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): February 14, 2023
(Exact name of registrant as specified in its charter)
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Registrant’s telephone number, including area code: (757 ) 366-4000
Not Applicable
(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:
Securities registered pursuant to Section 12(b) of the Act:
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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).
Emerging growth company ☐
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 2.02. Results of Operations and Financial Condition.
On February 14, 2023, Armada Hoffler Properties, Inc. (the “Company”) issued a press release announcing its financial position as of December 31, 2022, results of operations for the three and twelve months ended December 31, 2022, and other related information. Also on February 14, 2023, the Company made available on its website at www.ArmadaHoffler.com certain supplemental information concerning the Company’s financial results and operations for the three and twelve months ended December 31, 2022. Copies of such press release and supplemental information are furnished as Exhibits 99.1 and 99.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
In accordance with General Instructions B.2 and B.6 of Form 8-K, the information included in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing made by the Company under the Exchange Act or the Securities Act of 1933, as amended (the "Securities Act"), except as shall be expressly set forth by specific reference in such a filing.
Item 7.01. Regulation FD Disclosure.
The disclosure contained in Item 2.02 is incorporated herein by reference.
On February 14, 2023, the Company made available a presentation regarding its 2023 full-year guidance, which is furnished as Exhibit 99.3 to this Current Report on Form 8-K.
In accordance with General Instructions B.2 and B.6 of Form 8-K, the information included in this Current Report on Form 8-K, including Exhibits 99.1, 99.2, and 99.3 hereto, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing made by the Company under the Exchange Act or Securities Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description | |||||||
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. | |||||||
SIGNATURES
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.
| ARMADA HOFFLER PROPERTIES, INC. | ||||||||
| Date: February 14, 2023 | By: | /s/ Matthew T. Barnes-Smith | ||||||
| Matthew T. Barnes-Smith | ||||||||
| Chief Financial Officer, Treasurer, and Corporate Secretary | ||||||||
Exhibit 99.1
 | PRESS RELEASE | |||||||
ARMADA HOFFLER REPORTS FOURTH QUARTER AND FULL YEAR 2022 RESULTS
Net Income of $0.13 per Diluted Share for the Fourth Quarter
and $0.94 per Diluted Share for the Full Year
Normalized FFO of $0.35 per Diluted Share for the Fourth Quarter
and $1.22 per Diluted Share for the Full Year, Representing a 13% Year-Over-Year Increase
Earns BBB Investment Grade Credit Rating
Introduces 2023 Full-Year Normalized FFO Guidance Range of $1.23 to $1.27 per Diluted Share
VIRGINIA BEACH, VA, February 14, 2023 – Armada Hoffler Properties, Inc. (NYSE: AHH) today announced its results for the quarter and year ended December 31, 2022 and provided an update on current events.
Highlights include:
•Net income attributable to common stockholders and OP Unit holders of $11.5 million, or $0.13 per diluted share, for the quarter ended December 31, 2022 compared to $0.4 million, or less than $0.01 per diluted share, for the quarter ended December 31, 2021. Net income attributable to common stockholders and OP Unit holders of $82.5 million, or $0.93 per diluted share, for the year ended December 31, 2022 compared to $13.9 million, or $0.17 per diluted share, for the year ended December 31, 2021. See “Non-GAAP Financial Measures.”
•Funds from operations attributable to common stockholders and OP Unit holders ("FFO") of $29.4 million, or $0.33 per diluted share, for the quarter ended December 31, 2022 compared to $19.9 million, or $0.24 per diluted share, for the quarter ended December 31, 2021. FFO of $106.6 million, or $1.21 per diluted share, for the year ended December 31, 2022 compared to $85.4 million, or $1.05 per diluted share, for the year ended December 31, 2021, representing a 15% year-over-year increase. See “Non-GAAP Financial Measures.”
•Normalized funds from operations attributable to common stockholders and OP Unit holders ("Normalized FFO") of $30.6 million, or $0.35 per diluted share, for the quarter ended December 31, 2022 compared to $22.0 million, or $0.27 per diluted share, for the quarter ended December 31, 2021. Normalized FFO of $107.2 million, or $1.22 per diluted share, for the year ended December 31, 2022 compared to Normalized FFO of $87.6 million, or $1.08 per diluted share, for the year ended December 31, 2021, representing a 13% year-over-year increase.
•Introduced 2023 full-year Normalized FFO guidance of $1.23 to $1.27 per diluted share, with the mid-point of the range representing a moderate increase over 2022 actual results.
•Awarded an investment grade credit rating of BBB with a stable trend from DBRS Morningstar.
•Maintained 97% portfolio occupancy as of December 31, 2022. Office occupancy remained at 97%, retail occupancy remained at 98%, and multifamily occupancy remained at 96%.
•Positive renewal spreads during the fourth quarter across all segments:
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◦Lease rates on fourth quarter office lease renewals increased 6.1% on a GAAP basis and 1.9% on a cash basis.
◦Lease rates on fourth quarter retail lease renewals increased 10.3% on a GAAP basis and 5.4% on a cash basis.
•Same Store Net Operating Income ("NOI") increased 5.2% on a GAAP basis and 5.9% on a cash basis compared to the quarter ended December 31, 2021:
◦Office Same Store NOI increased 3.1% on a GAAP basis and 4.0% on a cash basis.
◦Retail Same Store NOI increased 6.3% on a GAAP basis and 7.1% on a cash basis.
◦Multifamily Same Store NOI increased 4.6% on a GAAP basis and 5.0% on a cash basis.
•Same Store NOI increased 5.6% on a GAAP basis and 6.7% on a cash basis compared to the year ended December 31, 2021:
◦Office Same Store NOI decreased 0.3% on a GAAP basis and increased 1.5% on a cash basis.
◦Retail Same Store NOI increased 6.6% on a GAAP basis and 7.6% on a cash basis.
◦Multifamily Same Store NOI increased 9.9% on a GAAP basis and 10.2% on a cash basis.
•Executed a new 46,000 square foot lease with Morgan Stanley at Thames Street Wharf that expands the tenant's space to over 240,000 square feet and extends the lease term to 2035.
•Delivered Chronicle Mill, a 238-unit market rate apartment project in the Charlotte suburb of Belmont, North Carolina. As of December 31, 2022, Chronicle Mill was already 93% leased.
•Reinvested $26.5 million of disposition proceeds to acquire Pembroke Square, a 100% leased grocery-anchored retail property located adjacent to the Town Center of Virginia Beach, at a 7.7% cap rate on in-place net operating income.
•Closed on a new $100 million unsecured term loan, with an option to expand to $200 million, subject to certain conditions, that matures in January 2027 and bears interest at term SOFR plus margin, with an effective fixed rate of 4.80% after considering the effect of interest rate swaps. The proceeds were used to repay mortgage debt secured by Wills Wharf and certain retail assets at the Town Center of Virginia Beach.
•Entered into an additional interest rate swap agreement covering $100 million of indebtedness on the senior unsecured term loan facility, resulting in an effective fixed interest rate of 4.73%.
"The underlying fundamentals of our portfolio — occupancy, renewal spreads, weighted average lease terms, tenant diversification and credit quality – are stronger than ever and recently validated by our first ever investment grade credit rating," said Louis Haddad, President & CEO of Armada Hoffler. "We are proud of our team for successfully executing an exceptional year with continued healthy NOI growth in each of our asset classes and record bottom-line per share earnings."
Financial Results
The fourth quarter changes in net income, FFO and Normalized FFO attributable to common stockholders and OP Unit holders as compared to the fourth quarter of 2021 were positively impacted by higher property operating income due to acquisitions and developments, improved same-store performance, higher construction segment gross profit, higher interest income on our mezzanine loan portfolio, and lower impairment charges, and were negatively impacted by higher interest expense and lower gains on sale of real estate.
Full year changes in net income, FFO and Normalized FFO attributable to common stockholders and OP Unit holders as compared to 2021 were positively impacted by higher property operating income due to acquisitions and developments, improved same-store performance, higher gross profit on the construction segment due to an increased volume of projects in 2022, lower impairment charges, and mark-to-market gains on interest rate
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derivatives, and were negatively impacted by higher interest expense, lower interest income from the mezzanine loan portfolio, lower gains on sale of real estate, and lower tax benefit.
Operating Performance
At the end of the year, the Company’s retail, office, and multifamily core operating property portfolios were 97.9%, 96.7%, and 96.1% occupied, respectively.
Total third-party construction contract backlog was $665.6 million as of December 31, 2022.
Balance Sheet and Financing Activity
As of December 31, 2022, the Company had $1.1 billion of total debt outstanding, including $61.0 million outstanding under its revolving credit facility and $400.0 million outstanding under its senior unsecured term loan facility. Total debt outstanding excludes unamortized GAAP fair value adjustments and deferred financing costs. Approximately 60% of the Company’s debt had fixed interest rates or was subject to interest rate swaps as of December 31, 2022. After considering London Interbank Offered Rate, Bloomberg Short-Term Bank Yield Index, and Secured Overnight Financing Rate interest rate caps with strike prices at or below 400 basis points, 100% of the Company’s outstanding debt is now fixed or economically hedged.
Outlook
The Company is introducing its 2023 full-year Normalized FFO guidance in the range of $1.23 to $1.27 per diluted share, as set forth in the separate presentation that can be found on the Investors page of the Company's website, ArmadaHoffler.com. The following table outlines the Company's assumptions along with Normalized FFO per diluted share estimates for 2023. The Company's executive management will provide further details regarding its 2023 earnings guidance during today's webcast and conference call.
Full-year 2023 Guidance [1][2] | Expected Ranges | |||||||||||||
| Portfolio NOI | $157.4M | $158.4M | ||||||||||||
| Construction Segment Profit | $11.8M | $12.8M | ||||||||||||
G&A Expenses | $16.7M | $17.3M | ||||||||||||
| Interest Income | $12.8M | $13.4M | ||||||||||||
Interest Expense[3] | $45.4M | $46.1M | ||||||||||||
| Normalized FFO per diluted share | $1.23 | $1.27 | ||||||||||||
[1] Includes the following assumptions:
•Chronicle Mill stabilizes 1Q 2023
•Acquisitions of $100 - $200M of assets
•Existing development pipeline fully funded through the unsecured revolving credit facility
•Delivery of Southern Post 4Q 2023
[2] Ranges exclude certain items per Company's Normalized FFO definition: Normalized FFO excludes certain items, including debt extinguishment losses, acquisition, development and other pursuit costs, mark-to-market adjustments for interest rate derivatives, provision for non-cash unrealized credit losses, certain costs for interest rate caps designated as cash flow hedges, amortization of right-of-use assets attributable to finance leases, severance related costs, and other non-comparable items. See "Non-GAAP Financial Measures." The Company does not provide a reconciliation for its guidance range of Normalized FFO per diluted share to net income per diluted share, the most directly comparable forward-looking GAAP financial measure, because it is unable to provide a meaningful or accurate estimate of reconciling items and the information is not available without unreasonable effort as a result of the inherent difficulty of forecasting the timing and/or amounts of various items that would impact net income per diluted share. For the same reasons, the Company is unable to address the probable significance of the unavailable information and believes that providing a reconciliation for its guidance range of Normalized FFO per diluted share would imply a degree of precision for its forward-looking net income per diluted share that could be misleading to investors.
[2] Includes the interest expense on finance leases
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Supplemental Financial Information
Further details regarding operating results, properties, and leasing statistics can be found in the Company’s supplemental financial package available on the Investors page at ArmadaHoffler.com.
Webcast and Conference Call
The Company will host a webcast and conference call on Tuesday, February 14, 2023 at 8:30 a.m. Eastern Time to review financial results and discuss recent events. The live webcast will be available through the Investors page of the Company’s website, ArmadaHoffler.com. To participate in the call, please dial (+1) 888 396 8049 (toll-free dial-in number) or (+1) 416 764 8646 (toll dial-in number). The conference ID is 35441548. A replay of the conference call will be available through Thursday, March 16, 2023 by dialing (+1) 877 674 7070 (toll-free dial-in number) or (+1) 416 764 8692 (toll dial-in number) and providing passcode 441548 #.
About Armada Hoffler Properties, Inc.
Armada Hoffler Properties, Inc. (NYSE: AHH) is a vertically-integrated, self-managed real estate investment trust ("REIT") with over four decades of experience developing, building, acquiring, and managing high-quality, institutional-grade office, retail, and multifamily properties located primarily in the Mid-Atlantic and Southeastern United States. In addition to developing and building properties for its own account, the Company also provides development and general contracting construction services to third-party clients. Founded in 1979 by Daniel A. Hoffler, the Company has elected to be taxed as a REIT for U.S. federal income tax purposes.
Forward-Looking Statements
Certain matters within this press release are discussed using forward-looking language as specified in the Private Securities Litigation Reform Act of 1995, and, as such, may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those projected in the forward-looking statement. These forward-looking statements may include comments relating to the current and future performance of the Company’s operating property portfolio, the Company’s development pipeline, the Company's mezzanine program, the Company’s construction and development business, including backlog and timing of deliveries and estimated costs, financing activities, as well as acquisitions, dispositions, and the Company’s financial outlook, guidance, and expectations. Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise, and we may not be able to realize any forward-looking statement. For a description of factors that may cause the Company’s actual results or performance to differ from its forward-looking statements, please review the information under the heading “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and the other documents filed by the Company with the Securities and Exchange Commission from time to time. The Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in the Company's expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by applicable law.
