Bluerock Residential Growth REIT Announces Fourth Quarter 2020 Results

NEW YORK, Feb. 11, 2021 /PRNewswire/ -- 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 December 31, 2020.

"We continue to drive solid same store occupancy, average rent, and operating margins performance in our investments in highly amenitized, live/work/play apartment communities, even with the challenges of COVID-19," said Ramin Kamfar, Company Chairman and CEO.  "Our increased occupancy, sequential quarterly rent growth improvement, and consistent elevated rental collections throughout the pandemic reflect a resilient Class A affordable suburban based portfolio well positioned to outperform in the coming quarters. We will also continue to opportunistically allocate capital through dispositions and new investments, as well as opportunistic share repurchases and redemption of our preferred equity."

Fourth Quarter Highlights

• Total revenues grew 6.6% to $56.0 million for the quarter from $52.5 million in the prior year period.
• Net loss attributable to common stockholders for the fourth quarter of 2020 was ($1.13) per diluted share, as compared to net loss attributable to common stockholders of ($0.62) per diluted share in the prior year period.
• Property Net Operating Income ("NOI") grew 9.7% to $30.9 million from $28.2 million in the prior year period.
• Portfolio occupancy was 95.4% at December 31, 2020, up 140 basis points from the prior year.
• Same store average occupancy increased 140 basis points and same store average rent increased 0.2%, as compared to the prior year period.
• Same store revenue increased 0.6% and same store NOI increased 0.2%, as compared to the prior year period.
• Improved operating margins by 50 basis points year over year to 62.1%.
• Blended lease rate growth of 1.0%, up 60 basis points on a sequential quarter-over-quarter basis. January 2021 average lease growth accelerated to 1.4%, led by renewals at 4.4% and new leases at negative 1%.
• Collected 97% of rents from its multifamily properties for the three months ended December 31, 2020.
• Core funds from operations attributable to common shares and units ("CFFO") was $6.1 million, compared to $6.7 million in the prior year period. CFFO per diluted share was $0.18 for the fourth quarter as compared to $0.21 in the prior year period.
• Consolidated real estate investments, at cost, were approximately $2.3 billion.
• Acquired three multifamily communities totaling 968 units for a total purchase price of $166 million.
• Made two additional Strategic Portfolio preferred equity investments in stabilized properties totaling $5 million and committed to another preferred equity investment in a development project for $10 million.
• Completed additional funding for eleven preferred equity, mezzanine loan, and ground lease investments totaling $20 million.
• Sold one operating asset for a sale price of $38 million and net proceeds of $10 million. The asset was sold at an in-place cap rate of 3.3% adjusting for the buyer's year one taxes and $300 per unit replacement reserves.
• Sold three development investments for gross sales pricing of $218 million netting the Company proceeds of $70 million – two mezzanine loan repayments yielded $55 million and one preferred equity investment returned $15 million in net proceeds to the Company.
• Completed 65 value-add unit upgrades during the quarter achieving an average 23.9% ROI.
• Paid quarterly dividend of $0.1625 in cash per share of common stock.
• Raised $76.2 million through its continuous registered Series T Preferred Stock offering in the quarter.
• Completed partial redemptions of its 8.25% Series A Cumulative Redeemable Preferred Stock totaling $85 million, including accrued and unpaid dividends. Subsequent to quarter end, the Company announced it will redeem the remaining $55 million outstanding on February 26^th.
• Repurchased 2,851,975 shares of Class A common stock during the quarter at an average price of $9.81 per share.
• As of December 31, 2020, had $208.3 million of unrestricted cash and availability under its revolving credit facilities.

Full Year Highlights

• Total revenues grew 4.7% to $219.8 million for the year from $210.0 million in the prior year.
• Net loss attributable to common stockholders for 2020 was ($1.91) per diluted share, as compared to ($0.91) per diluted share in the prior year.
• Property NOI grew 8.4% to $120.2 million, from $110.9 million in the prior year.
• Same store revenue and NOI increased 0.9% and 0.3%, respectively, as compared to the prior year.
• Completed 310 value-add unit upgrades during the year producing an average 23.3% ROI through increased monthly rental rates.
• Improved operating margin by 140 basis points year over year to 61.2%.
• CFFO was $23.7 million, compared to $25.4 million in the prior year. CFFO per diluted share was $0.72 for the year as compared to $0.82 in the prior year.
• Acquired six multifamily communities totaling 1,898 units for a total purchase price of $338 million.
• Made five additional Strategic Portfolio preferred equity investments in stabilized properties totaling $17 million and committed to another preferred equity investment in a development project for $10 million.
• Committed to two mezzanine loan investments in development properties for $22 million.
• Purchased land for a ground lease for $3 million and committed $20 million for the ground lease tenant's multifamily development.
• Completed additional funding for thirteen preferred equity, mezzanine loan, and ground lease investments totaling $38 million and invested $4 million to buyout the noncontrolling interests in an asset.
• Sold five operating assets for a sales price of $245 million and net proceeds of $90 million.
• Sold four development investments for gross sales pricing of $283 million netting the Company proceeds of $92 million – two mezzanine loan repayments yielded $55 million and two preferred equity investments returned $38 million in net proceeds to the Company.
• Paid quarterly dividends amounting to $0.65 on an annual basis in cash per share of common stock.
• Raised $243 million through its continuous registered Series T Preferred Stock offering during the year.

