UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 3, 2018
ABREVIATEDPACLOGOA04.JPG
Preferred Apartment Communities, Inc.
(Exact Name of Registrant as Specified in its Charter)
Maryland
001-34995
27-1712193
(State or other Jurisdiction
of Incorporation)
(Commission File Number)
(I.R.S. Employer
Identification No.)
3284 Northside Parkway NW, Suite 150
30327
(Address of Principal Executive Offices)
(Zip Code)
Registrant's telephone number, including area code:   (770) 818-4100
_____________________
   
(Former name or former address, if changed since last report)
_____________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨




Item 1.01      Entry into a Material Definitive Agreement .

On May 3, 2018, Preferred Apartment Communities, Inc. (" we ", " us ", or the " Company "), Preferred Apartment Communities Operating Partnership, L.P. (the " Partnership ") and Preferred Apartment Advisors, LLC (our " Manager ") executed Amendment No. 3 to the Sixth Amended and Restated Management Agreement (the " Amendment "). The Amendment amends the Sixth Amended and Restated Management Agreement among the Company, the Partnership and the Manager (the " Sixth Amended and Restated Management Agreement "). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed them in the Sixth Amended and Restated Management Agreement.

The Amendment modifies the Sixth Amended and Restated Management Agreement by modifying the Manager's Investment Guidelines to state that no more than 25% of the Company's Total Assets may be invested by the Manager in any metropolitan statistical area (" MSA "), other than the MSA that the Company’s corporate headquarters are located in, which will have a limit of 35% of the Company’s Total Assets.

The Amendment also modifies the Sixth Amended and Restated Management Agreement by clarifying that the Manager may agree to waive all or a portion of its Asset Management Fee, Multifamily Property Management and Leasing Fee, the Retail Management Fee, the Retail Leasing Fee, the Office Management Fee, the Office Leasing Fee, and the General and Administrative Expenses Fee (collectively referred to herein as the " Waived Fees "). The Amendment clarifies that upon written notice by the Manager to the Company of any waiver of the Waived Fees, such Waived Fees shall be replaced with contingent fees of the same amount, which shall be due and payable to the Manager as a Disposition Fee on Sale of Assets to the extent the Net Sale Proceeds (as defined in the Partnership Agreement) for such Capital Transaction exceed the Allocable Capital Contributions (as defined in the Partnership Agreement) for such asset plus a cumulative, non-compounded rate of return equal to seven percent (7%) per annum on such Allocable Capital Contributions.

Lastly, the Amendment modifies the Sixth Amended and Restated Management Agreement to state that if the Company does not pay a Multifamily Property Management and Leasing Fee to the Manager for services in connection with the rental, leasing, operation and management of a multifamily Investment then the Manager, in its discretion, may charge an additional Asset Management Fee of up to one-twelfth of 1.0% of the total value of such multifamily Investment held as of the last day of the immediately preceding month, based on the adjusted cost of such Investment before reduction for depreciation, amortization, impairment charges and cumulative acquisition costs charged to expense in accordance with GAAP and as adjusted for appropriate closing dates for individual asset acquisitions. This additional Asset Management Fee is being added to compensate the Manager when it manages investments in complex portfolios of multifamily assets, such as investments in Freddie Mac's K-Deal program.

Under the Sixth Amended and Restated Management Agreement, as amended, our Manager continues to be responsible for administering our day-to-day business operations, identifying and acquiring targeted real estate investments, overseeing the management of our investments, handling the disposition of our real estate investments, and providing us with our management team and appropriate support personnel.

The foregoing summary of the Amendment is qualified in its entirety by reference to the Amendment, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated by reference herein.





