Preferred Apartment Communities, Inc. (NYSE:APTS) Files An 8-K Completion of Acquisition or Disposition of Assets

On December 30, 2016, POP 3 Ravinia, LLC (the “Purchaser”), an
indirect, wholly-owned subsidiary of Preferred Apartment
Communities Operating Partnership, L.P. (“PAC-OP”), completed the
acquisition of a fee simple interest in a class A office building
located in the central perimeter submarket of Atlanta, Georgia
(Ravinia, or the Property) from SPUS6 Three Ravinia, LP (the
“Seller”).

The aggregate net purchase price was approximately $181.8 million
after certain credits for outstanding tenant improvements, capital
projects and rent abatements, and exclusive of acquisition-related
and financing-related transaction costs. Preferred Apartment
Communities, Inc. (the “Company”) is the general partner of, and
as of September 30, 2016 was the owner of an approximate 96.5%
interest in, PAC-OP. Outside of the acquisition of Ravinia, there
is no relationship between the Company, PAC-OP or the Purchaser and
the Seller.

The Company hereby amends the Current Report on Form 8-K filed on
January 6, 2017, reporting events on and after December 30, 2016,
to provide certain financial information related to its acquisition
of Ravinia required by Item 9.01(a) and (b) of Form 8-K.

Item 9.01 Financial Statements and Exhibits

(c) Exhibits

23.1 Consent of KPMG LLP

THREE RAVINIA DRIVE

STATEMENTS OF REVENUES AND CERTAIN EXPENSES

WITH INDEPENDENT AUDITORS REPORT

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)

AND THE YEAR ENDED DECEMBER 31, 2015

INDEPENDENT AUDITORS REPORT

The Board of Directors and Stockholders

Preferred Apartment Communities, Inc.

We have audited the accompanying statement of revenues and
certain expenses of Three Ravinia Drive for the year ended
December 31, 2015, and the related notes.

Managements Responsibility for the Statement

Management is responsible for the preparation and fair
presentation of the statement in accordance with U.S. generally
accepted accounting principles; this includes the design,
implementation, and maintenance of internal control relevant to
the preparation and fair presentation of the statement that is
free from material misstatement, whether due to fraud or error.

Auditors Responsibility

Our responsibility is to express an opinion on the statement
based on our audit. We conducted our audit in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the statement
is free from material misstatement. An audit involves performing
procedures to obtain audit evidence about the amounts and
disclosures in the statement. The procedures selected depend on
the auditors judgment including the assessment of the risk of
material misstatement of the statement, whether due to fraud or
error. In making those risk assessments, the auditor considers
internal control relevant to the entitys preparation and fair
presentation of the statement in order to design audit procedures
that are appropriate in the circumstances, but not for the
purpose of expressing an opinion of the effectiveness of the
entitys internal control. Accordingly, we express no such
opinion. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluating
the overall presentation of the statement. We believe that the
audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.

Opinion

In our opinion, the statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of
Three Ravinia Drive described in note 2 to the statement for the
year ended December 31, 2015, in accordance with U.S. generally
accepted accounting principles.

Emphasis of Matter

We draw attention to note 2 of the statement, which describes
that the accompanying statement of revenues and certain expenses
was prepared for the purpose of complying with the provisions of
Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission and is not intended to be a complete presentation of
Three Ravinia Drives revenues and expenses. Our opinion is not
modified with respect to this matter.

(signed) KPMG LLP

Los Angeles, California

January 24, 2017

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See accompanying notes to Statements of Revenues and Certain
Expenses.

Preferred Apartment Communities, Inc. (the Company) was formed as a
Maryland corporation on September 18, 2009, and has elected to be
taxed as a real estate investment trust, or REIT, under the
Internal Revenue Code of 1986, as amended, effective with its tax
year ended December 31, 2011. The Company was formed primarily to
acquire and operate multifamily properties in select targeted
markets throughout the United States. The Company is a majority
owner in Preferred Apartment Communities Operating Partnership,
L.P., which acquired a 817,000 square foot (unaudited) class A
office building located in Atlanta, Georgia (Ravinia, or the
Property) from an unaffiliated third party (the Seller) on December
30, 2016. The accompanying Statements of Revenues and Certain
Expenses for the nine-month period ended September 30, 2016
(unaudited) and the year ended December 31, 2015 of Ravinia
represent revenues and results of operations for periods preceding
the acquisition of the Property by the Company. Prior to December
30, 2016, the Seller was responsible for the accounting and
management decisions of Ravinia.

