UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 9, 2023
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||
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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 May 9, 2023, Armada Hoffler Properties, Inc. (the “Company”) issued a press release announcing its financial position as of March 31, 2023, results of operations for the three months ended March 31, 2023, and other related information. Also on May 9, 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 months ended March 31, 2023. 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, 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.
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: May 9, 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 FIRST QUARTER 2023 RESULTS
Net Income of $0.03 Per Diluted Share
Normalized FFO of $0.30 Per Diluted Share
Announced 3% Increase in the Quarterly Cash Dividend on Common Stock
Announced major off market, mixed-use acquisition of The Interlock in West Midtown, Atlanta
Maintained 2023 Full-Year Normalized FFO Guidance Range of $1.23 to $1.27 Per Diluted Share
Same Store net operating income ("NOI") increased 4.3% on a GAAP basis and 5.3% on a cash basis
VIRGINIA BEACH, VA, May 9, 2023 – Armada Hoffler Properties, Inc. (NYSE: AHH) today announced its results for the quarter ended March 31, 2023 and provided an update on current events.
First Quarter and Recent Highlights:
•Net income attributable to common stockholders and OP Unit holders of $2.4 million, or $0.03 per diluted share, compared to $9.3 million, or $0.11 per diluted share, for the three months ended March 31, 2022.
•Funds from operations attributable to common stockholders and OP Unit holders ("FFO") of $20.6 million, or $0.23 per diluted share, compared to $27.6 million, or $0.31 per diluted share, for the three months ended March 31, 2022. See "Non-GAAP Financial Measures."
•Normalized funds from operations attributable to common stockholders and OP Unit holders ("Normalized FFO") of $26.5 million, or $0.30 per diluted share, compared to $24.5 million, or $0.28 per diluted share, for the three months ended March 31, 2022.
•Maintained 2023 full-year Normalized FFO guidance of $1.23 to $1.27 per diluted share at the Company's previous guidance range.
•Maintained 97% portfolio occupancy as of March 31, 2023. Office occupancy remained at 97%, retail occupancy remained at 98%, and multifamily occupancy remained at 96%.
•Positive renewal spreads during the first quarter in both the office and retail segments:
◦Lease rates on first quarter office lease renewals increased 10.9% on a GAAP basis and 1.7% on a cash basis.
◦Lease rates on first quarter retail lease renewals increased 10.1% on a GAAP basis and 6.8% on a cash basis.
•Same Store NOI increased 4.3% on a GAAP basis and 5.3% on a cash basis compared to the quarter ended March 31, 2022:
◦Office Same Store NOI increased 2.1% on a GAAP basis and 0.8% on a cash basis.
◦Retail Same Store NOI increased 4.9% on a GAAP basis and 7.3% on a cash basis.
◦Multifamily Same Store NOI increased 5.1% on a GAAP and 5.4% on a cash basis.
•Announced the $215 million acquisition of the Interlock in West Midtown Atlanta, which the Company anticipates completing in the second quarter, subject to customary closing conditions. The Company
anticipates financing the transaction with $100 million of new fixed-rated financing in addition to the conversion of its existing mezzanine loan into equity and the issuance of OP Units to the sponsor developer.
•Announced that the Board of Directors declared a cash dividend of $0.195 per common share, representing a 3% increase over the prior quarter's dividend.
“We continue to see our best in class properties, located in desirable markets, yield impressive results in most any economic climate,” said Louis Haddad, President & CEO of Armada Hoffler. “With the acquisition of the immediately accretive Interlock asset in Atlanta’s West Midtown, we expect further growth with a concentration of investment in some of Atlanta’s premier markets, thus complementing our existing dominant position at Baltimore’s Harbor Point and Virginia Beach’s Town Center. With substantial growth in same-store sales and releasing spreads leading the way, while maintaining occupancy of 97%, the board has confidently raised the dividend beyond pre-pandemic levels."
Financial Results
Net income attributable to common stockholders and OP Unit holders for the first quarter decreased to $2.4 million compared to $9.3 million for the first quarter of 2022. The period-over-period decrease was primarily due to changes in the fair value of interest rate derivatives, and an increase in interest expense. The decrease was partially offset by an increase in property operating income due to acquisitions and developments, higher construction segment gross profit, decrease in unrealized credit loss provision, and higher interest income on the Company's real estate financing portfolio.
FFO attributable to common stockholders and OP Unit holders for the first quarter decreased to $20.6 million compared to $27.6 million for the first quarter of 2022. Normalized FFO attributable to common stockholders and OP Unit holders for the first quarter increased to $26.5 million compared to $24.5 million for the first quarter of 2022. The period-over-period decreases in FFO and Normalized FFO were due to an increase in interest expense. These decreases were partially offset by higher property operating income resulting primarily from leasing activity and property acquisitions, and an increase in general contracting gross profit.
Operating Performance
At the end of the first quarter, the Company’s office, retail, and multifamily stabilized operating property portfolios were 96.8%, 98.4% and 95.7% occupied, respectively.
Total construction contract backlog was $651.8 million as of March 31, 2023.
Interest income from real estate financing investments was $3.5 million for the three months ended March 31, 2023.
Balance Sheet and Financing Activity
As of March 31, 2023, the Company had $1.1 billion of total debt outstanding, including $105.0 million outstanding under its revolving credit facility. Total debt outstanding excludes GAAP adjustments and deferred financing costs. Approximately 57% of the Company’s debt had fixed interest rates or was subject to interest rate swaps as of March 31, 2023. The Company’s debt was 100% fixed or economically hedged as of March 31, 2023 after considering interest rate caps with strike prices at or below 400 basis points.
Outlook
The Company maintained its 2023 full-year Normalized FFO guidance range at the Company's previous guidance range of $1.23 to $1.27 per diluted share. The following table updates the Company's assumptions underpinning its full-year guidance. The Company's executive management will provide further details regarding its 2023 earnings guidance during today's webcast and conference call.
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Full-year 2023 Guidance [1][2] | Expected Ranges | |||||||||||||
| Portfolio NOI | $159.8M | $160.8M | ||||||||||||
| Construction Segment Gross Profit | $11.8M | $12.8M | ||||||||||||
| G&A Expenses | $17.3M | $18.0M | ||||||||||||
| Interest Income | $11.9M | $12.5M | ||||||||||||
Interest Expense[3] | $45.5M | $46.1M | ||||||||||||
| Normalized FFO per diluted share | $1.23 | $1.27 | ||||||||||||
[1] Includes the following assumptions:
•Acquisition of the Interlock for $215M in the second quarter of 2023
•Two real estate financing transactions occurring in the second and fourth quarters
[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.
[3] Includes interest expense on finance leases
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, May 9, 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) 888 259 6580 (toll-free dial-in number) or (+1) 514 316 5035 (toll dial-in number). The conference ID is 47149616. A replay of the conference call will be available through Sunday, June 11, 2023 by dialing (+1) 877 674 7070 (toll-free dial-in number) or (+1) 416 764 8692 (toll dial-in number) and providing passcode 149616.
About Armada Hoffler Properties, Inc.
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.
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
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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. 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, 2022, 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 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, debt extinguishment losses and prepayment penalties, impairment of intangible assets and liabilities, property acquisition, development and other pursuit costs, mark-to-market adjustments for interest rate derivatives not designated as cash flow hedges, 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. Other equity REITs may not calculate Normalized FFO in the same manner as we do, and, accordingly, our Normalized FFO may not be comparable to such other REITs' Normalized FFO.
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
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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 further in this release.