Item 5.02
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On May 3, 2018, the Board of Directors (the "Board") of the Company approved certain compensation arrangements for non-employee directors, which include grants of shares of restricted common stock. On May 3, 2018, the Compensation Committee of the Board of Directors approved grants of 4,135 shares of restricted common stock for each non-employee director consistent with the terms of the Company’s 2011 Stock Incentive Plan to each of the following non-employee directors of the Company: Steve Bartkowski, Gary B. Coursey, William J. Gresham, Jr., Howard A. McLure, Timothy A. Peterson and John M. Wiens. The shares of restricted common stock will vest in approximately equal amounts on the following dates: August 1, 2018, October 30, 2018, January 28, 2019 and April 29, 2019. The Board also approved the payment of annual cash compensation of $20,000, payable quarterly, for each non-employee director for committee service. The Board also approved cash compensation for committee chairs as follows: $20,000 for the Chair of the Audit Committee of the Company, Timothy A. Peterson; $10,000 for the Chair of the Compensation Committee of the Company, Gary B. Coursey; $10,000 for the Chair of the Nominating and Corporate Governance Committee of the Company, Steve Bartkowski; and $10,000 for the Chair of the Conflicts Committee of the Company, Howard A. McLure. The foregoing summary of the restricted common stock grants is qualified in its entirety by reference to the form of the Restricted Stock Agreement, filed as Exhibit 10.2 hereto and incorporated by reference herein.

Item 5.07    Submission of Matters to a Vote of Security Holders.
On May 3, 2018 the Company held its Annual Meeting in Atlanta, Georgia for the purpose of: (i) electing eight directors to serve on the Board until the 2018 Annual Meeting of Stockholders; (ii) taking an advisory vote on the compensation of our executive officers; (iii) taking an advisory vote the frequency of taking advisory votes on the compensation of our executive officers; and (iv) ratifying the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018.  As of the record date, March 15, 2018 there were 39,209,579 shares of Common Stock entitled to vote at the Annual Meeting. Represented at the meeting in person or by proxy were 35,775,857 shares of Common Stock representing approximately 91.2% of the total shares of Common Stock entitled to vote at the meeting.    
(1)    The following eight persons were elected directors of the Company:
Nominee
For
Withheld
Broker Non-Votes
Leonard A. Silverstein
21,237,403
295,881
14,242,573
Daniel M. DuPree
21,073,959
459,325
14,242,573
Steve Bartkowski
15,816,864
5,716,420
14,242,573
Gary B. Coursey
17,076,927
4,456,357
14,242,573
William J. Gresham, Jr.
21,226,346
306,938
14,242,573
Howard A. McLure
21,243,235
290,049
14,242,573
Timothy A. Peterson
17,091,443
4,441,841
14,242,573
John M. Wiens
21,239,629
293,655
14,242,573





(2)
Advisory vote on the Company's executive compensation:
For
18,018,738

Against
3,330,698

Abstain
183,848

Broker Non-Votes
14,242,573


(3)
Advisory vote on the frequency of advisory votes on the Company's executive compensation:
1 Year
15,773,351

2 Years
201,396

3 Years
5,438,201

Abstain
120,336

Broker Non-Votes
14,242,573


As shown above, the Company’s stockholders voted for an advisory vote on named executive officer compensation to be held every year. In response to these voting results and other factors, the Company’s Board of Directors determined at a meeting held on May 3, 2018, that the Company will hold an advisory vote on named executive officer compensation every year. The Company will continue to hold advisory votes on named executive officer compensation every year until the Company’s Board of Directors decides to hold the next stockholder advisory vote on the frequency of advisory votes, which shall be no later than the Company’s Annual Meeting of Stockholders in 2024.

(4)
The stockholders ratified PricewaterhouseCoopers LLP as the independent registered public accounting firm for the Company for 2018:
For
35,110,851

Against
580,459

Abstain
84,547

Further information regarding these proposals is set forth in the Company’s Proxy Statement.

Item 9.01    Financial Statements and Exhibits .

(d)     Exhibits.







SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
PREFERRED APARTMENT COMMUNITIES, INC.
(Registrant)

Date: May 3, 2018
By:
/s/ Jeffrey R. Sprain
 
 
Jeffrey R. Sprain
 
 
Executive Vice President, General Counsel and Corporate Secretary




AMENDMENT NO. 3
TO THE
SIXTH AMENDED AND RESTATED MANAGEMENT AGREEMENT

This Amendment No. 3 (the " Amendment ") to the Sixth Amended and Restated Management Agreement effective as of June 3, 2016, (as previously amended or modified, the " Management Agreement "), among Preferred Apartment Communities, Inc., a Maryland corporation (the " Company "), Preferred Apartment Communities Operating Partnership, L.P., a Delaware limited partnership (" PACOP "), and Preferred Apartment Advisors, LLC, a Delaware limited liability company (the " Manager "), is entered into as of May 3, 2018 (the " Effective Date "). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Management Agreement.

WHEREAS , PACOP is governed by that certain Sixth Amended and Restated Agreement of Limited Partnership effective as of June 3, 2016 (as amended or modified, the " Partnership Agreement "); and

WHEREAS , upon the terms set forth in this Amendment, the Manager has agreed to amend certain provisions of the Management Agreement.

NOW, THEREFORE , in consideration of the foregoing and of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company, PACOP and the Manager agree to amend the Management Agreement as follows:
    
1.
Fee Modifications. Section 7 of the Management Agreement is hereby amended to:

a.
Delete in its entirety Section 7(j) and replace it with the following:

(j) Waiver of Fees; Contingent Fees .
(i)    Notwithstanding the provisions of Sections 7(b) , 7(h) , and 7(l) with respect to the Asset Management Fee, Multifamily Property Management and Leasing Fee, the Retail Management Fee, the Retail Leasing Fee, the Office Management Fee, the Office Leasing Fee, and the General and Administrative Expenses Fee (the " Waivable Fees "), the Manager, on behalf of itself and its affiliates, and its and their respective successors and assigns, hereby agrees that it may waive all or a portion of the Waivable Fees with respect to all or any portion of the Company's assets, as determined by the Manager (any fees so waived, the " Waived Fees "). The Manager agrees to promptly deliver to the Company written notice of any waiver of the Waived Fees.
(ii)    Upon receipt by the Company of written notice of the Waived Fees, such Waived Fees shall be converted into contingent fees subject to payment upon the following conditions (the " Contingent Fees "). Upon a Capital Transaction (as defined in the Partnership Agreement) with respect to any asset of the Company, all Contingent Fees with respect to such asset shall become due and payable as a Disposition Fee on Sale of Assets to the extent the Net Sale Proceeds (as defined in the Partnership Agreement) for such Capital Transaction exceed the Allocable Capital Contributions (as defined in the Partnership Agreement) for such asset plus a cumulative, non-compounded rate of return equal to seven percent (7%) per annum on such Allocable Capital Contributions. To the extent payment of any Contingent Fees is due to the Manager pursuant to this Section 7(j)(ii) , the Company shall pay or cause to be paid to the Manager such Contingent Fees as a Disposition Fee on Sale of Assets at the closing of the Capital Transaction giving rise to such payment.



(iii)    Upon a Termination Without Cause pursuant to Section 11 , or a termination pursuant to Section 13 , all Contingent Fees shall become immediately due and payable to the Manager as a Disposition Fee on Sale of Assets. To the extent payment of any Contingent Fees is due the Manager pursuant to this Section 7(j)(iii) , the Company shall pay or cause to be paid to the Manager on the date the event giving rise to the payment obligation arises (e.g., the date on which the Termination Without Cause or other termination occurs).
(iv)    The Manager acknowledges and agrees that no interest shall accrue on any Contingent Fees.
b.
Delete in its entirety Section 7(b) and replace it with the following