Non-GAAP Financial Measures
The Company calculates FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts ("Nareit"). Nareit defines FFO as net income (loss) (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains or losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.
FFO is a supplemental non-GAAP financial measure. The Company uses FFO as a supplemental performance measure because it believes that FFO is beneficial to investors as a starting point in measuring the Company’s operational performance. Specifically, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, which do not relate to or are not indicative of operating performance, FFO provides a performance measure that, when compared period-over-period, captures trends in occupancy rates, rental
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rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare the Company’s operating performance with that of other REITs.
However, because FFO excludes depreciation and amortization and captures neither the changes in the value of the Company’s properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of the Company’s properties, all of which have real economic effects and could materially impact the Company’s results from operations, the utility of FFO as a measure of the Company’s performance is limited. In addition, other equity REITs may not calculate FFO in accordance with the Nareit definition as the Company does, and, accordingly, the Company’s FFO may not be comparable to such other REITs’ FFO. Accordingly, FFO should be considered only as a supplement to net income as a measure of the Company’s performance. FFO should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or service indebtedness. Also, FFO should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP.
Management also believes that the computation of FFO in accordance with Nareit’s definition includes certain items that are not indicative of the results provided by the Company’s operating property portfolio and affect the comparability of the Company’s period-over-period performance. Accordingly, management believes that Normalized FFO is a more useful performance measure that excludes certain items, including but not limited to, acquisition, development and other pursuit costs, gains or losses from the early extinguishment of debt, impairment of intangible assets and liabilities, mark-to-market adjustments for interest rate derivatives, certain costs for interest rate caps designated as cash flow hedges, provision for unrealized non-cash credit losses, amortization of right-of-use assets attributable to finance leases, severance related costs, and other non-comparable items.
NOI is the measure used by the Company’s chief operating decision-maker to assess segment performance. The Company calculates NOI as property revenues (base rent, expense reimbursements, termination fees and other revenue) less property expenses (rental expenses and real estate taxes). NOI is not a measure of operating income or cash flows from operating activities as measured in accordance with GAAP and is not indicative of cash available to fund cash needs. As a result, NOI should not be considered an alternative to cash flows as a measure of liquidity. Not all companies calculate NOI in the same manner. The Company considers NOI to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the core operations of the Company’s real estate and construction businesses. To calculate NOI on a cash basis, we adjust NOI to exclude the net effects of straight line rent and the amortization of lease incentives and above/below market rents.
For reference, as an aid in understanding the Company’s computation of NOI, NOI Cash Basis, FFO and Normalized FFO, a reconciliation of net income calculated in accordance with GAAP to NOI, NOI Cash Basis, FFO and Normalized FFO has been included at the end of this release.
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ARMADA HOFFLER PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
| December 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Real estate investments: | |||||||||||
| Income producing property | $ | 1,884,214 | $ | 1,658,609 | |||||||
| Held for development | 6,294 | 6,294 | |||||||||
| Construction in progress | 53,067 | 72,535 | |||||||||
| 1,943,575 | 1,737,438 | ||||||||||
| Accumulated depreciation | (329,963) | (285,814) | |||||||||
| Net real estate investments | 1,613,612 | 1,451,624 | |||||||||
| Real estate investments held for sale | — | 80,751 | |||||||||
| Cash and cash equivalents | 48,139 | 35,247 | |||||||||
| Restricted cash | 3,726 | 5,196 | |||||||||
| Accounts receivable, net | 39,186 | 29,576 | |||||||||
| Notes receivable, net | 136,039 | 126,429 | |||||||||
| Construction receivables, including retentions, net | 70,822 | 17,865 | |||||||||
| Construction contract costs and estimated earnings in excess of billings | 342 | 243 | |||||||||
| Equity method investment | 71,983 | 12,685 | |||||||||
| Operating lease right-of-use assets | 23,350 | 23,493 | |||||||||
| Finance lease right-of-use assets | 45,878 | 46,989 | |||||||||
| Acquired lease intangible assets | 103,870 | 62,038 | |||||||||
| Other assets | 85,363 | 45,927 | |||||||||
| Total Assets | $ | 2,242,310 | $ | 1,938,063 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Indebtedness, net | $ | 1,068,261 | $ | 917,556 | |||||||
| Liabilities related to assets held for sale | — | 41,364 | |||||||||
| Accounts payable and accrued liabilities | 26,839 | 29,589 | |||||||||
| Construction payables, including retentions | 93,472 | 31,166 | |||||||||
| Billings in excess of construction contract costs and estimated earnings | 17,515 | 4,881 | |||||||||
| Operating lease liabilities | 31,677 | 31,648 | |||||||||
| Finance lease liabilities | 46,477 | 46,160 | |||||||||
| Other liabilities | 54,055 | 55,876 | |||||||||
| Total Liabilities | 1,338,296 | 1,158,240 | |||||||||
| Total Equity | 904,014 | 779,823 | |||||||||
| Total Liabilities and Equity | $ | 2,242,310 | $ | 1,938,063 | |||||||
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ARMADA HOFFLER PROPERTIES, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share amounts)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||
| Rental revenues | $ | 55,692 | $ | 49,461 | $ | 219,294 | $ | 192,140 | ||||||||||||||||||
| General contracting and real estate services revenues | 95,912 | 20,463 | 234,859 | 91,936 | ||||||||||||||||||||||
| Total revenues | 151,604 | 69,924 | 454,153 | 284,076 | ||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||
| Rental expenses | 12,641 | 11,653 | 50,742 | 46,494 | ||||||||||||||||||||||
| Real estate taxes | 5,362 | 5,538 | 22,057 | 21,852 | ||||||||||||||||||||||
| General contracting and real estate services expenses | 93,667 | 19,750 | 227,158 | 88,100 | ||||||||||||||||||||||
| Depreciation and amortization | 18,109 | 16,616 | 72,974 | 68,853 | ||||||||||||||||||||||
| Amortization of right-of-use assets - finance leases | 277 | 277 | 1,110 | 1,022 | ||||||||||||||||||||||
| General and administrative expenses | 3,512 | 3,653 | 15,691 | 14,610 | ||||||||||||||||||||||
| Acquisition, development and other pursuit costs | — | 1 | 37 | 112 | ||||||||||||||||||||||
| Impairment charges | 83 | 18,256 | 416 | 21,378 | ||||||||||||||||||||||
| Total expenses | 133,651 | 75,744 | 390,185 | 262,421 | ||||||||||||||||||||||
| Gain on real estate dispositions | 42 | 15,436 | 53,466 | 19,040 | ||||||||||||||||||||||
| Operating income | 17,995 | 9,616 | 117,434 | 40,695 | ||||||||||||||||||||||
| Interest income | 6,568 | 3,829 | 16,978 | 18,457 | ||||||||||||||||||||||
| Interest expense | (10,933) | (8,685) | (39,680) | (33,905) | ||||||||||||||||||||||
| Loss on extinguishment of debt | (475) | (3,690) | (3,374) | (3,810) | ||||||||||||||||||||||
| Change in fair value of derivatives and other | 1,186 | 1,344 | 8,698 | 2,182 | ||||||||||||||||||||||
| Unrealized credit loss release (provision) | 232 | 508 | (626) | 792 | ||||||||||||||||||||||
| Other income (expense), net | (37) | 101 | 378 | 302 | ||||||||||||||||||||||
| Income before taxes | 14,536 | 3,023 | 99,808 | 24,713 | ||||||||||||||||||||||
| Income tax benefit | 5 | 220 | 145 | 742 | ||||||||||||||||||||||
| Net income | 14,541 | 3,243 | 99,953 | 25,455 | ||||||||||||||||||||||
| Net (income) loss attributable to noncontrolling interests in investment entities | (137) | 5 | (5,948) | 5 | ||||||||||||||||||||||
| Preferred stock dividends | (2,887) | (2,887) | (11,548) | (11,548) | ||||||||||||||||||||||
| Net income attributable to common stockholders and OP Unitholders | $ | 11,517 | $ | 361 | $ | 82,457 | $ | 13,912 | ||||||||||||||||||
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ARMADA HOFFLER PROPERTIES, INC.
RECONCILIATION OF NET INCOME TO FFO & NORMALIZED FFO
(in thousands, except per share amounts)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Net income attributable to common stockholders and OP Unitholders | $ | 11,517 | $ | 361 | $ | 82,457 | $ | 13,912 | ||||||||||||||||||
Depreciation and amortization (1) | 17,887 | 16,616 | 71,971 | 68,853 | ||||||||||||||||||||||
Loss (Gain) on operating real estate dispositions (2) | 11 | (15,442) | (47,984) | (18,793) | ||||||||||||||||||||||
Impairment of real estate assets | — | 18,339 | 201 | 21,378 | ||||||||||||||||||||||
| FFO attributable to common stockholders and OP Unitholders | $ | 29,415 | $ | 19,874 | $ | 106,645 | $ | 85,350 | ||||||||||||||||||
| Acquisition, development and other pursuit costs | — | 1 | 37 | 112 | ||||||||||||||||||||||
| Impairment of intangible assets and liabilities | 83 | (83) | 215 | — | ||||||||||||||||||||||
| Loss on extinguishment of debt | 475 | 3,690 | 3,374 | 3,810 | ||||||||||||||||||||||
| Unrealized credit loss (release) provision | (232) | (508) | 626 | (792) | ||||||||||||||||||||||
| Amortization of right-of-use assets - finance leases | 277 | 277 | 1,110 | 1,022 | ||||||||||||||||||||||
| Change in fair value of derivatives not designated as cash flow hedges and other | (1,186) | (1,344) | (8,698) | (2,182) | ||||||||||||||||||||||
| Amortization of interest rate cap premiums on designated cash flow hedges | 1,801 | 59 | 3,849 | 235 | ||||||||||||||||||||||
| Normalized FFO available to common stockholders and OP Unitholders | $ | 30,633 | $ | 21,966 | $ | 107,158 | $ | 87,555 | ||||||||||||||||||
| Net income attributable to common stockholders and OP Unitholders per diluted share and unit | $ | 0.13 | $ | — | $ | 0.93 | $ | 0.17 | ||||||||||||||||||
| FFO attributable to common stockholders and OP Unitholders per diluted share and unit | $ | 0.33 | $ | 0.24 | $ | 1.21 | $ | 1.05 | ||||||||||||||||||
| Normalized FFO attributable to common stockholders and OP Unitholders per diluted share and unit | $ | 0.35 | $ | 0.27 | $ | 1.22 | $ | 1.08 | ||||||||||||||||||
| Weighted-average common shares and units - diluted | 88,341 | 82,280 | 88,192 | 81,445 | ||||||||||||||||||||||
________________________________________
| (1) Adjusted for the depreciation attributable to noncontrolling interests in consolidated investments. | ||
| (2) The adjustment for gain on operating real estate dispositions for the year ended December 31, 2022 excludes $5.4 million of the gain on the sale of The Residences at Annapolis Junction that was allocated to our joint venture partner. Additionally, the adjustment for gain on operating real estate dispositions for the year ended December 31, 2021 excludes the gain on sale of easement rights on a non-operating parcel and the loss on sale of a non-operating parcel. | ||
8
ARMADA HOFFLER PROPERTIES, INC.
