Item 1. Financial Statements.
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2018 and December 31, 2017
|
|
2018
|
|
|
|
|
|
|
(unaudited)
|
|
|
2017
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in single-family residential properties:
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
11,328,161
|
|
|
$
|
10,996,361
|
|
Buildings and improvements
|
|
|
52,677,702
|
|
|
|
49,399,791
|
|
|
|
|
64,005,863
|
|
|
|
60,396,152
|
|
Accumulated depreciation
|
|
|
(6,061,956
|
)
|
|
|
(4,542,707
|
)
|
Investments in single-family residential properties, net
|
|
|
57,943,907
|
|
|
|
55,853,445
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
22,766,393
|
|
|
|
6,442,322
|
|
Restricted cash
|
|
|
1,259,492
|
|
|
|
-
|
|
Rent and other receivables
|
|
|
614,329
|
|
|
|
645,441
|
|
Lease origination costs, net
|
|
|
388,084
|
|
|
|
317,359
|
|
Deferred stock issuance costs
|
|
|
-
|
|
|
|
553,296
|
|
Other assets, net
|
|
|
652,220
|
|
|
|
1,774,978
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
83,624,425
|
|
|
$
|
65,586,841
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
1,405,822
|
|
|
$
|
1,453,142
|
|
Resident security deposits
|
|
|
757,683
|
|
|
|
697,379
|
|
Notes payable, net
|
|
|
50,082,837
|
|
|
|
30,493,124
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
52,246,342
|
|
|
|
32,643,645
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
|
|
|
Preferred stock, $.001 par value; 25,000,000 shares authorized; No shares issued or outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock, $.001 par value; 100,000,000 shares authorized; 10,945,074 and 10,734,025 shares issued and outstanding at at September 30, 2018 and December 31, 2017, respectively
|
|
|
10,945
|
|
|
|
10,734
|
|
Additional paid-in capital
|
|
|
42,543,805
|
|
|
|
41,677,465
|
|
Accumulated deficit
|
|
|
(11,176,667
|
)
|
|
|
(8,745,003
|
)
|
|
|
|
|
|
|
|
|
|
Total Stockholders' Equity
|
|
|
31,378,083
|
|
|
|
32,943,196
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
83,624,425
|
|
|
$
|
65,586,841
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Three and Nine Months Ended September
30, 2018 and 2017
|
|
Three Months
|
|
|
Three Months
|
|
|
Nine Months
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
2,211,085
|
|
|
$
|
2,043,322
|
|
|
$
|
6,623,163
|
|
|
$
|
5,814,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance
|
|
|
780,415
|
|
|
|
593,339
|
|
|
|
2,081,009
|
|
|
|
1,694,969
|
|
Real estate taxes
|
|
|
371,741
|
|
|
|
346,669
|
|
|
|
1,104,657
|
|
|
|
988,839
|
|
Depreciation and amortization
|
|
|
597,928
|
|
|
|
537,968
|
|
|
|
1,631,824
|
|
|
|
1,458,933
|
|
General and administration
|
|
|
511,158
|
|
|
|
558,074
|
|
|
|
1,702,990
|
|
|
|
1,860,473
|
|
Noncash share-based compensation
|
|
|
39,375
|
|
|
|
-
|
|
|
|
39,375
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
2,300,617
|
|
|
|
2,036,050
|
|
|
|
6,559,855
|
|
|
|
6,003,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(89,532
|
)
|
|
|
7,272
|
|
|
|
63,308
|
|
|
|
(189,079
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain on sale of single family residential properties
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
75,796
|
|
Casualty (loss) gain, net
|
|
|
-
|
|
|
|
(978,181
|
)
|
|
|
76,133
|
|
|
|
(895,194
|
)
|
Loss on early extinguishment of debt
|
|
|
(642,845
|
)
|
|
|
-
|
|
|
|
(642,845
|
)
|
|
|
-
|
|
Previously deferred stock issuance costs
|
|
|
-
|
|
|
|
-
|
|
|
|
(674,144
|
)
|
|
|
-
|
|
Other
|
|
|
7,993
|
|
|
|
5,466
|
|
|
|
22,989
|
|
|
|
13,628
|
|
Interest expense
|
|
|
(441,341
|
)
|
|
|
(342,253
|
)
|
|
|
(1,277,105
|
)
|
|
|
(967,410
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expenses), net
|
|
|
(1,076,193
|
)
|
|
|
(1,314,968
|
)
|
|
|
(2,494,972
|
)
|
|
|
(1,773,180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,165,725
|
)
|
|
$
|
(1,307,696
|
)
|
|
$
|
(2,431,664
|
)
|
|
$
|
(1,962,259
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Basic and fully diluted)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.23
|
)
|
|
$
|
(0.18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
10,779,070
|
|
|
|
10,734,025
|
|
|
|
10,769,062
|
|
|
|
10,734,025
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (unaudited)
For the Nine Months Ended September 30,
2018 and 2017
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,431,664
|
)
|
|
$
|
(1,962,259
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,631,824
|
|
|
|
1,458,933
|
|
Noncash share-based compensation
|
|
|
39,375
|
|
|
|
-
|
|
Amortization of deferred loan fees
|
|
|
152,982
|
|
|
|
108,117
|
|
Casualty loss, net
|
|
|
-
|
|
|
|
895,194
|
|
Gain on sale of single-family residential properties
|
|
|
-
|
|
|
|
(75,796
|
)
|
Loss on early extinguishment of debt
|
|
|
642,845
|
|
|
|
-
|
|
Previously deferred stock issuance costs
|
|
|
674,144
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Rent and other receivables
|
|
|
31,112
|
|
|
|
(427,708
|
)
|
Other assets
|
|
|
(298,153
|
)
|
|
|
79,262
|
|
Accounts payable and accrued liabilities
|
|
|
77,679
|
|
|
|
192,408
|
|
Resident security deposits
|
|
|
60,304
|
|
|
|
126,711
|
|
Net cash provided by operating activities
|
|
|
580,448
|
|
|
|
394,862
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
Acquisitions of single-family residential properties
|
|
|
(1,681,413
|
)
|
|
|
(10,117,039
|
)
|
Capital improvements for single-family residential properties
|
|
|
(1,928,298
|
)
|
|
|
(668,268
|
)
|
Proceeds from disposition of single-family residential properties
|
|
|
-
|
|
|
|
205,027
|
|
Insurance proceeds received for property damages
|
|
|
1,420,912
|
|
|
|
554,806
|
|
Lease origination costs
|
|
|
(183,300
|
)
|
|
|
(219,407
|
)
|
Net cash used in investing activities
|
|
|
(2,372,099
|
)
|
|
|
(10,244,881
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from notes payable
|
|
|
54,098,630
|
|
|
|
7,968,633
|
|
Proceeds from issuance of shares
|
|
|
702,176
|
|
|
|
-
|
|
Payments of notes payable
|
|
|
(33,742,217
|
)
|
|
|
(405,750
|
)
|
Payment of loan fees
|
|
|
(1,562,527
|
)
|
|
|
(220,773
|
)
|
Payments of stock issuance costs
|
|
|
(120,848
|
)
|
|
|
(556,604
|
)
|
Net cash provided by financing activities
|
|
|
19,375,214
|
|
|
|
6,785,506
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) In Cash, Cash Equivalents, and Restricted Cash
|
|
|
17,583,563
|
|
|
|
(3,064,513
|
)
|
Cash, Cash Equivalents, and Restricted Cash at the Beginning of the Period
|
|
|
6,442,322
|
|
|
|
10,044,977
|
|
|
|
|
|
|
|
|
|
|
Cash, Cash Equivalents, and Restricted Cash at the End of the Period
|
|
$
|
24,025,885
|
|
|
$
|
6,980,464
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
1,216,513
|
|
|
$
|
837,127
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)
September 30, 2018 and 2017
NOTE 1. ORGANIZATION AND OPERATION
Reven Housing REIT, Inc. is a Maryland
corporation (Reven Housing REIT, Inc., which along with its wholly-owned subsidiaries, are also referred to herein collectively
as the “Company”) which acquires portfolios of occupied and rented single-family residential properties located throughout
the United States with the objective of receiving income from rental property activity and future profits from the sale of rental
property at appreciated values.
