Preferred Apartment Communities, Inc. is a publicly traded REIT (Real Estate Investment Trust.) The Company was formed primarily to acquire and operate multifamily properties in select targeted markets throughout the United States. As a secondary strategy, the Company also may acquire or originate senior mortgage loans, subordinate loans or real estate loan investments 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 loan investments secured by interests in other income-producing property types.
The Company uses a variety of sources of long-term capital including common stock, redeemable preferred stock units and limited partnership interests. The preferred stock is sold as units consisting of a share of the preferred stock and a warrant to purchase 20 shares of the Company’s common shares exercisable over a four year period. There is no secondary market for the preferred stock units.
All numbers provided are hypothetical. Pease only use what is provided for your calculations. The statutory tax rate is 37%. The current market prices per share for the preferred stock is $1000 and common stock is $1.
Some useful information is provided below as a reference point for your analysis.
Some useful links:
http://prefcapitalsecurities.com/investment-programs/
https://www.marketwatch.com/investing/stock/apts/secfilings
As a Financial Analyst, you need to determine whether the preferred units are an attractive investment by analyzing the financial health of Preferred Apartment Communities. Your analysis should include an examination of the financial statements and the business environment in which the Company operates. Additionally, through a comprehensive analysis of the various financial and other ratios you should decide if the preferred units are an attractive investment. Support for your analysis should be no more than 8 double-spaced pages and include outside references using AP-style in-text and end-text citations (references.)
Assignment Structure:
1) Professional company cover page
2) Table of Contexts
3) Executive summary
4) Introduction: Write about company, the REIT industry, its competitors and what the assignment will include (see below)
5) Analysis (4 parts: Profitability Analysis, Risk Analysis, Coverage Analysis, Short-term liquidity analysis, Long-term Solvency analysis, and Bankruptcy analysis.
6) Conclusion discussing about the analysis results for investment decision making.
7) Reference list using APA referencing style.
Assignment Guidelines Step by Step
A- Profitability Analysis:
1) Calculate the following ratios for the past three years: Return on Assets (ROA), Return on Common Equity (ROCE), Return on Net Operating Assets (RNOA), Gross Profit margin ratio, NET PROFIT ratio, Operating profit ratio, Return on invested capital ratio, Cash flow margin ratio.
2) Show yourCalculationsto indicate the formulas and calculations.
3) The formulas must be indicated in the word document and also create and attach an excel with all the calculations (required).
4) Identify the underlying trend and changes, compare with the prior years (horizontally) and the industry benchmarks (horizontally and vertically.)
5) Compare with competitors (very important as well).
6) See attached excel file for the numbers and financial statements.
B – Risk Analysis
1. Calculate the following ratios for the past three years: Risk Analysis debt to capital ratio, Debt to equity ratio, Interest coverage ratio, Combined leverage ratio, Debt to assets ratio, Assets to equity ratio
2. Show yourCalculationsto indicate the formulas and calculations.
3. The formulas must be indicated in the word document and also create and attach an excel with all the calculations (required).
4. Identify the underlying trend and changes, compare with the prior years (horizontally) and the industry benchmarks (horizontally and vertically.)
5. Compare with competitors (very important as well).
6. See attached excel file for the numbers and financial statements.
C-Coverage Analysis
1. Calculate the following ratios for the past three years: Times Interest Earned Ratio, EBITDA Ratio, Cash from Operations to Total Debt, Assets coverage ratio.
2. Show yourCalculationsto indicate the formulas and calculations.
3. The formulas must be indicated in the word document and also create and attach an excel with all the calculations (required).
4. Identify the underlying trend and changes, compare with the prior years (horizontally) and the industry benchmarks (horizontally and vertically.)
5. Compare with competitors (very important as well).
6. See attached excel file for the numbers and financial statements.
D- Short-term Liquidity
1. Calculate the following ratios for the past three years: Current ratio, quick ratio, working capital.
2. Show yourCalculationsto indicate the formulas and calculations.
3. The formulas must be indicated in the word document and also create and attach an excel with all the calculations (required).
4. Identify the underlying trend and changes, compare with the prior years (horizontally) and the industry benchmarks (horizontally and vertically.)
5. Compare with competitors (very important as well).
6. See attached excel file for the numbers and financial statements
E- Longer-term Solvency
1. Calculate the following ratios for the past three years: Liabilities to equity, total debt-to equity, financial leverage.
2. Show yourCalculationsto indicate the formulas and calculations.
3. The formulas must be indicated in the word document and also create and attach an excel with all the calculations (required).
4. Identify the underlying trend and changes, compare with the prior years (horizontally) and the industry benchmarks (horizontally and vertically.)
5. Compare with competitors (very important as well).
6. See attached excel file for the numbers and financial statements
F- Bankruptcy Prediction
1. Calculate Z Score, a Bankruptcy Prediction Indicator for the most recent year.
Important note for the analysis section:
1)
Explain what each ratio shows us about the company.
2)
Be sure to include horizontal and vertical analysis comparing previous three years and competitors and industry average.
3)
Use and analyze the industry and the business environment that the company operates to support.
4)
Use subheadings and headings.
5)
The analysis must explain everything, from the formulas to the outcome of the comparisons. So, the conclusion will not have something new, about will take the results to support and answer the below questions (see Conclusion section).
Conclusion:
After the analysis, discuss whether the preferred units are an attractive investment from the financial health of Preferred Apartment Communities. Are the preferred units an attractive investment after your analysis? Discuss.
Provide detailed reasons from the above analysis for the answers. Not briefly but very detailed.
Reference list:
1) Use at least 4 valid scholarly and highly reliable sources like journals (very important). You can use more sources but 4 of them at least must be valid scholarly sources and not old. Newer than 2015.
2) Use APA 6TH
edition for in-text and end-text referencing.
See attached excel file for all the financial statements that you will need as well some other data included as well above (in the beginning)
Upload also detailed excel with all calculations and formulas