Bluerock Residential Growth REIT Announces Third Quarter 2020 Results

11/5/20

Bluerock Residential Growth REIT, Inc. (NYSE American: BRG), an owner of highly amenitized multifamily apartment communities, announced today its financial results for the quarter ended September 30, 2020.

"Our solid same store occupancy, average rent, and operating margins performance continue to validate our market, asset and operating strategy even with the challenges of COVID-19," said Ramin Kamfar, Company Chairman and CEO. "Our rental collections reflect favorably on our investments in highly amenitized, live/work/play apartment communities in knowledge-based economies such as health care, technology, education, sciences and finance sectors. We are making accretive capital allocation decisions, and while, we acknowledge the potential for future challenges due to the pandemic, we have a robust pipeline of growth opportunities."

Third Quarter Highlights

  • Total revenues grew 1.9% to $54.6 million for the quarter from $53.5 million in the prior year period.
  • Net loss attributable to common stockholders for the third quarter of 2020 was ($0.71) per diluted share, as compared to net income attributable to common stockholders of $0.75 per diluted share in the prior year period.
  • Property Net Operating Income ("NOI") grew 3.7% to $29.1 million, from $28.0 million in the prior year period.
  • Improved operating margins by 70 basis points year over year to 59.8%.
  • Portfolio occupancy was 95.1% at September 30, 2020, up 130 basis points from the prior year.
  • Same store occupancy increased 110 basis points and same store average rent increased 0.4%, as compared to the prior year period.
  • Same store revenue increased 0.6% and same store NOI decreased 1.3%, as compared to the prior year period.
  • Collected 97% of rents, including payment plans of 1%, from its multifamily properties for the three months ended September 30, 2020.
  • Core funds from operations attributable to common shares and units ("CFFO") was $5.4 million, compared to $5.8 million in the prior year period. CFFO per share was $0.16 for the third quarter as compared to $0.19 in the prior year period. CFFO per share was impacted by $0.03 as a result of the Company's strategic decision to reduce its investment pace and hold excess liquidity during the quarter. With its strong pipeline, the Company expects to invest available capital on a go forward basis.
  • Consolidated real estate investments, at cost, were approximately $2.2 billion.
  • Acquired a 92% interest in a multifamily community of 320-units for a total purchase price of $34.5 million.
  • Invested in two new development mezzanine loans with a total commitment of $21.7 million, of which $1.9 million was funded.
  • Completed additional funding for ten preferred equity, mezzanine loan, and ground lease investments totaling $27.1 million.
  • In October 2020, sold one operating asset, Cade Boca Raton, for a gross sales price of $37.8 million and net proceeds to the Company of $10.2 million. The asset was sold at an in-place cap rate of 3.3% adjusting for the buyer's year one taxes and $250 per unit replacement reserves.
  • Completed 86 value-add unit upgrades during the quarter achieving an average 25.5% ROI.
  • Paid quarterly dividend of $0.1625 in cash per share of common stock.
  • Raised $66.2 million through its continuous registered Series T Preferred Stock offering in the quarter.
  • Announced a partial redemption of its 8.25% Series A Cumulative Redeemable Preferred Stock.
  • As of September 30, 2020, had $245.4 million of unrestricted cash and availability under its revolving credit facilities.

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.

COVID-19 Pandemic Update

Since the beginning of the COVID-19 pandemic, the Company executed on actions to prioritize the health and well-being of its tenants, business partners, service providers and employees, while striving to provide the highest quality living experience possible and facilitating virtual leasing and services.

Post-Quarter Operational Performance

  • As of October 31, 2020, the Company has collected 97% of October rents, including payment plans of 0.5%, from its multifamily properties.
  • Occupancy and availability remains strong at 95.4% and 7.9%, as of October 31, 2020.
  • In October average lease rate grew 1.2% year over year.

Current Liquidity

Due to the uncertainties presented by the COVID-19 pandemic, the Company continues to take measures to increase its liquidity and believes it has sufficient liquidity through this uncertain period.

  • The Company has approximately $168.5 million in unrestricted cash and availability under its revolving credit facilities as of October 31, 2020.
  • Over $28 million was raised from the Company's continuous registered Series T Preferred Stock offering during October 2020.

Third Quarter 2020 Financial Results

Net loss attributable to common stockholders for the third quarter of 2020 was ($17.1) million, compared to net income attributable to common stockholders of $17.2 million in the prior year period. Net income (loss) attributable to common stockholders included non-cash expenses of $19.4 million or $0.79 per share in the third quarter of 2020 compared to $17.5 million or $0.77 per share for the prior year period.

CFFO for the third quarter of 2020 was $5.4 million, or $0.16 per diluted share, compared to $5.8 million, or $0.19 per diluted share, in the prior year period. CFFO was impacted by the Company's strategic decision to reduce its investment pace in the near term and to increase its cash position. CFFO was positively impacted by growth in property NOI of $1.1 million, preferred returns of $1.0 million, and a decrease in interest expense of $1.0 million. This was primarily offset by a year-over-year decrease in interest income of $0.2 million, an increase in general and administrative expense of $0.1 million and preferred stock dividends of $3.1 million.