As of September 30, 2018, the Company owned
826 single-family homes in the Houston, Jacksonville, Memphis, Birmingham and Atlanta metropolitan areas.
NOTE 2. BASIS OF PRESENTATION AND SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed consolidated
financial statements are presented in conformity with accounting principles generally accepted in the United States of America
(“GAAP”), as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification
(“ASC”), and the rules and regulations of the Securities Exchange Commission (“SEC”).
Certain information and footnote disclosures
normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. It is suggested that
these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto
included in the 2017 Annual Report on Form 10-K filed with the SEC on March 29, 2018. The results of operations for the period
ended September 30, 2018 are not necessarily indicative of the operating results for the full year.
Principles of Consolidation
The accompanying consolidated financial
statements include the accounts of Reven Housing REIT, Inc, Reven Housing REIT OP, LP, a Delaware limited partnership which is
its 100% owned operating partnership, and its wholly-owned subsidiaries, which have been formed primarily for financing purposes.
All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the condensed consolidated
financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates and reported amounts of
revenues and expenses for the periods presented. Accordingly, actual results could differ from those estimates.
Financial Instruments
The carrying value of the Company’s
financial instruments, as reported in the accompanying condensed consolidated balance sheets, approximates fair value due to their
short-term nature. The Company’s short term financial instruments consist of cash and cash equivalents, restricted cash,
rent and other receivables, escrow deposits, accounts payable and accrued liabilities, and resident security deposits.
The carrying value of the Company’s
notes payable, as reported in the accompanying condensed consolidated balance sheets, approximates fair value due to their market
interest rate and because their security and payment terms are similar to other debt instruments currently being issued.
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)
September 30, 2018 and 2017
NOTE 2. BASIS OF PRESENTATION AND SIGNIFICANT
ACCOUNTING POLICIES (continued)
Investments in Single-Family Residential
Properties
The Company accounts for its investments
in single-family residential properties as asset acquisitions and records these acquisitions at their purchase price. The purchase
price is allocated between land, building, improvements and existing leases based upon their relative fair values at the date of
acquisition. The purchase price for purposes of this allocation is inclusive of acquisition costs, which typically include legal
fees, title fees, property inspection and valuation fees, as well as other closing costs.
Building improvements and buildings are
depreciated over estimated useful lives of approximately 10 to 27.5 years, respectively, using the straight-line method. Lease
origination costs are amortized over the average remaining term of the in-place leases which is generally less than one year. Maintenance
and repair costs are charged to expenses as incurred.
The Company assesses its investments in
single-family residential properties for impairment whenever events or changes in business circumstances indicate that carrying
amounts of the assets may not be fully recoverable. When such events occur, management determines whether there has been impairment
by comparing the asset’s carrying value with its fair value. Should impairment exist, the asset is written down to its estimated
fair value. The Company did not recognize any impairment loss for the nine-month period ended September 30, 2018. During the quarter
ended September 30, 2017, the company reduced its carrying value of its homes by $2.6 million due to hurricane damages in Houston
and Jacksonville. Substantially all of those damages have since been repaired.
Cash and Cash Equivalents
The Company considers all demand deposits,
money market accounts and certificates of deposit with a maturity of three months or less to be cash equivalents. The Company maintains
its cash accounts at quality financial institutions. The combined account balances at one or more institutions typically exceed
the federal insurance coverage and thus there is a concentration of credit risk related to amounts on deposit in excess of available
federal insurance coverage. The Company believes that the risk is not significant, as the Company does not anticipate the financial
institutions non-performance.
Restricted Cash
Pursuant to the terms of the note payable
referred to in Note 5, the Company is required to establish, maintain, and fund monthly specified reserve accounts. These reserve
accounts include property tax reserves, insurance reserves, and capital expenditure reserves.
Rent and Other Receivables
Rent and other receivables represent the
amount of rent receivables, security deposits and net rental funds which are held by the property managers on behalf of the Company,
net of any allowance for amounts deemed uncollectible.
Deferred Loan Fees
Costs incurred in the placement of the
Company’s notes payable are deferred and amortized using the effective interest method over the term of the loans as a component
of interest expense on the consolidated statements of operations. These deferred loan fees are offset against the notes payable
in the accompanying balance sheets.
Deferred Stock Issuance Costs
Deferred stock issuance costs represent
amounts paid for legal, consulting, and other offering expenses in conjunction with the future raising of additional capital to
be completed within one year. These costs are netted against additional paid-in capital as a cost of the stock issuance upon closing
of the respective stock placement. During the nine-month period ended September 30, 2018, such capital raise was postponed indefinitely,
and the Company expensed the related $674,144 of deferred stock issuance costs incurred pertaining to its previously filed registration
statement on Form S-11.
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)
September 30, 2018 and 2017
NOTE 2. BASIS OF PRESENTATION AND SIGNIFICANT
ACCOUNTING POLICIES (continued)
Security Deposits
Security deposits represent amounts deposited
by tenants at the inception of the lease. As of September 30, 2018 and December 31, 2017, the Company had $757,683 and $697,379,
respectively, in resident security deposits. Security deposits are refundable, net of any outstanding charges and fees, upon expiration
of the underlying lease.
Revenue Recognition
Residential properties are leased to tenants
under short term rental agreements of generally one year and revenue is recognized over the lease term on a straight-line basis.
Income Taxes
The Company intends to elect to be taxed
as a real estate investment trust (“REIT”), as defined in the Internal Revenue Code, commencing with the taxable year
ended December 31, 2018. Accordingly, the Company does not expect to be subject to federal income tax, provided that it continues
to qualify as a REIT and distributions to the stockholders equal or exceed REIT taxable income.
Qualification and taxation as a REIT depends
upon the Company’s ability to meet the various qualification tests imposed under the Internal Revenue Code related to the
percentage of income that are earned from specified sources, the percentage of assets that fall within specified categories, the
diversity of capital stock ownership, and the percentage of earnings that are distributed. Accordingly, no assurance can be given
that the Company will be organized or be able to operate in a manner to qualify or remain qualified as a REIT. If the Company fails
to qualify as a REIT in any taxable year, it will be subject to federal and state income tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate tax rates, and the Company may be ineligible to qualify as a REIT for four
subsequent tax years. Even if the Company qualifies as a REIT, it may be subject to certain state or local income taxes.
Incentive Compensation Plan
During 2012, the Company established the
2012 Incentive Compensation Plan, which was subsequently amended and restated in December 2013 (“2012 Plan”). The 2012
Plan allows for the grant of options and other awards representing up to 1,650,000 shares of the Company’s common stock.
Such awards may be granted to officers, directors, employees, consultants and other persons who provide services to the Company
or any related entity. Under the 2012 Plan, options may be granted at an exercise price greater than or equal to the market value
at the date of the grant, for owners of 10% or more of the voting shares, at an exercise price of not less than 110% of the market
value. Awards are exercisable over a period of time as determined by a committee designated by the Board of Directors, but in no
event, longer than ten years.
During January 2018, an additional 35,505
shares were issued to officers, directors and employees as part of their accrued compensation for the year ended December 31, 2017.
Subsequent to September 30, 2018, the Company issued 9,918 shares to directors as part of their accrued compensation for the period
ended September 30, 2018. A total of 541,782 shares have been issued under the 2012 plan to date.
Net Loss Per Share
Net loss per share is computed by dividing
the net loss by the weighted average number of shares of common stock outstanding. Warrants, stock options, and common stock issuable
upon the conversion of the Company's preferred stock (if any) are not included in the computation if the effect would be anti-dilutive
and would increase earnings or decrease loss per share. For the three and nine months ended September 30, 2017, potentially dilutive
securities excluded from the calculations were 263,588 shares issuable upon exercise of outstanding warrants granted in prior years.