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ARMADA HOFFLER PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
| March 31, 2023 | December 31, 2022 | |||||||||||||
| (Unaudited) | ||||||||||||||
| ASSETS | ||||||||||||||
| Real estate investments: | ||||||||||||||
| Income producing property | $ | 1,894,941 | $ | 1,884,214 | ||||||||||
| Held for development | 6,294 | 6,294 | ||||||||||||
| Construction in progress | 61,513 | 53,067 | ||||||||||||
| 1,962,748 | 1,943,575 | |||||||||||||
| Accumulated depreciation | (344,081) | (329,963) | ||||||||||||
| Net real estate investments | 1,618,667 | 1,613,612 | ||||||||||||
| Cash and cash equivalents | 33,817 | 48,139 | ||||||||||||
| Restricted cash | 2,619 | 3,726 | ||||||||||||
| Accounts receivable, net | 38,195 | 39,186 | ||||||||||||
| Notes receivable, net | 133,082 | 136,039 | ||||||||||||
| Construction receivables, including retentions, net | 66,435 | 70,822 | ||||||||||||
| Construction contract costs and estimated earnings in excess of billings | 1,206 | 342 | ||||||||||||
| Equity method investments | 93,080 | 71,983 | ||||||||||||
| Operating lease right-of-use assets | 23,284 | 23,350 | ||||||||||||
| Finance lease right-of-use assets | 45,600 | 45,878 | ||||||||||||
| Acquired lease intangible assets | 100,006 | 103,870 | ||||||||||||
| Other assets | 76,024 | 85,363 | ||||||||||||
| Total Assets | $ | 2,232,015 | $ | 2,242,310 | ||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| Indebtedness, net | $ | 1,113,255 | $ | 1,068,261 | ||||||||||
| Accounts payable and accrued liabilities | 19,051 | 26,839 | ||||||||||||
| Construction payables, including retentions | 77,115 | 93,472 | ||||||||||||
| Billings in excess of construction contract costs and estimated earnings | 16,736 | 17,515 | ||||||||||||
| Operating lease liabilities | 31,645 | 31,677 | ||||||||||||
| Finance lease liabilities | 46,536 | 46,477 | ||||||||||||
| Other liabilities | 53,815 | 54,055 | ||||||||||||
| Total Liabilities | 1,358,153 | 1,338,296 | ||||||||||||
| Total Equity | 873,862 | 904,014 | ||||||||||||
| Total Liabilities and Equity | $ | 2,232,015 | $ | 2,242,310 | ||||||||||
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ARMADA HOFFLER PROPERTIES, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share amounts)
| Three Months Ended March 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| (Unaudited) | ||||||||||||||
| Revenues | ||||||||||||||
| Rental revenues | $ | 56,218 | $ | 54,635 | ||||||||||
| General contracting and real estate services revenues | 84,238 | 24,650 | ||||||||||||
| Interest income | 3,719 | 3,568 | ||||||||||||
| Total revenues | 144,175 | 82,853 | ||||||||||||
| Expenses | ||||||||||||||
| Rental expenses | 12,960 | 12,669 | ||||||||||||
| Real estate taxes | 5,412 | 5,404 | ||||||||||||
| General contracting and real estate services expenses | 81,170 | 23,821 | ||||||||||||
| Depreciation and amortization | 18,468 | 18,557 | ||||||||||||
| Amortization of right-of-use assets - finance leases | 277 | 278 | ||||||||||||
| General and administrative expenses | 5,448 | 4,708 | ||||||||||||
| Acquisition, development and other pursuit costs | — | 11 | ||||||||||||
| Impairment charges | 102 | 47 | ||||||||||||
| Total expenses | 123,837 | 65,495 | ||||||||||||
| Gain on real estate dispositions, net | — | — | ||||||||||||
| Operating income | 20,338 | 17,358 | ||||||||||||
| Interest expense | (12,302) | (9,031) | ||||||||||||
| Loss on extinguishment of debt | — | (158) | ||||||||||||
| Change in fair value of derivatives and other | (2,447) | 4,182 | ||||||||||||
| Unrealized credit loss provision | (77) | (605) | ||||||||||||
| Other income (expense), net | 93 | 229 | ||||||||||||
| Income before taxes | 5,605 | 11,975 | ||||||||||||
| Income tax (provision) benefit | (188) | 301 | ||||||||||||
| Net income | 5,417 | 12,276 | ||||||||||||
| Net income attributable to noncontrolling interests in investment entities | (154) | (100) | ||||||||||||
| Preferred stock dividends | (2,887) | (2,887) | ||||||||||||
| Net income attributable to common stockholders and OP Unitholders | $ | 2,376 | $ | 9,289 | ||||||||||
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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 March 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| (Unaudited) | ||||||||||||||
| Net income attributable to common stockholders and OP Unitholders | $ | 2,376 | $ | 9,289 | ||||||||||
Depreciation and amortization (1) | 18,245 | 18,285 | ||||||||||||
| FFO attributable to common stockholders and OP Unitholders | 20,621 | 27,574 | ||||||||||||
| Acquisition, development and other pursuit costs | — | 11 | ||||||||||||
| Impairment of intangible assets and liabilities | 102 | 47 | ||||||||||||
| Loss on extinguishment of debt | — | 158 | ||||||||||||
| Unrealized credit loss provision | 77 | 605 | ||||||||||||
| Amortization of right-of-use assets - finance leases | 277 | 278 | ||||||||||||
| Decrease (Increase) in fair value of derivatives not designated as cash flow hedges | 3,807 | (4,182) | ||||||||||||
| Amortization of interest rate cap premiums on designated cash flow hedges | 1,614 | 42 | ||||||||||||
| Normalized FFO available to common stockholders and OP Unitholders | $ | 26,498 | $ | 24,533 | ||||||||||
| Net income attributable to common stockholders and OP Unitholders per diluted share and unit | $ | 0.03 | $ | 0.11 | ||||||||||
| FFO attributable to common stockholders and OP Unitholders per diluted share and unit | $ | 0.23 | $ | 0.31 | ||||||||||
| Normalized FFO attributable to common stockholders and OP Unitholders per diluted share and unit | $ | 0.30 | $ | 0.28 | ||||||||||
| Weighted average common shares and units - diluted | 88,398 | 87,749 | ||||||||||||
________________________________________
| (1) The adjustment for depreciation and amortization for the three months ended March 31, 2023 and 2022 exclude $0.2 million and $0.3 million, respectively, of depreciation attributable to our joint venture partners. | ||
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ARMADA HOFFLER PROPERTIES, INC.
RECONCILIATION OF NET INCOME TO SAME STORE NOI, CASH BASIS
(in thousands) (unaudited)
| Three Months Ended March 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
Office Same Store(1) | ||||||||||||||
| Same Store NOI, Cash Basis | $ | 6,665 | $ | 6,611 | ||||||||||
GAAP Adjustments (2) | 88 | 2 | ||||||||||||
| Same Store NOI | 6,753 | 6,613 | ||||||||||||
Non-Same Store NOI (3) | 5,623 | 4,766 | ||||||||||||
| Segment NOI | 12,376 | 11,379 | ||||||||||||
Retail Same Store (4) | ||||||||||||||
| Same Store NOI, Cash Basis | 15,714 | 14,649 | ||||||||||||
GAAP Adjustments (2) | 749 | 1,041 | ||||||||||||
| Same Store NOI | 16,463 | 15,690 | ||||||||||||
Non-Same Store NOI (3) | 204 | 1 | ||||||||||||
| Segment NOI | 16,667 | 15,691 | ||||||||||||
Multifamily Same Store (5) | ||||||||||||||
| Same Store NOI, Cash Basis | 6,829 | 6,481 | ||||||||||||
GAAP Adjustments (2) | 208 | 217 | ||||||||||||
| Same Store NOI | 7,037 | 6,698 | ||||||||||||
Non-Same Store NOI (3) | 1,766 | 2,794 | ||||||||||||
| Segment NOI | 8,803 | 9,492 | ||||||||||||
| Total Property NOI | 37,846 | 36,562 | ||||||||||||
| General contracting & real estate services gross profit | 3,068 | 829 | ||||||||||||
| Real estate financing gross profit | 2,439 | 2,634 | ||||||||||||
Interest income(6) | 183 | 109 | ||||||||||||
| Depreciation and amortization | (18,468) | (18,557) | ||||||||||||
| Amortization of right-of-use assets - finance leases | (277) | (278) | ||||||||||||
| General and administrative expenses | (5,448) | (4,708) | ||||||||||||
| Acquisition, development and other pursuit costs | — | (11) | ||||||||||||
| Impairment charges | (102) | (47) | ||||||||||||
Interest expense(7) | (11,205) | (8,206) | ||||||||||||
| Loss on extinguishment of debt | — | (158) | ||||||||||||
| Change in fair value of derivatives and other | (2,447) | 4,182 | ||||||||||||
| Unrealized credit loss provision | (77) | (605) | ||||||||||||
| Other income (expense), net | 93 | 229 | ||||||||||||
| Income tax (provision) benefit | (188) | 301 | ||||||||||||
| Net income | 5,417 | 12,276 | ||||||||||||
| Net income attributable to noncontrolling interests in investment entities | (154) | (100) | ||||||||||||
| Preferred stock dividends | (2,887) | (2,887) | ||||||||||||
| Net income attributable to AHH and OP unitholders | $ | 2,376 | $ | 9,289 | ||||||||||
| (1) Office same-store portfolio excludes Constellation Office and Wills Wharf. | ||
| (2) GAAP Adjustments include adjustments for straight-line rent, termination fees, deferred rent, recoveries of deferred rent, and amortization of lease incentives. | ||
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| (3) Includes expenses associated with the Company's in-house asset management division. | ||
| (4) Retail same-store portfolio excludes Town Center Pembroke. | ||
| (5) Multifamily same-store portfolio excludes Gainesville Apartments, 1305 Dock Street, and Chronicle Mill. | ||
(6) Excludes real estate financing segment interest income. | ||
(7) Excludes real estate financing segment interest expense. | ||
Contact:
Chelsea Forrest
Armada Hoffler Properties, Inc.
