Bluerock Residential Growth REIT Announces First Quarter 2021 Results
Portfolio Lease Rate Growth of 3.5%
April Portfolio Lease Rate Growth of 7.7%
Same Store Average Occupancy Increased 1.2%
Repurchased 3.6 Million Common Shares
New York, NY (May 10, 2021) – Bluerock Residential Growth REIT, Inc. (NYSE American: BRG) (“the Company”), an owner of highly amenitized multifamily apartment communities, announced today its financial results for the quarter ended March 31, 2021.
“We are encouraged by the substantial sequential reacceleration of rent growth and year over year improvement in same store occupancy which reflect a high-quality affordable Class A portfolio of highly amenitized live/work/play apartment communities,” said Ramin Kamfar, Company Chairman and CEO. “Our strategy of maintaining occupancy over the past year, along with the favorable positioning of our portfolio, is allowing us to achieve industry-leading lease rate growth.”
First Quarter Highlights
- Net income attributable to common stockholders for the first quarter of 2021 was $23.6 million or $1.00 per diluted share, as compared to net loss attributable to common stockholders of ($16.5) million or ($0.70) per diluted share in the prior year period.
- Core funds from operations attributable to common stockholders and unit holders (“CFFO”) was $5.3 million, or $0.16 per diluted share, compared to $7.1 million, or $0.22 per diluted share, in the prior year period, as this year’s results were partially impacted by additional capital on the balance sheet.
- Collected 97% of rents from multifamily properties for the three months ended March 31, 2021.
- Total rental and other property revenues grew 1.4% to $51.1 million for the quarter from $50.4 million in the prior year period.
- Blended lease rate growth of 3.5%, up 300 basis points on a sequential quarter-over-quarter basis.
- March 2021 average lease growth finished at 5.8%, with renewals at 5.5% and new leases at 6.1%. Average lease growth accelerated to 7.7% growth in April.
- Portfolio occupancy was 95.8% at March 31, 2021, up 150 basis points from the prior year.
- Property Net Operating Income (“NOI”) was $31.1 million, consistent with $31.1 million in the prior year period.
- Property operating margins were 61.0% compared to 61.7% in the prior year period.
- Same store average occupancy expanded 120 basis points and same store average rent increased 1.0%, as compared to the prior year period.
- Same store revenue grew 2.0% and same store NOI increased 0.6%, as compared to the prior year period.
- Consolidated real estate investments, at cost, were approximately $2.1 billion.
- Sold three operating assets and two development properties for aggregate gross sales prices of $303 million with net proceeds of $102 million. The assets were sold at in-place cap rates of 4.0% adjusting for the buyer’s year one taxes and $300 per unit replacement reserves.
- Invested $7 million in preferred equity in a new stabilized property, and completed funding for eight existing preferred equity, mezzanine loan, and ground lease investments for $21 million.
- Completed 72 value-add unit upgrades during the quarter achieving an average 24.3% ROI.
Balance Sheet and Market Activity
- Had $260.5 million of unrestricted cash and availability under revolving credit facilities as of March 31, 2021.
- Paid quarterly dividend of $0.1625 in cash per share of common stock.
- Raised $98 million through its continuous registered Series T Preferred Stock offering in the quarter.
- Completed redemptions of its remaining 8.25% Series A Cumulative Redeemable Preferred Stock totaling $56 million, including accrued and unpaid dividends.
- Redeemed 72,535 shares of Series B Preferred Stock through the issuance of 6,518,267 shares of Class A common stock.
- Repurchased 3,557,562 shares of Class A common stock during the quarter at an average price of $11.45 per share.
Included later in this release are definitions of NOI, CFFO and other Non-GAAP financial measures and reconciliations of such measures to their most comparable financial measures as calculated and presented under GAAP.
First Quarter 2021 Financial Results
Net income attributable to common stockholders for the first quarter of 2021 was $23.6 million, compared to net loss attributable to common stockholders of ($16.5) million in the prior year period. Net income in 2021 was positively impacted by three asset sales generating $69 million in gain on sale of real estate investments. Net income (loss) attributable to common stockholders included non-cash expenses of $21.6 million or $0.93 per share in the first quarter of 2021 compared to $20.9 million or $0.88 per share for the prior year period.