These warrants were converted, or expired, during the quarter ended September 30, 2018.
Segment Reporting
The Company has determined that it has
one reportable segment with activities related to leasing and operating single-family homes as rental properties. The Company's
rental properties are geographically dispersed and management evaluates operating performance at the market level and while each
market and its properties are unique, the aggregate market portfolios have similar economic interests and operating performance.
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)
September 30, 2018 and 2017
NOTE 2. BASIS OF PRESENTATION AND SIGNIFICANT
ACCOUNTING POLICIES (continued)
New Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers (Topic 606)
, which outlines a new, single comprehensive model for entities to
use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including
industry-specific guidance. The new model will require revenue recognition to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services.
The standard can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date
of adoption. In July 2015, the FASB issued ASU 2015-14,
Revenue from Contracts with Customers (Topic 606): Deferral of
the Effective Date
, which delays the effective date of ASU 2014-09 by one year. In March 2016, the FASB issued ASU 2016-08,
Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus
Net)
, which is intended to improve the operability and understandability of the implementation guidance on principal versus
agent considerations. ASU 2014-09, ASU 2015-14 and ASU 2016-08 are herein collectively referred to as the "New Revenue Recognition
Standards". The New Revenue Recognition Standards are effective for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2017. Early adoption is permitted but not before annual periods beginning after December 15,
2016. The Company has adopted the New Revenue Recognition Standards effective as of January 1, 2018, and has applied the modified
retrospective method. The Company has evaluated its revenue streams and, as they are primarily related to leasing activities which
are scoped out of the New Revenue Recognition Standards, has determined that the adoption of such standards does not have a material
impact on the consolidated financial statements and thus there is no cumulative adjustment upon adoption. The Company evaluated
its real estate sales contracts through September 30, 2018 and 2017 and determined they qualified as sales to noncustomers. The
gain on the sale of real estate for the property sold through September 30, 2017 was recognized on the full accrual method based
on the existing accounting standards and was determined to be a completed contract as of September 30, 2017; therefore, the adoption
of the new revenue recognition standards did not have an impact on the Company’s real estate sale contracts.
In February 2016, the FASB issued ASU 2016-02,
Leases
, a new lease standard which sets out the principles for the recognition, measurement, presentation and disclosure
of leases for both parties to a contract (i.e. lessees and lessors). Under ASU 2016-02, lessor accounting will be substantially
similar to the current model, but aligned with certain changes to the lessee model and ASU 2014-09. The new standard requires lessors
to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing
leases and operating leases. The Company’s rental revenue is primarily generated from short-term operating leases. The new
standard requires lessees to apply a dual approach, classifying leases as either finance or operating based on the principle of
whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine
whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the
lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than
12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing
guidance for operating leases today. The new standard is expected to impact the Company’s consolidated financial statements
as the Company has an operating office lease arrangement for which it is the lessee. The new standard will be effective for the
Company beginning on January 1, 2019, with early adoption permitted. The new standard must be adopted using a modified retrospective
transition, requiring application of the new guidance at the beginning of the earliest comparative period presented and provides
for certain practical expedients. The Company is currently evaluating the impact on its consolidated financial statements.
Subsequent Events
Management has evaluated events subsequent
to September 30, 2018 through the date that the accompanying condensed consolidated financial statements were filed with the Securities
and Exchange Commission for transactions and other events which may require adjustments of and/or disclosure in such financial
statements.
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)
September 30, 2018 and 2017
NOTE 3. INVESTMENTS IN SINGLE-FAMILY
RESIDENTIAL PROPERTIES
The following table summarizes the Company’s
investments in single-family residential properties. The homes are generally leased to individual tenants under leases with terms
of one year or less.
|
|
|
|
|
|
|
|
|
|
|
Investments in
|
|
|
|
|
|
Investments in
|
|
|
|
|
|
|
|
|
|
|
|
|
Single-Family
|
|
|
|
|
|
Single-Family
|
|
|
|
Number
|
|
|
|
|
|
Buildings and
|
|
|
Residential
|
|
|
Accumulated
|
|
|
Residential
|
|
|
|
of Homes
|
|
|
Land
|
|
|
Improvements
|
|
|
Properties, Gross
|
|
|
Depreciation
|
|
|
Properties, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total at December 31, 2017
|
|
|
799
|
|
|
$
|
10,996,361
|
|
|
$
|
49,399,791
|
|
|
$
|
60,396,152
|
|
|
$
|
(4,542,707
|
)
|
|
$
|
55,853,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases and improvements during 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
27
|
|
|
|
331,800
|
|
|
|
1,349,613
|
|
|
|
1,681,413
|
|
|
|
-
|
|
|
|
1,681,413
|
|
Improvements
|
|
|
-
|
|
|
|
-
|
|
|
|
1,928,298
|
|
|
|
1,928,298
|
|
|
|
-
|
|
|
|
1,928,298
|
|
Depreciation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,519,249
|
)
|
|
|
(1,519,249
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total at September 30, 2018
|
|
|
826
|
|
|
$
|
11,328,161
|
|
|
$
|
52,677,702
|
|
|
$
|
64,005,863
|
|
|
$
|
(6,061,956
|
)
|
|
$
|
57,943,907
|
|
Approximately $987,000 of improvements
made during the nine months ended September 30, 2018 were related to renovations resulting from casualty losses incurred during
2017, and were primarily funded with insurance proceeds received during the period ended September 30, 2018.
NOTE 4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
At September 30, 2018 and December 31,
2017, accounts payable and accrued liabilities consisted of the following:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
36,925
|
|
|
$
|
162,221
|
|
Real estate taxes payable
|
|
|
1,031,027
|
|
|
|
781,898
|
|
Accrued compensation, board fees and other
|
|
|
337,870
|
|
|
|
416,633
|
|
Interest payable
|
|
|
-
|
|
|
|
92,390
|
|
|
|
$
|
1,405,822
|
|
|
$
|
1,453,142
|
|
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)
September 30, 2018 and 2017
NOTE 5. NOTES PAYABLE
On September 28, 2018, the Company, through
Reven Housing Funding 1, LLC, a wholly-owned subsidiary, refinanced its entire single-family home portfolio by entering into a
$51,362,000 loan with Arbor Agency Lending, LLC, on behalf of the Federal Home Loan Mortgage Corporation (Freddie Mac). The loan
is a seven-year, monthly interest-only payable loan accruing interest at 4.74% per annum, with principal due and payable at its
maturity on October 1, 2025. The loan is secured by 824 of the Company’s currently owned single-family homes and the Company
has also guaranteed approximately $12.8 million of the loan balance. Proceeds of approximately $33 million were utilized to pay
off and replace the Company’s eight previously outstanding notes. Additionally, as a result of the loan, the Company received
approximately $17 million of cash, net of transaction fees, prepayment fees, and loan payoffs which Reven intends to use for the
future acquisitions of single-family homes.
Early Extinguishment of Debt
As a result of the early payoff of the
Company’s previous loans on September 28, 2018 mentioned above, the Company incurred $642,845 of loss on early extinguishment
of debt primarily consisting of unamortized financing costs and prepayment fees.