A.Basis of Presentation

The accompanying Statement of Revenues and Certain Expenses has
been prepared on the accrual basis of accounting and for the
purpose of complying with Rule 3-14 of Regulation
S-X>promulgated under the Securities Act of 1933, as
amended,>and accordingly, is not representative of the actual
results of operations of the Property, due to the exclusion of the
following which may not be comparable to the proposed future
operations of Ravinia:

Except as noted above, management is not aware of any material
factors relating to the Property that would cause the reported
financial information not to be indicative of future operating
results.

The statement of revenue and certain expenses for the nine-month
period ended September 30, 2016 is unaudited. However, in the
opinion of management, all normal recurring adjustments necessary
for the fair presentation of this statement of revenue and certain
expenses for the interim period on the basis described above have
been included. The results for such an interim period are not
necessarily indicative of the results for the entire year.

B. Use of Estimates

The preparation of the Statements of Revenues and Certain Expenses
in conformity with U. S. generally accepted accounting principles
requires management to make estimates and assumptions that affect
the reported amounts of revenues and certain expenses. Actual
results could differ from those estimates.

C. Revenue Recognition

Rental revenues for office building leases, which include periods
of free rent and/or scheduled increases in rental rates over the
term of the lease, are recognized on a straightline basis. These
straight-line adjustments resulted in increases to base rent
revenue over the cash collected by approximately $1.8 million
(unaudited) and $4.3 million for the nine-month period ended
September 30, 2016 and the year ended December 31, 2015,
respectively. Revenues from reimbursements of the tenants’ share
of utilities, building repair and maintenance costs and common area
maintenance,

or CAM, costs are recognized in the periods in which the costs are
incurred.

D. Operating Expenses

Operating expenses represent the direct expenses of operating the
Property and consist primarily of real estate taxes, payroll,
repairs and maintenance, utilities, management fees, insurance and
other operating expenses that are expected to continue in the
proposed future operations of the Property.

E. Bad Debt Expense

The Company estimates the collectability of the tenant receivable
related to rental and reimbursement billings due from tenants and
straight-line rent receivables, which represent the cumulative
amount of future adjustments necessary to present rental revenue on
a straight-line basis, by taking into consideration the Company’s
historical write-off experience, tenant credit-worthiness, current
economic trends, and remaining lease terms. Any recoveries of
tenant receivables subsequent to the recognition of bad debt
expense is netted against bad debt expense in the period of
recovery.

F. Subsequent Events

The Company has evaluated subsequent events through January 24,
2017, the date the Statements of Revenues and Certain Expenses were
available to be issued and concluded that no subsequent events have
occurred that would require recognition in the Statements of
Revenues and Certain Expenses or disclosure in the Notes to the
Statements of Revenues and Certain Expenses.

Liabilities for loss contingencies arising from claims,
assessments, litigation, fines, penalties and other sources are
recorded when it is probable that a liability has been incurred and
the amount of the assessment can be reasonably estimated. Legal
costs incurred in connection with loss contingencies are expensed
as incurred. There is no material litigation nor to management’s
knowledge is any material litigation currently threatened against
the Property other than routine litigation, claims and
administrative proceedings arising in the ordinary course of
business.

As of December 30, 2016, the Property was approximately 98%
(unaudited) leased. Under the terms of the leases, each tenant is
required to reimburse to the landlord its proportionate share of
the Building’s operating expenses as defined in their specific
lease agreements. The rentable square footage is leased to various
office and retail tenants under lease agreements with terms that
vary in length and contain various reimbursement clauses.

Ravinia is located in Atlanta, Georgia. The Companys concentration
of assets in this city is subject not only to the risks of real
property ownership but also local and national economic growth
trends.