Renovation Activity

The Company completed 86 value-add unit upgrades during the third quarter achieving a 25.5% ROI. Since inception, within the existing portfolio, the Company has completed 2,890 value-add unit upgrades at an average cost of $5,873 per unit and achieved an average monthly rental rate increase of $115 per unit, equating to a 23.6% ROI on all unit upgrades leased as of September 30, 2020. The Company has identified approximately 4,486 remaining units within the existing portfolio for value-add upgrades with similar projected economics to the completed renovations. Due to the uncertainty surrounding the COVID-19 impact, the Company had temporarily suspended interior renovations at several properties subject to better visibility on the economic recovery, and now expects to complete between 250 and 300 unit renovations in 2020.

Portfolio Activity

The Company completed the following investments:

  • Acquired a 92% interest in a 320-unit apartment community located in Austin, Texas, known as Chevy Chase. The total purchase price was $34.5 million, funded in part by a $24.4 million mortgage loan secured by the property.
  • Entered into two development mezzanine loans with unrelated third parties in the third quarter. The mezzanine loans are for apartment communities with a total of 520-units in Orlando, Florida, and Atlanta, Georgia. The Company funded approximately $1.9 million of a total mezzanine commitment of $21.7 million.
  • Funded $27.1 million under existing preferred equity, mezzanine loan, and ground lease commitments in ten investments.

The Company completed the following sales activity:

  • Subsequent to quarter end, sold Cade Boca Raton for a gross sales price of $37.8 million and net proceeds to the Company of $10.2 million. The asset was sold at an in-place cap rate of 3.3% adjusting for the buyer's year one taxes and $250 per unit replacement reserves.

Balance Sheet

As of September 30, 2020, the Company had $245.4 million of unrestricted cash and availability under its revolving credit facilities, and $1.4 billion of indebtedness outstanding.

During the third quarter, the Company raised gross proceeds of approximately $66.2 million through the issuance of 2.6 million shares of Series T Preferred Stock at $25.00 per share. The Series T Preferred Stock continuous offering offers 20,000,000 preferred shares in the primary offering, along with 12,000,000 preferred shares pursuant to a dividend reinvestment plan. The preferred shares are offered at $25.00 per share and pay cumulative monthly dividends at a 6.15% annual rate, along with an annual stock dividend of up to 0.2% for five years.

The Company repurchased 103,574 shares of Class A Common Stock during the third quarter at an average price of $7.30 under its $50.0 million share repurchase plan announced in December 2019.

On October 21, 2020, the Company redeemed 1,393,294 shares of its 8.25% Series A Cumulative Redeemable Preferred Stock, representing approximately 25% of the total outstanding shares of Series A Preferred Stock. The total cost to redeem the shares was $35 million, including accrued and unpaid dividends.

Dividend

The Board of Directors authorized, and the Company declared, a quarterly cash dividend for the third quarter of 2020 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 September 25, 2020, and was paid on October 5, 2020. A portion of each dividend may constitute a return of capital for tax purposes.

The Board of Directors authorized, and the Company declared, a quarterly cash dividend on its 8.250% Series A Cumulative Redeemable Preferred Stock for the third quarter of 2020, in the amount of $0.515625 per share. In addition, 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 third quarter of 2020, 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 third quarter of 2020, in the amount of $0.4453125 per share. The dividends were payable to the stockholders of record as of September 25, 2020, and were paid on October 5, 2020.

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 July 24, 2020, August 25, 2020, and September 25, 2020, which were paid in cash on August 5, 2020, September 4, 2020 and October 5, 2020, respectively.

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 July 24, 2020, August 25, 2020, and September 25, 2020, which were paid in cash on August 5, 2020, September 4, 2020 and October 5, 2020, respectively.

On October 9, 2020, 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 October 23, 2020, which was paid in cash on November 5, 2020, and as of November 25, 2020, and December 24, 2020, which will be paid in cash on December 4, 2020 and January 5, 2021, respectively.

On October 9, 2020, 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 October 23, 2020, which was paid in cash on November 5, 2020, and as of November 25, 2020, and December 24, 2020, which will be paid in cash on December 4, 2020 and January 5, 2021, respectively.

2020 Guidance

The Company withdrew its full year 2020 guidance on May 11, 2020, due to inherent uncertainty regarding the economic effects of the COVID-19 pandemic.

AboutBluerockResidentialGrowthREIT,Inc.

Bluerock Residential Growth REIT, Inc. (NYSE American: BRG) is a real estate investment trust that focuses on developing and acquiring a diversified portfolio of institutional-quality highly amenitized live/work/play apartment communities in demographically attractive knowledge economy growth markets to appeal to the renter by choice. The Company's objective is to generate value through off-market/relationship-based transactions and, at the asset 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 income tax purposes.

For more information, please visit the Company's website at www.bluerockresidential.com.