CFFO for the first quarter of 2021 was $5.3 million, or $0.16 per diluted share, compared to $7.1 million, or $0.22 per diluted share, in the prior year period. CFFO was positively impacted by an increase in property NOI of $0.1 million and a decrease in interest expense of $0.8 million. This was primarily offset by a year-over-year reduction of $1.2 million in interest income from mezzanine loan and ground lease investments, $0.1 million in preferred returns, a $0.5 million increase in general and administrative expenses and preferred stock dividends of $1.1 million.
Total Portfolio Performance
(1) Including interest income from mezzanine loan and ground lease investments.
For the first quarter of 2021, property revenues increased by 1.4% compared to the same prior year period. Total portfolio NOI was $31.1 million, an increase of $0.1 million, or 0.3%, compared to the same period in the prior year. Property NOI margins were 61.0% of revenue for the quarter, compared to 61.7% in the prior year quarter.
Same Store Portfolio Performance
The Company’s same store portfolio for the quarter ended March 31, 2021 included 26 properties. For the first quarter of 2021, same store NOI was $24.0 million, an increase of $0.1 million, or 0.6%, compared to the 2020 period. Same store property revenues grew by 2.0% compared to the 2020 period, primarily driven by a 120-basis point increase in occupancy and 1.0% increase in average rental rates; of the Company’s 26 same store properties, 21 recognized occupancy increases and 18 recognized rental rate increases during the period. This was offset by $0.3 million increase in bad debt expense due to the impact of COVID-19.
Same store expenses increased 4.4%, or $0.6 million, primarily due to non-controllable real estate tax and insurance expense increases of $0.42 million due to municipality tax increases and industrywide multifamily insurance price increases, with the remaining $0.18 million due to administrative and repairs and maintenance expense increases.
The Company completed 72 value-add unit upgrades during the first quarter of 2021 achieving an average 24.3% ROI.Since inception, the Company has completed 3,027 value-add unit upgrades at an average cost of $5,953 per unit and achieved an average monthly rental rate increase of $117 per unit, equating to an average 23.6% ROI on all unit upgrades leased as of March 31, 2021. The Company has identified approximately 4,349 remaining units within the existing portfolio for value-add upgrades with similar projected economics to the completed renovations.
The following activities were completed during the first quarter:
- Made a preferred equity investment of $7 million in a stabilized asset with 262-units called The Riley, located in Richardson, Texas.
- Funded $21 million under existing preferred equity, mezzanine loan, and ground lease commitments in eight investments.
- On January 28, 2021, the Company sold ARIUM Grandewood for a gross sales price of $65 million and net proceeds to the Company of $25 million.
- On February 24, 2021, the Company sold James at South First for a gross sales price of $50 million and net proceeds to the Company of $18 million.
- On March 1, 2021, the Company sold Marquis at the Cascades for a gross sales price of $91 million and net proceeds to the Company of $33 million.
- On March 18, 2021, the Company’s preferred equity investment in The Conley was redeemed for $17 million.
- On March 25, 2021, Alexan Southside Place was sold and the Company’s preferred equity investment was redeemed for $9.8 million in April 2021, with an additional $0.3 million expected to be received before year end.
The Company completed the following activity subsequent to March 31, 2021:
- On April 12, 2021, the Company made a $10.7 million preferred equity investment in the operating partnership of Peak Housing, a private REIT invested in a portfolio of 474 single-family homes located throughout Texas.
- On April 14, 2021, the Company acquired a 95% interest in an 80-unit apartment community located in Olympia, Washington, known as Yauger Park. The total purchase price was $24.5 million, funded in part through the assumption of $15.1 million in mortgage loans secured by the property.
- On April 26, 2021, the Company sold Plantation Park for a gross sales price of $32 million and net proceeds to the Company of $2.7 million.
As of March 31, 2021, the Company had $260.5 million of unrestricted cash and availability under its revolving credit facilities, and $1.5 billion of indebtedness outstanding.
During the first quarter, the Company raised gross proceeds of approximately $98.0 million through the issuance of 3.9 million shares of Series T Preferred Stock at $25.00 per share.
The Company repurchased 3,557,562 shares of Class A Common Stock during the first quarter at an average price of $11.45 per share and increased its repurchase program up to an aggregate $150 million.
