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): November 8, 2013
ARMADA HOFFLER PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
| Maryland | 001-35908 | 46-1214914 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
| 222 Central Park Avenue, Suite 2100 Virginia Beach, Virginia |
23462 | |||
| (Address of principal executive offices) | (Zip Code) | |||
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:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02. | Results of Operations and Financial Condition. |
On November 8, 2013, Armada Hoffler Properties, Inc. (the “Company”) issued a press release announcing its financial position as of September 30, 2013, results of operations for the three months ended September 30, 2013 and other related information. Also on November 8, 2013, 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 nine months ended September 30, 2013. Copies of such press release and supplemental information are furnished as Exhibits 99.1 and 99.2, respectively, to this report on Form 8-K and are incorporated herein by reference.
The information included in this 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 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 of this report on Form 8-K is incorporated herein by reference.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
| Exhibit |
Description | |
| 99.1* | Press Release, dated November 8, 2013, issued by Armada Hoffler Properties, Inc., providing its financial position as of September 30, 2013 and results of operations for the three months ended September 30, 2013. | |
| 99.2* | Armada Hoffler Properties, Inc. Supplemental Information for the three and nine months ended September 30, 2013. | |
| * | Furnished herewith. |
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. | ||||||
| Dated: November 8, 2013 | By: | /s/ MICHAEL P. O’HARA | ||||
| Michael P. O’Hara | ||||||
| Chief Financial Officer and Treasurer | ||||||
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1* | Press Release, dated November 8, 2013, issued by Armada Hoffler Properties, Inc., providing its financial position as of September 30, 2013 and results of operations for the three months ended September 30, 2013. | |
| 99.2* | Armada Hoffler Properties, Inc. Supplemental Information for the three and nine months ended September 30, 2013. | |
| * | Furnished herewith. |
Exhibit 99.1
|
PRESS RELEASE |
ARMADA HOFFLER PROPERTIES REPORTS THIRD QUARTER 2013 RESULTS
Core FFO of $6.6 Million, $0.20 Per Diluted Share
Operating Property Portfolio at 93.3% Average Occupancy
VIRGINIA BEACH, VA, November 8, 2013—Armada Hoffler Properties, Inc. (NYSE: AHH), a full service real estate company, which develops and owns high-quality office, retail and multifamily properties in key Mid-Atlantic markets, today announced its results for the quarter ended September 30, 2013.
Highlights include:
| • | Generated Core Funds From Operations (“Core FFO”) of $6.6 million, or $0.20 per diluted share. |
| • | Average occupancy stable at 93.3% across the operating property portfolio. |
| • | New and renewal leases executed during the quarter totaling approximately 42,000 square feet in the office and retail property portfolios. |
| • | Development pipeline of six properties, consisting of approximately 376,000 square feet of office and retail property and 489 multifamily units. The 4525 Main Street development project in the Town Center of Virginia Beach is 45% pre-leased. |
| • | $81.5 million of new construction loans since the end of last quarter to fund the development pipeline. |
| • | $25.3 million of new construction contract work executed during the quarter; approximately $59.5 million of total backlog at the end of the quarter. |
| • | Credit facility capacity increased by $55.0 million to $155.0 million in October 2013. |
| • | Admiral Joseph W. Prueher, USN (Ret.) unanimously elected to the Company’s board of directors, effective October 24, 2013. |
“We are pleased with our performance this quarter and delighted with how well-positioned the Company is following our IPO in May,” commented Louis Haddad, Chief Executive Officer. “We are on track to accomplish what we set out to do this year, including maintaining a stable portfolio and executing on our identified development pipeline. I am extremely pleased with the attractive array of opportunities for the next generation pipeline. We are well-positioned to grow net operating income and create value for our stockholders into the future.”
November 8, 2013
Page 2 of 8
Financial Results
Net income was $1.3 million, or $0.04 per share, for the three months ended September 30, 2013. Core FFO was $6.6 million, or $0.20 per diluted share, for the three months ended September 30, 2013. In addition to the Company’s third quarter 2013 operating results, a reconciliation of Core FFO to GAAP net income can be found on page eight of this release.
Operating Performance
During the third quarter the Company executed one new office lease and five office lease renewals totaling approximately 17,000 square feet and six retail lease renewals totaling approximately 25,000 square feet. At the end of the third quarter, the Company’s office, retail and multifamily property operating portfolios were 93.4%, 93.6% and 92.7% occupied, respectively.
General Contracting Activity
During the quarter, the Company executed approximately $25.3 million of new construction contracts and generated approximately $1.0 million of gross profit on its third party construction contracts. At the end of the third quarter, the Company had total backlog of approximately $59.5 million.
Balance Sheet and Financing Activity
At the end of the third quarter, the Company had total outstanding debt of approximately $247.4 million, including $45.0 million outstanding on its revolving credit facility, as compared to approximately $244.3 million of total debt outstanding as of June 30, 2013. In October 2013, the Company increased the total capacity on its revolving credit facility to $155.0 million by adding six properties to the borrowing base collateral.
In July, the Company closed on a $63.0 million loan to fund the construction of 4525 Main Street and Encore Apartments in the Town Center of Virginia Beach. In October, the Company closed on an $18.5 million loan to fund development of the Whetstone Apartments in Durham, NC.
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November 8, 2013
Page 3 of 8
Dividend
On August 13, 2013, the Company announced that its Board of Directors declared a cash dividend of $0.16 per share on the Company’s common stock for the third quarter of 2013. The dividend was paid on October 10, 2013.
Supplemental Financial Information
Further details regarding operating results, properties and leasing statistics can be found in the Company’s supplemental financial package available at www.ArmadaHoffler.com under the Investor Relations section.
Webcast and Conference Call
The Company will host a webcast and conference call on Friday, November 8, 2013 at 8:30 a.m. Eastern Time to review third quarter ended September 30, 2013 results and discuss recent events. The live webcast will be available through the Investor Relations page of the Company’s website, www.ArmadaHoffler.com, or through www.viavid.com. To participate in the call, please dial 877-407-3982 (domestic) or 201-493-6780 (international). A replay of the conference call will be available through December 8, 2013, by dialing 877-870-5176 (domestic) or 858-384-5517 (international) and entering the pass code 10000728.
About Armada Hoffler Properties, Inc.
Armada Hoffler Properties, Inc. is a full service real estate company with extensive experience developing, building, owning and managing high-quality, institutional-grade office, retail and multifamily properties in attractive markets throughout the Mid-Atlantic United States. The Company has elected to be taxed as a real estate investment trust (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 portfolio, the Company’s identified & next generation development
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November 8, 2013
Page 4 of 8
pipelines, the Company’s construction and development business including backlog, and financing activities as well as comments on the Company’s outlook. 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 final prospectus related to its IPO, which was filed with the Securities and Exchange Commission on May 9, 2013, and other documents filed by the Company with the Securities and Exchange Commission.
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 gains (or losses) from sales of depreciable operating property, real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures.
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 year over year, 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.
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November 8, 2013
Page 5 of 8
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 portfolio and affect the comparability of the Company’s period-over-period performance. Accordingly, the Company further adjusts FFO to arrive at Core FFO, which eliminates certain of these items, including, but not limited to, gains and losses on the extinguishment of debt and non-cash stock compensation expense.
For reference, as an aid in understanding the Company’s computation of FFO and Core FFO, a reconciliation of FFO and Core FFO to net income calculated in accordance with GAAP has been included on page eight of this release.
