10-Q



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2016
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File No. 001-34995
 
Preferred Apartment Communities, Inc.
(Exact name of registrant as specified in its charter)
 
Maryland
27-1712193
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
3284 Northside Parkway NW, Suite 150, Atlanta, GA 30327
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (770) 818-4100
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).
Large accelerated filer  ¨            Accelerated filer  x            Non-accelerated filer  ¨            Smaller reporting company  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No  x
The number of shares outstanding of the registrant’s Common Stock, as of May 6, 2016 was 23,183,396.



 
PART I - FINANCIAL INFORMATION
 
 
 
 
INDEX
 
 
 
 
 
 
 
Item 1.
Financial Statements
Page No. 
 
 
 
 
 
1

 
 
 
 
2

 
 
 
 
3

 
 
 
 
4

 
 
 
 
6

 
 
 
Item 2.
33

 
 
 
Item 3.
59

 
 
 
Item 4.
60

 
 
 
 
 
 
Item 1.
Legal Proceedings
61

 
 
 
Item 1A.
Risk Factors
61

 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
61

 
 
 
Item 3.
Defaults Upon Senior Securities
61

 
 
 
Item 4.
Mine Safety Disclosures
61

 
 
 
Item 5.
Other Information
61

 
 
 
Item 6.
Exhibits
61

 
 
SIGNATURES
62

 
 
 
 
63





Preferred Apartment Communities, Inc.
Consolidated Balance Sheets
(Unaudited)
 
 
March 31, 2016
 
December 31, 2015
Assets
 
 
 
 
 
 
 
 
 
Real estate
 
 
 
 
Land
 
$
174,662,174

 
$
141,729,264

Building and improvements
 
908,022,540

 
733,417,442

Tenant improvements
 
6,029,479

 
5,781,199

Furniture, fixtures, and equipment
 
102,159,856

 
86,092,408

Construction in progress
 
814,623

 
609,400

Gross real estate
 
1,191,688,672

 
967,629,713

Less: accumulated depreciation
 
(59,160,582
)
 
(48,155,874
)
Net real estate
 
1,132,528,090

 
919,473,839

Property held for sale (net of accumulated depreciation of $6,034,171 and $5,838,792)
33,666,369

 
33,817,081

Real estate loans, net of deferred fee income
 
169,409,097

 
180,688,293

Real estate loans to related parties, net
 
91,221,265

 
57,313,465

Total real estate and real estate loans, net
 
1,426,824,821

 
1,191,292,678

 
 
 
 
 
Cash and cash equivalents
 
4,703,505

 
2,439,605

Restricted cash
 
13,597,705

 
12,539,440

Notes receivable
 
12,864,229

 
18,489,247

Note receivable and revolving line of credit to related party
 
26,181,955

 
19,454,486

Accrued interest receivable on real estate loans
 
13,219,191

 
14,294,648

Acquired intangible assets, net of amortization of $31,229,089 and $27,032,157
 
22,094,521

 
19,381,473

Deferred loan costs for revolving line of credit, net of amortization of $836,761 and $791,002
 
443,654

 
488,770

Deferred offering costs
 
5,031,237

 
5,834,304

Tenant receivables (net of allowance of $435,508 and $434,773) and other assets
 
11,874,629

 
11,314,382

 
 
 
 
 
Total assets
 
$
1,536,835,447

 
$
1,295,529,033

 
 
 
 
 
Liabilities and equity
 

 
 
 
 
 
 
 
Liabilities
 
 
 
 
Mortgage notes payable, principal amount
 
$
818,291,100

 
$
668,836,291

Less: deferred loan costs, net of amortization of $2,587,310 and $2,021,696
 
(10,642,652
)
 
(8,099,517
)
Mortgage notes payable, net of deferred loan costs
 
807,648,448

 
660,736,774

Mortgage note held for sale
 
28,109,000

 
28,109,000

Revolving line of credit
 
17,000,000

 
34,500,000

Term note payable
30,000,000

 
—

Less: deferred loan costs, net of amortization
(5,611
)
 
—

Term note payable, net of deferred loan costs
29,994,389

 
—

Real estate loan participation obligation
 
13,769,962

 
13,544,160

Accounts payable and accrued expenses
 
12,274,575

 
12,644,818

Accrued interest payable
 
2,524,558

 
1,803,389

Dividends and partnership distributions payable
 
7,322,267

 
6,647,507

Acquired below market lease intangibles, net of amortization of $1,932,035 and $1,578,205
 
8,899,620

 
9,253,450

Security deposits and other liabilities
 
3,466,767

 
2,836,145

Total liabilities
 
931,009,586

 
770,075,243

 
 
 
 
 
Commitments and contingencies (Note 12)
 
 
 
 
 
 
 
 
 
Equity
 
 
 
 
 
 
 
 
 
Stockholders' equity
 
 
 
 
Series A Redeemable Preferred Stock, $0.01 par value per share; 1,050,000
 
 
 
   shares authorized; 587,219 and 486,182 shares issued; 583,110 and 482,964
 
 
 
shares outstanding at March 31, 2016 and December 31, 2015, respectively
5,831

 
4,830

Common Stock, $0.01 par value per share; 400,066,666 shares authorized; 23,063,026 and
 
 
 
  22,761,551 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively
230,630

 
227,616

Additional paid-in capital
621,265,574

 
536,450,877

Accumulated deficit
 
(16,999,449
)
 
(13,698,520
)
Total stockholders' equity
 
604,502,586

 
522,984,803

Non-controlling interest
 
1,323,275

 
2,468,987

Total equity
 
605,825,861

 
525,453,790

 
 
 
 
 
Total liabilities and equity
 
$
1,536,835,447

 
$
1,295,529,033


The accompanying notes are an integral part of these consolidated financial statements.
1



Preferred Apartment Communities, Inc.
Consolidated Statements of Operations
(Unaudited)
 
 
 
 
 
Three months ended March 31,
 
2016
 
2015
Revenues:
 
 
 
Rental revenues
$
28,255,599

 
$
13,141,120

Other property revenues
3,760,083

 
1,969,767

Interest income on loans and notes receivable
6,942,159

 
4,875,086

Interest income from related parties
2,777,940

 
1,358,542

Total revenues
41,735,781

 
21,344,515

 
 
 
 
Operating expenses:
 
 
 
Property operating and maintenance
4,021,362

 
2,079,359

Property salary and benefits reimbursement to related party
2,363,463

 
1,117,573

Property management fees (including $1,071,088 and $480,051 to related parties)
1,228,021