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 has 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 January 31, 2021, the Company had collected 97% of January rents from its multifamily properties.
• Occupancy and availability remains strong at 95.6% and 7.4%, respectively, as of January 31, 2021.
• In January, average lease rate grew 1.4% year over year.

Current Liquidity

Due to the uncertainties presented by the COVID-19 pandemic, the Company continues to take measures to ensure an appropriate level of liquidity and believes it has sufficient liquidity through this uncertain period.

• The Company has approximately $158 million in unrestricted cash and availability under its revolving credit facilities as of January 31, 2021.
• Over $43 million was raised from the Company's continuous registered Series T Preferred Stock offering to date in 2021.

Fourth Quarter 2020 Financial Results

Net loss attributable to common stockholders for the fourth quarter of 2020 was ($26.2) million, compared to net loss attributable to common stockholders of ($13.8) million in the prior year period.  Net loss attributable to common stockholders included non-cash expenses of $31.2 million or $1.33 per share in the fourth quarter of 2020 compared to $18.6 million or $0.83 per share for the prior year period, which included a $16.4 million provision for credit loss on a preferred equity investment, primarily due to the submarket conditions in Houston, Texas impacting the underlying property operations.

CFFO for the fourth quarter of 2020 was $6.1 million, or $0.18 per diluted share, compared to $6.7 million, or $0.21 per diluted share, in the prior year period.  CFFO was positively impacted by growth in property NOI of $2.7 million and preferred returns of $0.7 million.  This was primarily offset by a year-over-year decrease in interest income of $0.5 million, an increase in general and administrative expense of $0.1 million, and preferred stock dividends of $2.8 million. 

Total Portfolio Performance

For the fourth quarter of 2020, property revenues increased by 8.8% compared to the same prior year period.  Total portfolio NOI was $30.9 million, an increase of $2.7 million, or 9.7%, compared to the same period in the prior year.  Property NOI margins expanded by 50 basis points to 62.1% of revenue for the quarter, compared to 61.6% of revenue in the prior year quarter. 

Same Store Portfolio Performance

The Company's same store portfolio for the quarter ended December 31, 2020 included 28 properties.  For the fourth quarter of 2020, same store NOI was $25.5 million, an increase of $0.1 million, or 0.2%, compared to the 2019 period. Same store property revenues increased by 0.6% compared to the 2019 period, primarily driven by a 140-basis point increase in occupancy and 0.2% increase in average rental rates; of our 28 same store properties, 22 recognized occupancy increases and 15 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 1.1%, or $0.2 million, primarily because of a $0.2 million repairs and maintenance expense increase due to timing.  Non-controllable expenses were essentially flat; insurance expenses increased $0.2 million due to industrywide multifamily price increases offset by a $0.2 million real estate tax decrease from prior year.  Real estate tax decrease was due to a $0.4 million credit in the current year offset by $0.2 million of municipality tax increases.

Renovation Activity

The Company completed 65 value-add unit upgrades during the fourth quarter achieving an average 23.9% ROI. Since inception, within the existing portfolio, the Company has completed 2,955 value-add unit upgrades at an average cost of $5,916 per unit and achieved an average monthly rental rate increase of $116 per unit, equating to an average 23.6% ROI on all unit upgrades leased as of December 31, 2020.  The Company has identified approximately 4,421 remaining units within the existing portfolio for value-add upgrades with similar projected economics to the completed renovations.

Portfolio Activity

The Company completed the following investments:

• Acquired a 100% interest in a 266-unit apartment community located in Morrisville, North Carolina, known as Carrington at Perimeter Park. The total purchase price was $52.0 million, funded in part by a $31.3 million mortgage loan secured by the property.
• Acquired a 100% interest in a 270-unit apartment community located in Austin, Texas, known as Elan. The total purchase price was $39.5 million, funded in part by a $25.6 million mortgage loan secured by the property.
• Acquired a 90% interest in a 432-unit apartment community located in Mesa, Arizona, known as Cielo on Gilbert. The total purchase price was $74.3 million, funded in part by a $58.0 million mortgage loan secured by the property.
• Made additional Strategic Portfolio preferred equity investments totaling $5 million in two stabilized assets with 388-units called Water's Edge and Hunter's Pointe, both located in Pensacola, Florida.
• Entered into a preferred equity commitment to invest $10.2 million in a 208-unit development called Encore Chandler located in Chandler, Arizona.
• Funded $20 million under existing preferred equity, mezzanine loan, and ground lease commitments in eleven investments.