Director of Corporate Communications and Investor Relations
Email: CForrest@ArmadaHoffler.com
Phone: (757) 612-4248
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1 1Q23 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 May 9, 2023, which has been furnished as Exhibit 99.1 to our Form 8-K furnished on May 9, 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. 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, 2022, 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 Shawn J. Tibbetts, Chief Operating Officer Matthew T. Barnes-Smith, Chief Financial Officer Eric E. Apperson, President of Construction Shelly R. Hampton, President of Asset Management Jefferies Peter Abramowitz (212) 336-7241 pabramowitz@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. Wesley Golladay (216) 737-7510 wgolladay@rwbaird.com Stifel Stephen Manaker (212) 271-3716 manakers@stifel.com CREDIT RATING Rating: BBB Agency: DBRS Morningstar
4 HIGHLIGHTS • Net income attributable to common stockholders and OP Unit holders of $2.4 million, or $0.03 per diluted share, compared to $9.3 million, or $0.11 per diluted share, for the three months ended March 31, 2022. • Funds from operations attributable to common stockholders and OP Unit holders ("FFO") of $20.6 million, or $0.23 per diluted share, compared to $27.6 million, or $0.31 per diluted share, for the three months ended March 31, 2022. • Normalized funds from operations attributable to common stockholders and OP Unit holders ("Normalized FFO") of $26.5 million, or $0.30 per diluted share, compared to $24.5 million, or $0.28 per diluted share, for the three months ended March 31, 2022. • Maintained 2023 full-year Normalized FFO guidance of $1.23 to $1.27 per diluted share at the Company’s previous guidance range. • Maintained 97% portfolio occupancy as of March 31, 2023. Office occupancy remained at 97%, retail occupancy remained at 98%, and multifamily occupancy remained at 96%. • Positive renewal spreads during the first quarter in both the office and retail segments: • Lease rates on first quarter office lease renewals increased 10.9% on a GAAP basis and 1.7% on a cash basis. • Lease rates on first quarter retail lease renewals increased 10.1% on a GAAP basis and 6.8% on a cash basis. • Same Store net operating income ("NOI") increased 4.3% on a GAAP basis and 5.3% on a cash basis compared to the quarter ended March 31, 2022: • Office Same Store NOI increased 2.1% on a GAAP basis and 0.8% on a cash basis. • Retail Same Store NOI increased 4.9% on a GAAP basis and 7.3% on a cash basis. • Multifamily Same Store NOI increased 5.1% on a GAAP and 5.4% on a cash basis. • Announced the $215 million acquisition of the Interlock in West Midtown Atlanta, which the Company anticipates completing in the second quarter, subject to customary closing conditions. The Company anticipates financing the transaction with $100 million of new fixed-rated financing in addition to the conversion of its existing mezzanine loan into equity and the issuance of OP Units to the sponsor developer. • Announced that the Board of Directors declared a cash dividend of $0.195 per common share, representing a 3% increase over the prior quarter's dividend.
5 2023 OUTLOOK & ASSUMPTIONS OUTLOOK(1) LOW HIGH PORTFOLIO NOI $159.8M $160.8M CONSTRUCTION SEGMENT PROFIT $11.8M $12.8M G&A EXPENSES $17.3M $18.0M INTEREST INCOME $11.9M $12.5M INTEREST EXPENSE(2) $45.5M $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. • Acquisition of the Interlock for $215M in May of 2023 • Two real estate financing transactions occurring in the second and fourth quarters
6 SUMMARY INFORMATION $ IN THOUSANDS, EXCEPT PER SHARE (1) Excludes GAAP adjustments. (2) See appendix for definitions. (3) Total occupancy weighted by annualized base rent. Three Months Ended OPERATIONAL METRICS 3/31/2023 12/31/2022 9/30/2022 6/30/2022 Net Income Attributable to Common Stockholders and OP Unitholders $2,376 $11,517 $33,899 $27,752 Net Income per Diluted Share Attributable to Common Stockholders and OP Unitholders $0.03 $0.13 $0.38 $0.31 Normalized FFO Attributable to Common Stockholders and OP Unitholders 26,498 30,633 25,789 26,203 Normalized FFO per Diluted Share Attributable to Common Stockholders and OP Unitholders $0.30 $0.35 $0.29 $0.30 Stabilized Portfolio Debt / Stabilized Portfolio Adjusted EBITDA 5.4x 5.3x 4.9x 5.5x Fixed charge coverage ratio 2.3x 2.6x 2.4x 2.5x CAPITALIZATION Common Shares Outstanding 67,939 67,730 67,730 67,730 Operating Partnership Units Outstanding 20,611 20,611 20,611 20,621 Common Shares and Operating Partnership Units Outstanding 88,550 88,341 88,341 88,351 Market Price per Common Share as of Last Day of Quarter $11.81 $11.49 $10.38 $12.84 Common Equity Capitalization 1,045,776 1,015,038 916,979 1,134,427 Preferred Equity Capitalization 171,085 171,085 171,085 171,085 Total Equity Capitalization 1,216,861 1,186,123 1,088,064 1,305,512 Total Debt(1) 1,117,424 1,073,132 1,042,955 1,165,108 Total Capitalization $2,334,285 $2,259,255 $2,131,019 $2,470,620 STABILIZED PORTFOLIO OCCUPANCY(2) Retail 98.4% 97.9% 98.0% 97.1% Office 96.8% 96.7% 96.8% 97.9% Multifamily 95.7% 96.1% 96.4% 97.2% Weighted Average(3) 97.1% 97.0% 97.1% 97.3% STABILIZED PORTFOLIO Commercial Retail Portfolio Net Operating Income $16,667 $16,474 $15,597 $15,940 Number of Properties 38 38 37 37 Net Rentable Square Feet 3,915,809 3,916,001 3,791,820 3,798,868 Office Portfolio Net Operating Income $12,376 $12,888 $11,757 $11,679 Number of Properties 9 9 9 8 Net Rentable Square Feet 2,111,924 2,111,923 2,120,341 1,792,350 Multifamily Multifamily Portfolio Net Operating Income $8,167 $8,327 $8,188 $9,083 Number of Properties 10 10 10 10 Units 2,254 2,254 2,254 2,447
7 SUMMARY INCOME STATEMENT $ IN THOUSANDS, EXCEPT PER SHARE Three Months Ended 3/31/2023 3/31/2022 Revenues (Unaudited) Rental Revenues $56,218 $54,635 General Contracting and Real Estate Services Revenues 84,238 24,650 Interest Income 3,719 3,568 Total Revenues 144,175 82,853 Expenses Rental Expenses 12,960 12,669 Real Estate Taxes 5,412 5,404 General Contracting and Real Estate Services Expenses 81,170 23,821 Depreciation and Amortization 18,468 18,557 Amortization of Right-of-Use Assets - Finance Leases 277 278 General & Administrative Expenses 5,448 4,708 Acquisition, Development & Other Pursuit Costs - 11 Impairment Charges 102 47 Total Expenses 123,837 65,495 Operating Income 20,338 17,358 Interest Expense (12,302) (9,031) Loss on Extinguishment of Debt - (158) Change in Fair Value of Derivatives and Other (2,447) 4,182 Unrealized Credit Loss Provision (77) (605) Other Income (Expense), Net 93 229 Income Before Taxes 5,605 11,975 Income Tax (Provision) Benefit (188) 301 Net Income $5,417 $12,276 Net Income Attributable to Noncontrolling Interest in Investment Entities (154) (100) Preferred Stock Dividends (2,887) (2,887) Net Income Attributable to AHH and OP Unitholders $2,376 $9,289 Net Income per Diluted Share and Unit Attributable to AHH and OP Unitholders $0.03 $0.11 Weighted Average Shares & OP Units - Diluted 88,398 87,749