 
570,406

Real estate taxes
5,173,441

 
2,076,677

General and administrative
919,952

 
458,204

Equity compensation to directors and executives
610,425

 
590,308

Depreciation and amortization
15,346,726

 
7,945,428

Acquisition and pursuit costs (including $67,131 and $47,005 to related party)
2,652,705

 
423,592

Acquisition fees to related parties
110,880

 
760,300

Asset management fees to related party
2,766,086

 
1,350,890

Insurance, professional fees and other expenses
1,306,981

 
705,552

Total operating expenses
36,500,042

 
18,078,289

 
 
 
 
Contingent asset management and general and administrative expense fees
(269,601
)
 
(345,960
)
 
 
 
 
Net operating expenses
36,230,441

 
17,732,329

 
 
 
 
Operating income
5,505,340

 
3,612,186

Interest expense
8,894,830

 
4,377,115

 
 
 
 
Net loss
(3,389,490
)
 
(764,929
)
 
 
 
 
Consolidated net loss attributable to non-controlling interests
88,561

 
9,699

 
 
 
 
Net loss attributable to the Company
(3,300,929
)
 
(755,230
)
 
 
 
 
Dividends declared to Series A preferred stockholders
(7,881,735
)
 
(3,172,897
)
Earnings attributable to unvested restricted stock
(1,451
)
 
(6,863
)
 
 
 
 
Net loss attributable to common stockholders
$
(11,184,115
)
 
$
(3,934,990
)
 
 
 
 
Net loss per share of Common Stock available to
 
 
 
common stockholders, basic and diluted
$
(0.49
)
 
$
(0.18
)
 
 
 
 
Dividends per share declared on Common Stock
$
0.1925

 
$
0.175

 
 
 
 
Weighted average number of shares of Common Stock outstanding,
 
 
 
basic and diluted
22,983,741

 
21,813,974


The accompanying notes are an integral part of these consolidated financial statements.
2



Preferred Apartment Communities, Inc.
Consolidated Statements of Stockholders' Equity
For the three months ended March 31, 2016 and 2015
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Series A Redeemable Preferred Stock
 
Common Stock
 
Additional Paid in Capital
 
Accumulated (Deficit)
 
Total Stockholders' Equity
 
Non-Controlling Interest
 
Total Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2015
 
$
1,928

 
$
214,039

 
$
300,576,349

 
$
(11,297,852
)
 
$
289,494,464

 
$
2,087,410

 
$
291,581,874

Issuance of Units
 
515

 
—

 
51,468,556

 
—

 
51,469,071

 
—

 
51,469,071

Redemptions of Series A Preferred Stock
 
(4
)
 
342

 
(51,279
)
 
—

 
(50,941
)
 
—

 
(50,941
)
Issuance of Common Stock
 
—

 
5,479

 
5,487,828

 
—

 
5,493,307

 
—

 
5,493,307

Exercises of warrants
 
—

 
392

 
115,964

 
—

 
116,356

 
—

 
116,356

Syndication and offering costs
 
—

 
—

 
(6,269,925
)
 
—

 
(6,269,925
)
 
—

 
(6,269,925
)
Equity compensation to executives and directors
 
—

 
18

 
98,382

 
—

 
98,400

 
—

 
98,400

Conversion of Class A Units to Common Stock
 
—

 
1,042

 
695,050

 
—

 
696,092

 
(696,092
)
 
—

Current period amortization of Class B Units
 
—

 
—

 
—

 
—

 
—

 
491,908

 
491,908

Net loss
 
—

 
—

 
—

 
(755,230
)
 
(755,230
)
 
(9,699
)
 
(764,929
)
Reallocation adjustment to non-controlling interests
 
—

 
—

 
209,799

 
—

 
209,799

 
(209,799
)
 
—

Distributions to non-controlling interests
 
—

 
—

 
—

 
—

 
—

 
(49,063
)
 
(49,063
)
Dividends to series A preferred stockholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
($5.00 per share per month)
 
—

 
—

 
(3,172,897
)
 
—

 
(3,172,897
)
 
—

 
(3,172,897
)
Dividends to common stockholders ($0.175 per share)
 
—

 
—

 
(3,850,754
)
 
—

 
(3,850,754
)
 
—

 
(3,850,754
)
Balance at March 31, 2015
 
$
2,439

 
$
221,312

 
$
345,307,073

 
$
(12,053,082
)
 
$
333,477,742

 
$
1,614,665

 
$
335,092,407

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2016
 
$
4,830

 
$
227,616

 
$
536,450,877

 
$
(13,698,520
)
 
$
522,984,803

 
$
2,468,987

 
$
525,453,790

Issuance of Units
 
1,010

 
—

 
100,979,717

 
—

 
100,980,727

 
—

 
100,980,727

Redemptions of Series A Preferred Stock
 
(9
)
 
—

 
(803,938
)
 
—

 
(803,947
)
 
—

 
(803,947
)
Exercises of warrants
 
—

 
1,967

 
1,976,547

 
—

 
1,978,514

 
—

 
1,978,514

Syndication and offering costs
 
—

 
—

 
(11,642,198
)
 
—

 
(11,642,198
)
 
—

 
(11,642,198
)
Equity compensation to executives and directors
 
—

 
19

 
103,992

 
—

 
104,011

 
—

 
104,011

Vesting of restricted stock
 
—

 
75

 
(75
)
 
—

 
—

 
—

 
—

Conversion of Class A Units to Common Stock
 
—

 
953

 
645,248

 
—

 
646,201

 
(646,201
)
 
—

Current period amortization of Class B Units
 
—

 
—

 
—

 
—

 
—

 
506,414

 
506,414

Net loss
 
—

 
—

 
—

 
(3,300,929
)
 
(3,300,929
)
 
(88,561
)
 
(3,389,490
)
Class A Units issued for property acquisition
 
—

 
—

 
—

 
—

 
—

 
5,072,659

 
5,072,659

Reallocation adjustment to non-controlling interests
 
—

 
—

 
5,872,628

 
—

 
5,872,628

 
(5,872,628
)
 
—

Distributions to non-controlling interests
 
—

 
—

 
—

 
—

 
—

 
(117,395
)
 
(117,395
)
Dividends to series A preferred stockholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
($5.00 per share per month)
 
—

 
—

 
(7,881,735
)
 
—

 
(7,881,735
)
 
—

 
(7,881,735
)
Dividends to common stockholders ($0.1925 per share)
 