(b) Asset Management Fee .     The Company shall pay a monthly Asset Management Fee to the Manager or its assignees as compensation for services rendered in connection with the management of the Investments. The Asset Management Fee shall be payable monthly in cash or shares of PAC's Common Stock, at the option of the Manager, and shall be equal to one-twelfth of 0.50% of the total value of the Company's assets (including cash or cash equivalents) held as of the last day of the immediately preceding month, based on the adjusted cost of the Company's assets before reduction for depreciation, amortization, impairment charges and cumulative acquisition costs charged to expense in accordance with GAAP (adjusted cost of Real Estate Assets and Real Estate Related Loans will include the purchase price, Acquisition Expenses, capital expenditures and other customarily capitalized costs) and as adjusted for appropriate closing dates for individual asset acquisitions. The Asset Management Fee will be appropriately pro rated for any partial month.  Notwithstanding the foregoing, in the event the Company does not pay a Multifamily Property Management and Leasing Fee to the Manager for services in connection with the rental, leasing, operation and management of a multifamily Investment then the Manager, in its discretion, may charge an additional Asset Management Fee of up to one-twelfth of 1.0% of the total value of such multifamily Investment held as of the last day of the immediately preceding month, based on the adjusted cost of such Investment before reduction for depreciation, amortization, impairment charges and cumulative acquisition costs charged to expense in accordance with GAAP and as adjusted for appropriate closing dates for individual asset acquisitions.

2.
Exhibit A – Investment Guidelines. Exhibit A of the Management Agreement is hereby amended as follows:
a.
Delete in its entirety Section 4 ii. in Exhibit A and replace it with the following:
No more than 25% of the Company's Total Assets may be invested by the Manager in any metropolitan statistical area (" MSA "), other than the MSA that the Company’s corporate headquarters are located in, which will have a limit of 35% of the Company’s Total Assets.
3.
Definitions . Section 1(a) of the Management Agreement is amended as follows:
a.
the definition of "Disposition Fee on Sale of Assets" is deleted and replaced with the following:
" Disposition Fee on Sale of Assets " means the fees payable to the Manager or its assignees pursuant to Section 7(d) or 7(j) .

b.
the following definition(s) are added in alphabetical order:

" Contingent Fee " has the meaning set forth in Section 7(j)(ii).




" Waived Fee " has the meaning set forth in Section 7(j)(i).

" Waivable Fees " has the meaning set forth in Section 7(j)(i).

c.
the following definitions are deleted in their entirety:

" Deferred Fees "
" Deferrable Fees "

d.
Any and all references in the Management Agreement to " Deferred Fees " or " Deferrable Fees " shall be deemed to mean " Waived Fees " and " Waivable Fees, " respectively:


4.
Ratification; Effect on Management Agreement.

a.
Ratification . The Management Agreement, as amended hereby, shall remain in full force and effect and is hereby ratified and confirmed in all respects.

b.
Effect on the Management Agreement . On and after the date hereof, each reference in the Management Agreement to "this Agreement," "herein," "hereof," "hereunder," or words of similar import shall mean and be a reference to the Management Agreement as amended hereby.
[ Signature page follows .]



IN WITNESS WHEREOF, each of the parties hereto has executed this Amendment as of the Execution Date, effective as of the Effective Date.
PREFERRED APARTMENT COMMUNITIES, INC.
By:
/s/ Leonard A. Silverstein             
Name: Leonard A. Silverstein
Title: President and Chief Operating Officer
PREFERRED APARTMENT COMMUNITIES OPERATING PARTNERSHIP, L.P.
By:
Preferred Apartment Communities, Inc.
its General Partner
By:
/s/ Leonard A. Silverstein         
Name: Leonard A. Silverstein
Title: President and Chief Operating Officer
PREFERRED APARTMENT ADVISORS, LLC
By:
NELL Partners, Inc.,
its Managing Member
By:
/s/ Leonard A. Silverstein         
Name: Leonard A. Silverstein
Title: President, Chief Operating Officer and Secretary

[Signature Page to Amendment No. 3 to Sixth Amended and Restated Management Agreement]