Berkshire Income Realty Announces First Quarter Funds from Operations of $2,793,605

Berkshire Income Realty Announces First Quarter Funds from Operations of $2,793,605

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 quarter ended March 31, 2013. Financial highlights for the three month period ended March 31, 2013 include:

- The Company's Funds From Operations ("FFO") grew approximately 220.5% for the three months ended March 31, 2013 - The Company's FFO, a non-GAAP financial measure, for the three months ended March 31, 2013 was $2,793,605 compared to $871,537 for the comparable three months ended March 31, 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 March 31, 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 March 31, 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 ofapproximately 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 March 31, 2013 and 2012:

   Three months ended
March 31,
2013   2012
Net income (loss)(3,996,676)2,011,956
Add:
Depreciation of real property5,816,7856,058,425
Depreciation of real property included in results of discontinued operations539,841
Amortization of acquired in-place leases and tenant relationships5,37719,968
Equity in loss of unconsolidated multifamily entities775,967
Funds from operations of unconsolidated multifamily entities, net of impairments368,701265,448
Less:
Funds from operations of noncontrolling interest in properties(176,549)(311,967)
Gain on disposition of real estate assets(6,589,323)
Equity in income of unconsolidated multifamily entities    (1,122,811)
Funds from Operations$2,793,605    $871,537 
 

FFO for the three months ended March 31, 2013 increased as compared to the three-month period ended March 31, 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 March 31, 2013 compared to the same period ended March 31, 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 March 31, 2013.

The following table represents the reconciliation of GAAP net income (loss) to the other non-GAAP measures presented for the three months ended March 31, 2013 and 2012:

   Three months ended
March 31,
2013  2012
Net income (loss)$(3,996,676)$2,011,956
Add:
Depreciation6,630,0736,684,951
Interest, inclusive of amortization of deferred financing fees6,598,4456,408,480
Amortization of acquired in-place leases and tenant relationships5,37719,968
Net income from discontinued operations(40,265)(5,654,477)
Equity in (income) loss of unconsolidated multifamily entities775,967 (1,122,811)
Net operating income9,972,9218,348,067
Add:
Net operating income related to properties acquired or placed in service after January 1, 2012 and non-property activities1,944,424 2,683,833 
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 December 31, 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,
2013

  

December 31,
2012

 
ASSETS
Multifamily apartment communities, net of accumulated depreciation of $242,455,812 and $235,825,752, respectively$398,052,658$402,999,104
Cash and cash equivalents9,282,54612,224,361
Cash restricted for tenant security deposits1,223,5011,332,178
Replacement reserve escrow998,230986,790
Prepaid expenses and other assets7,697,0069,545,966
Investments in unconsolidated multifamily entities16,308,06016,873,924
Acquired in-place leases and tenant relationships, net of accumulated amortization of $0 and $599,702, respectively5,377
Deferred expenses, net of accumulated amortization of $3,240,468 and $3,096,284, respectively3,099,818 3,210,510 
Total assets$436,661,819 $447,178,210 
 
LIABILITIES AND DEFICIT
 
Liabilities:
Mortgage notes payable$477,081,514$478,185,998
Revolving credit facility - affiliate1,627,000
Note payable - other1,250,0001,250,000
Due to affiliates, net2,569,1743,446,460
Due to affiliate, incentive advisory fees7,139,6676,634,261
Dividend and distributions payable837,6071,137,607
Accrued expenses and other liabilities10,797,65815,081,550
Tenant security deposits1,528,657 1,475,298 
Total liabilities502,831,277 507,211,174 
 
Commitments and contingencies
 
Deficit:
Noncontrolling interest in properties1,718,8391,527,431
Noncontrolling interest in Operating Partnership(95,900,145)(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 March 31, 2013 and December 31, 2012, respectively70,210,83070,210,830
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 outstanding at March 31, 2013 and December 31, 2012, respectively14,06214,062
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$17,829,685
Utility reimbursement922,532799,747
Other861,369    784,121 
Total revenue20,580,720    19,413,553 
Expenses:
Operating5,000,2784,698,309
Maintenance942,5101,129,622
Real estate taxes1,944,8021,838,192
General and administrative730,090767,169
Management fees1,239,2471,176,600
Incentive advisory fees750,8721,455,594
Depreciation6,630,0736,684,951
Interest, inclusive of amortization of deferred financing fees6,598,4456,408,480
Amortization of acquired in-place leases and tenant relationships5,377    19,968 
Total expenses23,841,694    24,178,885 
Loss before equity in income (loss) of unconsolidated multifamily entities(3,260,974)(4,765,332)
Equity in income (loss) of unconsolidated multifamily entities(775,967)   1,122,811 
Loss from continuing operations(4,036,941)   (3,642,521)
Discontinued operations:
Income (loss) from discontinued operations40,265(934,846)
Gain on disposition of real estate assets    6,589,323 
Net income from discontinued operations40,265    5,654,477 
Net income (loss)(3,996,676)2,011,956
Net income attributable to noncontrolling interest in properties(19,532)(88,025)
Net (income) loss attributable to noncontrolling interest in Operating Partnership5,555,378    (242,792)
Net income attributable to the Company1,539,1701,681,139
Preferred dividend(1,675,194)   (1,675,194)
Net income (loss) available to common shareholders$(136,024)    Read Full Story

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