Preferred Apartment Communities, Inc. reported results for the quarter and year ended December 31, 2016. Unless otherwise indicated, all per share results are reported based on the basic weighted average shares of Common Stock and Class A Units of the Company's operating partnership outstanding.

"The company had a superb year, with all areas of our business performing extremely well. Our fantastic earnings are a tribute to the hard work of the best management team in the REIT business" said John A. Williams, Preferred Apartment Communities' Chairman and Chief Executive Officer.

Highlights of the Fourth Quarter 2016

• During the fourth quarter 2016, we acquired a 31-story class A office building located in the central perimeter submarket of Atlanta, Georgia and another 110,000 square foot office building, also located in Atlanta, Georgia, which is situated upon a seven acre site which has been rezoned and is suitable for mixed-use development. We also acquired a grocery-anchored shopping center located in Houston, Texas, comprising approximately 380,000 square feet of gross leasable area.

• During the fourth quarter 2016, we closed on two real estate investment loans, two member loans and a land acquisition bridge loan of up to an approximate aggregate $49.7 million, in support of a proposed 392-unit multifamily community to be located in Tampa, Florida, a 356-unit multifamily community to be located in suburban Atlanta, Georgia and a 332-unit, 887-bed student housing project to be located in Charlotte, North Carolina.

Financial Highlights

Our operating results are presented below.

Core Funds From Operations Attributable to Common Stockholders and Unitholders ("Core FFO") excludes acquisition costs and certain other costs not representative of our ongoing operations.

⁽¹⁾ Per weighted average share of Common Stock outstanding for the periods indicated.
⁽²⁾ FFO and Core FFO are presented per weighted average share of Common Stock and Class A Unit in our Operating Partnership outstanding for the periods indicated.
⁽³⁾  Per share of Common Stock and Class A Unit outstanding.

Real Estate Assets

• For the year 2016, our Core FFO payout ratio to our Common Stockholders and Unitholders was approximately 63.6% and our AFFO payout ratio to Common Stockholders and Unitholders was approximately 77.5%. For the fourth quarter 2016, our Core FFO payout ratio to our Common Stockholders and Unitholders was approximately 71.6% and our AFFO payout ratio to Common Stockholders and Unitholders was approximately 128.8%. ⁽¹⁾

• For the year 2016, our Core FFO payout ratio (before the deduction of preferred dividends) to our Series A Preferred Stockholders was approximately 55.9% and our AFFO payout ratio (before the deduction of preferred dividends) to our Series A Preferred Stockholders was approximately 60.7%. For the fourth quarter 2016, our Core FFO payout ratio (before the deduction of preferred dividends) to our Series A Preferred Stockholders was approximately 60.6% and our AFFO payout ratio (before the deduction of preferred dividends) to our Series A Preferred Stockholders was approximately 73.4%. ⁽¹⁾

• As of December 31, 2016, our total assets were approximately $2.4 billion compared to approximately $1.3 billion as of December 31, 2015, an increase of approximately $1.1 billion, or approximately 86.9%. This growth was driven almost entirely by property acquisitions and new real estate loans.

• At December 31, 2016, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 58.9%.

• AFFO was $26,594,910, or $1.07 per share for the year ended December 31, 2016, an increase of 10.3% on a per share basis from our AFFO result of $21,783,083, or $0.97 per share for the 2015 period. AFFO is calculated after deductions for all preferred dividends.

• Cash flow from operations for the year 2016 was approximately $61.7 million, an increase of approximately $26.4 million, or 75.1%, compared to approximately $35.2 million for the year 2015.

⁽¹⁾ We calculate the Core FFO and AFFO payout ratios to Common Stockholders and Unitholders as the ratio of Common Stock dividends and distributions to Unitholders to Core FFO or AFFO, respectively. We calculate the Core FFO and AFFO payout ratios to Series A Preferred Stockholders as the ratio of Preferred Stock dividends to the sum of Preferred Stock dividends and Core FFO or AFFO, respectively. Since our operations resulted in a net loss for the periods presented, a payout ratio based on net loss is not calculable. See Definitions of Non-GAAP Measures on page S-15.

Subsequent to Quarter End

• On January 20, 2017, we sold our 364-unit Sandstone Creek multifamily community to an unrelated third party for $48.1 million, exclusive of disposition-related transaction costs and realized a gain on the sale of approximately $0.6 million.