RECONCILIATION OF NET INCOME TO SAME STORE NOI, CASH BASIS
(in thousands) (unaudited)
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||
Office Same Store(1) | ||||||||||||||||||||||||||
| Same Store NOI, Cash Basis | $ | 6,670 | $ | 6,412 | $ | 26,009 | $ | 25,614 | ||||||||||||||||||
GAAP Adjustments (2) | 68 | 124 | 370 | 838 | ||||||||||||||||||||||
| Same Store NOI | 6,738 | 6,536 | 26,379 | 26,452 | ||||||||||||||||||||||
Non-Same Store NOI (3) | 6,150 | 520 | 21,322 | 2,387 | ||||||||||||||||||||||
| Segment NOI | 12,888 | 7,056 | 47,701 | 28,839 | ||||||||||||||||||||||
Retail Same Store (4) | ||||||||||||||||||||||||||
| Same Store NOI, Cash Basis | 15,527 | 14,495 | 53,404 | 49,626 | ||||||||||||||||||||||
GAAP Adjustments (2) | 862 | 918 | 1,632 | 1,994 | ||||||||||||||||||||||
| Same Store NOI | 16,389 | 15,413 | 55,036 | 51,620 | ||||||||||||||||||||||
Non-Same Store NOI (3) | 85 | (26) | 8,666 | 6,024 | ||||||||||||||||||||||
| Segment NOI | 16,474 | 15,387 | 63,702 | 57,644 | ||||||||||||||||||||||
Multifamily Same Store (5) | ||||||||||||||||||||||||||
| Same Store NOI, Cash Basis | 6,751 | 6,430 | 26,390 | 23,957 | ||||||||||||||||||||||
GAAP Adjustments (2) | 212 | 228 | 850 | 825 | ||||||||||||||||||||||
| Same Store NOI | 6,963 | 6,658 | 27,240 | 24,782 | ||||||||||||||||||||||
Non-Same Store NOI (3) | 1,364 | 3,169 | 7,852 | 12,529 | ||||||||||||||||||||||
| Segment NOI | 8,327 | 9,827 | 35,092 | 37,311 | ||||||||||||||||||||||
| Total Property NOI | 37,689 | 32,270 | 146,495 | 123,794 | ||||||||||||||||||||||
| General contracting & real estate services gross profit | 2,245 | 713 | 7,701 | 3,836 | ||||||||||||||||||||||
| Depreciation and amortization | (18,109) | (16,616) | (72,974) | (68,853) | ||||||||||||||||||||||
| General and administrative expenses | (3,512) | (3,653) | (15,691) | (14,610) | ||||||||||||||||||||||
| Acquisition, development and other pursuit costs | — | (1) | (37) | (112) | ||||||||||||||||||||||
| Impairment charges | (83) | (18,256) | (416) | (21,378) | ||||||||||||||||||||||
| Gain on real estate dispositions, net | 42 | 15,436 | 53,466 | 19,040 | ||||||||||||||||||||||
| Interest income | 6,568 | 3,829 | 16,978 | 18,457 | ||||||||||||||||||||||
| Interest expense | (10,933) | (8,685) | (39,680) | (33,905) | ||||||||||||||||||||||
| Loss on extinguishment of debt | (475) | (3,690) | (3,374) | (3,810) | ||||||||||||||||||||||
| Unrealized credit loss release (provision) | 232 | 508 | (626) | 792 | ||||||||||||||||||||||
| Amortization of right-of-use assets - finance leases | (277) | (277) | (1,110) | (1,022) | ||||||||||||||||||||||
| Change in fair value of derivatives and other | 1,186 | 1,344 | 8,698 | 2,182 | ||||||||||||||||||||||
| Other income (expense), net | (37) | 101 | 378 | 302 | ||||||||||||||||||||||
| Income tax benefit | 5 | 220 | 145 | 742 | ||||||||||||||||||||||
| Net income | 14,541 | 3,243 | 99,953 | 25,455 | ||||||||||||||||||||||
| Net (income) loss attributable to noncontrolling interests in investment entities | (137) | 5 | (5,948) | 5 | ||||||||||||||||||||||
| Preferred stock dividends | (2,887) | (2,887) | (11,548) | (11,548) | ||||||||||||||||||||||
| Net income attributable to AHH and OP unitholders | $ | 11,517 | $ | 361 | $ | 82,457 | $ | 13,912 | ||||||||||||||||||
_______________________________________
| (1) Office same-store portfolio for the three and twelve months ended December 31, 2022 and 2021 excludes the Constellation Office and Wills Wharf. | ||
9
| (2) GAAP Adjustments include adjustments for straight-line rent, termination fees, deferred rent, recoveries of deferred rent, and amortization of lease incentives. | ||
| (3) Includes expenses associated with the Company's in-house asset management division. | ||
| (4) Retail same-store portfolio for the three months ended December 31, 2022 and 2021 excludes Pembroke Square. Additionally, retail same-store portfolio for the twelve months ended December 31, 2022 and 2021 excludes Delray Beach Plaza, Greenbrier Square, Overlook Village, Premier Retail, and Pembroke Square. | ||
| (5) Multifamily same-store portfolio for the three and twelve months ended December 31, 2022 and 2021 excludes 1305 Dock Street, Chronicle Mill, and Gainesville Apartments, | ||
Contact:
Chelsea Forrest
Armada Hoffler Properties, Inc.
Director of Corporate Communications and Investor Relations
Email: CForrest@ArmadaHoffler.com
Phone: (757) 612-4248
10
1 4Q22 FINANCIAL SUPPLEMENTAL PACKAGE ………………………………. Harbor Point in Baltimore, MD
2 This Supplemental Financial Package should be read in conjunction with the unaudited condensed consolidated financial statements appearing in our press release dated February 14, 2023, which has been furnished as Exhibit 99.1 to our Form 8-K furnished on February 14, 2023. The Company makes statements in this Supplemental Financial Package that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), and, as such, may involve known and unknown risks and uncertainties, and other factors that may cause the actual results or performance to differ from those projected in the forward-looking statement. These forward-looking statements may include comments relating to the current and future performance of the Company’s operating property portfolio, the Company’s development pipeline, the Company’s Mezzanine program, the Company’s construction and development business, including backlog and timing of deliveries and estimated costs, financing activities, as well as acquisitions, dispositions, and the Company’s financial outlook, guidance, and expectations. Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise, and we may not be able to realize any forward-looking statement. For a description of factors that may cause the Company’s actual results or performance to differ from its forward-looking statements, please review the information under the heading “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and the other documents filed by the Company with the Securities and Exchange Commission (the “SEC”) from time to time. The Company’s actual future results and trends may differ materially from expectations depending on a variety of factors discussed in the Company’s filings with the SEC from time to time. The Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in the Company’s expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by applicable law. FORWARD-LOOKING STATEMENTS
3 BOARD OF DIRECTORS Daniel A. Hoffler, Executive Chairman of the Board Louis S. Haddad, Vice Chairman of the Board Eva S. Hardy, Lead Independent Director George F. Allen, Independent Director James A. Carroll, Independent Director James C. Cherry, Independent Director Dennis H. Gartman, Independent Director A. Russell Kirk, Director John W. Snow, Independent Director CORPORATE OFFICERS Louis S. Haddad, President and Chief Executive Officer Matthew T. Barnes-Smith, Chief Financial Officer Shawn J. Tibbetts, Chief Operating Officer Eric E. Apperson, President of Construction and Development Shelly R. Hampton, President of Asset Management Jefferies Jonathan Petersen (212) 284-1705 jpetersen@jefferies.com Bank of America Merrill Lynch Camille Bonnel (416) 369-2140 camille.bonnel@bofa.com Janney, Montgomery, & Scott LLC Robert Stevenson (646) 840-3217 robertstevenson@janney.com Raymond James & Associates Bill Crow (727) 567-2594 bill.crow@raymondjames.com ANALYST COVERAGE Armada Hoffler (NYSE: AHH) is a vertically integrated, self-managed real estate investment trust with over four decades of experience developing, building, acquiring, and managing high-quality office, retail, and multifamily properties located primarily in the Mid-Atlantic and Southeastern United States. The Company also provides general construction and development services to third- party clients, in addition to developing and building properties to be placed in their stabilized portfolio. Founded in 1979 by Daniel A. Hoffler, Armada Hoffler has elected to be taxed as a REIT for U.S. federal income tax purposes. For more information visit ArmadaHoffler.com. CORPORATE PROFILE Robert W. Baird & Co. David Rodgers (216) 737-7341 drodgers@rwbaird.com Stifel Stephen Manaker (212) 271-3716 manakers@stifel.com
4 HIGHLIGHTS • Net income attributable to common stockholders and OP Unit holders of $11.5 million, or $0.13 per diluted share, for the quarter ended December 31, 2022 compared to $0.4 million, or less than $0.01 per diluted share, for the quarter ended December 31, 2021. • Net income attributable to common stockholders and OP Unit holders of $82.5 million, or $0.93 per diluted share, for the yearended December 31, 2022 compared to $13.9 million, or $0.17 per diluted share, for the year ended December 31, 2021. See “Non-GAAP Financial Measures.” • Funds from operations attributable to common stockholders and OP Unit holders ("FFO") of $29.4 million, or $0.33 per diluted share, for the quarter ended December 31, 2022 compared to $19.9 million, or $0.24 per diluted share, for the quarter ended December 31, 2021. FFO of $106.6 million, or $1.21 per diluted share, for the year ended December 31, 2022 compared to $85.4 million, or $1.05 per diluted share, for the year ended December 31, 2021, representing a 15% year-over-year increase. See “Non-GAAP Financial Measures.” • Normalized funds from operations attributable to common stockholders and OP Unit holders ("Normalized FFO") of $30.6 million,or $0.35 per diluted share, for the quarter ended December 31, 2022 compared to $22.0 million, or $0.27 per diluted share, for the quarter ended December 31, 2021. Normalized FFO of $107.2 million, or $1.22 per diluted share, for the year ended December 31, 2022 compared to Normalized FFO of $87.6 million, or $1.08 per diluted share, for the year ended December 31, 2021, representing a 13% year-over-year increase. • Introduced 2023 full-year Normalized FFO guidance of $1.23 to $1.27 per diluted share, with the mid-point representing a moderate increase over 2022 actual results. • Awarded an investment grade credit rating of BBB with a stable trend from DBRS Morningstar. • Maintained 97% portfolio occupancy as of December 31, 2022. Office, retail, and multifamily occupancy remained at 97%, 98%, and 96%, respectively. • Positive renewal spreads during the fourth quarter across all segments: • Lease rates on fourth quarter office lease renewals increased 6.1% on a GAAP basis and 1.9% on a cash basis. • Lease rates on fourth quarter retail lease renewals increased 10.3% on a GAAP basis and 5.4% on a cash basis. • Same Store Net Operating Income ("NOI") increased 5.2% on a GAAP basis and 5.9% on a cash basis compared to the quarter ended December 31, 2021. • Same Store NOI increased 5.6% on a GAAP basis and 6.7% on a cash basis compared to the year ended December 31, 2021. • Executed a new 46,000 square foot lease with Morgan Stanley at Thames Street Wharf that expands the tenant's space to over 240,000 square feet extending the term to 2035. • Delivered Chronicle Mill, a 238-unit market rate apartment project in the Charlotte suburb of Belmont, NC. As of December 31, 2022, Chronicle Mill was already 93% leased. • Reinvested $26.5 million of disposition proceeds to acquire Pembroke Square, a 100% leased grocery-anchored retail property located adjacent to the Town Center of Virginia Beach, at a 7.7% cap rate on in-place net operating income. • Closed on a new $100 million unsecured term loan, with an option to expand to $200 million, subject to certain conditions, that matures in January 2027 and bears interest at term SOFR plus margin, with an effective fixed rate of 4.80% after considering the effect of interest rate swaps. The proceeds were used to repay mortgage debt secured by Wills Wharf and certain retail assets at the Town Center of Virginia Beach. • Entered into an additional interest rate swap agreement covering $100 million of indebtedness on the senior unsecured term loan facility, resulting in an effective fixed interest rate of 4.73%.