The Company completed the following activity subsequent to December 31, 2020:

• 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.
• Announced the redemption of its remaining outstanding Series A Preferred Stock totaling $55 million.

Balance Sheet

As of December 31, 2020, the Company had $208.3 million of unrestricted cash and availability under its revolving credit facilities, and $1.6 billion of indebtedness outstanding.

During the fourth quarter, the Company raised gross proceeds of approximately $76.2 million through the issuance of 3.0 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 2,851,975 shares of Class A Common Stock during the fourth quarter at an average price of $9.81 per share.  

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.  In addition, on December 21, 2020, the Company redeemed 1,963,551 shares of its 8.25% Series A Cumulative Redeemable Preferred Stock, representing approximately 47% of the then total outstanding shares of Series A Preferred Stock.  The total cost to redeem the shares was $50 million, including accrued and unpaid dividends.

Dividend 

The Board of Directors authorized, and the Company declared, a quarterly cash dividend for the fourth 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 December 24, 2020, which was paid on January 5, 2021. 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 fourth 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 fourth 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 fourth quarter of 2020, in the amount of $0.4453125 per share.  The dividends were payable to the stockholders of record as of December 24, 2020, and were paid on January 5, 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 October 23, 2020, November 25, 2020, and December 24, 2020, which were paid in cash on November 5, 2020, December 4, 2020 and January 5, 2021, 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 October 23, 2020, November 25, 2020, and December 24, 2020, and were paid in cash on November 5, 2020, December 4, 2020 and January 5, 2021, respectively.

The Board authorized, and the Company declared, an annual Series T Preferred Stock dividend of 0.20% per share of Series T Preferred Stock. Shares of Series T Preferred Stock that are held only for a portion of the applicable annual stock dividend period received a prorated Series T Preferred Stock dividend based on the actual number of months in the applicable annual stock dividend period during which each such share of Series T Preferred Stock was outstanding. The annual stock dividend was payable to stockholders of record on December 24, 2020 and was paid on December 29, 2020.

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, which was paid in cash on February 5, 2021, and as of February 25, 2021, and March 25, 2021, which will be paid in cash on 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 are payable to the stockholders of record as of January 25, 2021, which was paid in cash on February 5, 2021, and as of February 25, 2021, and March 25, 2021, which will be paid in cash on March 5, 2021 and April 5, 2021, respectively.

2021 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 35 of Company's Fourth Quarter 2020 Earnings Supplement available under the Investors section on the Company's website (www.bluerockresidential.com).

Conference Call

All interested parties can listen to the live conference call at 11:00 AM ET on Thursday, February 11, 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 the Company's website two hours after the call concludes, and will remain available until March 11, 2021 at http://services.choruscall.com/links/brg210211.html, as well as by dialing +1 (877) 344-7529 in the U.S., or +1 (412) 317-0088 internationally, and requesting conference number 10151415.

The full text of this Earnings Release and additional Supplemental Information is available in the Investors section on the Company's website at http://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 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.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are based upon the Company's present expectations, but these statements are not guaranteed to occur.  Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Investors should not place 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 factors that could affect outcomes, please refer to the risk factors set forth in Item 1A of the Company's Annual Report on Form 10-K filed by the Company with the U.S. Securities and Exchange Commission ("SEC") on February 24, 2020, and subsequent filings by the Company with the SEC. We claim the safe harbor protection for forward looking statements contained in the Private Securities Litigation Reform Act of 1995.

Portfolio Summary 

The following is a summary of our operating real estate and mezzanine/preferred/ground lease investments as of December 31, 2020:

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 shares and units 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, gain or losses on sales of non-depreciable real estate property, shareholder activism, stock compensation expense and preferred stock accretion. Commencing January 1, 2020, we did not deduct the accrued portion of the preferred income on our preferred equity investments from FFO to determine CFFO as the income is deemed fully collectible. The accrued portion of the preferred income totaled $0.3 million and $1.5 million for the three and twelve months ended December 31, 2020, respectively. 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 six operating properties, made eight investments through mezzanine loans, preferred equity interests or ground lease investments, and sold six operating properties subsequent to December 31, 2019. 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 loss, the most directly comparable GAAP financial measure, for the three and twelve months ended December 31, 2020 and 2019 (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 (loss) income attributable to common stockholders to EBITDAre (unaudited and dollars in thousands).