On February 26, 2021, the Company redeemed the remaining 2,201,547 shares of its 8.25% Series A Cumulative Redeemable Preferred Stock. The total cost to redeem the shares was $55.7 million, including accrued and unpaid dividends.
The Company redeemed 72,535 shares of Series B Preferred Stock through the issuance of 6,518,267 shares of Class A common stock.
On March 12, 2021, the Board of Directors authorized, and the Company declared, a quarterly cash dividend for the first quarter of 2021 equal to a quarterly rate of $0.1625 per share on its Class A and Class C Common Stock, payable to the stockholders of record as of March 25, 2021, which was paid on April 5, 2021. A portion of each dividend mayconstitute a return of capital for tax purposes.
On March 12, 2021, the Board of Directors authorized, and the Company declared, a quarterly cash dividend on its 7.625% Series C Cumulative Redeemable Preferred Stock for the first quarter of 2021, in the amount of $0.4765625 per share. Further, the Board of Directors authorized, and the Company declared, a quarterly cash dividend on its 7.125% Series D Cumulative Preferred Stock for the first quarter of 2021, in the amount of $0.4453125 per share. The dividends were payable to the stockholders of record as of March 25, 2021 and were paid on April 5, 2021.
On January 13, 2021, the Board of Directors authorized, and the Company declared, a monthly dividend of $5.00 per share of Series B Preferred Stock, payable to the stockholders of record as of January 25, 2021, February 25, 2021, and March 25, 2021, which were paid in cash on February 5, 2021, March 5, 2021 and April 5, 2021, respectively.
On January 13, 2021, the Board of Directors authorized, and the Company declared, a monthly dividend of $0.128125 per share of Series T Preferred Stock, prorated on the basis of the actual number of days in the applicable dividend period during which each share was outstanding. Such pro-rated dividends were payable to the stockholders of record as of January 25, 2021, February 25, 2021, and March 25, 2021, and were paid in cash on February 5, 2021, March 5, 2021 and April 5, 2021, respectively.
On April 12, 2021, the Board of Directors authorized, and the Company declared, a monthly dividend of $5.00 per share of Series B Preferred Stock, payable to the stockholders of record as of April 23, 2021, which was paid in cash on May 5, 2021, and as of May 25, 2021, and June 25, 2021, which will be paid in cash on June 4, 2021 and July 2, 2021, respectively.
On April 12, 2021, the Board of Directors authorized, and the Company declared, a monthly dividend of $0.128125 per share of Series T Preferred Stock, prorated on the basis of the actual number of days in the applicable dividend period during which each share was outstanding. Such pro-rated dividends are payable to the stockholders of record as of April 23, 2021, which was paid in cash on May 5, 2021, and as of May 25, 2021, and June 25, 2021, which will be paid in cash on June 4, 2021 and July 2, 2021, respectively.
The Company is reaffirming its prior 2021 CFFO guidance. Based on the Company’s current outlook and market conditions, the Company anticipates 2021 CFFO in the range of $0.65 to $0.70 per share. The Company anticipates that earnings growth will be more heavily weighted towards the second half of 2021 as it realizes the upside opportunity from deploying the proceeds from opportunistic dispositions in late 2020 and early 2021, plus the implementation of institutional property management, lease-ups, and value-add renovations at its recent acquisitions. For additional guidance details underlying earnings guidance, please see page 32 of Company’s First Quarter 2021 Earnings Supplement available under the Investors section on the Company’s website (www.bluerockresidential.com).
All interested parties can listen to the live conference call at 11:00 AM ET on Monday, May 10, 2021 by dialing +1(866) 843-0890 within the U.S., or +1 (412) 317-6597, and requesting the “Bluerock Residential Conference.”
For those who are not available to listen to the live call, the conference call will be available for replay on theCompany’s website two hours after the call concludes, and will remain available until June 10, 2021 at https://services.choruscall.com/mediaframe/webcast.html?webcastid=VDVxOVOq, as well as by dialing +1 (877)344-7529 in the U.S., or +1 (412) 317-0088 internationally, and requesting conference number 10155057.
The full text of this Earnings Release and additional Supplemental Information is available in the Investors section on the Company’s website at https://www.bluerockresidential.com.
About Bluerock Residential Growth REIT, Inc.
