591 - 27,035,489
Income (loss) from discontinued operations 2,097 (110,833 ) (160,454 ) 25,278,436
Net income (loss) (6,143,768 ) (5,961,188 ) (23,145,399 ) 8,343,087
Net (income) loss attributable to noncontrolling interest in properties 26,899 (204,270 ) 273,465 (598,302 )
Net (income) loss attributable to noncontrolling interest in Operating Partnership 7,605,835 (976,100 ) 27,230,771 (12,689,300 )
Net income (loss) attributable to Parent Company 1,488,966 (7,141,558 ) 4,358,837 (4,944,515 )
Preferred dividend (1,675,197 ) (1,675,143 ) (5,025,589 ) (5,025,539 )
Net loss available to common shareholders $ (186,231 ) $ (8,816,701 ) $ (666,752 ) $ (9,970,054 )
Net loss from continuing operations attributable to Parent Company per common share, basic and diluted $ (0.13 ) $ (6.19 ) $ (0.36 ) $ (25.07 )
Net income (loss) from discontinued operations attributable to Parent Company per common share, basic and diluted $ (0.00 ) $ (0.08 ) $ (0.11 ) $ 17.98
Net loss attributable to Parent Company, per common share, basic and diluted $ (0.13 ) $ (6.27 ) $ (0.47 ) $ (7.09 )
Weighted average number of common shares outstanding, basic and diluted 1,406,196 1,406,196 1,406,196 1,406,196
Dividend declared per common share $ 0.00 $ 0.00 $ 0.00 $ 0.20
Berkshire Income Realty, Inc.
James Juliano, 1-617-574-8382
james.juliano@berkshire-group.com
Facsimile: 1-617-423-8919
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