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November 8, 2013
Page 6 of 8
ARMADA HOFFLER PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(dollars in thousands)
(Unaudited)
| September 30, 2013 |
||||
| Assets | ||||
| Real estate investments: |
||||
| Income producing property |
$ | 404,742 | ||
| Held for development |
7,081 | |||
| Construction in progress |
29,091 | |||
| Accumulated depreciation |
(101,920 | ) | ||
|
|
|
|||
| Net real estate investments |
338,994 | |||
| Cash and cash equivalents |
9,775 | |||
| Restricted cash |
2,966 | |||
| Accounts receivable, net |
17,846 | |||
| Construction receivables, including retentions |
12,619 | |||
| Construction contract costs and estimated earnings in excess of billings |
1,452 | |||
| Other assets |
23,199 | |||
|
|
|
|||
| Total Assets |
$ | 406,851 | ||
|
|
|
|||
| Liabilities and Equity | ||||
| Secured debt |
$ | 247,356 | ||
| Accounts payable and accrued liabilities |
6,970 | |||
| Construction payables, including retentions |
26,162 | |||
| Billings in excess of construction contract costs and estimated earnings |
2,270 | |||
| Other liabilities |
16,142 | |||
|
|
|
|||
| Total Liabilities |
298,900 | |||
| Equity |
||||
| Common stock |
192 | |||
| Additional paid-in capital |
1,010 | |||
| Distributions in excess of earnings |
(46,195 | ) | ||
| Noncontrolling interests in operating partnership |
152,944 | |||
|
|
|
|||
| Total Equity |
107,951 | |||
|
|
|
|||
| Total Liabilities and Equity |
$ | 406,851 | ||
|
|
|
|||
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November 8, 2013
Page 7 of 8
ARMADA HOFFLER PROPERTIES, INC.
CONDENSED CONSOLIDATED INCOME STATEMENT
(dollars in thousands, except per share)
(Unaudited)
| Three months ended September 30, 2013 |
||||
| Revenues |
||||
| Rental revenues |
$ | 14,899 | ||
| General contracting and real estate services revenues |
21,896 | |||
|
|
|
|||
| Total revenues |
36,795 | |||
|
|
|
|||
| Expenses |
||||
| Rental expenses |
3,840 | |||
| Real estate taxes |
1,317 | |||
| General contracting and real estate services expenses |
20,907 | |||
| Depreciation and amortization |
3,933 | |||
| General and administrative expenses |
1,638 | |||
|
|
|
|||
| Total expenses |
31,635 | |||
|
|
|
|||
| Operating income |
5,160 | |||
| Interest expense |
(2,598 | ) | ||
| Loss on extinguishment of debt |
(1,127 | ) | ||
| Other expense |
(109 | ) | ||
|
|
|
|||
| Income before taxes |
1,326 | |||
| Income tax provision |
(74 | ) | ||
|
|
|
|||
| Net income |
$ | 1,252 | ||
|
|
|
|||
| Per Share: |
||||
| Basic and Diluted |
$ | 0.04 | ||
|
|
|
|||
| Weighted Average Common Shares and Units: |
||||
| Basic and Diluted |
32,223 | |||
|
|
|
|||
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November 8, 2013
Page 8 of 8
ARMADA HOFFLER PROPERTIES, INC.
RECONCILIATION OF NET INCOME TO CORE FUNDS FROM OPERATIONS
(dollars in thousands, except per share)
(Unaudited)
| Three months ended September 30, 2013 |
||||
| Net Income |
$ | 1,252 | ||
| Funds From Operations Adjustments: Depreciation and amortization |
3,933 | |||
|
|
|
|||
| Funds From Operations |
5,185 | |||
|
|
|
|||
| Core FFO Adjustments: |
||||
| Loss on extinguishment of debt |
1,127 | |||
| Non-cash stock compensation |
242 | |||
|
|
|
|||
| Core Funds From Operations |
$ | 6,554 | ||
|
|
|
|||
| Core Funds From Operations per diluted share |
$ | 0.20 | ||
|
|
|
|||
| Common Shares and Units Outstanding |
32,223 | |||
Contact:
Julie Loftus Trudell
Armada Hoffler Properties, Inc.
Vice President of Investor Relations
Email: JTrudell@ArmadaHoffler.com
Phone: (757) 366-6692
###
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| Exhibit 99.2
|
Armada Hoffler Properties, Inc.
Third Quarter 2013 Supplemental Information
|
|
Table of Contents
Forward Looking Statement 3
Third Quarter Results and Financial Summary 5
Third Quarter 2013 Highlights 6
Summary Information 7
Summary Balance Sheet 8
Summary Income Statement 9
Core FFO & Core AFFO 10
Summary of Outstanding Debt 11
Debt to EBITDA 12
Debt Maturity 13
Portfolio Summary & Business Segment Overview 14
Business Segmentation Overview 15
Stabilized Portfolio Summary 16
Stabilized Portfolio Summary Footnotes 17
Identified Development Pipeline 18
Construction Business Summary 19
Operating Results & Property-Type Segment Analysis 20
Same Store NOI by Segment 21
Top 10 Tenants by Annual Base Rent 22
Office Lease Summary 23
Retail Lease Summary 25
Portfolio Occupancy 27
Appendix—Understanding AHH 29
Corporate Overview 30
Differentiation Provides Value Creation 31
Business Segmentation Overview 32
Components of NAV 33
Stabilized Portfolio 34
Identified & Next Generation Pipeline 35
3rd Party Construction 36
Net Asset Value Component Data 37
Appendix—Definitions & Reconciliations 38
Definitions 39
Reconciliations 43
| 2 |
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|
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Forward Looking Statement
This Supplemental Information should be read in conjunction with our Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 (the “10-Q”), the consolidated unaudited financial statements and notes thereto appearing in the 10-Q and our press release, dated November 8, 2013, which has been furnished as Exhibit 99.1 to our Form 8-K filed on November 8, 2013. The Company makes statements in this Supplemental Information 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 anticipated growth in our funds from operations, core 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,” “approximately,” “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 our Registration Statement on Form S-11, initially filed with the Securities and Exchange Commission (the “SEC”) on March 26, 2013, as subsequently amended, our Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 and the documents subsequently filed by us from time to time with the SEC.
| 3 |
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|
|
Corporate Profile
Corporate Information
Armada Hoffler Properties, Inc. (NYSE: AHH) is a full-service real estate investment trust (REIT) and property company that develops, builds, owns and manages institutional grade office, retail and multifamily properties in the Mid-Atlantic U.S. The Company also provides general construction and development services to third-party clients throughout the Mid-Atlantic and Southeastern regions of the U.S. Armada Hoffler Properties was founded in 1979 and is headquartered in Virginia Beach, VA.
Management & Board
Board of Directors Corporate Officers
Daniel A. Hoffler Chairman of the Board Louis S. Haddad President and Chief Executive Officer
A. Russell Kirk Vice Chairman of the Board Anthony P. Nero President of Development
Louis S. Haddad Director Shelly R. Hampton President of Asset Management
John W. Snow Lead Director Eric E. Apperson President of Construction
George F. Allen Director Michael P. O’Hara Chief Financial Officer
James A. Carroll Director Eric L. Smith Vice President of Operations and Secretary
James C. Cherry Director
Admiral Joseph W. Prueher Director
Analyst Coverage
Janney, Montgomery, & Scott LLC Raymond James & Associates Robert W. Baird & Co. Stifel, Nicolaus & Company, Inc. Wunderlich Securities
Michael Gorman Richard Mulligan David Rodgers John Guinee Craig Kucera
(215) 665-6224 (727) 567-2619 (216) 737-7341 (443) 224-1307 (540) 277-3366
mgorman@janney.com rj.milligan@raymondjames.com drodgers@rwbaird.com jwguinee@stifel.com ckucera@wundernet.com
Investor Relations Contact
Julie Loftus Trudell
Vice President of Investor Relations
(757) 366-6692
Jtrudell@armadahoffler.com
| 4 |
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THIRD QUARTER RESULTS AND FINANCIAL SUMMARY
|
|
Third Quarter 2013 Highlights
Generated Core Funds From Operations (“Core FFO”) of $6.6 million, or $0.20 per diluted share.
Average occupancy stable at 93.3% across the operating property portfolio.
New and renewal leases executed during the quarter totaling approximately 42,000 square feet in the office and retail property portfolios.
Development pipeline of six properties, consisting of approximately 376,000 square feet of office and retail property and 489 multifamily units. The 4525 Main Street development project in the Town Center of Virginia Beach is 45% pre-leased.
$81.5 million of new construction loans since the end of last quarter to fund the development pipeline.
$25.3 million of new construction contract work executed during the quarter; approximately $59.5 million of total backlog at the end of the quarter.