—

 
—

 
(4,435,489
)
 
—

 
(4,435,489
)
 
—

 
(4,435,489
)
 
 
$
5,831

 
$
230,630

 
$
621,265,574

 
$
(16,999,449
)
 
$
604,502,586

 
$
1,323,275

 
$
605,825,861


The accompanying notes are an integral part of these consolidated financial statements.
3


Preferred Apartment Communities, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
 
 
 
Three months ended March 31,
 
 
2016
 
2015
Operating activities:
 
 
 
 
Net loss
 
$
(3,389,490
)
 
$
(764,929
)
Reconciliation of net loss to net cash provided by operating activities:
 
 
 
 
Depreciation expense
 
11,203,056

 
5,340,425

Amortization expense
 
4,143,670

 
2,605,003

Amortization of above and below market leases
 
(265,410
)
 
(183,431
)
Deferred fee income amortization
 
(264,197
)
 
(158,817
)
Deferred loan cost amortization
 
691,207

 
347,538

Decrease (increase) in accrued interest income on real estate loans
 
1,075,458

 
(817,449
)
Equity compensation to executives and directors
 
610,425

 
590,308

Deferred cable income amortization
 
(4,616
)
 
(4,936
)
Changes in operating assets and liabilities:
 
 
 
 
(Increase) decrease in tenant receivables and other assets
 
(86,020
)
 
279,136

(Decrease) increase in accounts payable and accrued expenses
 
(1,267,380
)
 
257,372

Increase in accrued interest payable
 
721,170

 
37,407

Increase in prepaid rents
 
113,055

 
193,338

Increase in security deposits and other liabilities
 
109,187

 
15,038

Net cash provided by operating activities
 
13,390,115

 
7,736,003

 
 
 
 
 
Investing activities:
 
 
 
 
Investments in real estate loans
 
(56,970,287
)
 
(24,279,317
)
Repayments of real estate loans
 
27,695,229

 
5,206,045

Notes receivable issued
 
(3,870,191
)
 
(2,554,590
)
Notes receivable repaid
 
9,505,081

 
7,195,294

Note receivable issued to and draws on line of credit by related party
 
(12,382,910
)
 
(3,880,139
)
Repayments of line of credit by related party
 
5,508,066

 
2,097,135

Acquisition fees received on real estate loans
 
1,403,422

 
439,428

Acquisition fees paid on real estate loans
 
(701,369
)
 
(219,714
)
Acquisition fees paid to real estate loan participants
 
—

 
(24,665
)
Acquisition of properties
 
(220,850,440
)
 
(76,230,876
)
Additions to real estate assets - improvements
 
(1,461,711
)
 
(466,840
)
Payment of deposits for property acquisitions
 
(2,644,056
)
 
(541,475
)
Decrease in restricted cash
 
1,808,375

 
387,260

Net cash used in investing activities
 
(252,960,791
)
 
(92,872,454
)
 
 
 
 
 
Financing activities:
 
 
 
 
Proceeds from mortgage notes payable
 
151,640,000

 
50,778,000

Payments for mortgage debt
 
(2,185,191
)
 
(670,762
)
Payments for deposits and other mortgage loan costs
 
(3,716,469
)
 
(830,311
)
Proceeds from real estate loan participants
 
67,066

 
3,215,801

Proceeds from lines of credit
 
87,500,000

 
14,400,000

Payments on lines of credit
 
(105,000,000
)
 
(38,900,000
)
Proceeds from Term Loan
 
35,000,000

 
32,000,000

Repayment of the Term Loan
 
(5,000,000
)
 
(13,000,000
)
Proceeds from sales of Units, net of offering costs and redemptions
 
90,090,574

 
44,317,018

Proceeds from sales of Common Stock
 
—

 
5,381,848

Proceeds from exercises of warrants
 
5,548,468

 
53,945

Common Stock dividends paid
 
(4,314,999
)
 
(3,697,436
)
Series A Preferred Stock dividends paid
 
(7,391,620
)
 
(2,931,927
)
Distributions to non-controlling interests
 
(53,241
)
 
(25,377
)
Payments for deferred offering costs
 
(350,012
)
 
(452,825
)
Net cash provided by financing activities
 
241,834,576

 
89,637,974

 
 
 
 
 
Net increase in cash and cash equivalents
 
2,263,900

 
4,501,523

Cash and cash equivalents, beginning of period
 
2,439,605

 
3,113,270

Cash and cash equivalents, end of period
 
$
4,703,505

 
$
7,614,793

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these consolidated financial statements.
4


 
 
 
 
 
Preferred Apartment Communities, Inc.
Consolidated Statements of Cash Flows - continued
(Unaudited)
 
 
 
 
 
Three months ended March 31,
 
 
2016
 
2015
Supplemental cash flow information:
 
 
 
 
Cash paid for interest
 
$
7,482,453

 
$
3,992,132

 
 
 
 
 
Supplemental disclosure of non-cash activities:
 
 
 
 
Accrued capital expenditures
 
$
710,932

 
$
109,603

Writeoff of fully depreciated or amortized assets and liabilities
 
$
26,988

 
$
170,332

Dividends payable - Common Stock
 
$
4,435,489

 
$
3,850,754

Dividends payable - Series A Preferred Stock
 
$
2,769,385

 
$
1,141,403

Partnership distributions payable to non-controlling interests
 
$
117,392

 
$
49,063

Accrued and payable deferred offering costs
 
$
526,659

 
$
518,162

Reclass of offering costs from deferred asset to equity
 
$
1,545,488

 
$
985,679

Fair value issuance of Class A OP Units for contribution of property
 
$
5,072,659

 
$
—

Extinguishment of land loan for property
 
$
6,250,000

 
$
—

Fair value issuances of equity compensation
 
$
2,095,545

 
$
1,965,549

Offering cost reimbursement to related party
 
$
96,101

 
$
132,354



The accompanying notes are an integral part of these consolidated financial statements.
5

Preferred Apartment Communities, Inc.
Notes to Consolidated Financial Statements
March 31, 2016



1.
Organization and Basis of Presentation

Preferred Apartment Communities, Inc. was formed as a Maryland corporation on September 18, 2009, and elected to be taxed as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, or the Code, effective with its tax year ended December 31, 2011. Unless the context otherwise requires, references to the "Company", "we", "us", or "our" refer to Preferred Apartment Communities, Inc., together with its consolidated subsidiaries, including Preferred Apartment Communities Operating Partnership, L.P., or the Operating Partnership. The Company was formed primarily to acquire and operate multifamily properties in select targeted markets throughout the United States. As part of its business strategy, the Company may enter into forward purchase contracts or purchase options for to-be-built multifamily communities and may make real estate related loans, provide deposit arrangements, or provide performance assurances, as may be necessary or appropriate, in connection with the development of multifamily communities and other properties. As a secondary strategy, the Company also may acquire or originate senior mortgage loans, subordinate loans or real estate loans secured by interests in multifamily properties, membership or partnership interests in multifamily properties and other multifamily related assets and invest not more than 20% of its assets in other real estate related investments such as grocery-anchored shopping centers, as determined by its Manager (as defined below) as appropriate for the Company. The Company is externally managed and advised by Preferred Apartment Advisors, LLC, or its Manager, a Delaware limited liability company and related party (see Note 7).