5 2023 OUTLOOK & ASSUMPTIONS OUTLOOK(1) LOW HIGH PORTFOLIO NOI $157.4M $158.4M CONSTRUCTION SEGMENT PROFIT $11.8M $12.8M G&A EXPENSES $16.7M $17.3M INTEREST INCOME $12.8M $13.4M INTEREST EXPENSE(2) $45.4M $46.1M NORMALIZED FFO PER DILUTED SHARE $1.23 $1.27 GUIDANCE ASSUMPTIONS (1) See appendix for definitions. Ranges exclude certain items as per definition. (2) Includes the interest expense on finance leases. • Chronicle Mill stabilizes 1Q23 • Acquisition of $100 - $200M assets • Existing development pipeline fully funded through the unsecured revolving credit facility • Delivery of Southern Post 4Q23
6 SUMMARY INFORMATION $ IN THOUSANDS, EXCEPT PER SHARE (1) As of close of market on 12/30/2022. (2) Excludes GAAP adjustments. (3) See appendix for definitions. (4) Total occupancy weighted by annualized base rent. Three Months Ended OPERATIONAL METRICS 12/31/2022 9/30/2022 6/30/2022 3/31/2022 Net Income Attributable to Common Stockholders and OP Unitholders $11,517 $33,899 $27,752 $9,289 Net Income per Diluted Share Attributable to Common Stockholders and OP Unitholders $0.13 $0.38 $0.31 $0.11 Normalized FFO Attributable to Common Stockholders and OP Unitholders 30,633 25,789 26,203 24,533 Normalized FFO per Diluted Share Attributable to Common Stockholders and OP Unitholders $0.35 $0.29 $0.30 $0.28 Stabilized Portfolio Debt / Stabilized Portfolio Adjusted EBITDA 5.3x 4.9x 5.5x 5.6x Fixed charge coverage ratio 2.6x 2.4x 2.5x 2.6x CAPITALIZATION Common Shares Outstanding 67,730 67,730 67,730 67,695 Operating Partnership Units Outstanding 20,611 20,611 20,621 20,622 Common Shares and Operating Partnership Units Outstanding 88,341 88,341 88,351 88,317 Market Price per Common Share(1) $11.49 $10.38 $12.84 $14.60 Common Equity Capitalization 1,015,038 916,979 1,134,427 1,289,428 Preferred Equity Capitalization 171,085 171,085 171,085 171,085 Total Equity Capitalization 1,186,123 1,088,064 1,305,512 1,460,513 Total Debt(2) 1,073,132 1,042,955 1,165,108 1,179,296 Total Capitalization $2,259,255 $2,131,019 $2,470,620 $2,639,809 STABILIZED PORTFOLIO OCCUPANCY(3) Retail 97.9% 98.0% 97.1% 96.7% Office 96.7% 96.8% 97.9% 97.3% Multifamily 96.1% 96.4% 97.2% 97.3% Weighted Average(4) 97.0% 97.1% 97.3% 97.1% STABILIZED PORTFOLIO Commercial Retail Portfolio Net Operating Income $16,474 $15,597 $15,940 $15,691 Number of Properties 38 37 37 37 Net Rentable Square Feet 3,916,001 3,791,820 3,798,868 4,067,360 Office Portfolio Net Operating Income $12,888 $11,757 $11,679 $11,379 Number of Properties 9 9 8 8 Net Rentable Square Feet 2,111,923 2,120,341 1,792,350 1,792,054 Multifamily Multifamily Portfolio Net Operating Income $8,327 $8,188 $9,083 $9,492 Number of Properties 10 10 10 12 Units 2,254 2,254 2,447 2,447 Beds - - - 615
7 SUMMARY INCOME STATEMENT $ IN THOUSANDS, EXCEPT PER SHARE Three Months Ended Year Ended 12/31/2022 12/31/2021 12/31/2022 12/31/2021 Revenues (Unaudited) Rental Revenues $55,692 $49,461 $219,294 $192,140 General Contracting Revenues 95,912 20,463 234,859 91,936 Total Revenues 151,604 69,924 454,153 284,076 Expenses Rental Expenses 12,641 11,653 50,742 46,494 Real Estate Taxes 5,362 5,538 22,057 21,852 General Contracting Expenses 93,667 19,750 227,158 88,100 Depreciation and Amortization 18,109 16,616 72,974 68,853 Amortization of Right-of-Use Assets - Finance Leases 277 277 1,110 1,022 General & Administrative Expenses 3,512 3,653 15,691 14,610 Acquisition, Development & Pursuit Costs - 1 37 112 Impairment Charges 83 18,256 416 21,378 Total Expenses 133,651 75,744 390,185 262,421 Gain on Real Estate Dispositions 42 15,436 53,466 19,040 Operating Income 17,995 9,616 117,434 40,695 Interest Income 6,568 3,829 16,978 18,457 Interest Expense (10,933) (8,685) (39,680) (33,905) Loss on Extinguishment of Debt (475) (3,690) (3,374) (3,810) Change in Fair Value of Derivatives and Other 1,186 1,344 8,698 2,182 Unrealized Credit Loss Release (Provision) 232 508 (626) 792 Other Income (Expense), Net (37) 101 378 302 Income Before Taxes 14,536 3,023 99,808 24,713 Income Tax Benefit 5 220 145 742 Net Income $14,541 $3,243 $99,953 $25,455 Net (Income) Loss Attributable to Noncontrolling Interest in Investment Entities (137) 5 (5,948) 5 Preferred Stock Dividends (2,887) (2,887) (11,548) (11,548) Net Income Attributable to AHH and OP Unitholders $11,517 $361 $82,457 $13,912 Net Income per Diluted Share and Unit Attributable to AHH and OP Unitholders $0.13 $0.00 $0.93 $0.17 Weighted Average Shares & OP Units - Diluted 88,341 82,280 88,192 81,445
8 SUMMARY BALANCE SHEET $ IN THOUSANDS 12/31/2022 12/31/2021 Assets (Unaudited) Real Estate Investments: Income Producing Property $1,884,214 $1,658,609 Held for Development 6,294 6,294 Construction in Progress 53,067 72,535 Accumulated Depreciation (329,963) (285,814) Net Real Estate Investments 1,613,612 1,451,624 Real Estate Investments Held for Sale - 80,751 Cash and Cash Equivalents 48,139 35,247 Restricted Cash 3,726 5,196 Accounts Receivable, Net 39,186 29,576 Notes Receivable 136,039 126,429 Construction Receivables, Including Retentions 70,822 17,865 Costs in Excess of Earnings 342 243 Equity Method Investments 71,983 12,685 Operating Lease Right-of-Use Assets 23,350 23,493 Finance Lease Right-of-Use Assets 45,878 46,989 Acquired Intangibles 103,870 62,038 Other Assets 85,363 45,927 Total Assets $2,242,310 $1,938,063 Liabilities and Equity Indebtedness, Net $1,068,261 $917,556 Liabilities Related to Assets Held for Sale - 41,364 Accounts Payable and Accrued Liabilities 26,839 29,589 Construction Payables 93,472 31,166 Billings in Excess of Construction Contract Costs and Est. Earnings 17,515 4,881 Operating Lease Liabilities 31,677 31,648 Finance Lease Liabilities 46,477 46,160 Other Liabilities 54,055 55,876 Total Liabilities 1,338,296 1,158,240 Total Equity 904,014 779,823 Total Liabilities and Equity $2,242,310 $1,938,063 As Of
9 FFO, NORMALIZED FFO & AFFO(1) $ IN THOUSANDS, EXCEPT PER SHARE (1) See definitions in appendix. (2) Adjusted for the depreciation attributable to noncontrolling interests in consolidated investments. (3) Excludes gain/loss attributable to noncontrolling interests in consolidated investments and the disposition of non-operating parcels. (4) Excludes development, redevelopment, and first-generation space. (5) Includes non-cash interest expense relating to indebtedness and interest expense on finance leases. Three Months Ended (Unaudited) 12/31/2022 9/30/2022 6/30/2022 3/31/2022 12/31/2022 12/31/2021 Funds From Operations Net Income Attributable to AHH and OP Unitholders $11,517 $33,899 $27,752 $9,289 $82,457 $13,912 Net Income per Diluted Share $0.13 $0.38 $0.31 $0.11 $0.93 $0.17 Depreciation and Amortization(2) 17,887 17,290 18,509 18,285 71,971 68,853 Loss (Gain) on Dispositions of Operating Real Estate(3) 11 (28,502) (19,493) - (47,984) (18,793) Impairment of Real Estate Assets - - 201 - 201 21,378 FFO $29,415 $22,687 $26,969 27,574 $106,645 $85,350 FFO per Diluted Share $0.33 $0.26 $0.31 $0.31 $1.21 $1.05 Normalized FFO Acquisition, Development & Other Pursuit Costs - - 26 11 37 112 Loss on Extinguishment of Debt 475 2,123 618 158 3,374 3,810 Non-Cash GAAP Adjustments 128 236 657 930 1,951 230 Change in Fair Value of Derivatives and Other (1,186) (782) (2,548) (4,182) (8,698) (2,182) Amortization of Interest Rate Cap Premium on Designated Cash Flow Hedges 1,801 1,525 481 42 3,849 235 Normalized FFO $30,633 $25,789 $26,203 $24,533 $107,158 $87,555 Normalized FFO per Diluted Share $0.35 $0.29 $0.30 $0.28 $1.22 $1.08 Adjusted FFO Non-Cash Stock Compensation 562 614 506 1,609 3,291 2,230 Acquisition, Development & Other Pursuit Costs - - (26) (11) (37) (112) Tenant Improvements, Leasing Commissions, Lease Incentives(4) (1,875) (639) (1,242) (2,873) (6,629) (5,850) Property-Related Capital Expenditures (3,441) (2,417) (2,296) (3,735) (11,889) (9,880) Adjustment for Mezz Loan Modification and Exit Fees (209) (209) (209) (493) (1,120) (1,972) Non-Cash Interest Expense(5) 1,312 1,336 1,395 1,509 5,552 4,894 Cash Ground Rent Payment - Finance Lease (653) (635) (635) (635) (2,558) (2,287) GAAP Adjustments (1,718) (1,762) (1,622) (1,490) (6,592) (4,304) AFFO $24,611 $22,077 $22,074 $18,414 $87,176 $70,274 AFFO per Diluted Share $0.28 $0.25 $0.25 $0.21 $0.99 $0.86 Weighted Average Common Shares Outstanding 67,730 67,730 67,710 67,128 67,576 60,647 Weighted Average Operating Partnership Units Outstanding 20,611 20,611 20,621 20,621 20,616 20,798 Total Weighted Average Common Shares and OP Units Outstanding 88,341 88,341 88,331 87,749 88,192 81,445 Year Ended (Unaudited)
10 NET ASSET VALUE COMPONENT DATA $ AND SHARES/UNITS IN THOUSANDS (1) Excludes expenses associated with the Company’s in-house asset management division of $0.7M for the 3 months ended 12/31/2022. (2) Includes 100% of joint ventures. (3) Includes leases for spaces occupied by the Company which are eliminated for GAAP purposes. (4) Excludes lease right of use assets and lease liabilities. (5) Excludes GAAP adjustments. Stabilized Portfolio NOI (Cash) Liabilities(4) Three months ended 12/31/2022 As of 12/31/2022 Office(3) Retail Multifamily Total Mortgages and Notes Payable(5) $1,073,132 Stable Portfolio Accounts Payable and Accrued Liabilities 26,839 Portfolio NOI(1)(2) $12,336 $15,848 $8,282 $36,466 Construction Payables, Including Retentions 93,472 Non-Stabilized Properties NOI - - (290) (290) Other Liabilities(5) 70,333 Signed Leases Not Yet Occupied or in Free Rent Period 1,112 345 - 1,457 Total Liabilities $1,263,776 Stable Portfolio NOI $13,448 $16,193 $7,992 $37,633 Intra-Quarter Transactions Preferred Equity Net Acquisitions - 197 - 197 Liquidation Value Net Dispositions - - - - Series A Cumulative Redeemable Perpetual Preferred Stock $171,085 Annualized $53,792 $65,558 $31,968 $151,318 Non-Stabilized Portfolio Common Equity As of 12/31/2022 As of 12/31/2022 Projects Under Development $101,000 Total Common Shares Outstanding 67,730 Properties in Lease Up - Total OP Units Outstanding 20,611 Development Opportunities 17,000 Total Common Shares & OP Units Outstanding 88,341 Unconsolidated JV Development 72,900 Total Non-Stabilized Portfolio $190,900 Third-Party General Contracting and Real Estate Services Trailing 12 Months General Contracting Gross Profit $7,701 Non-Property Assets(4) As of 12/31/2022 Cash and Restricted Cash $51,865 Accounts Receivable 39,186 Notes Receivable and Other Notes Receivable(5) 29,933 Preferred Equity / Mezzanine Investments(5) 106,697 Construction Receivables, Including Retentions (5) 71,005 Acquired Lease Intangible Assets, Net 103,870 Other Assets / Costs in Excess of Earnings 85,705 Total Non-Property Assets $488,261
11 STABILIZED PORTFOLIO SUMMARY AS OF DECEMBER 31, 2022 SEE APPENDIX FOR FULL LIST OF PROPERTIES (1) See appendix for definitions and portfolio detail. COMMERCIAL PORTFOLIO Retail Properties # of Properties Net Rentable SF Average Age Occupied SF Occupancy(1) ABR(1) ABR per Occupied SF Town Center of Virginia Beach 10 618,498 15 608,065 98.3% $13,700,016 $22.53 Grocery Anchored 15 1,400,564 12 1,371,351 97.9% 22,606,777 16.49 Regional Centers 13 1,896,939 17 1,852,985 97.7% 34,618,990 18.68 Stabilized Retail Total 38 3,916,001 15 3,832,401 97.9% $70,925,783 $18.51 Office Properties # of Properties Net Rentable SF Average Age Occupied SF Occupancy(1) ABR(1) ABR per Occupied SF Town Center of Virginia Beach 4 788,529 20 780,238 98.9% $22,866,539 $29.31 Harbor Point - Baltimore Waterfront 3 1,073,734 7 1,029,418 95.9% 31,894,074 30.98 Other 2 249,660 3 233,501 93.5% 6,380,220 27.32 Stabilized Office Total 9 2,111,923 12 2,043,157 96.7% $61,140,833 $29.92 MULTIFAMILY PORTFOLIO Multifamily Properties # of Properties Units Average Age Occupied Units Occupancy(1) AQR (1) Monthly AQR per Occupied Unit Town Center of Virginia Beach 3 759 9 725 95.6% $17,003,040 $1,953 Harbor Point - Baltimore Waterfront 2 392 5 368 93.8% 11,307,996 2,563 Other 5 1,103 7 1,073 97.3% 21,814,872 1,694 Stabilized Multifamily Total 10 2,254 7 2,166 96.1% $50,125,908 $1,928