A summary of the Company’s notes
payable as of September 30, 2018 and December 31, 2017 is as follows:
|
|
2018
|
|
|
2017
|
|
|
Interest
Rate
(Fixed)
|
|
|
Maturity Date
|
Note
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reven Housing Fund 1, LLC
|
|
$
|
51,362,000
|
|
|
$
|
-
|
|
|
|
4.74
|
%
|
|
October, 2025
|
Reven Housing Texas, LLC
|
|
|
-
|
|
|
|
7,312,030
|
|
|
|
4.50
|
%
|
|
April, 2020
|
Reven Housing Texas 2, LLC
|
|
|
-
|
|
|
|
4,890,978
|
|
|
|
4.50
|
%
|
|
January, 2022
|
Reven Housing Tennessee, LLC
|
|
|
-
|
|
|
|
3,830,791
|
|
|
|
4.50
|
%
|
|
April, 2020
|
Reven Housing Florida, LLC
|
|
|
-
|
|
|
|
3,442,987
|
|
|
|
4.50
|
%
|
|
April, 2020
|
Reven Housing Florida 2, LLC
|
|
|
-
|
|
|
|
4,805,389
|
|
|
|
4.50
|
%
|
|
April, 2020
|
Reven Housing Georgia, LLC
|
|
|
-
|
|
|
|
1,780,765
|
|
|
|
4.50
|
%
|
|
July, 2020
|
Reven Housing Tennessee, LLC
|
|
|
-
|
|
|
|
1,148,726
|
|
|
|
4.50
|
%
|
|
September, 2020
|
Reven Housing Alabama, LLC
|
|
|
-
|
|
|
|
3,793,920
|
|
|
|
4.25
|
%
|
|
January, 2023
|
|
|
|
51,362,000
|
|
|
|
31,005,586
|
|
|
|
|
|
|
|
Less deferred loan fees, net
|
|
|
(1,279,163
|
)
|
|
|
(512,462
|
)
|
|
|
|
|
|
|
Notes payable, net
|
|
$
|
50,082,837
|
|
|
$
|
30,493,124
|
|
|
|
|
|
|
|
Costs incurred in the placement of the
Company’s debt are deferred and amortized using the effective interest method over the term of the loans as a component of
interest expense on the condensed consolidated statements of operations. The amount of unamortized fees are deducted from the remaining
principal amount owed on the corresponding notes payable. Unamortized deferred loan costs and fees totaled $1,279,163 and $512,462
as of September 30, 2018 and December 31, 2017, respectively.
During the three months ended September
30, 2018 and 2017, the Company incurred $441,341 and $342,253, respectively, of interest expense related to the notes payable,
which includes $50,994 and $39,998, respectively, of amortization of deferred loan fees. During the nine months ended September
30, 2018 and 2017, the Company incurred $1,277,105 and $967,410, respectively, of interest expense related to the notes payable,
which includes $152,982 and $108,117, respectively, of amortization of deferred loan fees.
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)
September 30, 2018 and 2017
NOTE 6. STOCKHOLDERS’ EQUITY AND STOCK COMPENSATION
On October 16, 2014, the Company issued
425,000 shares of the Company’s common stock under the 2012 Plan to certain officers and consultants of the Company. The
shares issued are subject to restrictions and future vesting conditions based on the Company reaching certain future milestones.
During the year ended December 31, 2016, 106,250 of these shares became vested upon the achievement of certain milestones related
to our public offering of common stock mentioned above. Accordingly, $425,000 of noncash share-based compensation expense was then
recognized based on the value of the shares on the date of grant. None of the remaining 318,750 shares were vested as of the issuance
date. Compensation expense will be recognized in the applicable future periods on these unvested shares should the applicable milestones
be achieved in accordance with the vesting schedule. There is no assurance that these milestones will in fact be achieved and that
the shares will in fact vest in the future.
In January 2018, the Company issued 35,505
shares of the Company’s common stock under the 2012 Plan to certain directors, officers, and consultants of the Company as
payment for accrued 2017 compensation. Subsequent to September 30, 2018, in November 2018, the Company approved the issuance of
9,918 shares of the Company’s common stock under the 2012 Plan to certain directors as payment for accrued 2018 compensation
for the three month period ending September 30, 2018.
The Company had previously issued outstanding
warrants that allowed holders to purchase up to 263,588 shares at an exercise price of $4.00 per share. During September
2018, 175,544 shares were issued upon the exercise of warrants and the Company received total proceeds on exercise of $702,176.
The remaining warrants expired on September 27, 2018.
Share Repurchase Program
In March 2018, the Company authorized our
existing share repurchase program, authorizing the repurchase of up to $500,000 of our outstanding common stock from time to time
in the open market. The program has an expiration date of December 31, 2018. All repurchased shares are constructively retired
and returned to an authorized and unissued status. The Company did not repurchase and retire any of our shares as of the period
ended September 30, 2018. Subsequent to September 30, 2018, the Company has repurchased a nominal number of shares under the program.
Distributions
In October 2018, the Company declared its
first distribution of $0.01 per share on the Company’s common shares. The distribution will be made on or about November
15, 2018 to shareholders of record as of October 25, 2018.
NOTE 7. INCOME TAXES
The Company intends to elect REIT status
effective for the year ending December 31, 2018. The Company would then generally not be subject to income taxes assuming it complied
with the various distribution rules applicable to REITs. The Company has also incurred current and prior year net operating losses;
thus, the Company does not expect to incur current income tax expenses even if it does not choose to elect REIT status in 2018.
Realization of deferred tax assets is dependent
upon sufficient future taxable income during the period that deductible temporary differences and expected carry-forwards are available
to reduce taxable income. The Company records a valuation allowance when, in the opinion of management, it is more likely than
not, that the Company will not realize some or all deferred tax assets. As the achievement of required future taxable income is
uncertain, the Company recorded a valuation allowance equal to the deferred tax asset at September 30, 2018 and December 31, 2017.
At December 31, 2017 the Company had federal and state net operating loss carry-forwards of approximately $5,350,000. The federal
and state tax loss carry-forwards will begin to expire in 2032, unless previously utilized.
Pursuant to Internal Revenue Code Section
382, use of the Company’s net operating loss carry-forwards may be limited if a cumulative change in ownership of more than
50% occurs within a three-year period. Management believes that such an ownership change had occurred but has not yet performed
a study of the limitations on the net operating losses.
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)
September 30, 2018 and 2017
NOTE 8. RELATED PARTY TRANSACTIONS
Reven Capital, LLC, which is wholly-owned
by Chad M. Carpenter, a shareholder of the Company and its Chief Executive Officer, currently subleases office space from the Company
on a month to month basis for a monthly rental of $500. For each of the three month periods ended September 30, 2018 and 2017,
the Company received income from Reven Capital, LLC of $1,500, respectively. For each of the nine month periods ended September
30, 2018 and 2017, the Company received income from Reven Capital, LLC of $4,500, respectively.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Purchase Commitments
The Company has entered into purchase contracts
to acquire approximately 200 homes at a contract price of approximately $22.4 million. However, it is not yet known if the purchases
of these properties will close because properties may fall out of escrow through the closing process for various reasons.
Legal and Regulatory
The Company is subject to potential liability
under laws and government regulations and various claims and legal actions arising in the ordinary course of the Company’s
business. Liabilities are established for legal claims when payments associated with the claims become probable and the costs can
be reasonably estimated. The actual costs of resolving legal claims may be substantially higher or lower than the amounts established
for those claims. Based on information currently available, management is not aware of any legal or regulatory claims that would
have a material effect on the Company’s condensed consolidated financial statements and, therefore, no accrual has been recorded
as of the periods ended September 30, 2018 and December 31, 2017.
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
The following discussion and analysis
of our financial condition and results of operations should be read in conjunction with the information appearing elsewhere in
this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2017. This discussion
and analysis contains forward-looking statements based upon our current expectations that involve risks and uncertainties. Our
actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors,
including those set further under Part I. Item 1A. “Risk Factors” in our most recent Annual Report on Form 10-K as
updated by our other periodic reporting.
Overview
We are an internally
managed Maryland corporation that engages in the acquisition, ownership and operation of portfolios of leased single-family residential
properties in the United States. We operate our portfolio properties as single family rentals, or SFRs, and we generate most of
our revenue from rental income from the existing tenants of the SFRs we have acquired. We intend to elect to be taxed as a real
estate investment trust (“REIT”), as defined in the Internal Revenue Code, commencing with the taxable year ending
December 31, 2018.
As of September 30,
2018, we have invested an aggregate of approximately $64 million and own a total of 826 homes, of which 263 homes are in the Houston,
Texas metropolitan area, 252 homes are in the Jacksonville, Florida metropolitan area, 120 homes are in the Memphis, Tennessee
metropolitan area (with two of the Memphis homes located just across the border in Mississippi), 144 homes are in the Birmingham,
Alabama metropolitan area, and 47 homes are in the Atlanta, Georgia metropolitan area.