8 SUMMARY BALANCE SHEET $ IN THOUSANDS 3/31/2023 12/31/2022 Assets (Unaudited) Real Estate Investments: Income Producing Property $1,894,941 $1,884,214 Held for Development 6,294 6,294 Construction in Progress 61,513 53,067 Accumulated Depreciation (344,081) (329,963) Net Real Estate Investments 1,618,667 1,613,612 Cash and Cash Equivalents 33,817 48,139 Restricted Cash 2,619 3,726 Accounts Receivable, Net 38,195 39,186 Notes Receivable, Net 133,082 136,039 Construction Receivables, Including Retentions, Net 66,435 70,822 Construction Contract Costs and Estimated Earnings in Excess of Billings 1,206 342 Equity Method Investments 93,080 71,983 Operating Lease Right-of-Use Assets 23,284 23,350 Finance Lease Right-of-Use Assets 45,600 45,878 Acquired Lease Intangible Assets 100,006 103,870 Other Assets 76,024 85,363 Total Assets $2,232,015 $2,242,310 Liabilities and Equity Indebtedness, Net $1,113,255 $1,068,261 Accounts Payable and Accrued Liabilities 19,051 26,839 Construction Payables, Including Retentions 77,115 93,472 Billings in Excess of Construction Contract Costs and Est. Earnings 16,736 17,515 Operating Lease Liabilities 31,645 31,677 Finance Lease Liabilities 46,536 46,477 Other Liabilities 53,815 54,055 Total Liabilities 1,358,153 1,338,296 Total Equity 873,862 904,014 Total Liabilities and Equity $2,232,015 $2,242,310 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) 3/31/2023 12/31/2022 9/30/2022 6/30/2022 Funds From Operations Net Income Attributable to AHH and OP Unitholders $2,376 $11,517 $33,899 $27,752 Net Income per Diluted Share $0.03 $0.13 $0.38 $0.31 Depreciation and Amortization(2) 18,245 17,887 17,290 18,509 Loss (Gain) on Dispositions of Operating Real Estate(3) - 11 (28,502) (19,493) Impairment of Real Estate Assets - - - 201 FFO $20,621 $29,415 $22,687 $26,969 FFO per Diluted Share $0.23 $0.33 $0.26 $0.31 Normalized FFO Acquisition, Development & Other Pursuit Costs - - - 26 Loss on Extinguishment of Debt - 475 2,123 618 Non-Cash GAAP Adjustments 456 128 236 657 Decrease (Increase) in Fair Value of Derivatives 3,807 (1,186) (782) (2,548) Amortization of Interest Rate Cap Premium on Designated Cash Flow Hedges 1,614 1,801 1,525 481 Normalized FFO $26,498 $30,633 $25,789 $26,203 Normalized FFO per Diluted Share $0.30 $0.35 $0.29 $0.30 Adjusted FFO Non-Cash Stock Compensation 1,846 562 614 506 Acquisition, Development & Other Pursuit Costs - - - (26) Tenant Improvements, Leasing Commissions, Lease Incentives (4) (3,460) (1,875) (639) (1,242) Property-Related Capital Expenditures (3,724) (3,441) (2,417) (2,296) Adjustment for Real Estate Financing Modification and Exit Fees (209) (209) (209) (209) Non-Cash Interest Expense(5) 1,292 1,312 1,336 1,395 Cash Ground Rent Payment - Finance Lease (668) (653) (635) (635) GAAP Adjustments (1,459) (1,718) (1,762) (1,622) AFFO $20,116 $24,611 $22,077 $22,074 AFFO per Diluted Share $0.23 $0.28 $0.25 $0.25 Weighted Average Common Shares Outstanding 67,787 67,730 67,730 67,710 Weighted Average Operating Partnership Units Outstanding 20,611 20,611 20,611 20,621 Total Weighted Average Common Shares and OP Units Outstanding 88,398 88,341 88,341 88,331
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 $0.8M for the 3 months ended 3/31/2023. (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 3/31/2023 As of 3/31/2023 Office(3) Retail Multifamily Total Mortgages and Notes Payable(5) $1,117,424 Stable Portfolio Accounts Payable and Accrued Liabilities 19,051 Portfolio NOI(1)(2) $12,048 $16,181 $8,788 $37,017 Construction Payables, Including Retentions 77,115 Non-Stabilized Properties NOI - - (636) (636) Other Liabilities(5) 69,790 Signed Leases Not Yet Occupied or in Free Rent Period 922 380 54 1,356 Total Liabilities $1,283,380 Stable Portfolio NOI $12,970 $16,561 $8,206 $37,737 Intra-Quarter Transactions Preferred Equity Net Acquisitions - - - - Liquidation Value Net Dispositions - - - - Series A Cumulative Redeemable Perpetual Preferred Stock $171,085 Annualized $51,880 $66,244 $32,823 $150,947 Non-Stabilized Portfolio Common Equity As of 3/31/2023 As of 3/31/2023 Projects Under Development $49,600 Total Common Shares Outstanding 67,939 Properties in Lease Up 54,900 Total OP Units Outstanding 20,611 Development Opportunities 17,000 Total Common Shares & OP Units Outstanding 88,550 Unconsolidated JV Development 94,500 Total Non-Stabilized Portfolio $216,000 Third-Party General Contracting and Real Estate Services Trailing 12 Months General Contracting Gross Profit $9,940 Non-Property Assets(4) As of 3/31/2023 Cash and Restricted Cash $36,436 Accounts Receivable, Net 38,195 Notes Receivable and Other Notes Receivable(5) 17,773 Real Estate Financing Investments(5) 116,418 Construction Receivables, Including Retentions (5) 66,618 Acquired Lease Intangible Assets 100,006 Other Assets / Costs in Excess of Earnings 77,230 Total Non-Property Assets $452,676
11 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. 7.7 x 6.6 x 5.4 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 3/31/2023 Stabilized Portfolio Adjusted EBITDA $36,784 Stabilized Portfolio Debt $801,388 Stabilized Portfolio Debt / Stabilized Portfolio Adjusted EBITDA 5.4x Total Adjusted EBITDA(1) $40,745 Net Debt(2) $1,080,988 Net Debt Plus Ancillary Debt/Total Adjusted EBITDA 6.6x Net Debt + Preferred $1,252,073 Net Debt + Preferred /Total Adjusted EBITDA 7.7x
12 DEBT MANAGEMENT $ IN THOUSANDS (1) Includes impact of non-designated interest rate caps. (2) Excludes debt subject to interest rate swap locks. (3) Represents the weighted average interest rate of the portfolio, inclusive of interest rate derivatives. (4) Includes debt subject to interest rate swap locks. (5) Excludes GAAP adjustments. (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)(3) 42.7% 4.3% 3.4 Yrs Fixed-Rate Debt(4)(5) 57.3% 3.7% 5.2 Yrs Secured vs. Unsecured Debt Unsecured Debt 45.2% 3.6% 2.7 Yrs Secured Debt 54.8% 4.2% 5.9 Yrs Portfolio Weighted Average 3.9% (3) 4.4 Yrs Interest Rate Cap Agreements Effective Date Maturity Date Strike Rate Notional Amount 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 September 2022 September 2024 SOFR 1.00%-3.00%(6) 32,822 Total Interest Rate Caps $766,776 Fixed-Rate Debt(4)(5) $639,885 Fixed-Rate and Hedged Debt $1,406,661 Total Debt(5) $1,117,424 % Fixed or Hedged 100%
