Preferred Apartment Communities, Inc. (NYSE:APTS) Q2 2019 Earnings Conference Call Transcript

Jul 30, 2019 • 11:00 am ET

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Preferred Apartment Communities, Inc. (NYSE:APTS) Q2 2019 Earnings Conference Call Transcript

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Presentation
Executive
Daniel DuPree

a long look at the composition of our portfolio to make sure we are investing in asset classes, which we believe offer the best opportunity for consistent success.

During the second quarter, we received an unsolicited offer to acquire our entire student housing operating portfolio from a very qualified prospective purchaser. After serious consideration and as disclosed in an 8-K filed on May 31st, we entered into a contract to sell this eight-asset portfolio. At the end of the due diligence period on June 28, the purchaser elected to terminate the agreement and as disclosed in an 8-K filed on July 5th, forfeited a $1 million in earnest money.

As further disclosed in that July 5th 8-K, they did leave a request to enter into a new purchase agreement. And yesterday we signed a new agreement to sell six of the eight properties on our student housing portfolio. After careful consideration, we elected to withdraw two of the assets from this deal, believing there was even more value to be harvested in these properties over time. This purchaser now has $3.25 million of earnest money at risk on these six assets with a closing date set for fourth quarter. This is a consistent and prudent step -- strategic step for us to exit the student housing business segment, but also an election by us to do so with a more measured approach. Our strategic decision on this exit relates to our view that to be successful in student in the student housing segment, you need to have significant scale and due to what we believe to be some out of balance supply metrics in the segment, we were unwilling to invest more financial or human capital into this segment. This is a second step in our transformation that we discussed at the outside of the call.

The third step of our transformative year and as disclosed in an 8-K filed on April 2nd, our external manager Preferred Apartment Advisors informed the company that it was considering making a proposal regarding internalizing the manager. The board set up a special committee composed of independent directors to work through this process with the appropriate legal and financial advisors, and this process continues to be ongoing. The company and the manager are aware of the many long-term benefits that could result from an internalized structure. As we continue to explore these long-term benefits, you'll note that the company will be incurring expenses in connection with this process.

We are issuing between $40 million and $45 million of our preferred stock into the independent broker dealer and RIA channels monthly. We have raised over $327 million year-to-date. Our ability to raise attractive capital through this network allows us to have clear visibility to steady and predictable capital inflows and gives us tremendous competitive advantage in the marketplace. At the same time, this capital availability can periodically put pressure on us to efficiently investment this capital accretively. We remain steadfast to invest within the focused