Preferred Apartment Communities Preps $500 Million Offering

Preferred Apartment Communities Inc. (NYSE: APTS), a publicly traded REIT and sponsor of alternative investments, filed a preliminary prospectus with the Securities and Exchange Commission for a proposed $500 million series M redeemable preferred stock offering.

The company plans to offer a maximum of 500,000 shares of series M redeemable preferred stock, referred to as mShares in the proposed offering. The dealer manager is Preferred Capital Securities LLC.

Each mShare is expected to be sold at a public offering price of $1,000 each. The company noted that the minimum permitted purchase is generally $5,000, but purchases of less than $5,000 may be made in the discretion of the dealer manager. The shares include a 3 percent dealer manager fee.

Preferred Apartments intends to use the net proceeds of the proposed offering to acquire multifamily properties and other real estate-related investments, including grocery-anchored shopping centers, and for general working capital purposes.

Cumulative cash dividends are expected to be paid at an initial annual rate of 5.75 percent. The dividend rate will increase by 0.25 percent per year beginning one year from the date of original issuance and on each one year anniversary thereafter. The dividend rate will not exceed 7.5 percent per year, and the company expects to pay dividends on the mShares monthly.

Shareholders may be charged a 2 percent redemption fee for shares redeemed within the first year of their issuance, while shares held for between one and two years may be subject to a 1 percent redemption fee. Shares held for two years have no associated redemption fee.

Assuming the maximum offering, the company estimates that it expects to receive net proceeds of approximately $477.5 million after deducting estimated offering expenses. If all the net proceeds of the offering are used to directly acquire real property, the company estimates that these investments would have a total gross value of approximately $1.3 billion.

Preferred Apartment Communities was launched as a non-traded REIT in 2010 and began trading on the New York Stock Exchange the following year. The company owns 30 grocery-anchored shopping centers, 23 multifamily communities, one student housing community, one class A office building and a 96 percent interest in one multifamily community joint venture. PAC recently began offering 2 million shares of non-traded redeemable preferred stock for $1,000 per share with a 6 percent yield. The preferred share also includes one warrant to purchase 20 shares of the company’s common stock. On Friday, shares of APTS common stock closed at $13.05.

For more Preferred Capital Securities related news, visit their directory page here.