Bluerock Residential Growth REIT, Inc. (NYSE American: BRG) is a real estate investment trust that focuses ondeveloping and acquiring a diversified portfolio of primarily affordable Class A highly amenitized live/work/play apartment communities in demographically attractive knowledge economy growth markets to appeal to the renter bychoice. The Company’s objective is to generate value through off-market/relationship-based transactions and, at theasset level, through value add improvements to properties and operations. The Company is included in the Russell 2000 and Russell 3000 Indexes. BRG has elected to be taxed as a real estate investment trust (REIT) for U.S. federal incometax purposes.
For more information, please visit the Company’s website at www.bluerockresidential.com.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities LitigationReform Act of 1995 and other federal securities laws. These forward-looking statements are based upon theCompany’s present expectations, but these statements are not guaranteed to occur. Furthermore, the Companydisclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlyingassumptions or factors, of new information, data or methods, future events or other changes. Investors should notplace undue reliance upon forward-looking statements. Although the Company believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions, the Company’s actual results and performance could differ materially from those set forth in these forward-looking statements due to numerous factors. Currently, one of the most significant factors is the potential adverse effect of the COVID-19 pandemic on the financial condition, results of operations, cash flows and performance of the Company and its tenants, partners and employees, as well as the real estate market and the global economy and financial markets. The extent to which COVID-19 impacts the Company and its tenants, partners and employees will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact (including governmental actions that may vary by jurisdiction, such as mandated business closing; stay-at-home orders; limits on group activity; and actions to protect residential tenants from eviction), and the direct and indirect economic effects of the pandemic and containment measures, including national and local employment rates and the corresponding impact on the Company’s tenants’ ability to pay their rent on time or at all, among others. For further discussion of the factorsthat could affect outcomes, please refer to the risk factors set forth in Item 1A of the Company’s Annual Report onForm 10-K filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on February 23,2021, and subsequent filings by the Company with the SEC. We claim the safe harbor protection for forward lookingstatements contained in the Private Securities Litigation Reform Act of 1995.
The following is a summary of our operating real estate and mezzanine/preferred/ground lease investments as of March 31, 2021:
(1) Represents date of last significant renovation or year built if no renovations.
(2) Represents the average effective monthly rent per occupied unit for the three months ended March 31, 2021.
(3) Percent occupied is calculated as (i) the number of units occupied as of March 31, 2021, divided by (ii) total number of units, expressed as a percentage.
(4) Represents the average pro forma effective monthly rent per occupied unit for all expected units upon stabilization.
(5) The average effective monthly rent including sold properties was $1,315 for the three months ended March 31, 2021.
(6) The average effective monthly rent including sold properties was $1,438 for the three months ended March 31, 2021.
(7) The average effective monthly rent including sold properties was $1,352 for the three months ended March 31, 2021.
Consolidated Statement of Operations
For the Three Months Ended March 31, 2021 and 2020
(Unaudited and dollars in thousands except for share and per share data)
Consolidated Balance Sheets
First Quarter 2021
(Unaudited and dollars in thousands except for share and per share amounts)
Non-GAAP Financial Measures
The foregoing supplemental financial data includes certain non-GAAP financial measures that we believe are helpful in understanding our business and performance, as further described below. Our definition and calculation of these non-GAAP financial measures may differ from those of other REITs, and may, therefore, not be comparable.
Funds from Operations and Core Funds from Operations
We believe that funds from operations (“FFO”), as defined by the National Association of Real Estate Investment Trusts (“NAREIT”) and core funds from operations (“CFFO”) are important non-GAAP supplemental measures of operating performance for a REIT.
FFO attributable to common stockholders and unit holders is a non-GAAP financial measure that is widely recognized as a measure of REIT operating performance. We consider FFO to be an appropriate supplemental measure of our operating performance as it is based on a net income analysis of property portfolio performance that excludes non-cash items such as depreciation. The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time. Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT, using historical accounting for depreciation, could be less informative. We define FFO, consistent with the NAREIT definition, as net income (loss), computed in accordance with GAAP, excluding gains or losses on sales of depreciable real estate property, plus depreciation and amortization of real estate assets, plus impairment write-downs of certain real estate assets and investments in entities where the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis.