As of March 31, 2016, the Company had 23,063,026 shares of common stock, par value $0.01 per share, or Common Stock, issued and outstanding and was the approximate 96.3% owner of the Operating Partnership at that date. The number of partnership units not owned by the Company totaled 886,520 at March 31, 2016 and represented Class A OP Units of the Operating Partnership, or Class A OP Units. The Class A OP Units are convertible at any time at the option of the holder into the Company's choice of either cash or Common Stock. In the case of cash, the value is determined based upon the trailing 20-day volume weighted average price of the Company's Common Stock.

The Company controls the Operating Partnership through its sole general partner interest and conducts substantially all of its business through the Operating Partnership. The Company has determined the Operating Partnership is a variable interest entity, of which the Company is the primary beneficiary. Substantially all of the Company's assets and liabilities are held by the Operating Partnership. New Market Properties, LLC, a wholly-owned subsidiary of the Operating Partnership, owns and conducts the business of the Company's grocery-anchored shopping centers.

Basis of Presentation

These unaudited consolidated financial statements include all of the accounts of the Company and the Operating Partnership presented in accordance with accounting principles generally accepted in the United States of America, or GAAP. All significant intercompany transactions have been eliminated in consolidation. Certain adjustments have been made consisting of normal recurring accruals, which, in the opinion of management, are necessary for a fair presentation of the Company's financial condition and results of operations. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The year end condensed balance sheet data was derived from audited financial statements, but does not include all the disclosures required by accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's 2015 Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on March 14, 2016.
    

6
Preferred Apartment Communities, Inc.
Notes to Consolidated Financial Statements – (continued)
March 31, 2016


2.
Summary of Significant Accounting Policies

Acquisitions and Impairments of Real Estate Assets

The Company generally records its initial investments in income-producing real estate at fair value at the acquisition date in accordance with ASC 805-10, Business Combinations, which requires that all consideration transferred be measured at its acquisition-date fair value. The aggregate purchase price of acquired properties is apportioned to the tangible and identifiable intangible assets and liabilities acquired at their estimated fair values. The value of acquired land, buildings and improvements is estimated by formal appraisals, observed comparable sales transactions, and information gathered during pre-acquisition due diligence activities and the valuation approach considers the value of the property as if it were vacant. The values of furniture, fixtures, and equipment are estimated by calculating their replacement cost and reducing that value by factors based upon estimates of their remaining useful lives. Intangible assets and liabilities for multifamily communities include the values of in-place leases and above-market or below-market leases. Additional intangible assets for retail properties also include costs to initiate leases such as commissions and legal costs.

In-place lease values for multifamily communities are estimated by calculating the estimated time to fill a hypothetically empty apartment complex to its stabilization level (estimated to be 92% occupancy) based on historical observed move-in rates for each property, and which approximate market rates. Carrying costs during these hypothetical expected lease-up periods are estimated, considering current market conditions and include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates. The intangible assets are calculated by estimating the net cash flows of the in-place leases to be realized, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject to lease-up. The acquired in-place lease values are amortized to operating expense over the average remaining non-cancelable term of the respective in-place leases. The amounts of above-market or below-market lease values are developed by comparing the Company's estimate of the average market rent to the average contract rent of the leases in place at the property acquisition date. This ratio is applied on a lease by lease basis to derive a total asset or liability amount for the property. The above-market or below-market lease values are recorded as a reduction or increase, respectively, to rental revenue over the remaining average non-cancelable term of the respective leases, plus any below market probable renewal options.

The fair values of in-place leases for retail shopping centers represent the value of direct costs associated with leasing, including opportunity costs associated with lost rentals that are avoided by acquiring in-place leases. Direct costs associated with obtaining a new tenant include commissions, legal and marketing costs, incentives such as tenant improvement allowances and other direct costs. Such direct costs are estimated based on our consideration of current market costs to execute a similar lease. The value of opportunity costs is estimated using the estimated market lease rates and the estimated absorption period of the space. These direct costs and opportunity costs are included in the accompanying consolidated balance sheets as acquired intangible assets and are amortized to expense over the remaining term of the respective leases. The fair values of above-market and below-market in-place leases for retail shopping centers are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) our estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining term of the leases, taking into consideration the probability of renewals for any below-market leases. The capitalized above-market leases and in place leases are included in the acquired intangible assets line of the consolidated balance sheets. Both above-market and below-market lease values are amortized as adjustments to rental revenue over the remaining term of the respective leases, plus any below market probable renewal options.

Estimating the fair values of the tangible and intangible assets requires us to estimate market lease rates, property operating expenses, carrying costs during lease-up periods, discount and capitalization rates, market absorption periods, and the number of years the property is held for investment. The use of unreasonable estimates would result in an incorrect assessment of our purchase price allocations, which would impact the amount of our reported net income. Acquired intangible assets and liabilities have no residual value.

The Company evaluates its tangible and identifiable intangible real estate assets for impairment when events such as declines in a property’s operating performance, deteriorating market conditions, or environmental or legal concerns bring recoverability of the carrying value of one or more assets into question. The total undiscounted cash flows of the asset group, including proceeds from disposition, are compared to the net book value of the asset group. If this test indicates that impairment exists, an impairment loss is recorded in earnings equal to the shortage of the book value to the discounted net cash flows of the asset group.


7
Preferred Apartment Communities, Inc.
Notes to Consolidated Financial Statements – (continued)
March 31, 2016


Discontinued Operations

The Company evaluates all disposal groups for held-for-sale classification for which such disposal represents (or will represent) a strategic shift which will have a significant effect on the Company's results or operations and financial results.