12 SAME STORE NOI BY SEGMENT $ IN THOUSANDS (RECONCILIATION TO GAAP LOCATED IN APPENDIX) (1) Excludes expenses associated with the Company’s in-house asset management division of $0.7M for each of the 3 months ended 12/31/2022 & 12/31/2021, and $2.8M & $2.7M for the years ended 12/31/2022 & 12/31/2021, respectively. Three Months Ended Year Ended 12/31/2022 12/31/2021 $ Change % Change 12/31/2022 12/31/2021 $ Change % Change Office Revenue $10,845 $10,213 $632 6.2% $41,705 $40,965 $740 1.8% Rental Expenses(1) 2,708 2,362 346 14.6% 9,901 9,295 606 6.5% Real Estate Taxes 1,399 1,315 84 6.4% 5,425 5,218 207 4.0% Net Operating Income $6,738 $6,536 $202 3.1% $26,379 $26,452 ($73) -0.3% GAAP Adjustments (68) (124) 56 (370) (838) 468 Net Operating Income, Cash $6,670 $6,412 $258 4.0% $26,009 $25,614 $395 1.5% Retail Revenue $21,733 $20,602 $1,131 5.5% $73,436 $69,256 $4,180 6.0% Rental Expenses(1) 3,204 3,088 116 3.8% 10,800 10,041 759 7.6% Real Estate Taxes 2,140 2,101 39 1.9% 7,600 7,595 5 0.1% Net Operating Income $16,389 $15,413 $976 6.3% $55,036 $51,620 $3,416 6.6% GAAP Adjustments (862) (918) 56 (1,632) (1,994) 362 Net Operating Income, Cash $15,527 $14,495 $1,032 7.1% $53,404 $49,626 $3,778 7.6% Multifamily Revenue $11,197 $10,609 $588 5.5% $44,098 $41,008 $3,090 7.5% Rental Expenses(1) 3,206 3,009 197 6.5% 12,790 12,418 372 3.0% Real Estate Taxes 1,028 942 86 9.1% 4,068 3,808 260 6.8% Net Operating Income $6,963 $6,658 $305 4.6% $27,240 $24,782 $2,458 9.9% GAAP Adjustments (212) (228) 16 (850) (825) (25) Net Operating Income, Cash $6,751 $6,430 $321 5.0% $26,390 $23,957 $2,433 10.2% Same Store NOI $30,090 $28,607 $1,483 5.2% $108,655 $102,854 $5,801 5.6% GAAP Adjustments (1,142) (1,270) 128 (2,852) (3,657) 805 $28,948 $27,337 $1,611 5.9% $105,803 $99,197 $6,606 6.7%Same Store Portfolio NOI, Cash Basis
13 DEBT TO ADJUSTED EBITDA $ IN THOUSANDS SEE APPENDIX FOR DEFINITIONS, CALCULATIONS, AND RECONCILIATIONS (1) Includes income and debt related to development, mezzanine, construction, and other ancillary activities outside of our stabilized portfolio. (2) Total notes payable less GAAP adjustments, cash, restricted cash, and other notes payable. 6.9 x 5.9 x 5.3 x 0.0 x 1.0 x 2.0 x 3.0 x 4.0 x 5.0 x 6.0 x 7.0 x 8.0 x Net Debt + Preferred/ Total Adjusted EBITDA Plus Ancillary Debt/ Total Adjusted EBITDA?¹? Stabilized Portfolio Debt/ Stabilized Portfolio Adjusted EBITDA Three Months Ended 12/31/2022 Stabilized Portfolio Adjusted EBITDA $37,414 Stabilized Portfolio Debt $791,605 Stabilized Portfolio Debt / Stabilized Portfolio Adjusted EBITDA 5.3x Total Adjusted EBITDA(1) $43,372 Net Debt(2) $1,021,267 Net Debt Plus Ancillary Debt/Total Adjusted EBITDA 5.9x Net Debt + Preferred $1,192,352 Net Debt + Preferred /Total Adjusted EBITDA 6.9x
14 DEBT MANAGEMENT $ IN THOUSANDS (1) Includes impact of non-designated interest rate caps. (2) Excludes debt subject to interest rate swap locks. (3) Includes debt subject to interest rate swap locks. (4) Excludes GAAP adjustments. (5) Represents the weighted average interest rate of the portfolio, inclusive of interest rate caps and swaps. (6) Represents a hedging corridor. Total Debt Composition(1) Weighted Average % of Debt Interest Rate Maturity Variable vs. Fixed-rate Debt Variable-Rate Debt(2) 40.2% 3.5% 3.7 Yrs Fixed-Rate Debt(3)(4) 59.8% 3.7% 5.3 Yrs Secured vs. Unsecured Debt Unsecured Debt 43.0% 3.1% 2.7 Yrs Secured Debt 57.0% 4.0% 6.1 Yrs Portfolio Weighted Average 3.6% (5) 4.7 Yrs Interest Rate Cap Agreements Effective Date Maturity Date Strike Rate Notional Amount February 2021 February 2023 LIBOR 0.50% $100,000 March 2021 April 2023 LIBOR 2.50% 14,479 November 2020 November 2023 SOFR 1.84% 84,375 July 2022 January 2024 SOFR 1.00%-3.00%(6) 85,100 January 2022 February 2024 BSBY + 4.00% 175,000 April 2022 February 2024 BSBY 1.00%-3.00%(6) 175,000 July 2022 March 2024 SOFR 1.00%-3.00%(6) 200,000 May 2022 September 2024 SOFR 1.00%-3.00%(6) 16,700 Total Interest Rate Caps $850,654 Fixed-Rate Debt(3)(4) $641,752 Fixed-Rate and Hedged Debt $1,492,406 Total Debt(4) $1,073,132 % Fixed or Hedged 100%
15 OUTSTANDING DEBT $ IN THOUSANDS (1) Excludes non-designated interest rate caps. (2) Subject to a rate floor. (3) Includes debt subject to interest rate swap locks. (4) Includes debt subject to designated interest rate caps. Debt Stated Rate Effective Rate of as 12/31/2022(1) Maturity Date 2023 2024 2025 2026 2027 Thereafter Outstanding as of 12/31/2022 Secured Notes Payable - Stabilized Debt Red Mill Central 4.80% 4.80% Jun-2024 $175 $1,838 $2,013 Premier Apartments L+1.55% 5.94% Oct-2024 234 16,035 16,269 Premier Retail L+1.55% 5.94% Oct-2024 115 7,898 8,013 Red Mill South 3.57% 3.57% May-2025 338 351 4,502 5,191 Market at Mill Creek L+1.55% 5.94% Jul-2025 647 647 11,200 12,494 Gainesville Apartments SOFR+1.50% 5.86% (2) Dec-2025 - - 30,000 30,000 Encore Apartments 2.93% 2.93% Feb-2026 556 573 590 22,261 23,980 4525 Main Street 2.93% 2.93% Feb-2026 714 735 757 28,579 30,785 Thames Street Wharf BSBY+1.30% 2.35% (3) Sep-2026 1,433 1,972 3,050 62,872 69,327 Constellation Energy Building BSBY+1.50% 3.86% (2)(4) Nov-2026 - - - 175,000 175,000 Southgate Square L+1.90% 6.29% (2) Dec-2026 864 864 864 23,603 26,195 Nexton Square SOFR+1.95% 6.31% (2) Jun-2027 613 613 613 613 19,743 22,195 Liberty Apartments SOFR+1.50% 5.86% Sep-2027 326 345 364 382 19,509 20,926 Greenbrier Square 3.74% 3.74% Oct-2027 371 385 399 415 18,370 19,940 Lexington Square 4.50% 4.50% Sep-2028 293 306 320 335 351 12,287 13,892 Red Mill North 4.73% 4.73% Dec-2028 116 121 127 133 140 3,442 4,079 Greenside Apartments 3.17% 3.17% Dec-2029 759 780 808 834 861 27,820 31,862 Smith's Landing 4.05% 4.05% Jun-2035 956 994 1,037 1,081 1,126 10,341 15,535 Edison Apartments 5.30% 5.30% Dec-2044 384 405 427 450 474 13,423 15,563 The Cosmopolitan 3.35% 3.35% Jul-2051 876 906 937 968 1,001 36,555 41,243 Total - Secured Stabilized Debt 9,770 35,768 55,995 317,526 61,575 103,868 584,502 Secured Notes Payable - Development Pipeline Chronicle Mill L+3.00% 5.36% (2) May-2024 - 27,630 27,630 Southern Post SOFR+2.25% 4.61% (2)(4) Aug-2026 - - - - - - Total - Development Pipeline - 27,630 - - - - 27,630 Total Secured Notes Payable 9,770 63,398 55,995 317,526 61,575 103,868 612,132 Unsecured Stabilized Debt Senior Unsecured Revolving Credit Facility SOFR+1.30%-1.85% 5.76% Jan-2027 - - - - 61,000 61,000 M&T Senior Unsecured Term Loan SOFR+1.25%-1.80% 4.80% (3) Mar-2027 - - - - 100,000 100,000 Senior Unsecured Term Loan SOFR+1.25%-1.80% 5.66% Jan-2028 - - - - - 31,658 31,658 Senior Unsecured Term Loan SOFR+1.25%-1.80% 1.80%-4.73% (3) Jan-2028 - - - - - 268,342 268,342 Total - Unsecured Stabilized Debt - - - - 161,000 300,000 461,000 Total Notes Payable Excluding GAAP Adjustments $9,770 $63,398 $55,995 $317,526 $222,575 $403,868 $1,073,132 Other Notes Payable 6,131 GAAP Adjustments (11,002) Total Notes Payable $1,068,261 Debt Maturities & Principal Payments
16 CAPITALIZATION & FINANCIAL RATIOS $ IN THOUSANDS, EXCEPT PER SHARE AS OF DECEMBER 31, 2022 (1) As of close of market on 12/30/22. (2) Reflects quarterly Total Adjusted EBITDA divided by total quarterly interest expense and required principal repayment. (3) Reflects quarterly Total Adjusted EBITDA divided by total quarterly interest expense, required principal repayment, and preferred equity dividends. (4) Excludes availability under construction loans. Debt % of Total Principal Balance Unsecured Credit Facility 6% $61,000 Unsecured Term Loans 28% 300,000 Mortgages Payable 66% 712,132 Total Debt $1,073,132 Preferred Equity Shares Liquidation Value per Share Total Liquidation Value 6,843 $25.00 $171,085 Common Equity % of Total Shares/Units Stock Price(1) Market Value Common Stock (NYSE: AHH) 77% 67,730 $11.49 $778,218 Operating Partnership Units 23% 20,611 $11.49 236,820 Equity Market Capitalization 88,341 $1,015,038 Total Capitalization $2,259,255 Enterprise Value $2,207,390 Financial Ratios Debt Service Coverage Ratio(2) 3.2x Fixed Charge Coverage Ratio(3) 2.6x Stabilized Portfolio Debt / Stabilized Portfolio Adjusted EBITDA 5.3x Net Debt Plus Ancillary Debt / Total Adjusted EBITDA 5.9x Net Debt Plus Preferred / Total Adjusted EBITDA 6.9x Debt/Total Capitalization 47% Liquidity(4) Unencumbered Properties Cash on hand $48,139 % of Total Properties 61% Availability Under Credit Facility 189,000 % of Annualized Base Rent 41% Total Liquidity $237,139 6.75% Series A Cumulative Redeemable Perpetual Preferred Stock (NYSE: AHHPrA) Debt 47% Common Equity 45% Preferred Equity 8%
17 ACTIVE DEVELOPMENT PROJECTS $ IN THOUSANDS (1) Represents estimates that may change as the development and redevelopment process proceeds. (2) First fully-stabilized quarter. See same store definition in appendix. (3) Majority interest in joint venture with preferred return. (4) The Company currently owns 78% and holds an option to increase ownership interest to 90%. T. Rowe Price Global HQ Baltimore, MD Southern Post Roswell, GA Projects Property Type Estimated Size (1) % Leased or LOI Construction Start Initial Occupancy Stabilized Operation(2) Estimated Cost(1) Loan Commitment Cost to Date AHH Ownership % Anchor Tenants Chronicle Mill Belmont, NC Multifamily 238 units / 14,900 sf 93% 1Q21 4Q22 1Q23 $60,000 $35,100 $54,000 85% (3) Southern Post Roswell, GA Mixed-use 137 units / 137,000 sf 23% 4Q21 4Q23 4Q24 119,000 73,600 47,000 100% Equity Method Investments Total Projects Under Development $179,000 $108,700 $101,000 Projects Property Type Estimated Size (1) % Leased or LOI Construction Start Initial Occupancy Stabilized Operation(2) Estimated Cost(1) Equity Requirement Funded to Date AHH Ownership % Anchor Tenants T. Rowe Price Global HQ Baltimore, MD Office 553,000 sf office / 20,200 sf retail / 250 parking spaces 93% 2Q22 3Q24 3Q24 $264,000 $44,600 $40,500 50% T. Rowe Price Parcel 4 Mixed-Use Baltimore, MD Mixed-Use 312 units / 12,100 sf retail / 1,250 parking spaces - 2Q22 3Q24 2Q26 226,000 102,600 32,400 90% (4) Total Unconsolidated JV Development $490,000 $147,200 $72,900 Q4 2022 Year to Date Capitalized Interest $1,209 $3,920 Schedule(1)
18 PREFERRED INVESTMENTS/MEZZANINE $ IN THOUSANDS AS OF DECEMBER 31, 2022 (1) Represents estimates that may change as the development process proceeds. (2) Includes amortization of fees. (3) Preferred equity with economic terms and accounting consistent with a loan receivable. (4) Project sold 12/31/2022. Solis City Park Charlotte, NC The Interlock Atlanta, GA Property Type Estimated Size(1) % Leased or LOI Initial Occupancy Loan Maturity Interest Rate Loan Balance QTD Interest Income/Exit Fee(2) Outstanding Investments The Interlock Atlanta, GA Mixed-use 300,000 sf 90% 1Q21 4Q24 15% $80,544 $2,319 Solis Nexton(3) Summerville, SC Multifamily 320 units NA 4Q22 4Q26 11% - 672 / 2,710 (4) Solis City Park II(3) Charlotte, NC Multifamily 250 units NA 3Q23(1) 1Q28 13% 19,240 484 Solis Gainesville II(3), Gainesville, GA Multifamily 184 units NA 2Q24 4Q26 14% 6,913 205 Total $106,697 $6,390