13 OUTSTANDING DEBT $ IN THOUSANDS (1) Excludes non-designated interest rate caps. (2) Converted to a SOFR note subsequent to quarter-end. (3) Subject to a rate floor. (4) Includes debt subject to interest rate swap locks. (5) Includes debt subject to designated interest rate caps. Debt Stated Rate Effective Rate of as 3/31/2023(1) Maturity Date 2023 2024 2025 2026 2027 Thereafter Outstanding as of 3/31/2023 Secured Debt - Stabilized Red Mill Central 4.80% 4.80% Jun-2024 $131 $1,838 $1,969 Premier Apartments L+1.55% 6.41% (2) Oct-2024 175 16,035 16,210 Premier Retail L+1.55% 6.41% (2) Oct-2024 86 7,898 7,984 Red Mill South 3.57% 3.57% May-2025 255 351 4,502 5,108 Market at Mill Creek L+1.55% 6.41% (2) Jul-2025 486 647 11,200 12,333 Gainesville Apartments SOFR+1.50% 6.30% (3) Dec-2025 - - 30,000 30,000 Encore Apartments 2.93% 2.93% Feb-2026 418 573 590 22,261 23,842 4525 Main Street 2.93% 2.93% Feb-2026 539 735 757 28,579 30,610 Thames Street Wharf BSBY+1.30% 2.35% (2)(4) Sep-2026 1,075 1,972 3,050 62,872 68,969 Constellation Energy Building BSBY+1.50% 4.42% (2)(3)(5) Nov-2026 - - - 175,000 175,000 Southgate Square L+1.90% 6.76% (2)(3) Dec-2026 648 864 864 23,603 25,979 Nexton Square SOFR+1.95% 6.75% (3) Jun-2027 459 613 613 613 19,743 22,041 Liberty Apartments SOFR+1.50% 6.30% Sep-2027 272 345 364 382 19,495 20,858 Greenbrier Square 3.74% 3.74% Oct-2027 279 385 399 415 18,370 19,848 Lexington Square 4.50% 4.50% Sep-2028 221 306 320 335 351 12,287 13,820 Red Mill North 4.73% 4.73% Dec-2028 87 121 127 133 140 3,442 4,050 Greenside Apartments 3.17% 3.17% Dec-2029 568 780 808 834 861 27,820 31,671 Smith's Landing 4.05% 4.05% Jun-2035 717 994 1,037 1,081 1,126 10,341 15,296 Edison Apartments 5.30% 5.30% Dec-2044 290 405 427 450 474 13,423 15,469 The Cosmopolitan 3.35% 3.35% Jul-2051 660 906 937 968 1,001 36,555 41,027 Total - Secured Stabilized Debt 7,366 35,768 55,995 317,526 61,561 103,868 582,084 Secured Debt - Development Pipeline Chronicle Mill L+3.00% 5.86% (2)(3)(5) May-2024 - $30,340 $30,340 Southern Post SOFR+2.25% 5.05% (3)(5) Aug-2026 - - - - - - Total - Development Pipeline - 30,340 - - - - 30,340 Total Secured Debt 7,366 66,108 55,995 317,526 61,561 103,868 612,424 Unsecured Debt Senior Unsecured Revolving Credit Facility SOFR+1.30%-1.85% 6.20% Jan-2027 - - - - 105,000 105,000 M&T Senior Unsecured Term Loan SOFR+1.25%-1.80% 4.80% (4) Mar-2027 - - - - 100,000 100,000 Senior Unsecured Term Loan SOFR+1.25%-1.80% 6.10% Jan-2028 - - - - - 31,794 31,794 Senior Unsecured Term Loan SOFR+1.25%-1.80% 1.74%-4.73% (4) Jan-2028 - - - - - 268,206 268,206 Total Unsecured Debt - - - - 205,000 300,000 505,000 Outstanding Debt Excluding GAAP Adjustments $7,366 $66,108 $55,995 $317,526 $266,561 $403,868 $1,117,424 Other Notes Payable 6,130 GAAP Adjustments (10,299) Indebtedness, Net $1,113,255 Debt Maturities & Principal Payments
14 CAPITALIZATION & FINANCIAL RATIOS $ IN THOUSANDS, EXCEPT PER SHARE AS OF MARCH 31, 2023 (1) As of close of market on 3/31/23. (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 9% $105,000 Unsecured Term Loans 36% 400,000 Mortgages Payable 55% 612,424 Total Debt $1,117,424 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% 67,939 $11.81 $802,360 Operating Partnership Units 23% 20,611 $11.81 243,416 Equity Market Capitalization 88,550 $1,045,776 Total Capitalization $2,334,285 Enterprise Value $2,297,849 Financial Ratios Debt Service Coverage Ratio(2) 2.8x Fixed Charge Coverage Ratio(3) 2.3x Stabilized Portfolio Debt / Stabilized Portfolio Adjusted EBITDA 5.4x Net Debt Plus Ancillary Debt / Total Adjusted EBITDA 6.6x Net Debt Plus Preferred / Total Adjusted EBITDA 7.7x Debt/Total Capitalization 48% Liquidity(4) Unencumbered Properties Cash on hand $33,817 % of Total Properties 61% Availability Under Credit Facility 145,000 % of Annualized Base Rent 41% Total Liquidity $178,817 6.75% Series A Cumulative Redeemable Perpetual Preferred Stock (NYSE: AHHPrA) Debt 48% Common Equity 45% Preferred Equity 7%
15 STABILIZED PORTFOLIO SUMMARY AS OF MARCH 31, 2023 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 Occupancy(1) ABR(1) ABR per Occupied SF Town Center of Virginia Beach 10 618,306 15 98.3% $13,792,046 $22.69 Grocery Anchored 15 1,400,564 12 98.6% 22,830,397 16.53 Retail Centers 13 1,896,939 17 98.2% 34,918,805 18.74 Stabilized Retail Total 38 3,915,809 15 98.4% $71,541,248 $18.57 Office Properties # of Properties Net Rentable SF Average Age Occupancy(1) ABR(1) ABR per Occupied SF Town Center of Virginia Beach 4 788,530 20 99.2% $22,842,420 $29.20 Harbor Point - Baltimore Waterfront 3 1,073,734 7 95.9% 32,033,415 31.12 Other 2 249,660 3 93.5% 6,431,587 27.54 Stabilized Office Total 9 2,111,924 12 96.8% $61,307,422 $29.98 MULTIFAMILY PORTFOLIO Multifamily Properties # of Properties Units Average Age Occupancy(1) AQR (1) Monthly AQR per Occupied Unit Town Center of Virginia Beach 3 759 9 95.7% $17,074,560 $1,959 Harbor Point - Baltimore Waterfront 2 392 5 95.4% 11,444,172 2,550 Other 5 1,103 7 95.7% 21,745,368 1,716 Stabilized Multifamily Total 10 2,254 7 95.7% $50,264,100 $1,943
16 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 $0.8M and $0.7M for the 3 months ended 3/31/2023 & 3/31/2022, respectively. Three Months Ended 3/31/2023 3/31/2022 $ Change % Change Office Revenue $10,750 $10,175 $575 5.7% Rental Expenses(1) 2,599 2,248 351 15.6% Real Estate Taxes 1,398 1,314 84 6.4% Net Operating Income $6,753 $6,613 $140 2.1% GAAP Adjustments (88) (2) (86) Net Operating Income, Cash $6,665 $6,611 $54 0.8% Retail Revenue $21,760 $21,131 $629 3.0% Rental Expenses(1) 3,118 3,210 (92) -2.9% Real Estate Taxes 2,179 2,231 (52) -2.3% Net Operating Income $16,463 $15,690 $773 4.9% GAAP Adjustments (749) (1,041) 292 Net Operating Income, Cash $15,714 $14,649 $1,065 7.3% Multifamily Revenue $11,281 $10,721 $560 5.2% Rental Expenses(1) 3,208 3,017 191 6.3% Real Estate Taxes 1,036 1,006 30 3.0% Net Operating Income $7,037 $6,698 $339 5.1% GAAP Adjustments (208) (217) 9 Net Operating Income, Cash $6,829 $6,481 $348 5.4% Same Store NOI $30,253 $29,001 $1,252 4.3% GAAP Adjustments (1,045) (1,260) 215 $29,208 $27,741 $1,467 5.3%Same Store Portfolio NOI, Cash Basis
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) Includes $5.7M earnout under certain conditions. (5) The Company currently owns 78% and holds an option to increase ownership interest to 90%. 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 98% 1Q21 4Q22 2Q23 $60,000 $35,100 $54,900 85% (3) Southern Post Roswell, GA Mixed-use 137 units / 137,000 sf 61% 4Q21 1Q24 4Q24 119,000 73,600 (4) 49,600 100% Equity Method Investments Total Projects Under Development $179,000 $108,700 $104,500 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 $41,100 50% T. Rowe Price Parcel 4 Mixed-Use Baltimore, MD Mixed-Use 312 units / 12,100 sf retail / 1,252 parking spaces - 2Q22 3Q24 2Q26 225,000 101,500 53,400 90% (5) Total Unconsolidated JV Development $489,000 $146,100 $94,500 Q1 2023 Capitalized Interest $1,047 Schedule(1) Southern Post Roswell, GA Parcel 4 (Allied | Harbor Point) Baltimore, MD