Loan Coordination Fees

Amendment Number One to the Fifth Amended and Restated Management Agreement, which was effective January 1, 2016, replaced the acquisition fees which were paid to the Manager upon the closing of the acquisition of a property with loan coordination fees. Acquisition fees were recognized in full at the date of acquisition. Loan coordination fees are recognized over the term of the associated loan using the effective interest method.     

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with guidance provided by ASC 505-50, Equity-Based Payments to Non-Employees and ASC 718, Stock Compensation. We calculate the fair value of equity compensation instruments at the date of grant based upon estimates of their expected term, the expected volatility of and dividend yield on our Common Stock over this expected term period and the market risk-free rate of return. We also estimate forfeitures of these instruments and accrue the compensation expense, net of estimated forfeitures, over the vesting period(s). We record the fair value of restricted stock awards based upon the closing stock price on the trading day immediately preceding the date of grant. For awards of equity compensation which have market performance vesting conditions in addition to multiple tranches of service period requirements, the Company utilizes the straight-line expense attribution method.

New Accounting Pronouncements    

In May 2014, the FASB issued Accounting Standards Update 2014-09 ("ASU 2014-09"), Revenue from Contracts with Customers (Topic 606). ASU 2014-09 provides a single comprehensive revenue recognition model for contracts with customers (excluding certain contracts, such as lease contracts) to improve comparability within industries. ASU 2014-09 requires an entity to recognize revenue to reflect the transfer of goods or services to customers at an amount the entity expects to be paid in exchange for those goods and services and provide enhanced disclosures, all to provide more comprehensive guidance for transactions such as service revenue and contract modifications. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. ASU 2014-09 may be applied using either a full retrospective or a modified approach upon adoption. The Company is currently evaluating the impact this standard may have on its financial statements.

In February 2015, the FASB issued Accounting Standards Update 2015-02 ("ASU 2015-02"), Consolidation (Topic 810): Amendments to the Consolidation Analysis. This new guidance specifically eliminates the presumption in the current voting model that a general partner controls a limited partnership or similar entity unless that presumption can be overcome. Generally, only a single limited partner that is able to exercise substantive kick-out rights will be required to consolidate the limited partnership. ASU 2015-02 is effective on January 1, 2016 and early adoption is permitted, including adoption in an interim period. The new standard must be applied using a modified retrospective approach by recording a cumulative-effect adjustment to equity/capital as of the beginning of the period of adoption or retrospectively to each period presented. The Company's adoption of ASU 2015-02 had no impact on its consolidated financial statements.

In January 2016, the FASB issued Accounting Standards Update 2016-01 ("ASU 2016-01"), Financial Instruments—Overall (Subtopic 825-10): Recognition and measurement of Financial Assets and Liabilities. The new standard's applicable provisions to the Company include an elimination of the disclosure requirement of the significant inputs and assumptions underlying the fair value calculations of its financial instruments which are carried at amortized cost. The standard is effective on January 1, 2018, and early adoption is not permitted for the applicable provision. The Company does not expected the adoption of ASU 2016-01 to impact the Company’s consolidated financial statements. 

In February 2016, the FASB issued Accounting Standards Update 2016-02 ("ASU 2016-02"), Leases (ASC 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASC 842 supersedes the previous leases standard, ASC 840 Leases. The standard is effective on January 1, 2019, with early adoption permitted. The Company is in the process of evaluating

8
Preferred Apartment Communities, Inc.
Notes to Consolidated Financial Statements – (continued)
March 31, 2016


the impact of this new guidance but does not expected its adoption to materially impact the Company’s consolidated financial statements. 

In March 2016, the FASB issued Accounting Standards Update 2016-09 ("ASU 2016-09"), Compensation—Stock Compensation
(Topic 178): Improvements to Employee Share-Based Payment Accounting. The new standard's provisions applicable to the Company include allowing the entity to make an accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures of equity compensation awards when they occur. Previous guidance required entities to estimate the number of awards that are expected to vest. The standard is effective on January 1, 2017, and the Company adopted ASU 2016-09 on January 1, 2016 pursuant to the allowed early adoption provision. The Company does not expect the adoption of ASU 2016-09 to materially impact the Company’s consolidated financial statements. 

3. Real Estate Assets
The Company's real estate assets consisted of:
 
 
As of:
 
 
3/31/2016
 
12/31/2015
Multifamily communities (1)
 
22

 
19

Units
 
7,300

 
6,136

Retail shopping centers
 
15

 
14

Approximate gross leasable area (2)
 
1,354,000

 
1,279,000

 
 
 
 
 
(1) The acquired second phases of the Trail Creek and Summit Crossing communities are managed in combination with the initial phases of these communities and are therefore considered single properties.
(2) The Company also owns approximately 47,600 square feet of gross leasable area of ground floor retail space which is embedded within the Lenox Portfolio and not included in the totals above.

On September 8, 2015, pursuant to a recommendation by the Company's investment committee, the Company took action to market for sale both phases of its Trail Creek multifamily community located in Hampton, Virginia. On February 24, 2016, a prospective purchaser's earnest money deposit became nonrefundable, subject to lender approval of the purchaser's assumption of the mortgage on Trail Creek held by the Company. As of that date, the Company reclassified the following real estate assets and the mortgage note payable for Trail Creek from its held and used multifamily segment to property held for sale on its consolidated balance sheets.
 
 
3/31/2016
 
12/31/2015
Real estate assets:
 
 
 
 
Land
 
$
4,200,000

 
$
4,200,000

Building and improvements
 
30,883,525

 
30,881,025

Furniture, fixtures and equipment
 
4,617,015

 
4,574,848

Accumulated depreciation
 
(6,034,171
)
 
(5,838,792
)
 
 
 
 
 
Property held for sale
 
$
33,666,369

 
$
33,817,081

 
 
 
 
 
Liabilities:
 
 
 
 
Mortgage note payable
 
$
28,109,000

 
$
28,109,000



9
Preferred Apartment Communities, Inc.
Notes to Consolidated Financial Statements – (continued)
March 31, 2016


The Company acquired the following multifamily communities during the three months ended March 31, 2016 and 2015:
Acquisition date
 
Property
 
Location
 
Approximate purchase price (millions) (1)
 
Units
 
 
 
 
 
 
 
 
 
1/5/2016
 
Baldwin Park
 
Orlando, Florida
 
$
110.8

 
528

1/15/2016
 
Crosstown Walk
 
Tampa, Florida
 
$
45.8

 
342

2/1/2016
 
Overton Rise
 
Atlanta, Georgia
 
$
61.1

 
294

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,164

 
 
 
 
 
 
 
 
 
2/13/2015
 
Avenues at Cypress
 
Houston, Texas
 
(2) 

 
240

2/13/2015
 
Avenues at Northpointe
 
Houston, Texas
 
(2) 

 
280

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
520


(1) Purchase prices shown are exclusive of acquired escrows, security deposits, prepaids, and other miscellaneous assets and assumed liabilities.