On September 28, 2018,
we completed the refinancing of our entire single-family home portfolio by entering into a $51,362,000 seven-year, monthly interest-only
payable loan accruing interest at 4.74% per annum, with principal due and payable at its maturity on October 1, 2025. The loan
is secured by 824 of our currently owned single-family homes. Proceeds of approximately $33 million were utilized to pay off and
replace the Company’s eight previously outstanding notes. Additionally, as a result of the loan, the Company received approximately
$17 million of cash, net of transaction fees, prepayment fees, and loan payoffs, which we intend to use for the future acquisitions
of single-family homes.
We intend to expand
our acquisitions in our current and other select markets in the United States that fit our investment criteria. As of September
30, 2018, our portfolio properties were 92.9% occupied.
Our principal objective
is to generate cash flow, while gaining home price appreciation, or HPA, at the same time through the ownership of our portfolio
properties. With this objective in mind, we have developed our primary business strategy of acquiring portfolios of leased SFRs.
We believe the execution of this strategy will allow us to generate immediate and steady cash flow from rental income from the
SFRs that we acquire while potentially gaining significant HPA over time. While our goal is to grow our company and generate available
cash flow that will allow us to pay all of our operating costs for the operation of our portfolio properties and distribute profits
to our stockholders in the form of quarterly dividends, there can be no assurance we will be able to do so.
In October 2018, we
declared our first distribution of $0.01 per share on our common shares. The distribution will be made on or about November 15,
2018 to shareholders of record as of October 25, 2018.
We plan to continue
to acquire and manage single-family homes with a focus on long term earnings growth and appreciation in asset value. Our ability
to identify and acquire single-family properties that meet our investment criteria will be affected by home prices in our markets,
the inventory of properties available through our acquisition channels, competition for our target assets, our capital available
for investment, and the cost of that capital. We believe the housing market environment in our markets remains attractive for single-family
property acquisitions and rentals. Pricing for housing in certain markets remains attractive and demand for housing is growing.
At the same time, we continue to face relatively steady competition for new properties and residents from local operators and institutional
managers. Housing prices across our markets have appreciated over the past years. Despite these gains, we believe housing in certain
of our markets continues to provide attractive acquisition opportunities and remains inexpensive relative to replacement cost and
affordability metrics.
We anticipate continued
strong rental demand for single-family homes. While new building activity has begun to increase, it remains below historical averages
and we believe substantial under-investment in residential housing over the past years will create upward pressure on home prices
and rents as demand exceeds supply.
Property Portfolio
The following tables
represent our investment in the homes as of September 30, 2018:
Total Portfolio of Single-Family Homes — Summary Statistics
|
(as of September 30, 2018)
|
Market
|
|
No. of Homes
|
|
|
Aggregate
Investment
|
|
|
Average
Investment per
Home
|
|
|
Properties
Leased
|
|
|
Properties
Vacant
|
|
|
Portfolio
Occupancy
Rate
|
|
|
Average Age
(years)
|
|
|
Average Size
(sq. ft.)
|
|
|
Average
Monthly Rent
|
|
|
Average
Remaining
Lease Term
(Months)
|
|
Atlanta,
Georgia
|
|
|
47
|
|
|
$
|
3,478,297
|
|
|
$
|
74,006
|
|
|
|
44
|
|
|
|
3
|
|
|
|
93.6
|
%
|
|
|
30
|
|
|
|
1,453
|
|
|
$
|
919
|
|
|
|
2.8
|
|
Birmingham,
Alabama
|
|
|
144
|
|
|
|
9,973,063
|
|
|
|
69,257
|
|
|
|
124
|
|
|
|
20
|
|
|
|
86.1
|
%
|
|
|
57
|
|
|
|
1,302
|
|
|
|
848
|
|
|
|
4.1
|
|
Houston,
Texas
|
|
|
263
|
|
|
|
22,533,386
|
|
|
|
85,678
|
|
|
|
250
|
|
|
|
13
|
|
|
|
95.1
|
%
|
|
|
49
|
|
|
|
1,452
|
|
|
|
1,139
|
|
|
|
3.7
|
|
Jacksonville,
Florida
|
|
|
252
|
|
|
|
18,229,481
|
|
|
|
72,339
|
|
|
|
234
|
|
|
|
18
|
|
|
|
92.9
|
%
|
|
|
55
|
|
|
|
1,289
|
|
|
|
943
|
|
|
|
5.7
|
|
Memphis,
Tennesee
|
|
|
120
|
|
|
|
9,791,636
|
|
|
|
81,597
|
|
|
|
115
|
|
|
|
5
|
|
|
|
95.8
|
%
|
|
|
44
|
|
|
|
1,675
|
|
|
|
999
|
|
|
|
8.6
|
|
Totals
|
|
|
826
|
|
|
$
|
64,005,863
|
|
|
$
|
77,489
|
|
|
|
767
|
|
|
|
59
|
|
|
|
92.9
|
%
|
|
|
50
|
|
|
|
1,409
|
|
|
$
|
996
|
|
|
|
5.0
|
|
Results of Operations
Three Months
Ended September 30, 2018 Compared to Three Months Ended September 30, 2017
The following table
sets forth a comparison of the results of operations for the three months ended September 30, 2018 and 2017:
|
|
|
|
|
|
|
|
$
|
|
|
%
|
|
|
|
2018
|
|
|
2017
|
|
|
Change
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
2,211,085
|
|
|
$
|
2,043,322
|
|
|
$
|
167,763
|
|
|
|
8.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance
|
|
|
780,415
|
|
|
|
593,339
|
|
|
|
187,076
|
|
|
|
31.5
|
%
|
Real estate taxes
|
|
|
371,741
|
|
|
|
346,669
|
|
|
|
25,072
|
|
|
|
7.2
|
%
|
Depreciation and amortization
|
|
|
597,928
|
|
|
|
537,968
|
|
|
|
59,960
|
|
|
|
11.1
|
%
|
General and administration
|
|
|
511,158
|
|
|
|
558,074
|
|
|
|
(46,916
|
)
|
|
|
-8.4
|
%
|
Noncash share-based compensation
|
|
|
39,375
|
|
|
|
-
|
|
|
|
39,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
2,300,617
|
|
|
|
2,036,050
|
|
|
|
264,567
|
|
|
|
13.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(89,532
|
)
|
|
|
7,272
|
|
|
|
(96,804
|
)
|
|
|
1331.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expenses) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casualty (loss) gain, net
|
|
|
-
|
|
|
|
(978,181
|
)
|
|
|
978,181
|
|
|
|
-100.0
|
%
|
Loss on early extinguishment of debt
|
|
|
(642,845
|
)
|
|
|
-
|
|
|
|
(642,845
|
)
|
|
|
|
|
Other
|
|
|
7,993
|
|
|
|
5,466
|
|
|
|
2,527
|
|
|
|
46.2
|
%
|
Interest expense
|
|
|
(441,341
|
)
|
|
|
(342,253
|
)
|
|
|
(99,088
|
)
|
|
|
29.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses
|
|
|
(1,076,193
|
)
|
|
|
(1,314,968
|
)
|
|
|
238,775
|
|
|
|
18.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,165,725
|
)
|
|
$
|
(1,307,696
|
)
|
|
$
|
141,971
|
|
|
|
10.9
|
%
|
For the three months
ended September 30, 2018, we had total rental income of $2,211,085 compared to total rental income of $2,043,322 for the three
months ended September 30, 2017. The increase is due primarily to an increase in the number of homes owned during the 2018 period
when compared to the number of homes owned during the three months ended September 30, 2017. As of September 30, 2018, we owned
826 homes; at September 30, 2017, we owned 755 homes.