Credit facility capacity increased by $55.0 million to $155.0 million in October 2013.
Admiral Joseph W. Prueher, USN (Ret.) unanimously elected to the Company’s board of directors, effective October 24, 2013.
| 6 |
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|
|
Summary Information
$ in thousands, except per share
Market Capitalization
9/30/2013
% of Total Total Market
Equity Capitalization
Market Data
Total Common Shares Outstanding 59% 19,163,500
Operating Partnership (“OP”) Units Outstanding 41% 13,059,365
Common shares and OP units outstanding 100% 32,222,865
Market price per common share $9.91
Equity market capitalization 319,329
Total debt 247,356
Total market capitalization $566,685
Less: cash (12,741)
Total enterprise value $553,944
Operating Metrics
9/30/2013
Rentable square feet or number of units:
Office 954,594
Retail 1,093,319
Multifamily 626
Occupancy:
Office (1) 93.4%
Retail (1) 93.6%
Multifamily(2) 92.7%
Weighted Average (3) 93.3%
Key Financials
Three months ended
9/30/2013
Financial Information:
Rental revenues $14,899
General contracting and real estate services revenues 21,896
Rental properties Net Operating Income (NOI) 9,742
General contracting and real estate services Gross Profit 989
Net income 1,252
Funds From Operations (FFO) 5,185
Core FFO 6,554
Core FFO per share $0.20
Debt Metrics
Three months ended
9/30/2013
Key Metrics
Core debt/enterprise value 44.7%
Fixed charge coverage ratio
Core EBITDA $9,099
Interest 2,598
Principal 757
Total Fixed Charges 3,355
Fixed charge coverage ratio 2.71x
Core Debt/Core EBITDA 6.8x
(1) Office and retail occupancy based on occupied square feet as a % of respective total (2) Multifamily occupancy based on weighted average of total units (3) Total occupancy weighted by annualized base rent
| 7 |
|
|
|
Summary Balance Sheet
$ in thousands As of
9/30/2013 12/31/2012
Assets (Unaudited)
Real estate, at cost
Income producing property $404,742 $350,814
Held for development 7,081 3,926
Construction in progress 29,091 -
440,914 354,740
Accumulated depreciation (101,920) (92,454)
Net real estate investments 338,994 262,286
Cash and cash equivalents 9,775 9,400
Restricted cash 2,966 3,725
Accounts receivable, net 17,846 17,423
Construction receivables, including retentions 12,619 10,490
Construction contract costs and estimated earnings in excess of billing 1,452 1,206
Due from affiliates — 5,719
Other assets 23,199 21,564
Total Assets $406,851 $331,813
Liabilities and Equity
Indebtedness:
Secured debt $247,356 $334,438
Participating note — 643
Accounts payable and accrued liabilities 6,970 2,478
Construction payables, including retentions 26,162 17,369
Billings in excess of construction contract costs and estimated earnings 2,270 4,236
Due to affiliates — 3,597
Due to related parties 406 -
Other liabilities 15,736 10,393
Total Liabilities $298,900 $373,154
Stockholders’ equity:
Common stock, $0.01 par value, 500,000,000 shares authorized,
19,163,500 shares issued and outstanding as of September 30, 2013 192 -
Additional paid-in capital 1,010 -
Distributions in excess of earnings (46,195) -
Predecessor deficit — (41,341)
Total stockholders’ and predecessor deficit (44,993) (41,341)
Non-controlling Interests 152,944 -
Total Equity 107,951 (41,341)
Total Liabilities and Equity $406,851 $331,813
| 8 |
|
|
|
Summary Income Statement
$ in thousands
Three months ended Nine months ended
9/30/2013 9/30/2012 9/30/2013 9/30/2012
Revenues: (Unaudited)
Rental revenues $14,899 $13,318 $42,528 $40,314
General contracting and real estate services revenues 21,896 13,631 63,143 40,655
Total Revenues $36,795 $26,949 $105,671 $80,969
Expenses:
Rental expenses $3,840 $3,637 $10,468 $9,445
Real estate taxes 1,317 1,200 3,777 3,592
General contracting and real estate services expenses 20,907 12,707 60,868 38,200
Depreciation and amortization 3,933 2,718 11,112 9,297
General and administrative expenses 1,638 904 5,212 2,692
Impairment charges —— 533 -
Total Expenses 31,635 21,166 91,970 63,226
Operating Income $5,160 $5,783 $13,701 $17,743
Interest expense (2,598) (4,174) (9,802) (12,518)
Loss on extinguishment of debt (1,127) — (2,252) -
Gain on acquisition —— 9,460 -
Other income (expense) (109) 146 343 533
Income from continuing operations, before tax 1,326 1,755 11,450 5,758
Income tax (provision) benefit (74) — 137 -
Income from continuing operations 1,252 1,755 11,587 5,758
Discontinued operations:
Loss from discontinued operations ——— (35)
Loss on sale of real estate ——— 25
Results from discontinued operations ——— (10)
Net income $1,252 $1,755 $11,587 $5,748
9
|
|
Core FFO & Core AFFO
$ in thousands, except per share
Three months ended
9/30/2013
(Unaudited)
Net income $1,252
Depreciation and amortization 3,933
FFO 5,185
Core FFO
Adjustments
Loss on extinguishment of debt 1,127
Non-cash stock compensation 242
Impairment charges -
Acquisition costs -
Unstabalized development pipeline adjustments -
Core FFO $6,554
Core FFO per share $0.20
Core AFFO
Adjustments
Reversal of unstabalized development pipeline adjustments from above -
Tenant improvements, leasing commissions(1) (505)
Property related Capital expenditures(2) (170)
Amortization of deferred financing fees 145
GAAP Adjustments
Net effect of straight-line rents (125)
Amortization of lease incentives and net above (below) market rents 154
Derivative (income) losses 115
Government development grants not included in FFO 190
Core AFFO $6,358
Core AFFO per share $0.20
Total Common Shares Outstanding 19,164
Operating Partnership (“OP”) Units Outstanding 13,059
Common shares and OP units outstanding 32,223
(1) Excludes tenant improvements and leasing commissions on first generation rental space and funded by previous owners (2) Excludes one time, non-recurring capital expenditures
10
|
|
Summary of Outstanding Debt
$ in thousands
Amount Effective Rate as of Balance at
Debt Outstanding Interest Rate (1) September 30, 2013 Maturity Date Maturity
Virginia Beach Town Center
249 Central Park Retail $15,899 5.99% September 8, 2016 $15,084
South Retail 7,014 5.99% September 8, 2016 6,655
Studio 56 Retail 2,708 3.75% May 7, 2015 2,592
Commerce Street Retail 6,754 LIBOR+3.00% 3.18% August 18, 2014 6,694
Fountain Plaza Retail 7,949 5.99% September 8, 2016 7,542
Dick’s at Town Center 8,334 LIBOR+2.75% 2.93% October 31, 2017 7,889
The Cosmopolitan 47,867 3.75% July 1, 2051 -
Diversified Portfolio -
Oyster Point 6,513 5.41% December 1, 2015 6,089
Broad Creek Shopping Center -
Note 1 4,516 LIBOR +3.00% 3.18% November 29, 2014 4,454
Note 2 8,290 LIBOR+2.75% 2.93% December 7, 2016 7,947
Note 3 3,471 LIBOR+2.75% 2.93% December 7, 2016 3,327
Hanbury Village -
Note 1 21,506 6.67% October 11, 2017 20,499
Note 2 4,296 LIBOR+2.75% 2.93% February 28, 2015 4,226
Harrisonburg Regal 3,887 6.06% June 8, 2017 3,165
North Point Center -
Note 1 10,359 6.45% February 5, 2019 9,333
Note 2 2,858 7.25% September 15, 2015 1,344