6. FUTURE MINIMUM LEASE PAYMENTS

The future minimum lease payments to be received under
non-cancelable operating leases in effect as of December 31, 2015
were:

One tenant accounted for approximately 61% of minimum rent revenue
of the Property and another tenant accounted for approximately 22%
of minimum rent revenue of the Property for the year ended December
31, 2015. One tenant accounted for approximately 63% (unaudited) of
minimum rent revenue of the Property and another tenant accounted
for approximately 20% (unaudited) of minimum rent revenue of the
Property for the nine months ended September 30, 2016.

7. RELATED PARTIES

Prior to the Company’s acquisition of the Property, management of
the building and rental activities was handled by a property
management group which was a related party to the Seller. Property
management fees of $241,183 (unaudited) and $301,990 were paid for
the nine months ended September 30, 2016 and the year ended
December 31, 2015, respectively.

>UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

The accompanying Unaudited Pro Forma Condensed Consolidated Balance
Sheet of the Company is presented as of September 30, 2016>and
illustrates the estimated effects of the acquisition of Three
Ravinia Drive as if it had occurred on September 30, 2016.

The accompanying Unaudited Pro Forma Condensed
Consolidated>Statements of Operations of the Company are
presented for the nine months ended September 30, 2016 and the year
ended December 31, 2015 (the “Pro Forma Periods”), and illustrate
the estimated effects of the acquisition of Three Ravinia Drive as
if it had occurred on January 1, 2015.

This unaudited pro forma condensed consolidated financial
information is presented for informational purposes only and does
not purport to be indicative of the Company’s financial results as
if the transaction reflected herein had occurred on the date or
been in effect during the period indicated. This pro forma
condensed consolidated financial information should not be viewed
as indicative of the Company’s financial results in the future and
should be read in conjunction with the Company’s financial
statements as filed on Form 10-K for the year ended December 31,
2015 and on Form 10-Q for the interim period ended September 30,
2016.

The accompanying notes are an integral part of this pro forma
condensed consolidated financial statement.

The accompanying notes are an integral part of this pro forma
condensed consolidated financial statement.

The accompanying notes are an integral part of this pro forma
condensed consolidated financial statement.

>1. Basis of Presentation

Preferred Apartment Communities, Inc. was formed as a Maryland
corporation on September 18, 2009, and elected to be taxed as a
real estate investment trust, or REIT, under the Internal Revenue
Code of 1986, as amended, or the Code, effective with its tax year
ended December 31, 2011. Unless the context otherwise requires,
references to the “Company”, “we”, “us”, or “our” refer to
Preferred Apartment Communities, Inc., together with its
consolidated subsidiaries, including Preferred Apartment
Communities Operating Partnership, L.P., or the Operating
Partnership. The Company was formed primarily to acquire and
operate multifamily properties in select targeted markets
throughout the United States. As part of its business strategy, the
Company may enter into forward purchase contracts or purchase
options for to-be-built multifamily communities and may make real
estate 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, the Company 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 its 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 property types,
membership or partnership interests in other property types as
determined by its Manager (as defined below) as appropriate for the
Company. The Company is externally managed and advised by Preferred
Apartment Advisors, LLC, or its Manager, a Delaware limited
liability company and a related party.

On December 30, 2016, the Company acquired Three Ravinia Drive, a
class A office building located in Atlanta, Georgia (Ravinia, or
the Property) from an unaffiliated third party for an aggregate net
purchase price of approximately $181.8 million after certain
credits for outstanding tenant improvements, capital projects and
rent abatements, and exclusive of acquisition-related and
financing-related transaction costs.

The Unaudited Pro Forma Condensed Consolidated Balance Sheet
includes three columns. The first column labeled “PAC REIT
Historical” represents the actual financial position of the
Company as of September 30, 2016. The second column, entitled
“Three Ravinia Drive” represents the pro forma adjustments
required in order to reflect the balance sheet impact of the
addition of the Property as if the acquisition had occurred on
September 30, 2016, including the new mortgage financing. The third
column, entitled “PAC REIT Pro Forma” presents the combined pro
forma condensed consolidated balance sheet of the Company as of
September 30, 2016.

The Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the nine-month period ended September 30, 2016
includes four columns. The first column labeled “PAC REIT
Historical” represents the actual results of operations of the
Company for the nine months ended September 30, 2016. The second
column, entitled “Three Ravinia Drive” represents the historical
revenues and operating expenses of the Property for the nine-month
period ended September 30, 2016. The third column, entitled “Other
Pro Forma Adjustments” represents the pro forma adjustments
required to reflect the acquired Property as described in note 3.
The fourth column, entitled “PAC REIT pro forma” presents the
combined pro forma results of operations of the Company for the
nine months ended September 30, 2016.

The Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended December 31, 2015 also includes four
columns and follows the same approach described above.

The results presented on the Unaudited Pro Forma Condensed
Consolidated Statements of Operations assume the acquisition closed
on January 1, 2015 and present pro forma operating results for the
nine months ended September 30, 2016 and the year ended December
31, 2015. These Unaudited Pro Forma Condensed Consolidated
Statements of Operations should not be considered indicative of
future results.

2. Adjustments to Unaudited Pro Forma Condensed Consolidated
Balance Sheet

(A) The Company allocated the purchase price of Ravinia to the
acquired assets and liabilities based upon their fair values, as
shown in the following table. The purchase price allocation was
based upon the Company’s best estimates of the fair values of the
acquired assets and liabilities, but is preliminary and is subject
to refinement for a period of up to one year from the closing of
the acquisition.

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The fair value of the building was estimated on an as-if-vacant
basis, based on relevant information obtained in connection with
the acquisition of these properties and is to be depreciated on a
straight-line basis over its estimated remaining useful life of 39
years. The estimated fair value of acquired in-place leases are
estimates of the costs the Company would have incurred to lease the
property to the occupancy level of the properties at the dates of
acquisition. Tenant improvements, in-place leases and above-market
and below-market leases are all depreciated or amortized over the
remaining individual non-cancelable lease terms.

(B) The Company financed the acquisition of the Property with a
combination of new mortgage indebtedness, a draw on its revolving
line of credit (see note 3.FF, below), the pro forma issuance of
21,177 shares of the Company’s Series A Preferred Stock, and with
cash on hand. The deferred loan origination costs are to be
amortized over the lives of the loans using the effective interest
method and include a loan coordination fee of $1,848,000, which was
paid to the Company’s Manager. The pro forma adjustment to cash
was calculated as follows:

3. Adjustments to Unaudited Pro Forma Condensed Consolidated
Statements of Operations

The adjustments to the Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the nine months ended September 30,
2016 are as follows:

(AA) Reflected in the pro forma adjustment is the Company’s
estimate of the amount of below-market leases which are to be
amortized into income over the actual underlying remaining lease
terms.

(BB) Effective with the purchase of Ravinia by the Company, the
property management functions were assumed by an unrelated third
party property management company and the property management fee
was calculated as 2% of monthly gross rental income. The pro forma
adjustment reflects this additional cost burden on the Property’s
operations.

(CC) Reflected in the pro forma adjustment is the Company’s
estimate of the depreciation and amortization charges that would
have been incurred by the Property. The adjustments utilize a
straight-line depreciation

method assuming a remaining useful life for the building of 39
years and six to ten years for site improvements. Also included is
the amortization of the estimated fair values of the acquired
intangible assets for the Property, which are also to be amortized
over the individual non-cancelable remaining lease terms of up to
approximately 15 years.

(DD) The Company had recorded due diligence costs related to the
Property during the nine months ended September 30, 2016 of
approximately $483,000. These costs are removed for pro forma
purposes.

(EE) The estimated asset management fee is based on 0.5% of the
total value of the Company’s assets based on their adjusted cost
before reduction for depreciation, amortization, impairment charges
and cumulative acquisition costs charged to expense in accordance
with GAAP (adjusted cost will include the purchase price,
acquisition expenses, capital expenditures and other customarily
capitalized costs). In calculating the estimated asset management
fee, the Company used the total acquired assets from the Property,
as adjusted, plus the pro forma loan coordination fee incurred. In
addition, a similar adjustment is included for general and
administrative expense fees, recorded as 2% of gross revenues of
the Property for the nine months ended September 30, 2016.