18 REAL ESTATE FINANCING $ IN THOUSANDS AS OF MARCH 31, 2023 (1) Represents estimates that may change as the development process proceeds. (2) Excludes accrued exit fees. (3) Includes amortization of fees. (4) Pending acquisition subsequent to quarter end. (5) Preferred equity with economic terms and accounting consistent with a loan receivable. (6) The interest rate varies over the life of the loan and earns an unused commitment fee of 10%. Solis City Park Charlotte, NC The Interlock Atlanta, GA Solis Gainesville II Gainesville, GA The Interlock Atlanta, GA Property Type Estimated Size(1) % Leased or LOI Initial Occupancy Loan Maturity Interest Rate Loan Balance(2) QTD Interest Income/Exit Fee (3) Outstanding Investments The Interlock(4) Atlanta, GA Mixed-use 300,000 sf 91% 1Q21 4Q24 15% $82,608 $2,273 Solis City Park II(5) Charlotte, NC Multifamily 250 units NA 3Q23(1) 1Q28 13% 22,265 670 Solis Gainesville II(5) Gainesville, GA Multifamily 184 units NA 2Q24 4Q26 14%(6) 11,545 593 Total $116,418 $3,536
19 GENERAL CONTRACTING & REAL ESTATE SERVICES $ IN THOUSANDS Adams Hill Apartments Greenville, SC Q1 2023 Q4 2022 Q3 2022 Q2 2022 Trailing 4 Quarters Revenue $84,238 $95,912 $69,024 $45,273 $294,447 Expense (81,170) (93,667) (66,252) (43,418) (284,507) Gross Profit $3,068 $2,245 $2,772 $1,855 $9,940 Operating Margin 3.6% 2.3% 4.0% 4.1% 3.4% Third-Party Backlog as of Q1 2023 Beginning Backlog $665,564 New Contracts 70,792 Work Performed (84,516) Ending Backlog $651,840
20 NET INCOME BY SEGMENT $ in thousands Three Months Ended 3/31/2023 Office Real Estate Retail Real Estate Multifamily Real Estate General Contracting and Real Estate Services Real Estate Financing Unallocated Total Revenues Rental Revenues $19,574 $22,438 $14,206 - - - $56,218 General Contracting and Real Estate Services Revenues - - - 84,238 - - 84,238 Interest Income - - 9 - 3,536 174 3,719 Total Revenues 19,574 22,438 14,215 84,238 3,536 174 144,175 Expenses Rental Expenses 5,103 3,564 4,293 - - - 12,960 Real Estate Taxes 2,095 2,207 1,110 - - - 5,412 General Contracting and Real Estate Services Expenses - - - 81,170 - - 81,170 Depreciation and Amortization 6,904 7,298 4,185 - - 81 18,468 Amortization of Right-of-Use Assets - Finance Leases - 210 67 - - - 277 General and Administrative Expenses - - - - - 5,448 5,448 Impairment Charges - 102 - - - - 102 Total Expenses 14,102 13,381 9,655 81,170 - 5,529 123,837 Operating Income 5,472 9,057 4,560 3,068 3,536 (5,355) 20,338 Interest Expense (3,689) (4,479) (3,037) - (1,097) - (12,302) Change in Fair Value of Derivatives and Other (660) (1,070) (217) - (500) - (2,447) Unrealized Credit Loss Provision - - - - (55) (22) (77) Other Income (Expense), Net - 84 (7) - - 16 93 Income Before Taxes 1,123 3,592 1,299 3,068 1,884 (5,361) 5,605 Income Tax Provision - - - - - (188) (188) Net Income $1,123 $3,592 $1,299 $3,068 $1,884 ($5,549) $5,417
21 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 Total/Weighted Average 1,018,256 / 103 units $364,300 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 Total/Weighted Average 404,001 / 1,599 units/beds $348,526 4.5%
22 TOP 20 TENANTS BY ABR(1) $ IN THOUSANDS AS OF MARCH 31, 2023 (1) Excludes leases from the development and redevelopment properties that have been delivered, but not yet stabilized. (2) Per public sources. (3) Space has been released to Morgan Stanley. Commercial Portfolio Tenant Investment Grade Rating(2) Number of Leases Lease Expiration Annualized Base Rent % of Total Annualized Base Rent Constellation Energy Generation ✓ 1 2036 $14,575 8.0% Morgan Stanley ✓ 3 2028 - 2035 7,303 4.0% Harris Teeter/Kroger ✓ 6 2026 - 2035 3,766 2.1% Canopy by Hilton 1 2045 2,846 1.6% ABR 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 1,700 0.9% Huntington Ingalls Industries ✓ 1 2029 1,606 0.9% Dick's Sporting Goods ✓ 1 2032 1,553 0.8% PetSmart 5 2025 - 2027 1,527 0.8% TJ Maxx/Homegoods ✓ 5 2023 - 2027 1,519 0.8% Mythics 1 2030 1,285 0.7% Johns Hopkins Medicine(3) ✓ 1 2023 1,213 0.7% Amazon/Whole Foods ✓ 1 2040 1,144 0.6% Apex Entertainment 1 2035 1,134 0.6% Ross Dress for Less ✓ 3 2025 - 2027 1,122 0.6% Bed Bath & Beyond 2 2025 ; 2027 1,084 0.6% Regal Cinemas 2 MTM ; 2024 1,056 0.6% Top 20 Total $53,251 29.1%
23 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 Q1 2023 2 3,429 10.9% 1.7% 3.5 $8,385 $2.45 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 Trailing 4 Quarters 11 234,169 6.1% 1.4% 6.7 $3,575,050 $15.27 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 Q1 2023 3 20,751 $29.56 7.8 $1,487,872 $71.70 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 Trailing 4 Quarters 11 106,971 $28.67 8.7 $8,194,293 $76.60 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 Q1 2023 18 68,142 10.1% 6.8% 5.1 $713,574 $10.47 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 Trailing 4 Quarters 64 457,787 10.2% 5.3% 6.4 $1,792,841 $3.92 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 Q1 2023 12 40,681 $18.86 8.3 $1,168,512 $28.72 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 Trailing 4 Quarters 35 109,845 $20.60 8.5 $4,566,550 $41.57
24 LEASE EXPIRATIONS(1) AS OF MARCH 31, 2023 (1) Excludes leases from properties in development and delivered, but not yet stabilized. OFFICE Year Leases Expiring Square Footage Expiring % Portfolio Net Rentable Square Feet ABR % of Portfolio ABR Available - 66,681 3.2% -$ - M-T-M 1 0 - 20,400 - 2023 9 70,430 3.3% 1,949,197 3.2% 2024 13 141,894 6.7% 3,729,764 6.1% 2025 19 152,590 7.2% 4,778,333 7.8% 2026 10 49,398 2.3% 1,285,845 2.1% 2027 18 131,322 6.2% 3,719,004 6.1% 2028 14 113,036 5.4% 3,329,083 5.4% 2029 11 299,154 14.2% 8,197,243 13.4% 2030 10 149,487 7.1% 4,412,246 7.2% 2031 5 22,356 1.1% 628,533 1.0% 2032 3 6,214 0.3% 182,795 0.3% 2033 1 34,602 1.6% 1,055,361 1.7% Thereafter 7 874,760 41.4% 28,019,618 45.7% Total / Weighted Average 121 2,111,924 100.0% $61,307,422 100.0% RETAIL Year Leases Expiring Square Footage Expiring % Portfolio Net Rentable Square Feet ABR % of Portfolio ABR Available - 63,743 1.6% -$ - M-T-M 2 52,845 1.3% 378,726 0.5% 2023 29 117,037 3.000% 2,541,253 3.6% 2024 82 408,085 10.4% 7,699,942 10.8% 2025 94 501,116 12.8% 8,843,457 12.4% 2026 85 468,423 12.0% 9,535,795 13.3% 2027 73 459,946 11.7% 8,570,883 12.0% 2028 54 279,628 7.1% 5,921,931 8.3% 2029 36 136,235 3.5% 2,941,299 4.1% 2030 47 269,711 6.9% 5,926,280 8.3% 2031 30 271,334 6.9% 4,898,233 6.8% 2032 24 289,109 7.4% 4,688,572 6.6% 2033 19 75,541 1.9% 1,661,496 2.3% Thereafter 23 523,056 13.5% 7,933,381 11.0% Total / Weighted Average 598 3,915,809 100.0% $71,541,248 100.0%
25Town Center of Virginia Beach Virginia Beach, VA APPENDIX DEFINITIONS & RECONCILIATIONS
26 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 March 31, 2023, 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 March 31, 2023. 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, by (b) 4.