CFFO makes certain adjustments to FFO, removing the effect of items that do not reflect ongoing property operations such as acquisition expenses, non-cash interest, unrealized gains and losses on derivatives, losses on extinguishment of debt and debt modification costs (includes prepayment penalties incurred and the write-off of unamortized deferred financing costs and fair market value adjustments of assumed debt), one-time weather-related costs, stock compensation expense and preferred stock accretion. We believe that CFFO is helpful to investors as a supplemental performance measure because it excludes the effects of certain items which can create significant earnings volatility, but which do not directly relate to our core recurring property operations. As a result, we believe that CFFO can help facilitate comparisons of operating performance between periods and provides a more meaningful predictor of future earnings potential.
Our calculation of CFFO differs from the methodology used for calculating CFFO by certain other REITs and, accordingly, our CFFO may not be comparable to CFFO reported by other REITs. Our management utilizes FFO and CFFO as measures of our operating performance after adjustment for certain non-cash items, such as depreciation and amortization expenses, and acquisition and pursuit costs that are required by GAAP to be expensed but may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods. Furthermore, although FFO and CFFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we also believe that FFO and CFFO may provide us and our stockholders with an additional useful measure to compare our financial performance to certain other REITs.
Neither FFO nor CFFO is equivalent to net income, including net income attributable to common stockholders, or cash generated from operating activities determined in accordance with GAAP. Furthermore, FFO and CFFO do not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO nor CFFO should be considered as an alternative to net income, including net income attributable to common stockholders, as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity.
We have acquired four operating properties, made six property investments through preferred equity or mezzanine loan investments, sold seven operating properties and received our full mezzanine loan or preferred equity in four investments subsequent to March 31, 2020. The results presented in the table below are not directly comparable and should not be considered an indication of our future operating performance.
The table below reconciles our calculations of FFO and CFFO to net income (loss), the most directly comparable GAAP financial measure, for the three months ended March 31, 2021 and 2020 (in thousands, except per share amounts):
Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (“EBITDAre”)
NAREIT defines earnings before interest, taxes, depreciation and amortization for real estate (“EBITDAre”) (September 2017 White Paper) as net income (loss), computed in accordance with GAAP, before interest expense, income taxes, depreciation and amortization expense, and further adjusted for gains and losses from sales of depreciated operating properties, and impairment write-downs of depreciated operating properties.
We consider EBITDAre to be an appropriate supplemental measure of our performance because it eliminates depreciation, income taxes, interest and non-recurring items, which permits investors to view income from operations unobscured by non-cash items such as depreciation, amortization, the cost of debt or non-recurring items.
Adjusted EBITDAre represents EBITDAre further adjusted for non-comparable items and it is not intended to be a measure of free cash flow for our management’s discretionary use, as it does not consider certain cash requirements such as income tax payments, debt service requirements, capital expenditures and other fixed charges.
EBITDAre and Adjusted EBITDAre are not recognized measurements under GAAP. Because not all companies use identical calculations, our presentation of EBITDAre and Adjusted EBITDAre may not be comparable to similarly titled measures of other companies.
Below is a reconciliation of net income (loss) attributable to common stockholders to EBITDAre and Adjusted EBITDAre (unaudited and dollars in thousands).
Same Store Properties
Same store properties are conventional multifamily residential apartments which were owned and operational for theentire periods presented, including each comparative period.
Property Net Operating Income (“Property NOI”)
We believe that net operating income, or NOI, is a useful measure of our operating performance. We define NOI astotal property revenues less total property operating expenses, excluding depreciation and amortization and interest.Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparableto other REITs. We believe that this measure provides an operating perspective not immediately apparent fromGAAP operating income or net income. We use NOI to evaluate our performance on a same store and non-same storebasis; NOI measures the core operations of property performance by excluding corporate level expenses and otheritems not related to property operating performance and captures trends in rental housing and property operatingexpenses. However, NOI should only be used as a supplemental measure of our financial performance.
The following table reflects net income (loss) attributable to common stockholders together with a reconciliation to NOI and to same store and non-same store contributions to consolidated NOI, as computed in accordance with GAAP for the periods presented (unaudited and amounts in thousands):
(1) Same store portfolio for the three months ended March 31, 2021 consists of 26 properties, which represent 9,116 units.