(FF) Reflected in the pro forma adjustment is the Company’s
estimate of interest expense on $115.5 million of mortgage debt,
the amortization of associated debt issuance costs and the pro
forma loan coordination fee and interest accrued on the pro forma
drawn proceeds of $70.4 million from the Company’s revolving line
of credit. The mortgage matures on January 1, 2042 and accrues
interest at a fixed rate of 4.46% per annum. The revolving line of
credit bears interest at a rate of 1 Month LIBOR, plus a spread of
3.25% per annum. If 1 Month LIBOR were to fluctuate upward or
downward by 1/8%, it would result in an increase or decrease in
interest expense of approximately $108,000 for the pro forma
nine-month period ended September 30, 2016.

(GG) Outstanding Class A Units of the Operating Partnership become
entitled to pro-rata distributions of profit and allocations of
loss as non-controlling interests of the Operating Partnership. The
weighted-average percentage of ownership by the non-controlling
interests was approximately 3.27% for the nine months ended
September 30, 2016. This adjustment reflects the pro-rata
adjustment to the amount of net income (loss) attributable to the
non-controlling interests.

(HH) The pro forma adjustment to dividends declared on Series A
Preferred Stock is to reflect the incremental dividends which would
be due on the pro forma issuance of 21,177 additional shares of
Series A Preferred Stock at January 1, 2015. The Company’s Series
A Preferred Stock pays monthly dividends of $5.00 per share.

The adjustments to the Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the year ended December 31, 2015 are as
follows:

(AA) Reflected in the pro forma adjustment is the Company’s
estimate of the amount of below-market leases which are to be
amortized into income over the actual underlying remaining lease
terms.

(BB) Effective with the purchase of Ravinia by the Company, the
property management functions were assumed by an unrelated third
party property management company and the property management fee
was calculated as 2% of monthly gross rental income. The pro forma
adjustment reflects this additional cost burden on the Property’s
operations.

(CC) Reflected in the pro forma adjustment is the Company’s
estimate of the depreciation and amortization charges that would
have been incurred by the Property. The adjustments utilize a
straight-line depreciation method assuming a remaining useful life
for the building of 39 years and six to ten years for site
improvements. Also included is the amortization of the estimated
fair values of the acquired intangible assets for the Property,
which are also to be amortized over the individual non-cancelable
remaining lease terms of up to approximately 15 years.

(DD) The estimated asset management fee is based on 0.5% of the
total value of the Company’s assets based on their adjusted cost
before reduction for depreciation, amortization, impairment charges
and cumulative acquisition costs charged to expense in accordance
with GAAP (adjusted cost will include the purchase price,
acquisition expenses, capital expenditures and other customarily
capitalized costs). In calculating the estimated asset management
fee, the Company used the total acquired assets from the Acquired
Properties, as adjusted, plus the pro forma loan coordination fees
incurred. In addition, a similar adjustment is included for general
and administrative expense fees, recorded as 2% of gross revenues
of the Acquired Properties for the year ended December 31, 2015.

(EE) Reflected in the pro forma adjustment is the Company’s
estimate of interest expense on $115.5 million of mortgage debt,
the amortization of associated debt issuance costs and the pro
forma loan coordination fee and interest accrued on the pro forma
drawn proceeds of $70.4 million from the Company’s revolving line
of credit. The mortgage matures on January 1, 2042 and accrues
interest at a fixed rate of 4.46% per annum, The revolving line of
credit bears interest at a rate of 1 Month LIBOR, plus a spread of
3.25% per annum. If 1 Month LIBOR were to fluctuate upward or
downward by 1/8%, it would result in an increase or decrease in
interest expense of approximately $144,000 for the pro forma
twelve-month period ended December 31, 2015.

(FF) Outstanding Class A Units of the Operating Partnership become
entitled to pro-rata distributions of profit and allocations of
loss as non-controlling interests of the Operating Partnership. The
weighted-average percentage of ownership by the non-controlling
interests was approximately 1.24% for the twelve months ended
December 31, 2015. This adjustment reflects the pro-rata adjustment
to the amount of net income (loss) attributable to the
non-controlling interests.

(GG) The pro forma adjustment to dividends declared on Series A
Preferred Stock is to reflect the incremental dividends which would
be due on the pro forma issuance of 21,177 additional shares of
Series A Preferred Stock at January 1, 2015. The Company’s Series
A Preferred Stock pays monthly dividends of $5.00 per share.