Note 4 1,036 5.59% December 1, 2014 1,007
Note 5 710 LIBOR+2.00% 3.57% (2) February 1, 2017 641
Tyre Neck Harris Teeter 2,650 LIBOR+2.75% 2.93% June 10, 2014 2,650
Bermuda Crossroads 10,773 (4) 6.01% January 1, 2014 10,710
Smith’s Landing 24,870 (4) LIBOR+2.15% 2.33% January 31, 2014 24,770
202,260 146,618
Credit Facility 45,000 (5) LIBOR + 1.60%—2.20% 1.93% (5) May 13, 2016 45,000
Total including Credit Facility $247,260 $191,618
Notes Payable—Development Pipeline
4525 Main Street — LIBOR+1.95% 2.13% (3) January 30, 2017 -
Encore Apartments — LIBOR+1.95% 2.13% (3) January 30, 2017 -
Total Notes Payable—Development Pipeline — -
Unamortized fair value adjustments 96
Total Notes Payable $247,356 $191,618
| (1) |
|
LIBOR rate is determined by individual lenders. |
| (2) |
|
Subject to an interest rate swap lock. |
| (3) |
|
Subject to LIBOR interest rate cap of 3.5%. |
| (4) |
|
Principal balance excluding any fair value adjustment that was recognized upon acquisition. |
| (5) |
|
Subject to a $40 million LIBOR interest rate cap of 1.50%. |
Weighted Average Fixed Interest Rate 4.5%
Weighted Average Variable Interest Rate 2.7%
Variable Interest Rate as a % of Total (net of interest rate caps) 25.8%
Weighted Average Maturity (years) 9.3
3Q 2013 YTD 2013 Capitalized Interest $140 $254
11
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|
Debt to EBITDA
$ in thousands
Three months ended 9/30/13 (Unaudited)
Net Income $1,252
Excluding:
Interest Expense 2,598 Income taxes 74 Depreciation and amortization 3,933
EBITDA 7,857
Additional Adjustments:
Non-recurring or extraordinary gains (losses) -Early extinguishment of debt 1,127 Derivative (income) losses 115 Acquisition costs -Development Pipeline -Total Other Adjustments 1,242
Core EBITDA $9,099
Annualized Core EBITDA $36,396
9/30/2013 (Unaudited)
Total Debt $247,356
Excluding:
Development Pipeline Construction Loans -
Core Debt $247,356
Core debt/Core EBITDA 6.8x
Ratio Would Be ~6.0x When Excluding LOC Draws for Development Pipeline
12
|
|
Debt Maturity
$ in thousands
Debt Maturity as of 9/30/13
$90,000 $80,000 $70,000 s) $60,000 $50,000
thousand $40,000 in
$ $30,000
2013 2014 2015 2016 2017 and thereafter
(
$20,000
$10,000 $-
Debt Maturity as of 11/8/13
$80,000 $70,000 $60,000 s) $50,000
thousand $40,000
in $30,000
$
( $20,000
$10,000 $-
13
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|
PORTFOLIO SUMMARY & BUSINESS SEGMENTATION OVERVIEW
|
|
Business Segmentation Overview
Definition Characteristics Valuation
• Includes stabilized office,
Stabilized retail, and multifamily real • Consistent cash flow • Traditional real estate
estate (defined as the • High occupancy valuation, NAV/Cap Rates
Portfolio earlier of 80% occupancy or • Stable same store metrics
the 13th quarter after CO)
Development • Real estate assets in • Value creation
development or ramping • Equity Creation
Pipeline towards stabilization • Asset base growth
• Stable earnings and value
creation
Construction • 3rd party construction • Reduces risk in
selecting/executing • Multiples analysis
Business business development opportunities
• Brand recognition in new
markets
15
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|
Stabilized Portfolio Summary
As of 9/30/2013
Average Net
Effective
Annualized Annual Base
Net Rentable Annualized Base Rent per Rent per
Property Location Year Built Square Feet(1) % Leased(2) Base Rent(3) Leased Sq. Ft.(3) Leased Sq. Ft.(4)
Office Properties
Armada Hoffler Tower(5) Virginia Beach, VA 2002 328,572 95.9% $8,655,103 $27.48 $ 26.39
One Columbus Virginia Beach, VA 1984 129,424 95.6% 2,851,513 23.04 23.22
Two Columbus Virginia Beach, VA 2009 109,215 82.3% 2,232,487 24.85 25.23
Virginia Natural Gas(6) Virginia Beach, VA 2010 31,000 100.0% 568,230 18.33 20.17
Richmond Tower Richmond, VA 2010 206,969 98.0% 7,274,896 35.87 41.83
Oyster Point Newport News, VA 1989 100,214 79.8% 1,737,265 21.72 21.23
Sentara Williamsburg(6) Williamsburg, VA 2008 49,200 100.0% 1,006,140 20.45 20.50
Subtotal / Weighted Average Office Portfolio(7) 954,594 93.4% $24,325,635 $27.28 $ 28.34
Retail Properties Not Subject to Ground Lease
Bermuda Crossroads Chester, VA 2001 111,566 95.4% 1,425,112 13.39 15.54
Broad Creek Shopping Center Norfolk, VA 1997-2001 227,750 96.8% 2,923,152 13.26 12.90
Courthouse 7-11 Virginia Beach, VA 2011 3,177 100.0% 125,000 39.35 43.81
Gainsborough Square Chesapeake, VA 1999 88,862 93.0% 1,293,439 15.65 15.36
Hanbury Village Chesapeake, VA 2006-2009 61,049 86.4% 1,309,963 24.85 24.44
North Point Center Durham, NC 1998-2009 215,689 93.1% 2,365,181 11.77 11.35
Parkway Marketplace Virginia Beach, VA 1998 37,804 100.0% 760,328 20.11 20.92
Harrisonburg Regal Harrisonburg, VA 1999 49,000 100.0% 683,550 13.95 13.95
Dick’s at Town Center Virginia Beach, VA 2002 100,804 83.3% 798,000 9.50 7.79
249 Central Park Retail Virginia Beach, VA(8) 2004 91,171 96.2% 2,536,543 28.93 27.55
Studio 56 Retail Virginia Beach, VA 2007 11,600 84.8% 371,200 37.75 36.92
Commerce Street Retail(9) Virginia Beach, VA 2008 20,123 100.0% 792,313 39.37 39.67
Fountain Plaza Retail Virginia Beach, VA 2004 35,961 100.0% 962,056 26.75 25.68
South Retail(24) Virginia Beach, VA 2002 38,763 83.6% 621,240 19.17 19.03
Subtotal / Weighted Avg Retail Portfolio not Subject to Ground Leases(10) 1,093,319 93.6% $16,967,075 $16.58 $ 16.34
Retail Properties Subject to Ground Lease
| (11) |
|
(13) |
Bermuda Crossroads Chester, VA 2001 100.0% 163,350
| (12) |
|
(14) |
Broad Creek Shopping Center Norfolk, VA 1997-2001 100.0% 572,291
| (11) |
|
(15) |
Hanbury Village Chesapeake, VA 2006-2009 100.0% 1,067,598
| (11) |
|
(16) |
North Point Center Durham, NC 1996-2009 100.0% 1,055,125
| (12) |
|
(17) |
Tyre Neck Harris Teeter Chesapeake, VA 2011 100.0% 508,134
Subtotal / Weighted Avg Retail Portfolio Subject to Ground Leases 100.0% $3,366,499
| (18) |
|
Total / Weighted Avg Retail Portfolio 1,093,319 93.6% $16,967,075 $16.58 $ 16.34
Total / Weighted Average Retail and Office Portfolio 2,047,913 93.5% $41,292,710 $21.57 $ 21.93
Average
Monthly Base
Annualized Rent per
Property Location Year Built Units(19) % Leased(2) Base Rent(20) Leased Unit(21)
Multifamily
Smith’s Landing(22) Blacksburg, VA 2009 284 100.0% $3,427,980 $1,005.86
The Cosmopolitan Virginia Beach, VA 2006 342 86.5% 6,442,907 1,550.33
Total / Weighted Avg Multifamily Portfolio 626 92.7% $9,870,887 $1,283.73
16
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Stabilized Portfolio Summary Footnotes
The net rentable square footage for each of our office properties is the sum of (a) the square footages 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 determined consistently with the Building Owners and Managers Association, or BOMA, 1996 measurement guidelines. The net rentable square footage for each of our retail properties is the sum of (a) the square footages of existing leases, plus (b) for available space, the field verified square footage.