As of September 30,
2018, 767, or approximately 92.9%, of our 826 homes were occupied. During the three months ended September 30, 2018, we had 63
home leases turnover, which represented approximately 7.6% of our end of the quarter portfolio. As of September 30, 2017, 709,
or approximately 93.9%, of our 755 homes were occupied. During the quarter ended September 30, 2017, we had 65 home leases turnover,
which represented approximately 8.6% of our end of the quarter portfolio.
For the three months
ended September 30, 2018, we had property operating and maintenance expenses of $780,415 compared to $593,339 for the corresponding
prior year period. Property operating and maintenance expenses consist of insurance, property management fees paid to third parties,
repairs and maintenance costs, home owner association fees, and other miscellaneous property costs. Real estate taxes for the three
months ended September 30, 2018 were $371,741 compared to $346,669 for the three months ended September 30, 2017. The increase
in property operating, maintenance expenses from 2017 to 2018 is primarily due to an increase in repairs and insurance costs in
the current period when compared to the prior year. The increase in real estate taxes in the current quarter compared to the corresponding
prior period are primarily due to an increase in the number of homes owned. We had net operating income from rentals of $1,058,929
for the three months ended September 30, 2018 compared to net operating income from rentals of $1,103,314 in the corresponding
prior year period. This resulted in a net operating income margin of approximately 47.9% in 2018 compared to 54.0% in the corresponding
prior year period. The decrease in operating margin was primarily due to the increase in repair and insurance costs in the current
period.
Depreciation and amortization
on our home investments increased to $597,928 for the three months ended September 30, 2018 compared to $537,968 in 2017, reflecting
the corresponding increase in the number of single family homes owned.
General and administrative
expenses for the three months ended September 30, 2018 totaled $511,158 compared to $558,074 for the corresponding prior year period.
General and administrative expenses consist of personnel costs, outside director fees, occupancy fees, public company filing fees,
legal, accounting, and other general expenses. The nominal decrease in our general and administrative expenses is due primarily
to a portion of the directors’ fees being paid in stock in 2018 when compared to 2017. Noncash share-based compensation for
the three months ended September 30, 2018 was $39,375. There was no noncash share-based compensation awarded during the three months
ended September 30, 2017.
The above results in
total expenses of $2,300,617 for the three months ended September 30, 2018 resulting in an operating loss for the three months
ended September 30, 2018 of $89,532, compared to total expenses of $2,036,050 for the three months ended September 30, 2017 and
a corresponding operating income of $7,272 for the three months ended September 30, 2017.
During the quarter
ended September 30, 2017, we had net casualty losses of $978,181 due to Hurricane Harvey and Irma. There were no casualty gains
or losses during the three months ended September 30, 2018. On September 28, 2018, we refinanced our loan portfolio with a new
loan and paid off our prior debt. This resulted in a loss on early extinguishment of debt of $642,845 due to the write-off of unamortized
loan fees of $424,642 and the payment of prepayment charges of $218,203. Other income was $7,993 for the three months ended September
30, 2018 as compared to other income of $5,466 for the three months ended September 30, 2017. Interest expense on our notes payable
was $441,341 for the three months ended September 30, 2018 compared to $342,253 for the three months ended September 30, 2017.
The increase is primarily due to higher note payable balances for the three months ended September 30, 2018 when compared to the
corresponding period in 2017. This resulted in net other expense of $1,076,193 for the three months ended September 30, 2018 compared
to a net other expense of $1,314,968 for the three months ended September 30, 2017.
Net loss for the three
months ended September 30, 2018 was $1,165,725. The net loss for the three months ended September 30, 2017 was $1,307,696. The
weighted average number of shares outstanding for the three months ended September 30, 2018 increased to 10,779,070 from 10,734,025
for the three months ended September 30, 2017 resulting in a net loss per share of $0.11 for the three months ended September 30,
2018 and a net loss per share of $0.12 for the three months ended September 30, 2017. You will note that the loss on early extinguishment
of debt of $642,845 during the three months ended September 30, 2018 caused the net loss per share to increase $0.06 per share.
The net casualty loss of $978,181 resulted in an increase in the net loss per share of $0.09 during the three months ended September
30, 2017.
Nine Months Ended
September 30, 2018 Compared to Nine Months Ended September 30, 2017
The following table
sets forth a comparison of the results of operations for the nine months ended September 30, 2018 and 2017:
|
|
|
|
|
|
|
|
$
|
|
|
%
|
|
|
|
2018
|
|
|
2017
|
|
|
Change
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
6,623,163
|
|
|
$
|
5,814,135
|
|
|
$
|
809,028
|
|
|
|
13.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance
|
|
|
2,081,009
|
|
|
|
1,694,969
|
|
|
|
386,040
|
|
|
|
22.8
|
%
|
Real estate taxes
|
|
|
1,104,657
|
|
|
|
988,839
|
|
|
|
115,818
|
|
|
|
11.7
|
%
|
Depreciation and amortization
|
|
|
1,631,824
|
|
|
|
1,458,933
|
|
|
|
172,891
|
|
|
|
11.9
|
%
|
General and administration
|
|
|
1,702,990
|
|
|
|
1,860,473
|
|
|
|
(157,483
|
)
|
|
|
-8.5
|
%
|
Noncash share-based compensation
|
|
|
39,375
|
|
|
|
-
|
|
|
|
39,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
6,559,855
|
|
|
|
6,003,214
|
|
|
|
556,641
|
|
|
|
9.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
63,308
|
|
|
|
(189,079
|
)
|
|
|
252,387
|
|
|
|
133.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expenses) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain on sale of residential properties
|
|
|
-
|
|
|
|
75,796
|
|
|
|
(75,796
|
)
|
|
|
-100.0
|
%
|
Casualty (loss) gain, net
|
|
|
76,133
|
|
|
|
(895,194
|
)
|
|
|
971,327
|
|
|
|
-108.5
|
%
|
Loss on early extinguishment of debt
|
|
|
(642,845
|
)
|
|
|
-
|
|
|
|
(642,845
|
)
|
|
|
|
|
Previously deferred stock issuance costs
|
|
|
(674,144
|
)
|
|
|
-
|
|
|
|
(674,144
|
)
|
|
|
|
|
Other
|
|
|
22,989
|
|
|
|
13,628
|
|
|
|
9,361
|
|
|
|
68.7
|
%
|
Interest expense
|
|
|
(1,277,105
|
)
|
|
|
(967,410
|
)
|
|
|
(309,695
|
)
|
|
|
32.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses
|
|
|
(2,494,972
|
)
|
|
|
(1,773,180
|
)
|
|
|
(721,792
|
)
|
|
|
-40.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,431,664
|
)
|
|
$
|
(1,962,259
|
)
|
|
$
|
(469,405
|
)
|
|
|
-23.9
|
%
|
For the nine months
ended September 30, 2018, we had total rental income of $6,623,163 compared to total rental income of $5,814,135 for the nine months
ended September 30, 2017. The increase in total rental and other income is due primarily to the increase in rental homes owned
for the 2018 time period as compared to 2017.
For the nine months
ended September 30, 2018, we had property operating and maintenance expenses of $2,081,009 compared to $1,694,969 for the nine
months ended September 30, 2017. Real estate taxes for the nine months ended September 30, 2018 were $1,104,657 compared to $988,839
for the nine months ended September 30, 2017. The increase in property operating, maintenance expenses is due to higher repairs
and insurance costs in the current period. The increase in real estate taxes from 2017 to 2018 is due primarily to a corresponding
increase in our inventory of single family homes.
We had net operating
income from rentals of $3,437,497 for the first nine months of 2018 compared to net operating income from rentals of $3,130,327
in the corresponding prior year’s period. The increase in net operating income is due primarily to the increase in rental
homes owned during the current 2017 period offset by an increase in repairs and insurance costs. This results in a net operating
income margin of approximately 51.9% in 2018 compared to a net operating income margin of 53.8% in 2017.
Depreciation and amortization
increased to $1,631,824 during the nine months ended September 30, 2018 compared to $1,458,933 during the nine months ended September
30, 2017, reflecting the corresponding increase in our number of single family homes owned.