(2) Avenues at Cypress and Avenues at Northpointe are referred to collectively as the Houston Portfolio, which was acquired for approximately $76.0 million.

The purchase prices approximated the fair value of the acquired assets and assumed liabilities. The Company allocated the purchase prices to the acquired assets and liabilities based upon their fair values, as shown in the following table. These purchase price allocations were based upon the Company's best estimates of the fair values of the acquired assets and liabilities, but are preliminary and are subject to refinement for a period of up to one year from the closing date of each transaction.
 
2016
 
2015
 
Overton Rise
 
Baldwin Park
 
Crosstown Walk
 
Houston Portfolio
Land
$
8,511,370

 
$
17,402,882

 
$
5,178,375

 
$
7,162,226

Buildings and improvements
44,710,034

 
87,105,757

 
33,605,831

 
54,217,075

Furniture, fixtures and equipment
6,286,105

 
3,358,589

 
5,726,583

 
13,078,872

Lease intangibles
1,611,314

 
2,882,772

 
1,323,511

 
1,571,827

Prepaids & other assets
73,754

 
229,972

 
125,706

 
150,326

Escrows
354,640

 
2,555,753

 
291,868

 
362,332

Accrued taxes
(66,422
)
 
(17,421
)
 
(25,983
)
 
(212,601
)
Security deposits, prepaid rents, and other liabilities
(90,213
)
 
(226,160
)
 
(53,861
)
 
(99,181
)
 
 
 
 
 
 
 
 
Net assets acquired
$
61,390,582

 
$
113,292,144

 
$
46,172,030

 
$
76,230,876

 
 
 
 
 
 
 
 
Cash paid
$
20,090,582

 
$
35,492,144

 
$
13,632,030

 
$
25,452,876

Mortgage debt
41,300,000

 
77,800,000

 
32,540,000

 
50,778,000

 
 
 
 
 
 
 
 
Total consideration
$
61,390,582

 
$
113,292,144

 
$
46,172,030

 
$
76,230,876

 
 
 
 
 
 
 
 
Three months ended March 31, 2015:
 
 
 
 
 
 
 
Revenue
$
—

 
$
—

 
$
—

 
$
932,000

Net loss
$
—

 
$
—

 
$
—

 
$
(609,000
)
 
 
 
 
 
 
 
 
Three months ended March 31, 2016:
 
 
 
 
 
 
 
Revenue
$
916,000

 
$
2,412,000

 
$
1,052,000

 
$
2,156,000

Net loss
$
(251,000
)
 
$
(1,128,000
)
 
$
(453,000
)
 
$
(432,000
)
 
 
 
 
 
 
 
 
Cumulative acquisition costs incurred by the Company
$
106,000

 
$
1,841,000

 
$
307,000

 
$
1,142,000

Remaining amortization period of intangible
 
 
 
 
 
 
 
 assets and liabilities (months)
7.5

 
5.5

 
6.5

 
0


The Company acquired the following grocery-anchored shopping center during the three months ended March 31, 2016:

10
Preferred Apartment Communities, Inc.
Notes to Consolidated Financial Statements – (continued)
March 31, 2016


Acquisition date
 
Property
 
Location
 
Approximate purchase price (millions) (2)
 
Gross leasable area
2/29/2016
 
Wade Green Village (1)
 
Atlanta, Georgia
 
$
11.0

 
74,978


(1) See Note 7 - Related Party Transactions.
(2) Purchase price shown is exclusive of acquired escrows, security deposits, prepaids, and other miscellaneous assets and assumed liabilities.

The purchase prices approximated the fair value of the acquired assets and assumed liabilities. The Company allocated the purchase prices to the acquired assets and liabilities based upon their fair values, as shown in the following table. These purchase price allocations were based upon the Company's best estimates of the fair values of the acquired assets and liabilities, but are preliminary and are subject to refinement for a period of up to one year from the closing date of each transaction.
 
Wade Green Village
 
Land
$
1,840,284

 
Buildings and improvements
8,159,147

 
Tenant improvements
251,250

 
In-place leases
841,785

 
Above-market leases
107,074

 
Leasing costs
167,541

 
Other assets
10,525

 
Security deposits, prepaid rents, and other liabilities
(59,264
)
 
 
 
 
Net assets acquired
$
11,318,342

 
 
 
 
Loan assumed, net of fees
$
6,245,683

(1) 
Fair value of Class A OP Units granted
5,072,659

(2) 
 
 
 
Total consideration
$
11,318,342

 
 
 
 
Three months ended March 31, 2016:
 
 
Revenue
$
84,000

 
Net loss
$
(43,000
)
 
 
 
 
Cumulative acquisition costs incurred by the Company
$
286,000

 
Remaining amortization period of intangible
 
 
 assets and liabilities (years)
3.0

 

(1) The contributor had an outstanding $6.25 million bridge loan secured by the property issued by Madison Wade Green Lending, LLC, an indirect wholly owned entity of the Company. Upon contribution of the property, the Company assumed the loan and concurrently extinguished the obligation.

(2) As partial consideration for the property contribution, the Company granted 419,228 Class A OP Units to the contributor, net of contribution adjustments at closing. The value and number of Class A OP Units to be granted at closing was determined during the contract process and remeasured at fair value as of the contribution date of February 29, 2016.