Percentage leased for each of our office and retail properties is calculated as (a) square footage under commenced leases as of September 30, 2013, divided by (b) net rentable square feet, expressed as a percentage. Percentage leased for our multifamily properties is calculated as (a) total units rented as of September 30, 2013, divided by (b) total units available, expressed as a percentage.
For the properties in our office and retail portfolios, annualized base rent is calculated by multiplying (a) base rental payments (defined as cash base rents (before abatements) excluding tenant reimbursements for expenses paid by the landlord) for the month ended September 30, 2013, by (b) 12. Annualized base rent per leased square foot is calculated by dividing (a) annualized base rent, by (b) square footage under commenced leases as of September 30, 2013. In the case of triple net or modified gross leases, annualized base rent does not include tenant reimbursements for real estate taxes, insurance, common area or other operating expenses.
Average net effective annual base rent per leased square foot represents (a) the contractual base rent for leases in place as of September 30, 2013, calculated on a straight-line basis to amortize free rent periods and abatements, but without regard to tenant improvement allowances and leasing commissions, divided by (b) square footage under commenced leases as of September 30, 2013.
As of September 30, 2013, the Company occupied 16,151 square feet at this property at an annualized base rent of $446,172, or $29.40 per leased square foot, which amounts are reflected in the % leased, annualized base rent and annualized base rent per square foot columns in the table above. The rent paid by us is eliminated from our revenues in consolidation. In addition, effective March 1, 2013, the Company sublease approximately 5,000 square feet of space from a tenant at this property.
This property is subject to a triple net lease pursuant to which the tenant pays operating expenses, insurance and real estate taxes.
Includes square footage and annualized base rent pursuant to leases for space occupied by us.
As of September, 2013, the Company occupied 8,995 square feet at this property at an annualized base rent of $278,935, or $31.01 per leased square foot, which amounts are reflected in the % leased, annualized base rent and annualized base rent per square foot columns in the table above. The rent paid by us is eliminated from our revenues in consolidation.
Includes $31,200 of annualized base rent pursuant to a rooftop lease.
Reflects square footage and annualized base rent pursuant to leases for space occupied by us.
For this ground lease, the Company own the land and the tenant owns the improvements thereto. The Company will succeed to the ownership of the improvements to the land upon the termination of the ground lease.
The Company lease the land underlying this property from the owner of the land pursuant to a ground lease. The Company re-lease the land to our tenant under a separate ground lease pursuant to which our tenant owns the improvements on the land.
Tenants collectively lease approximately 139,356 square feet of land from us pursuant to ground leases.
Tenants collectively lease approximately 299,170 square feet of land from us pursuant to ground leases.
Tenants collectively lease approximately 105,988 square feet of land from us pursuant to ground leases.
Tenants collectively lease approximately 1,443,985 square feet of land from us pursuant to ground leases.
Tenant leases approximately 200,073 square feet of land from us pursuant to a ground lease.
The total square footage of our retail portfolio excludes the square footage of land subject to ground leases.
Units represent the total number of apartment units available for rent at September 30, 2013.
For the properties in our multifamily portfolio, annualized base rent is calculated by multiplying (a) base rental payments for the month ended September 30, 2013 by (b) 12.
Average monthly base rent per leased unit represents the average monthly rent for all leased units for the month ended September 30, 2013.
The Company lease the land underlying this property from the owner of the land pursuant to a ground lease.
The annualized base rent for The Cosmopolitan includes $936,143 of annualized rent from 15 retail leases at the property.
As of September, 2013, The Company occupied 2,908 square feet at this property at an annualized base rent of $12,000, or $4.13 per leased square foot, which amounts are reflected in the % leased, annualized base rent and annualized base rent per square foot columns in the table above. The rent paid by us and is eliminated from our revenues in consolidation.
17
|
|
Identified Development Pipeline
$ in thousands
Schedule
Estimated Cost Incurred
Square Estimated through Anchor Tenant Stabilized AHH Principal
Office/Retail Location Footage(1) Cost(1) 9/30/13 Start Occupancy Operation Ownership % (1) Property Type Tenants %leased
4525 Main Street(2) Virginia Beach, VA 234,000(3) $50,000 $17,851 1Q13 3Q14 3Q15 100% Office Clark Nexsen, Development 46%
Authority of Virginia Beach(3)
Sandbridge Commons Virginia Beach, VA 70,000 12,500 5,666 4Q13 2Q15 2Q16 85% Retail Harris Teeter 66%
Brooks Crossing Newport News, VA 54,000 12,500 832 2Q14 3Q15 3Q15 65% Office Huntington Ingalls(4) , City of 0%(4)
Newport News(4)
Greentree Shopping Center(5) Chesapeake, VA 18,000 6,000 583 4Q13 1Q15 4Q15 100% Retail Wawa 40%
376,000 $81,000 $24,932
Schedule
Estimated Cost Incurred
Apartment Estimated through Initial Stabilized AHH
Multifamily Location Units(1) Cost(1) 9/30/13 Start Occupancy Complete(1) Operation Ownership %
Encore Apartments(2) Virginia Beach, VA 286 $33,500 $5,831 1Q13 3Q14 4Q15 1Q16 100%
Whetstone Apartments Durham, NC 203 27,500 4,893 3Q13 3Q14 3Q15 1Q16 100%
Liberty Apartments(6) Newport News, VA 197 31,900 ——— 1Q14 3Q15 100%
686 $92,900 $10,724
Total $173,900 $35,656
Represents estimates that may change as the development process proceeds
This property will be located within the Virginia Beach Town Center
Approximatlely 83,000 square feet is leased to Clark Nexsen, an architectural firm and approximately 23,000 square feet is leased to the Development Authority of Virginia Beach
The principal tenant leases have not been signed as of the date of this supplemental information
AHH has a contract to sell Wal -Mart a pad-ready site adjacent to Greentree Shopping Center
Purchase during 1Q 2014
18
|
|
Construction Business Summary
$ in thousands
Work in Place Estimated
Location Total Contract Value as of 09/30/13 Backlog Date of Completion
Projects Greater than $5.0M
City of Suffolk Municipal Center Suffolk, VA $24,436 $6,972 $ 17,464 2Q 2015
Hyatt Place Baltimore / Inner Harbor Hotel Baltimore, MD 24,417 351 24,066 3Q 2014
Newport News Apprentice School of Shipbuilding(1) Newport News, VA 22,933 17,871 5,062 4Q 2013