19 THIRD-PARTY CONSTRUCTION $ IN THOUSANDS Boulders Lakeview Apartments North Chesterfield, VA Q4 2022 Q3 2022 Q2 2022 Q1 2022 Trailing 4 Quarters Revenue $95,912 $69,024 $45,273 $24,650 $234,859 Expense (93,667) (66,252) (43,418) (23,821) (227,158) Gross Profit $2,245 $2,772 $1,855 $829 $7,701 Operating Margin 2.3% 4.0% 4.1% 3.4% 3.3% Third-Party Backlog as of Q4 2022 Beginning Backlog $525,929 New Contracts 236,042 QTD Work Performed (96,406) Ending Backlog $665,565
20 ACQUISITIONS & DISPOSITIONS $ IN THOUSANDS (1) Represents 100% of property value of which the Company owns a 90% economic interest. (2) Anchor tenant vacant at time of sale. ACQUISITIONS Properties Location Square Feet/Units Purchase Price Cash Cap Rate Purchase Date Anchor Tenants 2022 606,181 / 103 units $299,450 6.2% Pembroke Square Virginia Beach, VA 124,181 26,450 7.7% 4Q22 Fresh Market, Nordstrom Rack, DSW Constellation Energy Building Baltimore, MD 482,000 / 103 units 273,000 (1) 6.1% 1Q22 Constellation Energy Group 2021 412,075 $64,850 6.9% Greenbrier Square Chesapeake, VA 260,710 36,500 6.3% 3Q21 Kroger, Homegoods, Dick's Sporting Goods Overlook Village Asheville, NC 151,365 28,350 7.7% 3Q21 T.J. Maxx|Homegoods, Ross 2020 174 units $25,700 6.8% Edison Apartments Richmond, VA 174 units 25,700 6.8% 4Q20 Total/Weighted Average 1,018,256 / 277 units $390,000 6.4% DISPOSITIONS Properties Location Square Feet/Units/Beds Sale Price Cash Cap Rate Disposition Date Anchor Tenants 2022 275,896 / 1,031 units/beds $258,261 4.3% Sandbridge Outparcels Virginia Beach, VA 7,233 3,455 4.5% 3Q22 Autozone, Valvoline Annapolis Junction Annapolis Junction, MD 416 units 150,000 4.2% 3Q22 North Pointe Outparcels Durham, NC 268,663 23,931 4.0% 2Q22 Costco, Home Depot Summit Place Charleston, SC 357 beds 37,800 4.8% 2Q22 Hoffler Place Charleston, SC 258 beds 43,075 4.1% 2Q22 2021 128,105 / 568 beds $90,265 5.2% Johns Hopkins Village Baltimore, MD 568 beds 75,000 5.6% 4Q21 Courthouse 7-Eleven Virginia Beach, VA 3,177 3,065 4.5% 4Q21 7-Eleven Socastee Commons Myrtle Beach, SC 57,273 3,800 NA (2) 3Q21 Oakland Marketplace Oakland, TN 64,538 5,500 7.8% 1Q21 Kroger Hanbury 7-Eleven Chesapeake, VA 3,117 2,900 5.5% 1Q21 7-Eleven 2020 645,600 $97,300 7.7% Hanbury Walgreens Chesapeake, VA 14,820 7,300 6.1% 3Q20 Walgreens Retail Portfolio (7 properties) Mid-Atlantic 630,780 90,000 7.8% 2Q20 Harris Teeter, Food Lion, Weis Markets, Office Max Total/Weighted Average 1,049,601 / 1,599 units/beds $445,826 5.2%
21 TOP 20 TENANTS BY ABR(1) $ IN THOUSANDS AS OF DECEMBER 31, 2022 (1) Excludes leases from the development and redevelopment properties that have been delivered, but not yet stabilized. (2) Per public sources. Commercial Portfolio Tenant Investment Grade Rating(2) Number of Leases Lease Expiration Annualized Base Rent % of Total Annualized Base Rent Constellation Energy Group ✓ 1 2036 $14,575 8.0% Morgan Stanley ✓ 3 2028 - 2035 7,178 3.9% Harris Teeter/Kroger ✓ 6 2026 - 2035 3,766 2.1% Canopy by Hilton 1 2045 2,846 1.6% Clark Nexsen 1 2029 2,801 1.5% WeWork 1 2034 2,180 1.2% Lowes Foods 2 2037 ; 2039 1,976 1.1% Franklin Templeton ✓ 1 2038 1,861 1.0% Duke University ✓ 1 2029 1,659 0.9% Huntington Ingalls Industries ✓ 1 2029 1,606 0.9% Dick's Sporting Goods ✓ 1 2032 1,553 0.9% PetSmart 5 2025 - 2027 1,527 0.8% TJ Maxx/Homegoods ✓ 5 2023 - 2027 1,519 0.8% Mythics 1 2030 1,260 0.7% Johns Hopkins Medicine ✓ 1 2023 1,213 0.7% Amazon/Whole Foods ✓ 1 2040 1,144 0.6% Ross Dress for Less ✓ 3 2025 - 2027 1,122 0.6% Apex Entertainment 1 2035 1,092 0.6% Bed Bath & Beyond 2 2025 ; 2027 1,084 0.6% Regal Cinemas 2 MTM ; 2024 1,058 0.6% Top 20 Total $53,020 29.1%
22 LEASE SUMMARY (1) Excludes leases from properties in development. OFFICE Renewals For GAAP and Cash Releasing Spread Calc: Quarter Number of Leases Signed Net Rentable SF Signed GAAP Releasing Spread Cash Releasing Spread Wtd Average Lease Term Remaining (yrs) TI & LC TI & LC per SF Q4 2022 3 200,712 6.1% 1.9% 7.2 $3,435,248 $17.12 Q3 2022 3 22,374 3.3% -3.1% 3.9 117,290 5.24 Q2 2022 3 7,654 13.1% 3.0% 4.6 14,127 1.85 Q1 2022 5 22,985 11.3% 2.6% 4.9 321,154 13.97 Trailing 4 Quarters 14 253,725 6.5% 1.5% 6.6 $3,887,819 $15.32 New Leases (1) Quarter Number of Leases Signed Net Rentable SF Signed Cash Rent per SF Wtd Average Lease Term Remaining (yrs) TI & LC TI & LC per SF Q4 2022 3 49,719 $30.86 9.6 $5,023,164 $101.03 Q3 2022 1 17,617 26.25 10.0 1,088,088 61.76 Q2 2022 4 18,884 24.20 6.2 595,169 31.52 Q1 2022 2 5,407 29.11 7.7 358,633 66.33 Trailing 4 Quarters 10 91,627 $28.50 8.9 $7,065,054 $77.11 RETAIL Renewals For GAAP and Cash Releasing Spread Calc: Quarter Number of Leases Signed Net Rentable SF Signed GAAP Releasing Spread Cash Releasing Spread Wtd Average Lease Term Remaining (yrs) TI & LC TI & LC per SF Q4 2022 8 109,384 10.3% 5.4% 5.6 $485,589 $4.44 Q3 2022 18 62,880 10.7% 5.8% 5.3 176,982 2.81 Q2 2022 20 217,381 9.9% 3.5% 7.5 416,696 1.92 Q1 2022 22 199,653 11.8% 3.5% 6.1 251,045 1.26 Trailing 4 Quarters 68 589,298 10.7% 4.4% 6.5 $1,330,312 $2.26 New Leases (1) Quarter Number of Leases Signed Net Rentable SF Signed Cash Rent per SF Wtd Average Lease Term Remaining (yrs) TI & LC TI & LC per SF Q4 2022 2 6,620 $28.09 9.5 $833,566 $125.92 Q3 2022 10 22,354 25.09 9.0 1,316,282 58.88 Q2 2022 11 40,190 18.62 8.2 1,248,190 31.06 Q1 2022 5 19,680 28.15 11.6 1,753,363 89.09 Trailing 4 Quarters 28 88,844 $23.07 9.2 $5,151,401 $57.98
23 LEASE EXPIRATIONS(1) AS OF DECEMBER 31, 2022 (1) Excludes leases from properties in development and delivered, but not yet stabilized. OFFICE Year Leases Expiring Square Footage Expiring % Portfolio Net Rentable Square Feet ABR % of Portfolio ABR Available - 68,766 3.3% -$ - M-T-M 2 1,623 0.1% 63,329 0.1% 2022 - - - - - 2023 7 61,898 2.9% 1,693,941 2.8% 2024 13 142,077 6.7% 3,862,140 6.3% 2025 20 156,165 7.4% 4,800,586 7.9% 2026 11 54,355 2.6% 1,442,176 2.4% 2027 18 131,322 6.2% 3,727,300 6.1% 2028 14 113,036 5.4% 3,301,082 5.4% 2029 11 297,348 14.1% 8,173,497 13.4% 2030 10 149,487 7.1% 4,358,881 7.1% 2031 4 20,270 1.0% 576,476 0.9% 2032 3 6,214 0.3% 182,795 0.3% Thereafter 8 909,362 42.9% 28,958,630 47.3% Total / Weighted Average 121 2,111,923 100.0% $61,140,833 100.0% RETAIL Year Leases Expiring Square Footage Expiring % Portfolio Net Rentable Square Feet ABR % of Portfolio ABR Available - 83,600 2.1% -$ - M-T-M 4 51,737 1.3% 340,578 0.5% 2022 1 1,200 - 37,818 0.1% 2023 47 183,357 4.7% 4,127,714 5.8% 2024 85 420,397 10.7% 7,990,879 11.3% 2025 94 501,116 12.8% 8,817,185 12.4% 2026 82 450,350 11.5% 9,049,900 12.8% 2027 75 470,148 12.0% 8,741,304 12.3% 2028 46 246,109 6.3% 4,953,704 7.0% 2029 31 115,967 3.0% 2,465,625 3.5% 2030 46 260,461 6.7% 5,818,903 8.2% 2031 30 271,334 6.9% 4,894,065 6.9% 2032 24 289,109 7.4% 4,670,093 6.6% Thereafter 33 571,116 14.6% 9,018,015 12.6% Total / Weighted Average 598 3,916,001 100.0% $70,925,783 100.0%
24Town Center Virginia Beach, VA APPENDIX DEFINITIONS & RECONCILIATIONS
25 ANNUALIZED BASE RENT: For the properties in our retail & office portfolios, we calculate annualized base rent (“ABR”) by multiplying (a) monthly base rent (defined as cash base rent, before contractual tenant concessions and abatements, and excluding tenant reimbursements for expenses paid by us) as of December 31, 2022, for in-place leases as of such date by (b) 12, and do not give effect to periodic contractual rent increases or contingent rental revenue (e.g., percentage rent based on tenant sales thresholds). ABR per leased square foot is calculated by dividing (a) ABR by (b) square footage under in-place leases as of December 31, 2022. In the case of triple net or modified gross leases, our calculation of ABR does not include tenant reimbursements for real estate taxes, insurance, common area or other operating expenses. DEFINITIONS ADJUSTED FUNDS FROM OPERATIONS: We calculate Adjusted Funds From Operations (“AFFO”) as Normalized FFO adjusted for the impact of non-cash stock compensation, tenant improvement, leasing commission and leasing incentive costs associated with second generation rental space, capital expenditures, non-cash interest expense, straight-line rents, cash ground rent payments for finance leases, the amortization of leasing incentives and above (below) market rents, and proceeds from government development grants, and payments made to purchase interest rate caps designated as cash flow hedges. Management believes that AFFO provides useful supplemental information to investors regarding our operating performance as it provides a consistent comparison of our operating performance across time periods and allows investors to more easily compare our operating results with other REITs. However, other REITs may use different methodologies for calculating AFFO or similarly entitled FFO measures and, accordingly, our AFFO may not always be comparable to AFFO or other similarly entitled FFO measures of other REITs. ANNUALIZED QUARTERLY RENT: For the properties in our multifamily portfolio, we calculate annualized quarterly rent (“AQR”) by multiplying (a) revenue for the quarter ended by (b) 4.
26 NET OPERATING INCOME: We calculate Net Operating Income (“NOI”) as property revenues (base rent, expense reimbursements, termination fees and other revenue) less property expenses (rental expenses and real estate taxes). Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to such other REITs’ NOI. NOI is not a measure of operating income or cash flows from operating activities as measured by GAAP and is not indicative of cash available to fund cash needs. As a result, NOI should not be considered an alternative to cash flows as a measure of liquidity. We consider NOI to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the core operations of our real estate business. To calculate NOI on a cash basis, we adjust NOI to exclude the net effects of straight-line rent and the amortization of lease incentives and above/below market rents. DEFINITIONS FUNDS FROM OPERATIONS: We calculate Funds From Operations (“FFO”) in accordance with the standards established by the National Association of Real Estate Investment Trusts (“Nareit”). Nareit defines FFO as net income (loss) (calculated in accordance with accounting principles generally accepted in the United States (“GAAP”)), excluding depreciation and amortization related to real estate, gains or losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. FFO is a supplemental non-GAAP financial measure. Management uses FFO as a supplemental performance measure because it believes that FFO is beneficial to investors as a starting point in measuring our operational performance. Specifically, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, which do not relate to or are not indicative of operating performance, FFO provides a performance measure that, when compared period-over-period, captures trends in occupancy rates, rental rates and operating costs. Other equity REITs may not calculate FFO in accordance with the Nareit definition as we do, and, accordingly, our FFO may not be comparable to such other REITs’ FFO. NET RENTABLE SQUARE FOOTAGE: We define net rentable square footage for each of our retail & office properties as the sum of (a) the square footage of existing leases, plus (b) for available space, management’s estimate of net rentable square footage based, in part, on past leases. The net rentable square footage included in office leases is generally consistent with the Building Owners and Managers Association 1996 measurement guidelines.