General and administrative
expenses for the nine months ended September 30, 2018 totaled $1,702,990 compared to $1,860,473 for the prior year period. The
decrease in our general and administrative expenses is due primarily to a decrease in legal, accounting, and miscellaneous travel
and promotional expenses in 2018 when compared to 2017, due to a decrease in acquisition and promotional activities in the current
period. Additionally, a portion of the directors’ fees were paid in stock in 2018 when compared to 2017. Noncash share-based
compensation for the nine months ended September 30, 2018 was $39,375. There was no noncash share-based compensation awarded during
the nine months ended September 30, 2017.
We sold two residential
properties during the nine months ended September 30, 2017 for a gain of $75,796. There were no corresponding sales during the
nine months ended September 30, 2018. We had net casualty gains of $76,133 during the nine months ended September 30, 2018, compared
to net casualty losses of $895,194 due primarily to Hurricane Harvey and Irma during the nine months ended September 30, 2017.
On September 28, 2018, we refinanced our loan portfolio with a new loan and paid off our prior debt. This resulted in a loss on
early extinguishment of debt of $642,845 consisting of the to the write-off of unamortized loan fees of $424,642 and the payment
of prepayment charges of $218,203. During the nine months ended September 30, 2018 we expensed $674,144 of previously deferred
stock issuance costs relating to a postponed capital raise; there was not a corresponding charge during the nine months ended September
30, 2017. Other income was $22,989 for the nine months ended September 30, 2018 as compared to other income of $13,628 for the
nine months ended September 30, 2017. Interest expense on our notes payable was $1,277,105 for the nine months ended September
30, 2018 compared to $967,410 for the nine months ended September 30, 2017. The increase is primarily due to higher note payable
balances for the nine months ended September 30, 2018 when compared to the corresponding period in 2017. This resulted in net other
expense of $2,494,972 for the nine months ended September 30, 2018 compared to a net other expense of $1,773,180 for the nine months
ended September 30, 2017.
Net loss for the nine
months ended September 30, 2018 was $2,431,664. The net loss for the nine months ended September 30, 2017 was $1,962,259. The weighted
average number of shares outstanding for the nine months ended September 30, 2018 increased to 10,769,062 from 10,734,025 for the
nine months ended September 30, 2017, resulting in a net loss per share of $0.23 for the nine months ended September 30, 2018 and
a net loss per share of $0.18 for the nine months ended September 30, 2017. The loss on early extinguishment of debt caused the
loss per share to increase $0.06 per share in 2018. Additionally, the expensing of $674,144 of previously deferred stock issuance
costs during the period ended September 30, 2018 caused the net loss per share to increase an additional $0.06 per share. The net
casualty loss in the period ended September 30, 2017 caused the net loss per share to increase $0.08 in that period.
Liquidity and Capital Resources
Liquidity is a measure
of our ability to meet potential cash requirements, fund and maintain our assets and operations, make interest payments and fund
other general business needs. Our liquidity, to a certain extent, is subject to general economic, financial, competitive and other
factors that are beyond our control. Our near-term liquidity requirements consist primarily of acquiring properties, funding our
operations, and making interest payments.
Our liquidity and capital
resources as of September 30, 2018 consisted primarily of cash and cash equivalents of $22,766,393. We believe our current liquidity
and the expected cash flows from operations will be sufficient to fund the present level of our operations through the 12 months
following the date of this report. However, our future acquisition activity will depend primarily on our ability to raise funds
from the further issuance of shares of our common stock or units of our operating partnership combined with new loan transactions
secured by our current and future home inventories. In order to purchase additional single-family homes, we intend to opportunistically
utilize the capital markets to raise additional capital, including through the issuance of debt and equity securities, but there
can be no assurance that we will be able to access adequate liquidity sources on favorable terms, or at all.
Credit Facilities
On September 28, 2018,
we refinanced our entire single-family home portfolio by entering into a $51,362,000 loan with Arbor Agency Lending, LLC, on behalf
of the Federal Home Loan Mortgage Corporation (Freddie Mac). The loan is a seven-year, monthly interest-only payable loan accruing
interest at 4.74% per annum, with principal due and payable at its maturity on October 1, 2025. The loan is secured by 824 of our
currently owned single-family homes and we also guaranteed approximately $12.8 million of the loan balance. Proceeds of approximately
$33 million were utilized to pay off and replace our eight previously outstanding notes. Additionally, as a result of the loan,
we received approximately $17 million of cash, net of transaction fees, prepayment fees, and loan payoffs, which we intend to use
for the future acquisitions of single-family homes.
A summary of our notes
payable as of September 30, 2018 and December 31, 2017 is as follows:
|
|
2018
|
|
|
2017
|
|
|
Interest
Rate
(Fixed)
|
|
|
Maturity Date
|
Note
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reven Housing Fund 1, LLC
|
|
$
|
51,362,000
|
|
|
$
|
-
|
|
|
|
4.74
|
%
|
|
October, 2025
|
Reven Housing Texas, LLC
|
|
|
-
|
|
|
|
7,312,030
|
|
|
|
4.50
|
%
|
|
April, 2020
|
Reven Housing Texas 2, LLC
|
|
|
-
|
|
|
|
4,890,978
|
|
|
|
4.50
|
%
|
|
January, 2022
|
Reven Housing Tennessee, LLC
|
|
|
-
|
|
|
|
3,830,791
|
|
|
|
4.50
|
%
|
|
April, 2020
|
Reven Housing Florida, LLC
|
|
|
-
|
|
|
|
3,442,987
|
|
|
|
4.50
|
%
|
|
April, 2020
|
Reven Housing Florida 2, LLC
|
|
|
-
|
|
|
|
4,805,389
|
|
|
|
4.50
|
%
|
|
April, 2020
|
Reven Housing Georgia, LLC
|
|
|
-
|
|
|
|
1,780,765
|
|
|
|
4.50
|
%
|
|
July, 2020
|
Reven Housing Tennessee, LLC
|
|
|
-
|
|
|
|
1,148,726
|
|
|
|
4.50
|
%
|
|
September, 2020
|
Reven Housing Alabama, LLC
|
|
|
-
|
|
|
|
3,793,920
|
|
|
|
4.25
|
%
|
|
January, 2023
|
|
|
|
51,362,000
|
|
|
|
31,005,586
|
|
|
|
|
|
|
|
Less deferred loan fees, net
|
|
|
(1,279,163
|
)
|
|
|
(512,462
|
)
|
|
|
|
|
|
|
Notes payable, net
|
|
$
|
50,082,837
|
|
|
$
|
30,493,124
|
|
|
|
|
|
|
|
Cash Flows
The following table
summarizes our cash flows for the nine months ended September 30, 2018 and 2017.
|
|
|
|
|
|
|
|
$
|
|
|
|
2018
|
|
|
2017
|
|
|
Change
|
|
Net cash provided by operating activities
|
|
$
|
580,448
|
|
|
$
|
394,862
|
|
|
$
|
185,586
|
|
Net cash used in investing activities
|
|
|
(2,372,099
|
)
|
|
|
(10,244,881
|
)
|
|
|
7,872,782
|
|
Net cash provided by financing activities
|
|
|
19,375,214
|
|
|
|
6,785,506
|
|
|
|
12,589,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
$
|
17,583,563
|
|
|
$
|
(3,064,513
|
)
|
|
$
|
20,648,076
|
|
Operating Activities
We had net cash provided
by operating activities of $580,448 for the nine months ended September 30, 2018. This resulted from a net loss of $2,431,664,
adding back depreciation and amortization of $1,631,824, noncash share-based compensation of $39,375, amortization of deferred
loan fees of $152,982, loss on early extinguishment of debt of $642,845, cancelled offering costs of $674,144, and then decreasing
the amount by the net change in operating assets and liabilities of $129,058.