Liberty Apartments(1) Newport News, VA 20,107 18,924 1,183 4Q 2013
Main Street Parking Garage(1) Virginia Beach 17,756 9,103 8,653 3Q 2014
| (2) |
|
Biomedical Research Lab at Hampton University Hampton, VA 10,432 10,003 429 4Q 2013
| (1) |
|
(2) |
Newport News Shipbuilding Parking Garage Newport News, VA 7,940 7,393 547 4Q 2013
Total Projects Greater then $5.0M 128,021 70,617 57,404
Projects Less than $5.0M 12,722 10,676 2,046
Total $140,743 $81,293 $ 59,450
Gross Profit Summary
3Q 2013 Annualized
(Unaudited)
Revenue $21,896 $87,583
Expense (20,907) (83,627)
Gross Profit $989 $3,956
Related party contracts
These contracts are materially complete
19
|
|
OPERATING RESULTS & PROPERTY-TYPE SEGMENT ANALYSIS
|
|
Same Store NOI by Segment
(Reconciliation to GAAP located in appendix pg. 44)
$ in thousands
Three months ended 9/30 Nine months ended 9/30
2013 2012 $ Change % Change 2013 2012 $ Change % Change
Office(1) (Unaudited) (Unaudited)
Revenue $ 6,364 $ 6,194 $170 3% $ 19,270 $ 19,153 $117 1%
Expenses 2,081 2,271 (190) -8% 5,967 5,921 46 1%
Net Operating Income 4,283 3,923 360 9% 13,303 13,232 71 1%
Retail(2)
Revenue 5,162 5,297 (135) -3% 14,867 15,345 (478) -3%
Expenses 1,643 1,618 25 2% 4,695 4,520 175 4%
Net Operating Income 3,519 3,679 (160) -4% 10,172 10,825 (653) -6%
Multi Family(3)
Revenue 1,874 1,827 47 3% 5,684 5,577 107 2%
Expenses 868 946 (78) -8% 2,558 2,453 105 4%
Net Operating Income 1,006 881 125 14% 3,126 3,124 2 0%
Same Store Net Operating Income (NOI), GAAP basis $ 8,808 $ 8,483 $325 4% $ 26,601 $ 27,181 ($580) -2%
Net effect of straight-line rents (73) (306) 233 -76% (425) (1,103) 679 -62%
Amortization of lease incentives 179 185 (6) -3% 582 549 32 6%
Same store portfolio NOI, cash basis $ 8,915 $ 8,362 $553 7% $ 26,758 $ 26,627 $131 0%
Cash Basis:
Office 4,100 3,589 511 14% 12,546 12,058 488 4%
Retail 3,803 3,887 (85) -2% 11,068 11,434 (367) -3%
Multifamily 1,005 885 120 14% 3,142 3,134 8 0%
$ 8,908 $ 8,362 $546 7% $ 26,756 $ 26,627 $129 0%
GAAP Basis:
Office 4,283 3,923 360 9% 13,303 13,232 71 1%
Retail 3,519 3,679 (160) -4% 10,172 10,825 (653) -6%
Multifamily 1,006 881 125 14% 3,126 3,124 2 0%
$ 8,808 $ 8,483 $325 4% $ 26,601 $ 27,181 ($580) -2%
(1) No assets excluded
(2) Bermuda Crossroads and Tyre Neck Harris Teeter excluded
(3) Smith’s Landing excluded
21
|
|
Top 10 Tenants by Annual Base Rent
As of September 30, 2013
Office Portfolio
Number
Number of
Tenant of Leases Properties Property(ies)
Williams Mullen 3 2 Armada Hoffler Tower, Richmond Tower
Troutman Sanders LLP 1 1 Armada Hoffler Tower
Sentara Medical Group 1 1 Sentara Williamsburg
Pender & Coward 2 1 Armada Hoffler Tower
Cherry, Bekaert & Holland, LLP 3 3 Armada Hoffler Tower, Richmond Tower, Oyster Point
GSA-USAF 1 1 Oyster Point
The Art Institute 1 1 Two Columbus
Hampton University 2 1 Armada Hoffler Tower
Virginia Natural Gas 1 1 Virginia Natural Gas Headquarters
Hankins & Anderson 1 1 Armada Hoffler Tower
Top 10 Total
Retail Portfolio
Number
Number of
Tenant of Leases Properties Property(ies)
Home Depot 2 2 Broad Creek Shopping Center, North Point Center
Harris Teeter 2 2 Tyre Neck Harris Teeter, Hanbury Village
Food Lion 3 3 Broad Creek Shopping Center, Bermuda Crossroads,
Gainsborough Square
Dick’s Sporting Goods 1 1 Dick’s at Town Center
Regal Cinemas 1 1 Harrisonburg Regal
Pet smart 2 2 Broad Creek Shopping Center, North Point Center
Kroger 1 1 North Point Center
Yard House 1 1 Commerce Street Retail
Rite Aid 2 2 Gainsborough Square, Parkway Marketplace
Walgreens 1 1 Hanbury Village
Top 10 Total
% of Office % of Total
Weighted Portfolio Portfolio
Lease Annualized Annualized Annualized
Expiration Base Rent Base Rent Base Rent
3/19/2026 $7,779,349 32.0% 14.3%
1/31/2015 1,026,938 4.2% 1.9%
3/31/2023 1,006,140 4.1% 1.8%
1/31/2015 972,179 4.0% 1.8%
9/21/2022 932,547 3.8% 1.7%
4/26/2017 870,047 3.6% 1.6%
12/31/2019 771,898 3.2% 1.4%
4/28/2023 629,935 2.6% 1.2%
9/30/2025 568,230 2.3% 1.0%
4/30/2022 562,363 2.3% 1.0%
$15,119,627 62.2% 27.7%
% of Retail % of Total
Weighted Portfolio Portfolio
Lease Annualized Annualized Annualized
Expiration Base Rent Base Rent Base Rent
12/27/2019 $2,032,600 10.0% 3.7%
10/16/2028 1,430,001 7.0% 2.6%
3/19/2020 1,282,568 6.3% 2.4%
1/31/2020 798,000 3.9% 1.5%
4/23/2019 683,550 3.4% 1.3%
2/7/2016 618,704 3.0% 1.1%
8/31/2018 552,864 2.7% 1.0%
11/30/2023 538,000 2.6% 1.0%
5/29/2019 484,193 2.4% 0.9%
12/31/2083 447,564 2.2% 0.8%
$8,868,044 43.6% 16.3%
22
|
|
Office Lease Summary
In thousands, except per share
Renewal Lease Summary(1) GAAP Cash
Number of Weighted
Leases Net rentable Contractual Prior Rent Annual Change Contractual Prior Rent Annual Change Average Lease TI, LC, & TI, LC, & Incentives
Quarter Signed SF Signed Rent per SF per SF in Rent Rent per SF per SF in Rent Term Incentives per SF
3rd Quarter 2013 5 16,289 $29.18 $26.76 $2.42 $28.26 $27.92 $0.33 6.8 $60,809 $3.73
2nd Quarter 2013 6 29,725 22.86 23.14 (0.28) 21.81 24.20 (2.39) 5.7 481,389 16.19
Total 11 46,014 $2.14 ($2.05) $542,198
New Lease Summary(1)
Number of Weighted TI, LC, &
Leases Net rentable Contractual Average TI, LC, & Incentives
Quarter Signed SF Signed Rent per SF Lease Term Incentives per SF
3rd Quarter 2013 1 1,142 $29.50 $5.00 $3,577 $3.13
2nd Quarter 2013 2 4,046 26.77 5.00 165,628 $40.94
Total 3 5,188 $169,205
| (1) |
|
Excludes leases from space occupied by AHH |
23
|
|
Office Lease Expirations
Square
Number of Footage of % Portfolio % of Portfolio Annualized Base Rent
Leases Leases Net Rentable Annualized Annualized per Leased Square
Year of Lease Expiration Expiring Expiring Square Feet Base Rent Base Rent Foot
Available — 63,047 6.6% —— -
2013 4 5,112 0.5% 158,608 0.7% 31.03
2014 14 59,226 6.2% 1,551,703 6.4% 26.20
2015 9 97,785 10.2% 2,636,714 10.8% 26.96
2016 10 33,481 3.5% 784,541 3.2% 23.43
2017 5 65,186 6.8% 1,566,263 6.4% 24.03
2018 15 150,853 15.8% 4,009,237 16.5% 26.58
2019 4 54,264 5.7% 1,239,364 5.1% 22.84
2020 3 25,283 2.6% 772,781 3.2% 30.57
2021 4 41,363 4.3% 946,624 3.9% 22.89
2022 3 48,117 5.0% 1,268,882 5.2% 26.37
2023 5 105,160 11.0% 2,310,230 9.5% 21.97
Thereafter 4 205,717 21.6% 7,080,688 29.1% 34.42
Total / Weighted Average 80 954,594 100.0% $24,325,635 100.0% $27.28
35.0%
29.1%
30.0%
25.0%
20.0%
16.5%
15.0%
10.8%
9.5%
10.0%
6.4% 6.4%
5.1% 5.2%
3.2% 3.2% 3.9%
5.0%
0.7%
0.0%
24
|
|
Retail Lease Summary
In thousands, except per share
Renewal Lease Summary(1) GAAP Cash
Number of Weighted
Leases Net rentable Contractual Prior Rent Annual Change Contractual Prior Rent Annual Change Average Lease TI, LC, & TI, LC, & Incentives
Quarter Signed SF Signed Rent per SF per SF in Rent Rent per SF per SF in Rent Term Incentives per SF
3rd Quarter 2013 6 24,506 $24.26 $25.11 ($0.85) $23.55 $28.34 ($4.79) 5.67 $227,766 $ 9.29
2nd Quarter 2013 6 26,345 17.02 17.40 (0.37) 16.50 18.03 (1.53) 4.12 — -
Total 12 50,851 ($1.22) ($6.32) $227,766