27 DEFINITIONS OCCUPANCY: The occupancy for each of our retail & office properties is calculated as (a) square footage under executed leases as of the last day of the quarter, divided by (b) net rentable square feet, expressed as a percentage. Occupancy for our multifamily properties is calculated as (a) average of the number of occupied units/beds on the 20th day of each of the trailing three months from the reporting period end date, divided by (b) total units/beds available as of such date, expressed as a percentage. Management believes that this methodology best captures the average monthly occupancy. NORMALIZED FUNDS FROM OPERATIONS: We calculate Normalized Funds From Operations (“Normalized FFO") as FFO calculated in accordance with the standards established by Nareit, adjusted for certain items, including but not limited to, acquisition, development and other pursuit costs, debt extinguishment losses, prepayment penalties, impairment of intangible assets and liabilities, mark-to-market adjustments on interest rate derivatives not designated as cash flow hedges, amortization of payments made to purchase interest rate caps designated as cash flow hedges, provision for unrealized non-cash credit losses, amortization of right-of-use assets attributable to finance leases, severance related costs, and other non-comparable items. Management believes that the computation of FFO in accordance with Nareit’s definition includes certain items that are not indicative of the results provided by our operating property portfolio and affect the comparability of our year-over-year performance. Accordingly, management believes that Normalized FFO is a more useful performance measure. Our calculation of Normalized FFO differs from Nareit’s definition of FFO. Other equity REITs may not calculate Normalized FFO in the same manner as us, and, accordingly, our Normalized FFO may not be comparable to other REITs’ Normalized FFO. PROPERTY/STABILIZED PROPERTY ADJUSTED EBITDA: We calculate Property Adjusted EBITDA as EBITDA coming solely from our operating properties. When referring to Stabilized Property Adjusted EBITDA, we exclude certain items, including, but not limited to, the impact of redevelopment and development pipeline projects that are still in lease-up. We generally consider a property to be stabilized upon the earlier of (i) the quarter after which the property reaches 80% occupancy or (ii) the thirteenth quarter after the property receives its certificate of occupancy. Additionally, any property that is fully or partially taken out of service for the purpose of redevelopment is no longer considered stabilized until the redevelopment activities are complete, the asset is placed back into service, and the stabilization criteria above are again met. A property may also be fully or partially taken out of service as a result of a disposition, depending on the significance of the portion of the property disposed. Management believes that Stabilized Property Adjusted EBITDA provides useful supplemental information to investors regarding our properties’ recurring operating performance as it provides a consistent comparison of our operating performance across time periods and allows investors to more easily compare our operating results with other REITs. However, other REITs may use different methodologies for calculating Stabilized Property Adjusted EBITDA or similarly titled measures.
28 DEFINITIONS STABILIZED PROPERTY DEBT: We calculate Stabilized Property Debt as our total debt secured by our stabilized properties, excluding loans associated with our development pipeline and our unsecured line of credit. TOTAL ADJUSTED EBITDA: We calculate Total Adjusted EBITDA as net income (loss) (calculated in accordance with GAAP), excluding interest expense, income taxes, depreciation and amortization, gains (or losses) from sales of depreciable operating property, impairment of real estate assets, debt extinguishment losses, non-cash stock compensation and mark-to-market adjustments on interest rate derivates, other one-time adjustments including non-recurring bad debt and termination fees. Management believes Total Adjusted EBITDA is useful to investors in evaluating and facilitating comparisons of our operating performance between periods and between REITs by removing the impact of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from our operating results along with other non-comparable items. SAME STORE PORTFOLIO: We define same store properties as those that we owned and operated and that were stabilized for the entirety of both periods compared. We generally consider a property to be stabilized upon the earlier of: (i) the quarter after the property reaches 80% occupancy or (ii) the thirteenth quarter after the property receives its certificate of occupancy. Additionally, any property that is fully or partially taken out of service for the purpose of redevelopment is no longer considered stabilized until the redevelopment activities are complete, the asset is placed back into service, and the stabilization criteria above are again met. A property may also be fully or partially taken out of service as a result of a disposition, depending on the significance of the portion of the property disposed. Finally, any property classified as Held for Sale is not considered stabilized.
29 PROPERTY PORTFOLIO AS OF DECEMBER 31, 2022 (1) See appendix for definitions. (2) The Company leases all or a portion of the land underlying this property pursuant to a ground lease. Retail Properties - Stabilized Location Year Built / Redeveloped Net Rentable SF Occupancy(1) ABR(1) ABR per Occupied SF(1) Anchor Tenant(s) Town Center of Virginia Beach 249 Central Park Retail Virginia Beach, VA 2004 92,456 100.0% $2,562,965 $27.72 Cheesecake Factory, Brooks Brothers Apex Entertainment Virginia Beach, VA 2002/2020 103,335 100.0% 1,545,919 14.96 Apex Entertainment, USI Columbus Village Virginia Beach, VA 2013/2020 62,207 100.0% 1,899,747 30.54 Barnes & Noble, CAVA, Shake Shack, Five Below, Ulta Columbus Village II Virginia Beach, VA 1996 92,061 96.7% 978,078 10.98 BB&B, Regal Commerce Street Retail Virginia Beach, VA 2008 19,173 100.0% 963,746 50.27 Yard House Fountain Plaza Retail Virginia Beach, VA 2004 35,961 93.7% 1,101,937 32.69 Ruth's Chris, Nando's Pembroke Square Virginia Beach, VA 1966/2015 124,181 100.0% 2,096,262 16.88 Fresh Market, Nordstrom Rack, DSW Premier Retail Virginia Beach, VA 2018 39,015 86.8% 1,140,886 33.70 Williams Sonoma, Pottery Barn South Retail Virginia Beach, VA 2002 38,515 100.0% 1,003,080 26.04 lululemon, free people, CPK Studio 56 Retail Virginia Beach, VA 2007 11,594 100.0% 407,396 35.14 Rocket Title, Legal Sea Foods Grocery Anchored Broad Creek Shopping Center(2) Norfolk, VA 2001 121,504 95.7% $2,210,002 $19.00 Food Lion, PetSmart Broadmoor Plaza South Bend, IN 1980 115,059 98.2% 1,354,680 11.99 Kroger Brooks Crossing Retail Newport News, VA 2016 18,349 78.3% 219,975 15.31 Various Small Shops (grocery shadow) Delray Beach Plaza(2) Delray Beach, FL 2021 87,207 100.0% 2,997,459 34.37 Whole Foods Greenbrier Square Chesapeake, VA 2017 260,710 95.4% 2,486,750 10.00 Kroger, Homegoods, Dick's Sporting Goods Greentree Shopping Center Chesapeake, VA 2014 15,719 92.6% 325,081 22.33 Various Small Shops (grocery shadow) Hanbury Village Chesapeake, VA 2009 98,638 100.0% 2,007,780 20.36 Harris Teeter Lexington Square Lexington, SC 2017 85,440 98.3% 1,860,608 22.15 Lowes Foods Market at Mill Creek Mt. Pleasant, SC 2018 80,319 97.7% 1,841,264 23.46 Lowes Foods North Pointe Center Durham, NC 2009 226,083 100.0% 2,923,017 12.93 Harris Teeter Parkway Centre Moultrie, GA 2017 61,200 100.0% 850,761 13.90 Publix Parkway Marketplace Virginia Beach, VA 1998 37,804 100.0% 780,481 20.65 Rite Aid (grocery shadow) Perry Hall Marketplace Perry Hall, MD 2001 74,256 98.0% 1,245,907 17.13 Safeway Sandbridge Commons Virginia Beach, VA 2015 69,417 100.0% 943,064 13.59 Harris Teeter Tyre Neck Harris Teeter(2) Portsmouth, VA 2011 48,859 100.0% 559,948 11.46 Harris Teeter Regional Centers Dimmock Square Colonial Heights, VA 1998 106,166 79.0% $1,559,633 $18.59 Best Buy, Old Navy Harrisonburg Regal Harrisonburg, VA 1999 49,000 100.0% 717,850 14.65 Regal Cinemas Marketplace at Hilltop(2) Virginia Beach, VA 2001 116,953 100.0% 2,797,454 23.92 Total Wine, Panera, Chick-Fil-A Nexton Square Summerville, SC 2020 133,608 100.0% 3,479,320 26.04 Various Small Shops North Hampton Market Taylors, SC 2004 114,954 97.9% 1,503,219 13.36 PetSmart, Hobby Lobby Overlook Village Asheville, NC 1990 151,365 100.0% 2,197,835 14.52 T.J. Maxx|Homegoods, Ross Patterson Place Durham, NC 2004 160,942 97.9% 2,472,240 15.69 BB&B, PetSmart, DSW Providence Plaza Charlotte, NC 2008 103,118 100.0% 3,059,505 29.67 Cranfill, Sumner & Hartzog, Chipotle Red Mill Commons Virginia Beach, VA 2005 373,808 96.6% 6,840,888 18.94 Homegoods, Walgreens Southgate Square Colonial Heights, VA 2016 260,131 100.0% 3,755,046 14.44 Burlington, PetSmart, Michaels, Conn's South Square Durham, NC 2005 109,590 100.0% 1,984,616 18.11 Ross, Petco, Office Depot Southshore Shops Chesterfield, VA 2006 40,307 97.5% 820,402 20.87 Buffalo Wild Wings Wendover Village Greensboro, NC 2004 176,997 98.8% 3,430,982 19.63 T.J. Maxx, Petco, Beauty World Total Retail Portfolio 3,916,001 97.9% $70,925,783 $18.51
30 PROPERTY PORTFOLIO CONT. AS OF DECEMBER 31, 2022 (1) See appendix for definitions. (2) The Company leases all or a portion of the land underlying this property pursuant to a ground lease. (3) The Company occupies 55,390 square feet at these two properties at an ABR of $1.8M, or $33.32 per leased square foot, which are reflected in this table. The rent paid by us is eliminated in accordance with GAAP in the consolidated financial statements. (4) The ABR for Liberty, Cosmopolitan, Edison, and 1405 Point excludes approximately $0.2M, $1.0M, $0.3M and $0.4M, respectively, from ground floor retail leases. Office Properties- Stabilized Location Net Rentable SF Year Built Occupancy(1) ABR(1) ABR per Occupied SF(1) Anchor Tenant(s) Town Center of Virginia Beach 4525 Main Street Virginia Beach, VA 235,088 2014 100.0% $7,144,928 $30.39 Clark Nexsen, Anthropologie, Mythics Armada Hoffler Tower(3) Virginia Beach, VA 315,916 2002 98.7% 9,551,515 30.62 AHH, Troutman Pepper, Williams Mullen, Morgan Stanley One Columbus Virginia Beach, VA 129,066 1984 98.3% 3,243,789 25.56 Truist, HBA Two Columbus Virginia Beach, VA 108,459 2009 98.1% 2,926,307 27.51 Hazen & Sawyer, Fidelity Harbor Point - Baltimore Waterfront Constellation Office Baltimore, MD 482,317 2016 97.1% $15,192,121 $32.44 Constellation Energy Group Thames Street Wharf(3) Baltimore, MD 263,426 2010 100.0% 7,655,559 29.06 Morgan Stanley, JHU Medical Wills Wharf(2) Baltimore, MD 327,991 2020 90.8% 9,046,394 30.39 Canopy by Hilton, Transamerica, RBC, Franklin Templeton Other Brooks Crossing Office Newport News, VA 98,061 2019 100.0% $1,925,167 $19.63 Huntington Ingalls Industries One City Center Durham, NC 151,599 2019 89.3% 4,455,053 32.89 Duke University, WeWork Stabilized Office Total 2,111,923 96.7% $61,140,833 $29.92 Multifamily Properties- Stabilized Location Units Year Built / Redeveloped Occupancy(1) AQR (1) Monthly AQR per Occupied Unit Town Center of Virginia Beach Encore Apartments Virginia Beach, VA 286 2014 95.6% $5,605,860 $1,709 Premier Apartments Virginia Beach, VA 131 2018 98.0% 2,830,644 1,837 The Cosmopolitan(4) Virginia Beach, VA 342 2006/2020 94.6% 8,566,536 2,207 Harbor Point - Baltimore Waterfront 1405 Point(2)(4) Baltimore, MD 289 2018 94.1% $8,463,276 $2,593 1305 Dock Street Baltimore, MD 103 2016 92.9% 2,844,720 2,477 Other Edison Apartments(4) Richmond, VA 174 2014 96.0% $3,028,380 $1,511 Greenside Apartments Charlotte, NC 225 2018 97.5% 4,755,864 1,807 Liberty Apartments(4) Newport News, VA 197 2013 97.0% 3,645,264 1,590 Smith's Landing(2) Blacksburg, VA 284 2009 97.4% 5,546,400 1,671 Gainesville Apartments Gainesville, GA 223 2022 98.2% 4,838,964 1,841 Multifamily Total 2,254 96.1% $50,125,908 $1,928
31 $ IN THOUSANDS RECONCILIATION OF DEBT & EBITDA (1) Excludes GAAP adjustments. Three Months Ended 12/31/2022 9/30/2022 6/30/2022 3/31/2022 Property Net Operating Income $37,689 $35,542 $36,702 $36,562 Property Other Income (Expense), Net (120) (30) (190) 104 Amortization of Right of Use Assets (277) (278) (277) (278) Impairment of Intangible Assets and Liabilities (83) - (85) (47) Property Adjusted EBITDA $37,209 $35,234 $36,150 $36,341 Acquisition 217 - - 826 Disposition - (368) (496) - Development (12) - (771) (674) Stabilized Portfolio Adjusted EBITDA $37,414 $34,866 $34,883 $36,493 Construction Gross Profit 2,245 2,772 1,855 829 Corporate G&A (3,451) (3,708) (3,446) (4,552) Non-Cash Stock Comp 562 614 506 1,609 Acquisition, Development & Other Pursuit Costs - - (26) (11) Interest Income 6,562 3,487 3,350 3,568 Other Income (Expense), Net 28 5 89 (31) Add Back: Unstabilized Development 12 - 771 674 Total Adjusted EBITDA $43,372 $38,036 $37,982 $38,579 Stabilized Property Debt 584,502 684,704 768,852 812,703 Add Unsecured Property Debt 207,103 - - - Stabilized Portfolio Debt $791,605 $684,704 $768,852 $812,703 Stabilized Portfolio Debt / Stabilized Portfolio Adjusted EBITDA 5.3x 4.9x 5.5x 5.6x Total Debt(1) 1,073,132 1,042,955 1,165,108 1,179,296 Cash (51,865) (59,565) (76,412) (39,486) Net Debt $1,021,267 $983,390 $1,088,696 $1,139,810 Net Debt Plus Ancillary Debt/Total Adjusted EBITDA 5.9x 6.5x 7.2x 7.4x Preferred 171,085 171,085 171,085 171,085 Net Debt + Preferred $1,192,352 $1,154,475 $1,259,781 $1,310,895 Net Debt + Preferred /Total Adjusted EBITDA 6.9x 7.6x 8.3x 8.5x