• On February 2, 2017, the Company declared a quarterly dividend on its Common Stock of $0.22 per share, payable on April 14, 2017 to stockholders of record on March 15, 2017.

• On February 14, 2017, we sold the last of the Units authorized for sale under our $900 million Follow-on Offering. Also on February 14, 2017, our $1.5 Billion Unit Offering was declared effective by the Securities and Exchange Commission.

Same Store Operations

The following table presents the percentage change in same store multifamily gross revenues, operating expenses and net operating income for the year 2016 versus 2015. Our same store property operating results exclude any properties that are not comparable for the periods presented.

Capital Markets Activities

During 2016, we issued and sold 438,673 Units, with each Unit consisting of one share of our Series A Redeemable Preferred Stock and one Warrant to purchase up to 20 shares of our Common Stock, under our existing $900 million Unit offering (the "$900 Million Follow-on Offering"), resulting in gross proceeds of approximately $438.1 million. In addition, during 2016, we issued approximately 1.7 million shares of common stock pursuant to the exercise of warrants issued under our $900 Million Follow-on Offering and our expired $150 million Unit Offering, resulting in aggregate gross proceeds of approximately $18.2 million.

On February 14, 2017, we closed the $900 Million Follow-on Offering after a successful capital raise of $900 million and on the same day, our registration statement on Form S-3 (Registration No. 333-211924) (the "$1.5 Billion Follow-On Registration Statement")  was declared effective by the Securities and Exchange Commission. This $1.5 Billion Follow-On Registration Statement allows us to offer up to a maximum of 1,500,000 Units, with each Unit consisting of one share of Series A Redeemable Preferred Stock and one Warrant to purchase up to 20 shares of Common Stock (the "$1.5 Billion Unit Offering"). The price per Unit is $1,000. The Units are being offered by our affiliate, Preferred Capital Securities, LLC on a "reasonable best efforts" basis. The Company intends to invest substantially all the net proceeds of the $1.5 Billion Unit Offering in connection with the acquisition of multifamily communities, other real estate-related investments and general working capital purposes.

On December 2, 2016, the Company's registration statement on Form S-3 (Registration No. 333-214531) (the "mShares Registration Statement") was declared effective by the SEC.  The mShares Registration Statement allows us to offer up to a maximum of 500,000 shares of Series M Redeemable Preferred Stock, par value $0.01 per share (the "mShares Offering").  During 2016, we issued and sold no mShares. The mShares are being offered by PCS on a "reasonable best efforts" basis. The Company intends to invest substantially all the net proceeds of the mShares Offering in connection with the acquisition of multifamily communities, other real estate-related investments and general working capital purposes.

On July 18, 2016, the Company filed a prospectus for its registration statement on Form S-3 (Registration No. 333-211178) to issue and sell up to $150 million of Common Stock from time to time in an "at the market" offering through JonesTrading Institutional Services LLC, FBR Capital Markets & Co, and Canaccord Genuity Inc, as its sales agents. The Company intends to use any proceeds from the ATM Offering to (a) repay outstanding amounts under our existing senior secured revolving credit facility and (b) for other general corporate purposes, which includes making investments in accordance with the Company's investment objectives. During 2016, we issued and sold  approximately 1.7 million  shares of our Common Stock through the ATM Offering for gross proceeds of approximately $23.4 million.

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

On November 3, 2016, we declared a quarterly dividend on our Common Stock of $0.22 per share for fourth quarter 2016. This represents a 14.3% increase in our common stock dividend from our fourth quarter 2015 common stock dividend of $0.1925 per share, and an annualized dividend growth rate of 13.9% since June 30, 2011, the first quarter end following our initial public offering in April 2011. The fourth quarter dividend was paid on January 17, 2017 to all stockholders of record on December 15, 2016. In conjunction with the Common Stock dividend, the Company's operating partnership declared a distribution on its Class A Units of $0.22 per unit for fourth quarter 2016, which was paid on or around January 17, 2017 to all Class A Unit holders of record as of December 15, 2016.

Monthly Dividends on Series A Redeemable Preferred Stock

We declared and paid monthly dividends of $5.00 per share on our Series A Redeemable Preferred Stock, which totaled approximately $12.7 million for the fourth quarter ended December 31, 2016 and represents a 6% annual yield.