New Lease Summary(1)
Number of Net rentable Weighted TI, LC, &
Leases Square Feet Contractual Average TI, LC, & Incentives per
Quarter Signed Signed Rent per Sq. Ft. Lease Term Incentives SF
3rd Quarter 2013 —— $0.00 — $0 $0.00
2nd Quarter 2013 6 20,037 11.59 5.34 433,101 $21.62
Total 6 20,037 $433,101
| (1) |
|
Excludes leases from space occupied by AHH |
25
|
|
Retail Lease Expiration
Square
Number of Footage of % Portfolio % of Portfolio Annualized Base Rent
Leases Leases Net Rentable Annualized Annualized per Leased Square
Year of Lease Expiration Expiring Expiring Square Feet Base Rent Base Rent Foot
Available — 70,263 6.4% —— -
2013 9 13,098 1.2% 232,260 1.4% 17.73
2014 16 38,008 3.5% 678,450 4.0% 17.85
2015 18 89,178 8.2% 1,592,588 9.4% 17.86
2016 24 73,240 6.7% 1,730,127 10.2% 23.62
2017 19 135,545 12.4% 1,891,569 11.1% 13.96
2018 17 117,114 10.7% 1,679,899 9.9% 14.34
2019 14 283,635 25.9% 3,991,553 23.5% 14.07
2020 5 105,946 9.7% 1,343,863 7.9% 12.68
2021 3 15,068 1.4% 455,649 2.7% 30.24
2022 6 83,588 7.6% 1,214,794 7.2% 14.53
2023 5 27,625 2.5% 869,930 5.1% 31.49
Thereafter 5 41,011 3.8% 1,286,392 7.6% 31.37
Total / Weighted Average 141 1,093,319 100.0% $16,967,075 100.0% $16.58
25.0% 23.5%
20.0%
15.0%
11.1%
10.2% 9.9%
9.4%
10.0% 7.9%
7.2% 7.6
4.0% 5.1%
5.0%
2.7%
1.4%
0.0%
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Historical Occupancy
Occupancy—All Properties as of
Sector 9/30/2013 6/30/2013 3/31/2013 12/31/2012
Office (1) 93.4% 93.4% 93.9% 94.1%
Retail (1) 93.6% 94.6% 93.9% 93.9%
Multifamily(2) 92.7% 91.2% 93.3% 94.9%
Weighted Average(3) 93.3% 93.5% 93.8% 94.2%
Office and retail occupancy based on occupied square feet as a % of respective total
Multifamily occupancy based on weighted average of total units
Total occupancy weighted by annualized base rent
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Multifamily Occupancy
Occupancy Summary—Smiths Landing (284 available units)
Number of Units Percentage Annualized Base Average Monthly Rent
Quarter Ended Occupied Occupied(1) Rent(2) per Occupied Unit(3)
9/30/2013 284 100.0% $3,427,980 $1,006
6/30/2013 264 93.0% 3,163,164 998
3/31/2013 284 100.0% 3,395,184 996
12/31/2012 280 98.6% 3,353,280 998
Occupancy Summary—The Cosmopolitan (342 available units)
Number of Units Percentage Annualized Base Average Monthly Rent
Quarter Ended Occupied Occupied(1) Rent(2)(4) per Occupied Unit(3)
9/30/2013 296 86.5% $5,506,764 $1,550
6/30/2013 307 89.9% 5,818,908 1,580
3/31/2013 300 87.7% 5,490,864 1,525
12/31/2012 314 91.8% 5,889,528 1,563
(1) Total units rented as of each respective quarter end date
(2) Annualized base rent is calculated by multiplying (a) contractual rental due under our tenants leases payments for each last month of the respective quarter by (b) 12
(3) Average Monthly Rent per Occupied unit is calculated as (a) annualized Based rent divided by (b) the number of occupied units as of the last month of each respective quarter end date.
(3) Excludes annualized base rent from retail leases
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APPENDIX—UNDERSTANDING AHH
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Understanding AHH –Corporate Overview
Armada Hoffler Properties, Inc. is a full-service real estate investment trust (REIT) and property company that develops, builds, owns and manages institutional grade office, retail and multifamily properties in the Mid-Atlantic U.S. The Company also provides general construction and development services to third-party clients throughout the Mid-Atlantic and Southeastern regions of the U.S. Armada Hoffler Properties was founded in 1979 and is headquartered in Virginia Beach, VA.
Diversified portfolio consisting of Office, Retail and Multifamily properties
Institutional grade portfolio focused on the Mid-Atlantic region
34 year corporate track record with senior leadership team averaging more than 20 years with the company
Market Cap of ~$320 million as of 9/30/13
Management and previous partners own in excess of 40% of the company through Current Portfolio & Development Pipeline
operating partnership units in the limited Previous Construction or Development Projects
partnership
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Understanding AHH –
Differentiation Provides Value Creation
3. Advantages of Construction Company:
Stable earnings and value creation
Reduces risk in selecting/executing development opportunities
Brand recognition in new markets
Sum of the Parts Leads to Valuation
1. Advantages of Core Stabilized Portfolio:
Consistent cash flow
High occupancy
Stable same store metrics
2. Advantages of Wholesale Development Pipeline Engine:
Equity creation
Asset base growth
Development Engine
Stable Construction Portfolio Business
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Business Segmentation Overview
Definition Characteristics Valuation
• Includes stabilized office,
Stabilized retail, and multifamily real • Consistent cash flow • Traditional real estate
estate (defined as the • High occupancy valuation, NAV/Cap Rates
Portfolio earlier of 80% occupancy or • Stable same store metrics
the 13th quarter after CO)
Development • Real estate assets in • Value creation
development or ramping • Equity Creation
Pipeline towards stabilization • Asset base growth
• Stable earnings and value
creation
Construction • 3rd party construction • Reduces risk in
selecting/executing • Multiples analysis
Business business development opportunities
• Brand recognition in new
markets
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Components of NAV
stabilized portfolio noi market cap rate = stabilized portfolio value
development value creation x appropriate discount rate = equity value
operating company income x market multiple = operating company value
other assets
liabilities
See Pages 33-36 for Further Information Regarding the Components of NAV
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1) Understanding AHH –Stabilized Portfolio
(Reconciliation to GAAP located in appendix pg. 45)
$ in thousands
Cash NOI
Three months
ended 9/30/13 Annualized
Diversified Portfolio
Office $ 2,079 $8,316
Retail 3,030 12,120
Multifamily 546 2,184
Total Diversified Portfolio NOI $ 5,655 $22,620
Virginia Beach Town Center
Office(1) $ 2,152 $8,608
Retail (1) 1,168 4,672
Multifamily 1,005 4,020
Total Virginia Beach Town Center NOI $ 4,325 $17,300
Total Stabilized Portfolio NOI $ 9,980 $39,920
| (1) |
|
Includes Armada Hoffler leases which are eliminated for GAAP purposes totaling $210,000 |
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2) Understanding AHH –
Identified & Next Generation Pipeline
$ in thousands
Note: The data below reflects the Companies current estimates, which may change as a result of various factors. The Company can make no assurances that the estimates below will actually be realized.
The Companies Est.