32 QUARTER TO DATE(1) $ IN THOUSANDS AS OF DECEMBER 31, 2022 CAPITAL EXPENDITURES (1) Excludes activity related to held for sale, acquired and/or disposed properties. (2) Represents recurring capital expenditures. YEAR TO DATE(1) Leasing Commissions Lease Incentive Tenant Improvements Land Improvements(2) Building Improvements(2) Fixtures & Equipment(2) Total Second Generation Capex Retail $418 - $449 $493 $1,020 - $2,380 Office 122 - 378 - 660 - 1,160 Multifamily 4 - 503 - 989 279 1,775 Total Portfolio $544 - $1,330 $493 $2,669 $279 $5,315 Leasing Commissions Lease Incentive Tenant Improvements Land Improvements(2) Building Improvements(2) Fixtures & Equipment(2) Total Second Generation Capex Retail $1,831 - $2,665 $1,056 $4,317 - $9,869 Office 1,732 - 1,206 - 1,898 - 4,836 Multifamily 2 - 730 126 3,431 1,060 5,349 Total Portfolio $3,565 - $4,601 $1,182 $9,646 $1,060 $20,054
33 RECONCILIATION TO PROPERTY PORTFOLIO NOI $ IN THOUSANDS (1) Includes expenses associated with the Company’s in-house asset management division. Three months ended 12/31 Year Ended 12/31 2022 2021 2022 2021 Office Same Store Rental revenues $10,845 $10,213 $41,705 $40,965 Property expenses 4,107 3,677 15,326 14,513 NOI 6,738 6,536 26,379 26,452 Non-Same Store NOI(1) 6,150 520 21,322 2,387 Segment NOI $12,888 $7,056 $47,701 $28,839 Retail Same Store Rental revenues $21,733 $20,602 $73,436 $69,256 Property expenses 5,344 5,189 18,400 17,636 NOI 16,389 15,413 55,036 51,620 Non-Same Store NOI(1) 85 (26) 8,666 6,024 Segment NOI $16,474 $15,387 $63,702 $57,644 Multifamily Same Store Rental revenues $11,197 $10,609 $44,098 $41,008 Property expenses 4,234 3,951 16,858 16,226 NOI 6,963 6,658 27,240 24,782 Non-Same Store NOI(1) 1,364 3,169 7,852 12,529 Segment NOI $8,327 $9,827 $35,092 $37,311 Total Property Portfolio NOI $37,689 $32,270 $146,495 $123,794
34 RECONCILIATION TO GAAP NET INCOME $ IN THOUSANDS Office Retail Multifamily Total Rental Properties General Contracting & Real Estate Services Total Segment revenues 20,012$ 22,146$ 13,534$ 55,692$ 95,912$ 151,604$ Segment expenses 7,125 5,673 5,205 18,003 93,667 111,670 Net operating income 12,887$ 16,473$ 8,329$ 37,689$ 2,245$ 39,934$ Depreciation and amortization (18,109) General and administrative expenses (3,512) Acquisition, development and other pursuit costs - Impairment charges (83) Gain (loss) on real estate dispositions 42 Interest income 6,568 Interest expense (10,933) Loss on extinguishment of debt (475) Unrealized credit loss release (provision) 232 Amortization of right-of-use assets - finance leases (277) Change in fair value of derivatives and other 1,186 Other income (expense) (37) Income tax benefit (provision) 5 Net income 14,541$ Net loss (income) attributable to noncontrolling interest in investment entities (137) Preferred stock dividends (2,887) Net income attributable to AHH and OP unitholders 11,517$ Year Ended 12/31/2022 Office Retail Multifamily Total Rental Properties General Contracting & Real Estate Services Total Segment revenues 74,036$ 86,344$ 58,914$ 219,294$ 234,859$ 454,153$ Segment expenses 26,335 22,642 23,822 72,799 227,158 299,957 Net operating income 47,701$ 63,702$ 35,092$ 146,495$ 7,701$ 154,196$ Depreciation and amortization (72,974) General and administrative expenses (15,691) Acquisition, development and other pursuit costs (37) Impairment charges (416) Gain (loss) on real estate dispositions 53,466 Interest income 16,978 Interest expense (39,680) Unrealized credit loss release (provision) (626) Amortization of right-of-use assets - finance leases (1,110) Loss on extinguishment of debt (3,374) Change in fair value of derivatives and other 8,698 Other income (expense) 378 Income tax benefit (provision) 145 Net income 99,953$ Net loss attributable to noncontrolling interest in investment entities (5,948) Preferred stock dividends (11,548) Net income attributable to AHH and OP unitholders 82,457$ Three Months Ended 12/31/2022
35 RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA $ IN THOUSANDS Three Months Ended 12/31/2022 9/30/2022 6/30/2022 3/31/2022 Net income attributable to common stockholders and OP unitholders $11,517 $33,899 $27,752 $9,289 Excluding: Depreciation and amortization 18,109 17,527 18,781 18,557 Loss (gain) on real estate dispositions (42) (33,931) (19,493) - Impairment of real estate assets - - 201 - Income tax provision (benefit) (5) 181 (20) (301) Interest expense 10,933 10,345 9,371 9,031 Change in fair value of derivatives and other (1,186) (782) (2,548) (4,182) Preferred dividends 2,887 2,887 2,887 2,887 Loss on extinguishment of debt 475 2,123 618 158 Unrealized credit loss provision (release) (232) (42) 295 605 Investment Entities 137 5,583 128 100 Non-cash stock compensation 562 614 506 1,609 Adjusted EBITDA $43,155 $38,404 $38,478 $37,753 Dispositions - (368) (496) - Acquisitions (full quarter) 217 - - 826 Total Adjusted EBITDA $43,372 $38,036 $37,982 $38,579 Construction Gross Profit (2,245) (2,772) (1,855) (829) Corporate G&A 3,451 3,708 3,446 4,552 Non-Cash Stock Comp (562) (614) (506) (1,609) Acquisition, Development & Other Pursuit Costs - - 26 11 Interest income (6,562) (3,487) (3,350) (3,568) Other income (expense), net (28) (5) (89) 31 Add Back: Unstabilized Development (12) - (771) (674) Stabilized Portfolio Adjusted EBITDA $37,414 $34,866 $34,883 $36,493 Acquisition (217) - - (826) Disposition - 368 496 - Development 12 - 771 674 Property Adjusted EBITDA $37,209 $35,234 $36,150 $36,341
1CLICK TO EDIT MASTER TITLE STYLE GUIDANCE PRESENTATION 2023
2FORWARD-LOOKING STATEMENTS This presentation should be read in conjunction with the unaudited condensed consolidated financial statements appearing in our press release dated February 14, 2023, which has been furnished as Exhibit 99.1 to our Form 8-K furnished on February 14, 2023. The Company makes statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). In particular, statements pertaining to our capital resources, portfolio performance and results of operations contain forward-looking statements. Likewise, all of our statements regarding our 2023 outlook and related assumptions, projections, anticipated growth in our funds from operations, normalized funds from operations, adjusted funds from operations, funds available for distribution and net operating income are forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise and the Company may not be able to realize them. The Company does not guarantee that the transactions and events described will happen as described (or that they will happen at all). For further discussion of risk factors and other events that could impact our future results, please refer to the section entitled “Risk Factors” in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”), and the documents subsequently filed by us from time to time with the SEC. The Company's actual future results and trends may differ materially from expectations depending on a variety of factors discussed in the Company's filings with the SEC. These factors include, without limitation: (a) the impact of the coronavirus (COVID-19) pandemic on macroeconomic conditions and economic conditions in the markets in which the Company operates, including, among others: (i) disruptions in, or a lack of access to, the capital markets or disruptions in the Company's ability to borrow amounts subject to existing construction loan commitments; (ii) adverse impacts to the Company's tenants' and other third parties' businesses and financial condition that adversely affect the ability and willingness of the Company's tenants and other third parties to satisfy their rent and other obligations to the Company, including deferred rent; (iii) the ability and willingness of the Company's tenants to renew their leases with the Company upon expiration of the leases or to re-lease the Company's properties on the same or better terms in the event of nonrenewal or early termination of existing leases; and (iv) federal, state and local government initiatives to mitigate the impact of the COVID-19 pandemic, including additional restrictions on business activities, shelter-in place orders and other restrictions, and the timing and amount of economic stimulus or other initiatives; (b) the Company's ability to continue construction on development and construction projects, in each case on the timeframes and on terms currently anticipated; (c) uncertainty regarding the timing of distribution and effectiveness of COVID-19 vaccines; (d) the Company's ability to accurately assess and predict the impact of the COVID-19 pandemic on its results of operations, financial condition, dividend policy, acquisition and disposition activities and growth opportunities; and (e) the Company's ability to maintain compliance with the covenants under its existing debt agreements or to obtain modifications to such covenants from the applicable lenders. The Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in the Company's expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by applicable law. The Company does not provide a reconciliation for its guidance range of Normalized FFO per diluted share to net income per diluted share, the most directly comparable forward-looking GAAP financial measure, because it is unable to provide a meaningful or accurate estimate of reconciling items and the information is not available without unreasonable effort as a result of the inherent difficulty of forecasting the timing and/or amounts of various items that would impact net income per diluted share. For the same reasons, the Company is unable to address the probable significance of the unavailable information and believes that providing a reconciliation for its guidance range of Normalized FFO per diluted share would imply a degree of precision for its forward-looking net income per diluted share that could be misleading to investors.
32023 OUTLOOK & ASSUMPTIONS LOW HIGH Portfolio NOI $157.4M $158.4M Construction Segment Profit $11.8M $12.8M G&A Expenses $16.7M $17.3M Interest Income $12.8M $13.4M Interest Expense(1) $45.4M $46.1M Normalized FFO Per Diluted Share $1.23 $1.27 SUMMARY OF GUIDANCE ASSUMPTIONS • Chronicle Mill stabilizes 1Q23 • Acquisition of $100 - $200M assets • Existing development pipeline fully funded through the unsecured revolving credit facility • Delivery of Southern Post 4Q23 (1) Includes the interest expense on finance leases. $ in millions
4ESTIMATED NOI & FEE INCOME(1) (1) Includes AHH rent. Excludes expenses associated with the Company’s in house asset management division. (2) Based on management’s guidance. (3) Fully Stabilized Portfolio assumes 100% NOI from Parcel 4 Mixed-Use project and announced pipeline is delivered and stabilized per schedule on page 17 of the 4Q22 Supplemental Financial Package; excludes T. Rowe Price Global HQ. $ in millions $106 $121 $151 $163 $185 $195 $20 $18 $17 $13 $13 $13 $8 $4 $8 $12 $7 $7 $0 $50 $100 $150 $200 2020 2021 2022 2023⁽²⁾ 2024⁽²⁾ Fully Stabilized Portfolio⁽³⁾ 91% 9% 79% 21% 2020 2021 2022 2023⁽²⁾ 2024⁽²⁾ Fully Stabilized Portfolio⁽³⁾ CAGR Portfolio NOI $106 $121 $151 $163 $185 $195 10.7% Construction Gross Profit (net of taxes) 8 4 8 12 7 7 -2.2% Mezz Income 20 18 17 13 13 13 -6.9% Total Fee Income $28 $22 $25 $25 $20 $20 -5.5% Total $134 $143 $176 $188 $205 $215 8.2%
5EVOLVING PORTFOLIO GAAP NOI COMPOSITION 2021 2023 Guidance Midpoint Retail Multifamily Office Projected Property Segment NOI Fully Stabilized (2)(3) (1) Includes AHH rent. Excludes expenses associated with the Company’s in house asset management division. (2) Fully Stabilized Portfolio assumes announced pipeline is delivered and stabilized per schedule on page 17 of the 4Q22 Supplemental Financial Package. (3) Assumes company acquired 100% interest in Parcel 4 Mixed-Use development and disposes of T. Rowe Price world headquarters. $ in millions 49% 25% 26% 44% 34% 22% 42% 33% 25% PORTFOLIO COMPOSITION(1) 2021 2023 MIDPOINT FULLY STABILIZED(2)(3) RETAIL $59 $72 $82 OFFICE $31 $56 $64 MULTIFAMILY $31 $35 $49 TOTAL $121 $163 $195
6TREND COMPARISONS $ IN MILLIONS 2021 2022 2023E NOI $121 $151 $163 EBITDA $127 $152 $168 NFFO $87 $108 $110 Total Dividend $49 $61 $69 $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 NOI EBITDA NFFO Total Dividend 2021 2022 2023E