Preferred Apartment Communities, Inc.

169 Pages·2017·13.68 MB·English

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2016 ANNUAL REPORT
S O A R I N G
2016 ANNUAL REPORT
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2016 ANNUAL REPORT
PREFERRED
APARTMENT
COMMUNITIES
WE L C OME
COMPANY PROFILES
LETTER TO STOCKHOLDERS
FORM 10-K
COMPANY INFORMATION
W
ith assets in 25 cities
across 9 states, the PAC family
of companies provides the
full gamut of services for
our core business, including
Investment Management,
Acquisition and Disposition,
Asset Management and
Property Management. Our
guiding philosophy is to
provide our residents and
tenants with an exceptional
experience by offering quality
apartment homes and retail
centers, superior resident and
tenant services, and total
customer satisfaction.
... As of December 31, 2016, our assets grew to
$2.4 Billion and revenues soared to $200 Million.
COMPANY PROFILES
Preferred Apartment Communities, Inc. (NYSE: APTS) is a Maryland corporation formed
primarily to acquire and operate multifamily properties in select targeted markets throughout
the United States. As part of our business strategy, we may enter into forward purchase contracts
or purchase options for to-be-built multifamily communities and we 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, we 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 a lesser portion
of our assets in other real estate related investments, including other
income-producing property types, senior mortgage loans, subordinate
loans or real estate loans secured by interests in other income-producing
property types, membership or partnership interests in other income-
producing property types as determined by our manager as appropriate for us. Preferred Apartment
Communities, Inc. has elected to be taxed as a real estate investment trust, or REIT, under the Internal
Revenue Code of 1986, as amended, commencing with its tax year ended December 31, 2011.
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2016 ANNUAL REPORT
PREFERRED APARTMENT ADVISORS, LLC
is the operating arm of Preferred Apartment Communities, which is responsible
for the overall operations and controls of our company.
P P
REFERRED RESIDENTIAL MANAGEMENT, LLC REFERRED CAPITAL SECURITIES, LLC
is a subsidiary of Preferred Apartment Advisors, is focused on the wholesale distribution of
LLC, the external manager for Preferred Apartment securities to broker dealer and registered investment
Communities, Inc. PRM manages PAC’s communities advisory firms located in the United States and
throughout the United States. Its goal is to provide its territories. PCS is the distribution platform for
residents an exceptional living experience by offering Preferred Apartment Communities’ Series A
quality apartment homes, superior resident services Redeemable Preferred Stock and Warrant Offering and
and total satisfaction. From its cutting edge amenities, mShares Preferred Stock Offering. PCS is a registered
meticulously groomed landscaping and superior broker dealer in all 50 states and territories in the U.S. and
maintenance service to its well-trained staff, PRM is a member of the Financial Industry Regulatory Authority
committed to creating a higher standard of living that (FINRA) and the Security Investment Protection
sets its communities apart from all others. Corporation (SIPC).
P P
REFERRED CAMPUS MANAGEMENT, LLC REFERRED OFFICE PROPERTIES, LLC
is a subsidiary of Preferred Apartment Advisors, is a subsidiary of Preferred Apartment
LLC, the external manager for Preferred Apartment Communities, Inc. formed to invest in Class A office
Communities, Inc. PCM is a student housing property properties across the United States. The company
management company that provides turn-key property sources portfolio assets through acquisitions of
management services to student housing communities operating properties as well as strategic, structured
utilizing PAC’s loan investment program. PCM’s goal participations in new developments.
is to provide residents an extraordinary living
experience through superior resident services,
N
innovative technology, cutting edge amenities and EW MARKET PROPERTIES, LLC
meticulously groomed landscaping. is a subsidiary of Preferred Apartment
Communities, Inc. and is focused on the grocery-
anchored shopping center sector. New Market’s
P
REFERRED CAMPUS COMMUNITIES, LLC strategy is to aggressively grow its existing portfolio
is a subsidiary of Preferred Apartment throughout the mid-Atlantic, the Southeast and
Communities, Inc. PCC was formed to acquire off-campus Texas. New Market targets high quality suburban
student communities in select targeted university markets markets with dominant grocers such as Publix, Kroger,
with growing enrollments throughout the United States. and Tom Thumb.
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2016 ANNUAL REPORT

“
W ”
e consider our stockholders as our partners.

- John A. WillliAms
Chief exeCutive offiCer

Y ASTER AT LELY RESORT
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2016 ANNUAL REPORT
TO OUR STOCKHOLDERS
2016 represents a truly outstanding year for Preferred Apartment Communities. We increased our funds
from operation (FFO) 21.6% per share and our core FFO 12.9% per share.1 We also increased our common
stock dividends 12.4% per share compared to last year. On an annualized basis, our common stock
dividend growth rate since June 30, 2011, the first quarter-end following our initial public offering (IPO) and
commencement of operations in April 2011, is 13.9% per share. Since our IPO, our stockholders’ annualized
return on investment is 20.25% assuming automatic reinvestment of all dividends. These performance results
have far exceeded our goals of a 10% per share increase for earnings and dividend growth and are among
the best in the REIT industry, if not the best.
During the year we concentrated on enhancing the three key
elements forming the foundation of Preferred Apartment Communities:
our Product, Associates, and Customers (PAC). We remained
laser-focused on our multifamily community operations, including student
housing, although we continued to invest a portion of our assets in
non-multifamily properties such as grocery-anchored shopping centers
and office properties. We strengthened the experience and depth
of our management team and refined and implemented a training
program for all of our associates designed to make them second to
none. We also began implementing a bench-marking system through which we are able to measure the
success of our interactions with all of our customers; that is, our residents, tenants, vendors and stockholders.
Last, we installed a series of technology enhancements across all levels of our operations that we believe
places us in the forefront of having best-in-class financial and operational controls and efficiencies.
Demonstration Kitchen at The Encore, Atlanta, GA
Y RETREAT AT LENOX VILLAGE
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2016 ANNUAL REPORT
OPERATIONAL RESULTS AND CAPITAL MARKETS ACTIVITIES
For 2016, our revenue totaled $200.1 million, an 83.1% increase over 2015. This revenue growth reflects
the success of our property management efforts for our multifamily communities, grocery-anchored shopping
centers and office properties, our 86.8% growth in assets to $2.4 billion compared to 2015, and our unique
real estate loan investment program. As of the end of 2016, we owned an aggregate of 59 properties in 25
cities across 9 states. We have continued to focus on our cash flow from operations, and are pleased to report
that our cash flow from operations was approximately $61.7 million for 2016, a 75.1% increase compared
to 2015. Moreover, we continue to emphasize our objective to cover the payment of dividends to both our
common and preferred stockholders out of our cash flow from operations. We also are pleased to report that
our core FFO payout ratio to our common stockholders and unitholders for 2016 was approximately 63.6%
and to our preferred stockholders was approximately 55.9%. We believe our payout ratios to our preferred
stockholders are the lowest ratios for securities sold through the independent broker dealer and registered
investment advisory channels.
Our extensive growth activities through acquisitions and our real estate loan investment program are
supported, in part, by our multifaceted capital markets activities and our asset divestiture program.
COMMON STOCKHOLDERS’
ANNUALIZED RETURN
ON INVESTMENT:
20.25%
Since IPO, April 2011
(ASSUMING AUTOMATIC
DIVIDEND REINVESTMENT)
“
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ur outstanding
performance results
for 2016 are a direct
reflection of the
collaborative strength

”
of the PAC team.

- leonArd A. silverstein
President And
Chief oPerAting offiCer
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