27 NET OPERATING INCOME: We calculate Net Operating Income (“NOI”) as segment revenues less segment expenses. Segment revenues include rental revenues (base rent, expense reimbursements, termination fees, and other revenue) for our property segments, general contracting and real estate services revenues for our general contracting and real estate services segment, and interest income for our real estate financing segment. Segment expenses include rental expenses and real estate taxes for our property segments, general contracting and real estate services expenses for our general contracting and real estate services segment, and interest expense for our real estate financing segment. Segment NOI for the general contracting and real estate services and real estate financing segments is also referred to as segment gross profit. 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.
28 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 on the 20th day of each of the trailing three months from the reporting period end date, divided by (b) total units 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.
29 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.
30 PROPERTY PORTFOLIO AS OF MARCH 31, 2023 (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 92,264 100.0% $2,591,278 $28.09 Cheesecake Factory, Brooks Brothers Apex Entertainment Virginia Beach, VA 2002/2020 103,335 100.0% 1,587,919 15.37 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% 975,258 10.95 BB&B, Regal Commerce Street Retail Virginia Beach, VA 2008 19,173 100.0% 969,945 50.59 Yard House Fountain Plaza Retail Virginia Beach, VA 2004 35,961 93.7% 1,102,955 32.72 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% 1,020,400 26.49 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% $2,221,509 $19.10 Food Lion, PetSmart Broadmoor Plaza South Bend, IN 1980 115,059 98.2% 1,355,288 12.00 Kroger Brooks Crossing Retail Newport News, VA 2016 18,349 71.8% 200,491 15.22 Various Small Shops (grocery shadow) Delray Beach Plaza(2) Delray Beach, FL 2021 87,207 98.0% 2,947,717 34.47 Whole Foods Greenbrier Square Chesapeake, VA 2017 260,710 98.9% 2,579,250 10.00 Kroger, Homegoods, Dick's Sporting Goods Greentree Shopping Center Chesapeake, VA 2014 15,719 92.6% 325,511 22.36 Various Small Shops (grocery shadow) Hanbury Village Chesapeake, VA 2009 98,638 100.0% 2,017,025 20.45 Harris Teeter Lexington Square Lexington, SC 2017 85,440 98.3% 1,901,565 22.64 Lowes Foods Market at Mill Creek Mt. Pleasant, SC 2018 80,319 100.0% 1,899,536 23.65 Lowes Foods North Pointe Center Durham, NC 2009 226,083 100.0% 2,943,927 13.02 Harris Teeter Parkway Centre Moultrie, GA 2017 61,200 100.0% 854,470 13.96 Publix Parkway Marketplace Virginia Beach, VA 1998 37,804 100.0% 793,096 20.98 Rite Aid (grocery shadow) Perry Hall Marketplace Perry Hall, MD 2001 74,256 100.0% 1,287,496 17.34 Safeway Sandbridge Commons Virginia Beach, VA 2015 69,417 100.0% 943,568 13.59 Harris Teeter Tyre Neck Harris Teeter(2) Portsmouth, VA 2011 48,859 100.0% 559,948 11.46 Harris Teeter Retail Centers Dimmock Square Colonial Heights, VA 1998 106,166 87.7% $1,687,988 $18.13 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% 2,812,159 24.05 Total Wine, Panera, Chick-Fil-A Nexton Square Summerville, SC 2020 133,608 100.0% 3,500,402 26.20 Various Small Shops North Hampton Market Taylors, SC 2004 114,954 97.9% 1,508,785 13.40 PetSmart, Hobby Lobby Overlook Village Asheville, NC 1990 151,365 100.0% 2,220,670 14.67 T.J. Maxx|Homegoods, Ross Patterson Place Durham, NC 2004 160,942 97.9% 2,478,042 15.73 BB&B, PetSmart, DSW Providence Plaza Charlotte, NC 2008 103,118 98.8% 3,043,153 29.86 Cranfill, Sumner & Hartzog, Chipotle Red Mill Commons Virginia Beach, VA 2005 373,808 97.5% 6,938,727 19.05 Homegoods, Walgreens Southgate Square Colonial Heights, VA 2016 260,131 100.0% 3,780,869 14.53 Burlington, PetSmart, Michaels, Conn's South Square Durham, NC 2005 109,590 100.0% 1,991,444 18.17 Ross, Petco, Office Depot Southshore Shops Chesterfield, VA 2006 40,307 95.0% 798,976 20.86 Buffalo Wild Wings Wendover Village Greensboro, NC 2004 176,997 98.8% 3,439,740 19.68 T.J. Maxx, Petco, Beauty World Total Retail Portfolio 3,915,809 98.4% $71,541,248 $18.57
31 PROPERTY PORTFOLIO CONT. AS OF MARCH 31, 2023 (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 $1.9M, or $34.20 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 $0.3M, $1.1M, $0.3M and $0.5M, 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% $7,167,416 $30.49 Clark Nexsen, Anthropologie, Mythics Armada Hoffler Tower(3) Virginia Beach, VA 315,916 2002 98.7% 9,601,295 30.78 AHH, Troutman Pepper, Williams Mullen, Morgan Stanley One Columbus Virginia Beach, VA 129,066 1984 98.3% 3,266,707 25.74 Truist, HBA Two Columbus Virginia Beach, VA 108,460 2009 100.0% 2,807,002 25.88 Hazen & Sawyer, Fidelity Harbor Point - Baltimore Waterfront Constellation Office Baltimore, MD 482,317 2016 97.1% $15,183,881 $32.42 Constellation Energy Group Thames Street Wharf(3) Baltimore, MD 263,426 2010 100.0% 7,771,908 29.50 Morgan Stanley, JHU Medical Wills Wharf(2) Baltimore, MD 327,991 2020 90.8% 9,077,626 30.49 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% 4,506,420 33.27 Duke University, WeWork Stabilized Office Total 2,111,924 96.8% $61,307,422 $29.98 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 95.2% $5,640,696 $1,726 Premier Apartments Virginia Beach, VA 131 2018 96.4% 2,878,212 1,899 The Cosmopolitan(4) Virginia Beach, VA 342 2006/2020 95.8% 8,555,652 2,176 Harbor Point - Baltimore Waterfront 1405 Point(2)(4) Baltimore, MD 289 2018 95.5% $8,479,008 $2,560 1305 Dock Street Baltimore, MD 103 2016 95.1% 2,965,164 2,523 Other Edison Apartments(4) Richmond, VA 174 2014 96.0% $3,068,604 $1,531 Greenside Apartments Charlotte, NC 225 2018 96.1% 4,703,052 1,813 Liberty Apartments(4) Newport News, VA 197 2013 91.9% 3,471,372 1,598 Smith's Landing(2) Blacksburg, VA 284 2009 98.0% 5,655,216 1,693 Gainesville Apartments Gainesville, GA 223 2022 95.7% 4,847,124 1,893 Multifamily Total 2,254 95.7% $50,264,100 $1,943