Estimated The Companies Equity Creation
Estimated Return on Projected Estimated Equity Excluding JV
Estimated Cost Stabilized NOI Cost Value Spread Creation Ownership
Identified Pipeline $ 142,000 $ 11,700 8.24% 125bp $ 25,395 $ 24,286
Next Generation Pipeline 150,000 12,400 8.27% 150bp 33,251 33,251
| (1) |
|
Liberty Apartments 31,900 2,060
Estimated Stabilized Value/Weighted Average $ 323,900 $ 26,160 8.25% $ 58,647 $ 57,537
Greater than $55M in Equity Creation - 3 to 4 Years
| (1) |
|
Contractual price |
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3) Understanding AHH –3rd Party Construction
$ in thousands
Gross Profit—metric to use when evaluating the profitability and valuation of the general contracting & real estate services segment
Gross Profit Summary
3Q 2013 Annualized (Unaudited) Revenue $21,896 $87,583 Expense (20,907) (83,627) Gross Profit $989 $3,956
Construction Company—Ongoing Profitable Business with Intrinsic Value
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4) NAV Component Data
$ in thousands
Stabilized Portfolio NOI (Cash) Development Pipeline
Annualized three
months ended
9/30/2013 Development Investment as of 9/30/13 $36,172
Diversified Portfolio The Companies Estimated Equity Creation—3-4 years (pg. 35) 58,647
Office $8,316 $94,819
Retail 12,120
Multifamily 2,184
Total Diversified Portfolio NOI (pg. 34) $22,620
Operating Companies
Virginia Beach Town Center Annualized
Office(1) $8,608 9/30/2013
Retail (1) 4,672
Multifamily 4,020 General Contracting and Real Estate Services (pg. 36) $3,956
Total Virginia Beach Town Center NOI (pg. 34) $17,300
Stabilized Portfolio NOI (Cash) $39,920
Other Assets Liabilities & Share Count
As of 9/30/2013 As of 9/30/2013
Other Assets Liabilities
Cash and Cash Equivalents $9,775 Mortgages and notes payable $247,356
Restricted Cash 2,966 Accounts payable and accrued liabilities 6,970
Accounts Receivable 17,846 Other Liabilities 16,142
Other Assets 23,199 Total Liabilities $270,468
Total Other Assets $53,786
Share Count
Total Common Shares Outstanding 19,164
Operating Partnership (“OP”) Units Outstanding 13,059
Common Shares and OP Units Outstanding 32,223
| (1) |
|
Includes Armada Hoffler leases which are eliminated for GAAP purposes totaling $210,000 |
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APPENDIX –
DEFINITIONS & RECONCILIATIONS
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Definitions
Net Operating Income:
We calculate Net Operating Income (“NOI”) as property revenues (base rent, expense reimbursements and other revenue) less property expenses (rental expenses and real estate taxes). For our office, retail and multifamily segments, NOI excludes general contracting and real estate services expenses, depreciation and amortization, general and administrative expenses, and impairment charges. 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, net operating income 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.
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 (“G GAAP”)), excluding gains (or losses) from sales of depreciable operating property, real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures.
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 year over year, 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.
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Definitions
Core Funds From Operations:
We calculate Core Funds From Operations (“Core FFO”) as FFO calculated in accordance with the standards established by NAREIT, adjusted for losses on debt extinguishments, non-cash stock compensation and impairment charges. Such items are non-recurring or non-cash in nature. Our calculation of Core FFO also excludes acquisition costs and the impact of development pipeline projects that are still in lease-up. We generally consider a property to be in lease-up until 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.
Management believes that the computation of FFO in accordance to NAREIT’s definition includes certain items that are not indicative of the results provided by the Company’s operating portfolio and affect the comparability of the Company’s period-over-period performance. Our calculation of Core FFO differs from NAREIT’s definition of FFO. Other equity REITs may not calculate Core FFO in the same manner as us, and, accordingly, our Core FFO may not be comparable to other REITs’ Core FFO.
Core Adjusted Funds From Operations:
We calculate Core Adjusted Funds From Operations (“Core AFFO”) as Core FFO, (i) excluding the impact of tenant improvement and leasing commission costs, capital expenditures, the amortization of deferred financing fees, derivative (income) loss, the net effect of straight-line rents and the amortization of lease incentives and net above (below) market rents and (ii) adding back the impact of development pipeline projects that are still in lease-up and government development grants that are not included in FFO.
Management believes that Core 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 Core AFFO or similarly entitled FFO measures and, accordingly, our Core AFFO may not always be comparable to Core AFFO or other similarly entitled FFO measures of other REITs.
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Definitions
EBITDA:
We calculate EBITDA as net income (loss) (calculated in accordance with GAAP), excluding interest expense, income taxes and depreciation and amortization. Management believes 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.
Core EBITDA:
We calculate Core EBITDA as EBITDA, excluding certain items, including, but not limited to, non-recurring or extraordinary gains (losses), early extinguishment of debt, derivative (income) losses, acquisition costs and the impact of development pipeline projects that are still in lease-up. We generally consider a property to be in lease-up until 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. Management believes that Core EBITDA provides useful supplemental information to investors regarding our ongoing 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 Core EBITDA or similarly entitled measures and, accordingly, our Core EBITDA may not always be comparable to Core EBITDA or other similarly entitled measures of other REITs.
Core Debt:
We calculate Core Debt as our total debt, excluding any construction loans associated with our development pipeline.
Same Store Portfolio:
We define same store properties as including those properties that were owned and operated for the entirety of the period being presented and excluding properties that were in lease-up during the period present. We generally consider a property to be in lease-up until 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. The following table shows the properties included in the same store and non-same store portfolio for the comparative periods presented.
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Definitions
Comparison of Three Months Ended Comparison of Nine Months Ended
September 30, 2013 to 2012 September 30, 2013 to 2012
Same Store Non-Same Store Same Store Non-Same Store
Office Properties
Armada Hoffler Tower X X
One Columbus X X
Two Columbus X X
Virginia Natural Gas X X
Richmond Tower X X
Oyster Point X X
Sentara Williamsburg X X
Retail Properties
Bermuda Crossroads X X
Broad Creek Shopping Center X X
Courthouse 7-Eleven X X
Gainsborough Square X X
Hanbury Village X X
North Point Center X X
Parkway Marketplace X X
Harrisonburg Regal X X
Dick’s at Town Center X X
249 Central Park Retail X X
Studio 56 Retail X X
Commerce Street Retail X X
Fountain Plaza Retail X X
South Retail X X
Tyre Neck Harris Teeter X X
Multifamily
Smith’s Landing X X
The Cosmopolitan X X
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Reconciliation to GAAP -Segment Portfolio NOI
$ in thousands
No assets excluded
Bermuda Crossroads and Tyre Neck Harris Teeter excluded
Smith’s Landing excluded
Three months ended 9/30 Nine months ended 9/30
2013 2012 2013 2012
Office Same Store
Rental revenues(1) $6,364 $6,194 $19,270 $19,153
Property expenses 2,081 2,271 5,968 5,921
NOI 4,283 3,923 13,302 13,232
Non-Same Store NOI ——— -
Segment NOI $ 4,283 $3,923 $13,302 $13,232
Retail Same Store(2)
Rental revenues $5,162 $5,297 $14,867 $15,345
Property expenses 1,643 1,618 4,695 4,520
NOI 3,519 3,679 10,172 10,825
Non-Same Store NOI 419 — 845 135
Segment NOI $3,938 $3,679 $11,017 $10,960
Multifamily Same Store(3)
Rental revenues $1,874 $1,827 $5,684 $5,577
Property expenses 868 946 2,558 2,453
NOI 1,006 881 3,126 3,124
Non-Same Store NOI 515 — 837 -
Segment NOI $1,521 $881 $3,963 $3,124
Total Segment Portfolio NOI $9,742 $8,483 $28,282 $27,316
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Reconciliation to GAAP—
Segment Portfolio NOI
$ in thousands
Three months ended 9/30/13
Diversified Portfolio Office Retail Multifamily Total
Cash NOI $2,079 $3,030 $546 $5,655
Net effect of straight-line rents 267 (54) — 213
Amortization of lease incentives and (above) below market rents (14) 38 (25) (1)
GAAP NOI $2,332 $3,014 $521 $5,867
Town Center of Virginia Beach Office Retail Multifamily Total
Cash NOI $2,152 $1,168 $1,006 $4,326
Net effect of straight-line rents (36) (34) (6) (76)
Amortization of lease incentives and (above) below market rents (33) (132) — (165)
Elimination of AHH rent (132) (78) — (210)
GAAP NOI $1,951 $924 $1,000 $3,875
GAAP NOI Office Retail Multifamily Total
Diversified Portfolio $2,332 $3,014 $521 $5,867
Town Center of Virginia Beach 1,951 924 1,000 3,875
Total Segment Portfolio NOI $4,283 $3,938 $1,521 $9,742
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