11
Preferred Apartment Communities, Inc.
Notes to Consolidated Financial Statements – (continued)
March 31, 2016


The Company's consolidated amortization and depreciation expense consisted of:
 
 
Three months ended March 31,
 
 
2016
 
2015
Depreciation:
 
 
 
 
Buildings and improvements
 
$
6,781,145

 
$
3,225,298

Furniture, fixtures, and equipment
 
4,421,911

 
2,115,127

 
 
11,203,056

 
5,340,425

Amortization:
 
 
 
 
Acquired intangible assets
 
4,133,893

 
2,603,813

Deferred leasing costs
 
4,857

 
—

Website development costs
 
4,920

 
1,190

Total depreciation and amortization
 
$
15,346,726

 
$
7,945,428


4. Acquired Intangible Assets and Liabilities
 
The Company recorded the following acquired lease intangible assets and liabilities and related accumulated amortization, as of
March 31, 2016 and December 31, 2015:
 
March 31, 2016
 
December 31, 2015
 
Multifamily
 
Retail
 
Total
 
Multifamily
 
Retail
 
Total
In-place leases
$
30,522,330

 
$
15,261,461

 
$
45,783,791

 
$
24,704,733

 
$
14,439,414

 
$
39,144,147

Above-market leases
—

 
1,490,602

 
1,490,602

 
—

 
1,386,254

 
1,386,254

Customer relationships
1,588,277

 
—

 
1,588,277

 
1,588,277

 
—

 
1,588,277

Lease origination costs
78,786

 
4,382,154

 
4,460,940

 
78,786

 
4,216,166

 
4,294,952

  Acquired intangible assets
$
32,189,393

 
$
21,134,217

 
$
53,323,610

 
$
26,371,796

 
$
20,041,834

 
$
46,413,630

 
 
 
 
 
 
 
 
 
 
 
 
Less accumulated amortization of:
 
 
 
 
 
 
 
 
 
 
 
In-place leases
$
(24,633,839
)
 
$
(3,849,441
)
 
$
(28,483,280
)
 
$
(21,608,833
)
 
$
(2,965,096
)
 
$
(24,573,929
)
Above market leases
—

 
(319,527
)
 
(319,527
)
 
—

 
(233,833
)
 
(233,833
)
Customer relationships
(1,588,277
)
 
—

 
(1,588,277
)
 
(1,588,277
)
 
—

 
(1,588,277
)
Lease origination costs
(10,263
)
 
(827,742
)
 
(838,005
)
 
(1,466
)
 
(634,652
)
 
(636,118
)
Accumulated amortization
(26,232,379
)
 
(4,996,710
)
 
(31,229,089
)
 
(23,198,576
)
 
(3,833,581
)
 
(27,032,157
)
 
 
 
 
 
 
 
 
 
 
 
 
Acquired intangible assets, net
$
5,957,014

 
$
16,137,507

 
$
22,094,521

 
$
3,173,220

 
$
16,208,253

 
$
19,381,473

 
 
 
 
 
 
 
 
 
 
 
 
Below market lease liability
$
383,593

 
$
10,448,062

 
$
10,831,655

 
$
383,593

 
$
10,448,062

 
$
10,831,655

Less: accumulated amortization
(383,593
)
 
(1,548,442
)
 
(1,932,035
)
 
(383,593
)
 
(1,194,612
)
 
(1,578,205
)
Below market lease liability, net
$
—

 
$
8,899,620

 
$
8,899,620

 
$
—

 
$
9,253,450

 
$
9,253,450


The Company recognized amortization of acquired intangible assets and liabilities as follows:
 
Three months ended March 31,
 
2016
 
2015
Amortization expense
Multifamily
 
Retail
 
Total
 
Multifamily
 
Retail
 
Total
Intangible assets:
 
 
 
 
 
 
 
 
 
 
 
Leases in place
$
3,025,006

 
$
904,083

 
$
3,929,089

 
$
1,878,059

 
$
606,292

 
$
2,484,351

Above-market leases (1)
—

 
88,420

 
88,420

 
—

 
41,817

 
41,817

Customer relationships
—

 
—

 
—

 
—

 
—

 
—

Lease origination costs
10,161

 
194,643

 
204,804

 
—

 
119,214

 
119,214

 
$
3,035,167

 
$
1,187,146

 
$
4,222,313

 
$
1,878,059

 
$
767,323

 
$
2,645,382

Intangible liabilities:
 
 
 
 
 
 
 
 
 
 
 
Below-market leases (1)
$
—

 
$
353,830

 
$
353,830

 
$
—

 
$
225,248

 
$
225,248

 
 
 
 
 
 
 
 
 
 
 
 
(1) Amortization of above and below market lease intangibles is recorded as a decrease and an increase to rental revenue, respectively.

 

12
Preferred Apartment Communities, Inc.
Notes to Consolidated Financial Statements – (continued)
March 31, 2016


5.     Real Estate Loans, Notes Receivable, and Line of Credit

At March 31, 2016, our portfolio of real estate loans consisted of:

 
Project/Property
 
Location
 
Date of loan
 
Maturity date
 
Optional extension date
 
Total loan commitments
 
Senior loans held by unrelated third parties
 
Current / deferred interest % per annum
 
 
(1) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
City Vista
 
Pittsburgh, PA
 
8/31/2012
 
6/1/2016
 
7/1/2017
 
$
16,107,735

 
$
28,400,000

 
8 / 6
 
 
Haven West
(2) 
Atlanta, GA
 
7/15/2013
 
6/2/2016
 
6/2/2018
 
6,940,795

 
$
16,195,189

 
8 / 6
 
 
Haven 12
(3) 
Starkville, MS
 
6/16/2014
 
6/16/2017
 
11/30/2020
 
6,116,384

 
$
18,615,081

 
8.5 / 6.5
(4) 
 
Founders' Village
 
Williamsburg, VA
 
8/29/2013
 
8/29/2018
 
N/A
 
10,346,000

 
$
26,936,000

 
8 / 6
 
 
Encore
 
Atlanta, GA
 
10/9/2015
 
4/8/2019
 
10/8/2020
 
10,958,200

 
$
46,892,800

 
8.5 / 5
(4) 
 
Encore Capital
 
Atlanta, GA
 
10/9/2015
 
4/8/2019
 
10/8/2020
 
9,758,200

 
—

 
8.5 / 5
 
 
Palisades
 
Northern VA
 
8/18/2014
 
2/18/2018
 
8/18/2019
 
17,270,000

 
$
38,000,000

 
8 / 5
(4) 
 
Fusion
 
Irvine, CA
 
7/1/2015
 
5/31/2018
 
5/31/2020
 
59,052,583

 
$
43,747,287

 
8.5 / 7.5
(4) 
 
Green Park
 
Atlanta, GA
 
12/1/2014
 
12/1/2017
 
12/1/2019
 
13,464,372

 
$
27,775,000

 
8.5 / 4.33
(4) 
 
Stadium Village
(5) 
Atlanta, GA
 
6/27/2014
 
6/27/2017
 
N/A
 
13,424,995

 
$
34,825,000

 
8.5 / 4.33
(4) 
 