We had net cash provided
by operating activities of $394,862 for the nine months ended September 30, 2017. This resulted from a net loss of $1,962,259,
adding back depreciation and amortization of $1,458,933, amortization of deferred loan fees of $108,117, casualty losses of $895,194
and then deducting gain on sale of residential properties of $75,796, and then decreasing the amount by the net change in operating
assets and liabilities of $29,327.
Investing Activities
During the nine months
ended September 30, 2018, we invested $1,681,413 in new homes, $1,928,298 in capital improvements for our homes (of which approximately
$987,000 were for hurricane renovation costs), and $183,300 in lease origination costs. We received $1,420,912 of insurance proceeds
for property damages for a total of $2,372,099 of net cash used in investing activities.
During the nine months
ended September 30, 2017, we invested $10,117,039 in new homes, $668,268 in capital improvements for our homes, and $219,407 in
lease origination costs. We received $205,027 of proceeds on the disposition of residential properties and $554,806 of insurance
proceeds for property damages for a total of $10,244,881 of cash used in investing activities.
Financing Activities
During the nine months
ended September 30, 2018, we had net cash provided by financing activities of $19,375,214 derived from $54,098,630 of proceeds
from notes payable, $702,176 of proceeds from issuance of shares, less $33,742,217 of notes payable principal payments, less $1,562,527
of loan fees, and the payment of $120,848 of deferred offering costs.
During the nine months
ended September 30, 2017, we had net cash provided by financing activities of $6,785,506 derived from $7,968,633 of proceeds from
notes payable, less $405,750 of notes payable principal payments, less $220,773 of loan fees, less payments of deferred stock issuance
costs of $556,604.
Our future acquisition
activity relies primarily on our ability to raise funds from the further issuance of common shares combined with new loan transactions
secured by our current and future home inventories. We remain focused on acquiring new capital. We believe our current cash balance
combined with our estimated future net rental revenue is sufficient to fund our operating activities through the 12 months following
the date of this report.
Off Balance Sheet Arrangements
None.
Net Operating Income
We define net operating
income (or NOI) as total revenue less property operating and maintenance and real estate taxes. NOI is a non-GAAP measurement that
excludes acquisition costs, depreciation and amortization, general and administration, legal and accounting, and interest expenses.
We consider NOI to
be a meaningful financial measure when considered with the financial statements determined in accordance with GAAP. We believe
NOI is helpful to investors in understanding the amount of income after operating expenses which is generated in a given period.
The following is a
reconciliation of our NOI to net loss as determined in accordance with GAAP for the three and nine months ended September 30, 2018
and 2017.
|
|
Three Months ended September 30,
|
|
|
Nine Months ended September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,165,725
|
)
|
|
$
|
(1,307,696
|
)
|
|
$
|
(2,431,664
|
)
|
|
$
|
(1,962,259
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
597,928
|
|
|
|
537,968
|
|
|
|
1,631,824
|
|
|
|
1,458,933
|
|
General and administration
|
|
|
511,158
|
|
|
|
558,074
|
|
|
|
1,702,990
|
|
|
|
1,860,473
|
|
Noncash share-based compensation
|
|
|
39,375
|
|
|
|
-
|
|
|
|
39,375
|
|
|
|
-
|
|
Other expenses, net
|
|
|
1,076,193
|
|
|
|
1,314,968
|
|
|
|
2,494,972
|
|
|
|
1,773,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income (NOI)
|
|
$
|
1,058,929
|
|
|
$
|
1,103,314
|
|
|
$
|
3,437,497
|
|
|
$
|
3,130,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income as a percentage of total revenue
|
|
|
47.9
|
%
|
|
|
54.0
|
%
|
|
|
51.9
|
%
|
|
|
53.8
|
%
|
NOI should not be considered
an alternative to net loss or net cash flows from operating activities, as determined in accordance with GAAP, as indications of
our performance or as measures of liquidity. Nor is NOI necessarily indicative of cash available to fund future cash needs or distributions
to shareholders. In addition, although we use NOI for comparability in assessing our performance against other REITs, not all REITs
compute the same non-GAAP measure of NOI. Accordingly, our basis for computing this non- GAAP measure may not be comparable with
that of other REITs. This is due in part to the differences in property operating and maintenance expenses incurred by, and real
estate taxes applicable to, different companies and the significant effect these items have on NOI.
Funds From Operations and Core Funds
From Operations
Funds From Operations
(or FFO) is a non-GAAP financial measure that we believe, when considered with the financial statements determined in accordance
with GAAP, is helpful to investors in understanding our performance because it captures features particular to real estate performance
by recognizing that real estate generally appreciates over time or maintains residual value to a much greater extent than do other
depreciable assets. The National Association of Real Estate Investment Trusts (or NAREIT) defines FFO as net income (computed in
accordance with GAAP), excluding gains (or losses) from sales of, and impairment losses recognized with respect to, depreciable
property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments
for unconsolidated partnerships and joint ventures are calculated on the same basis to determine FFO.
Core Funds From Operations
(or Core FFO) is a non-GAAP financial measure that we use as a supplemental measure of our performance. We believe that Core FFO
is further helpful to investors as it provides a more consistent measurement of our performance across reporting periods by removing
the impact of certain items that are not comparable from period to period. We adjust FFO for expensed acquisition fees and costs,
share-based compensation, non-cash interest expense related to amortization of deferred financing costs, casualty gains and losses,
loss on early extinguishment of debt, cancelled offering costs, and certain other non-comparable costs to arrive at Core FFO.
FFO and Core FFO should
not be considered alternatives to net income (loss) or net cash flows from operating activities, as determined in accordance with
GAAP, as indications of our performance or as measures of liquidity. These non-GAAP measures are not necessarily indicative of
cash available to fund future cash needs. In addition, although we use these non-GAAP measures for comparability in assessing our
performance against other REITs, not all REITs compute the same non-GAAP measures. Accordingly, there can be no assurance that
our basis for computing these non-GAAP measures is comparable with that of other REITs. This is due in part to the differences
in capitalization policies used by different companies and the significant effect these capitalization policies have on FFO and
Core FFO. Real estate costs which are accounted for as capital improvements are added to the carrying value of the property and
depreciated over time, whereas real estate costs that are expenses are accounted for as a current period expense. This affects
FFO and Core FFO because costs that are accounted for as expenses reduce FFO and Core FFO. Conversely, real estate costs associated
with assets that are capitalized and then subsequently depreciated are added back to net income to calculate FFO and Core FFO.
The following table
sets forth a reconciliation of our net loss as determined in accordance with GAAP and our calculations of FFO and Core FFO for
the three and nine months ended September 30, 2018 and 2017:
|
|
Three Months ended September 30,
|
|
|
Nine Months ended September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,165,725
|
)
|
|
$
|
(1,307,696
|
)
|
|
$
|
(2,431,664
|
)
|
|
$
|
(1,962,259
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add back depreciation and amortization
|
|
|
597,928
|
|
|
|
537,968
|
|
|
|
1,631,824
|
|
|
|
1,458,933
|
|
Less gain on sale of residential properties
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(75,796
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from (used in) operations
|
|
$
|
(567,797
|
)
|
|
$
|
(769,728
|
)
|
|
$
|
(799,840
|
)
|
|
$
|
(579,122
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add back noncash share-based compensation
|
|
|
39,375
|
|
|
|
-
|
|
|
|
39,375
|
|
|
|
-
|
|
Add back noncash amortization of deferred loan fees
|
|
|
50,994
|
|
|
|
39,998
|
|
|
|
152,982
|
|
|
|
108,117
|
|
Less net casualty gain; add net casualty loss
|
|
|
-
|
|
|
|
978,181
|
|
|
|
(76,133
|
)
|
|
|
895,194
|
|
Add back loss on early extinguishment of debt
|
|
|
642,845
|
|
|
|
-
|
|
|
|
642,845
|
|
|
|
-
|
|
Add back previously deferred stock issuance costs
|
|
|
-
|
|
|
|
-
|
|
|
|
674,144
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core funds from operations
|
|
$
|
165,417
|
|
|
$
|
248,451
|
|
|
$
|
633,373
|
|
|
$
|
424,189
|
|