32 $ IN THOUSANDS RECONCILIATION OF DEBT & EBITDA (1) Excludes GAAP adjustments. Three Months Ended 3/31/2023 12/31/2022 9/30/2022 6/30/2022 Property Net Operating Income $37,846 $37,689 $35,542 $36,702 Property Other Income (Expense), Net (47) (120) (30) (190) Amortization of Right-of-Use Assets (277) (277) (278) (277) Impairment of Intangible Assets and Liabilities (102) (83) - (85) Property Adjusted EBITDA $37,420 $37,209 $35,234 $36,150 Acquisition - 217 - - Disposition - - (368) (496) Development (636) (12) - (771) Stabilized Portfolio Adjusted EBITDA $36,784 $37,414 $34,866 $34,883 Construction Gross Profit 3,068 2,245 2,772 1,855 Corporate G&A (5,308) (3,451) (3,708) (3,446) Non-Cash Stock Comp 1,846 562 614 506 Acquisition, Development & Other Pursuit Costs - - - (26) Interest Income 3,709 6,562 3,487 3,350 Other Income (Expense), Net 10 28 5 89 Add Back: Unstabilized Development 636 12 - 771 Total Adjusted EBITDA $40,745 $43,372 $38,036 $37,982 Stabilized Property Debt 582,084 584,502 684,704 768,852 Add Unsecured Property Debt 219,304 207,103 - - Stabilized Portfolio Debt $801,388 $791,605 $684,704 $768,852 Stabilized Portfolio Debt / Stabilized Portfolio Adjusted EBITDA 5.4x 5.3x 4.9x 5.5x Total Debt(1) 1,117,424 1,073,132 1,042,955 1,165,108 Cash (36,436) (51,865) (59,565) (76,412) Net Debt $1,080,988 $1,021,267 $983,390 $1,088,696 Net Debt Plus Ancillary Debt/Total Adjusted EBITDA 6.6x 5.9x 6.5x 7.2x Preferred 171,085 171,085 171,085 171,085 Net Debt + Preferred $1,252,073 $1,192,352 $1,154,475 $1,259,781 Net Debt + Preferred /Total Adjusted EBITDA 7.7x 6.9x 7.6x 8.3x
33 QUARTER TO DATE(1) $ IN THOUSANDS AS OF MARCH 31, 2023 CAPITAL EXPENDITURES (1) Excludes activity related to held for sale, acquired, and/or disposed properties. (2) Represents recurring capital expenditures. Leasing Commissions Lease Incentive Tenant Improvements Land Improvements(2) Building Improvements(2) Fixtures & Equipment(2) Total Second Generation Capex Retail $330 $20 $2,239 $224 $2,225 - $5,038 Office 313 - 552 - 620 - 1,485 Multifamily 6 - - 27 392 235 660 Total Portfolio $649 $20 $2,791 $251 $3,237 $235 $7,183
34 RECONCILIATION TO PROPERTY PORTFOLIO NOI $ IN THOUSANDS (1) Includes expenses associated with the Company’s in-house asset management division. Three months ended 3/31 2023 2022 Office Same Store Rental revenues $10,750 $10,175 Property expenses 3,997 3,562 NOI 6,753 6,613 Non-Same Store NOI(1) 5,623 4,766 Segment NOI $12,376 $11,379 Retail Same Store Rental revenues $21,760 $21,131 Property expenses 5,297 5,441 NOI 16,463 15,690 Non-Same Store NOI(1) 204 1 Segment NOI $16,667 $15,691 Multifamily Same Store Rental revenues $11,281 $10,721 Property expenses 4,244 4,023 NOI 7,037 6,698 Non-Same Store NOI(1) 1,766 2,794 Segment NOI $8,803 $9,492 Total Property Portfolio NOI $37,846 $36,562
35 RECONCILIATION TO GAAP NET INCOME $ IN THOUSANDS Three Months Ended 3/31/2023 Office(1) Retail(1) Multifamily(1) Total Rental Properties General Contracting & Real Estate Services(2) Real Estate Financing(3) Total Segment revenues 19,574$ 22,438$ 14,206$ 56,218$ 84,238$ 3,536$ 143,992$ Segment expenses 7,198 5,771 5,403 18,372 81,170 1,097 100,639 Net operating income 12,376$ 16,667$ 8,803$ 37,846$ 3,068$ 2,439$ 43,353$ Depreciation and amortization (18,468) General and administrative expenses (5,448) Acquisition, development and other pursuit costs - Impairment charges (102) Gain (loss) on real estate dispositions - Interest income 183 Interest expense (11,205) Loss on extinguishment of debt - Unrealized credit loss release (provision) (77) Amortization of right-of-use assets - finance leases (277) Change in fair value of derivatives and other (2,447) Other income (expense) 93 Income tax benefit (provision) (188) Net income 5,417$ Net loss (income) attributable to noncontrolling interest in investment entities (154) Preferred stock dividends (2,887) Net income attributable to AHH and OP unitholders 2,376$ 1) Segment net operating income for the office, retail, and multifamily segments is calculated as rental revenues, less rental expenses and rental taxes. 2) Segment gross profit for the general contracting & real estate services segment is calculated as general contracting and real estate services revenues, less general contracting and real estate services expenses. 3) Segment gross profit for the real estate financing segment is calculated as interest income, less interest expense.
36 RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA $ IN THOUSANDS Three Months Ended 3/31/2023 12/31/2022 9/30/2022 6/30/2022 Net income attributable to common stockholders and OP unitholders $2,376 $11,517 $33,899 $27,752 Excluding: Depreciation and amortization 18,468 18,109 17,527 18,781 Loss (gain) on real estate dispositions - (42) (33,931) (19,493) Impairment of real estate assets - - - 201 Income tax provision (benefit) 188 (5) 181 (20) Interest expense 12,302 10,933 10,345 9,371 Change in fair value of derivatives and other 2,447 (1,186) (782) (2,548) Preferred dividends 2,887 2,887 2,887 2,887 Loss on extinguishment of debt - 475 2,123 618 Unrealized credit loss provision (release) 77 (232) (42) 295 Investment Entities 154 137 5,583 128 Non-cash stock compensation 1,846 562 614 506 Adjusted EBITDA $40,745 $43,155 $38,404 $38,478 Dispositions - - (368) (496) Acquisitions (full quarter) - 217 - - Total Adjusted EBITDA $40,745 $43,372 $38,036 $37,982 Construction Gross Profit (3,068) (2,245) (2,772) (1,855) Corporate G&A 5,308 3,451 3,708 3,446 Non-Cash Stock Comp (1,846) (562) (614) (506) Acquisition, Development & Other Pursuit Costs - - - 26 Interest income (3,709) (6,562) (3,487) (3,350) Other income (expense), net (10) (28) (5) (89) Add Back: Unstabilized Development (636) (12) - (771) Stabilized Portfolio Adjusted EBITDA $36,784 $37,414 $34,866 $34,883 Acquisition - (217) - - Disposition - - 368 496 Development 636 12 - 771 Property Adjusted EBITDA $37,420 $37,209 $35,234 $36,150