Summit Crossing III
 
Atlanta, GA
 
2/27/2015
 
2/26/2018
 
2/26/2020
 
7,246,400

 
$
16,822,000

 
8.5 / 6
(4) 
 
Overture
 
Tampa, FL
 
7/21/2015
 
7/21/2018
 
7/21/2020
 
6,920,000

 
$
17,080,000

 
8.5 / 6
(4) 
 
Aldridge at Town Village
 
Atlanta, GA
 
1/27/2015
 
12/27/2017
 
12/27/2019
 
10,975,000

 
$
28,338,937

 
8.5 / 6
(4) 
 
18 Nineteen
(6) 
Lubbock, TX
 
4/9/2015
 
4/9/2018
 
4/9/2020
 
15,598,352

 
$
34,871,251

 
8.5 / 6
(4) 
 
Haven South
(7) 
Waco, TX
 
5/1/2015
 
5/1/2018
 
5/1/2019
 
15,455,668

 
$
41,827,034

 
8.5 / 6
(4) 
 
Haven46
(8) 
Tampa, FL
 
3/29/2016
 
3/29/2019
 
9/29/2020
 
9,819,662

 
$
29,885,928

 
8.5 / 5
(4) 
 
Bishop Street
(9) 
Atlanta, GA
 
2/18/2016
 
2/18/2020
 
N/A
 
12,693,457

 
$
29,700,000

 
8.5 / 5
(4) 
 
Dawson Marketplace
(10) 
Atlanta, GA
 
12/16/2015
 
11/15/2018
 
11/15/2020
 
12,857,005

 
$
36,740,430

 
8.5 / 5
(4) 
 
Hidden River
 
Tampa, FL
 
12/4/2015
 
12/3/2018
 
12/3/2020
 
4,734,960

 
$
27,620,600

 
8.5 / 5
(4) 
 
Hidden River Capital
 
Tampa, FL
 
12/4/2015
 
12/4/2018
 
12/4/2020
 
5,380,000

 
$
—

 
8.5 / 5
 
 
CityPark II
 
Charlotte, NC
 
1/8/2016
 
1/7/2019
 
1/7/2021
 
3,364,800

 
$
19,628,000

 
8.5 / 5
(4) 
 
CityPark II Capital
 
Charlotte, NC
 
1/8/2016
 
1/8/2019
 
1/31/2021
 
3,916,000

 
$
—

 
8.5 / 5
 
 
Crescent Avenue
(11) 
Atlanta, GA
 
1/13/2016
 
7/13/2017
 
N/A
 
6,000,000

 
$
—

 
9 / 3
 
 
Haven Northgate
(12) 
College Station, TX
 
3/15/2016
 
3/15/2018
 
N/A
 
33,750,000

 
$
—

 
11 / -
 
 










 






 










$
312,150,568




 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) 
All loans pertain to developments of multifamily communities, except as otherwise indicated.
(2) 
Real estate loan in support of a completed 160-unit, 568-bed student housing community adjacent to the campus of the University of West Georgia.
(3) 
Real estate loan in support of a completed 152-unit, 536-bed student housing community adjacent to the campus of Mississippi State University.
(4) 
The purchase price is to be calculated based upon market cap rates at the time of exercise of the purchase option, with discounts ranging from between 20 and 60 basis points, depending on the loan.
(5) 
Real estate loan in support of a completed 198-unit, 792-bed student housing community adjacent to the campus of Kennesaw State University in Atlanta, Georgia.
(6) 
Real estate loan of up to approximately $15.6 million in support of a planned 217-unit, 732-bed student housing community adjacent to the campus of Texas Tech University.
(7) 
Real estate loan in support of a planned 250-unit, 840-bed student housing community adjacent to the campus of Baylor University.
(8) 
On March 29, 2016, our bridge loan was converted to a real estate loan in support of a planned 158-unit, 542-bed student housing community adjacent to the campus of the University of South Florida.
(9) 
On February 18, 2016, our bridge loan was converted to a real estate loan in support of a planned multifamily community in Atlanta, Georgia.
(10) 
Real estate loan in support of a planned approximate 200,000 square foot retail center in the Atlanta, Georgia market.
(11) 
Bridge loan in support of a proposed multi-use property in Atlanta, Georgia.
(12) 
Bridge loan in support of a planned 427-unit, 808-bed student housing community adjacent to the campus of Texas A&M University. See note 7 for related party disclosure.


13
Preferred Apartment Communities, Inc.
Notes to Consolidated Financial Statements – (continued)
March 31, 2016


The Palisades, Green Park, Stadium Village and Founders' Village loans are subject to a loan participation agreement with a syndicate of unaffiliated third parties, under which the syndicate is to fund 25% of the loan commitment amount and collectively receive 25% of interest payments and returns of principal.

The Company's real estate loans are collateralized by 100% of the membership interests of the underlying project entity, and, where considered necessary, by unconditional joint and several repayment guaranties and performance guaranties by the principal(s) of the borrowers. These guaranties generally remain in effect until the receipt of a final certificate of occupancy. All of the guaranties are subject to the rights held by the senior lender pursuant to a standard intercreditor agreement. The Crescent Avenue and Haven Northgate loans are also collateralized by the acquired land. The Haven West loan is additionally collateralized by an assignment by the developer of security interests in unrelated projects. Prepayment of the real estate loans are permitted in whole, but not in part, without the Company's consent.

Management monitors the credit quality of the obligors under each of the Company's real estate loans by tracking the timeliness of scheduled interest and principal payments relative to the due dates as specified in the loan documents, as well as draw requests on the loans relative to the project budgets. In addition, management monitors the actual progress of development and construction relative to the construction plan, as well as local, regional and national economic conditions that may bear on our current and target markets. The credit quality of the Company’s borrowers is primarily based on their payment history on an individual loan basis, and as such, the Company does not assign quantitative credit value measures or categories to its real estate loans and notes receivable in credit quality categories. At March 31, 2016, none of the Company's real estate loans were delinquent.
 
 
As of 3/31/2016
 
Carrying amount as of
 
 
Amount drawn
 
Loan Fee received from borrower - 2%
 
Acquisition fee paid to Manager - 1%
 
Unamortized deferred loan fee revenue
 
March 31, 2016
 
December 31, 2015
Project/Property
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Crosstown Walk
 
—

 
—

 
—

 
—

 
—

 
$
10,950,040

City Vista
 
16,107,735

 
322,134

 
(161,067
)
 
(9,669
)
 
16,098,066

 
16,083,431

Overton Rise
 
—

 
—

 
—