SEC Filing - Armada Hoffler Properties, Inc.

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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): October 19, 2016

ARMADA HOFFLER PROPERTIES, INC.

(Exact name of registrant as specified in its charter)



Maryland (State or other jurisdiction of incorporation)	001-35908 (Commission File Number)		46-1214914 (IRS Employer Identification No.)

222 Central Park Avenue, Suite 2100 Virginia Beach, Virginia (Address of principal executive offices)		23462 (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 8.01	Other Events.

On April 1, 2016, Armada Hoffler Properties, Inc. (the “Company”) filed an amended Current Report on Form 8-K/A for the sole purpose of filing the financial statements and pro forma financial information required by Item 9.01 of Form 8-K in connection with the Company’s acquisition of a portfolio of 11 retail properties (the “Retail Portfolio”) on January 14, 2016. The financial statements of the Retail Portfolio included therein were for the nine months ended September 30, 2015 (unaudited) and the year ended December 31, 2014.

As previously reported, the Company acquired Southgate Square on April 29, 2016 and Southshore Shops on August 4, 2016.

The Company is filing this Current Report on Form 8-K to file: (i) the financial statement of the Retail Portfolio for the year ended December 31, 2015; (ii) financial statements of Southgate Square and Southshore Shops in order to satisfy the requirement of Rule 3-14 of Regulation S-X that relates to the acquisition of one or more properties since January 1, 2016 that are individually insignificant, but significant in the aggregate, to the Company; and (iii) updated pro forma financial information that gives effect to the acquisitions of the Retail Portfolio, Southgate Square and Southshore Shops.



Item 9.01	Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired.


•	Audited Combined Statement of Revenues and Certain Operating Expenses of the Retail Portfolio for the year ended December 31, 2015. (1)


•	Notes to Combined Statement of Revenues and Certain Operating Expenses of the Retail Portfolio. (1)


•	Statements of Revenues and Certain Operating Expenses of Southgate Square for the three months ended March 31, 2016 (unaudited) and the year ended December 31, 2015 (audited). (2)


•	Notes to Statements of Revenues and Certain Operating Expenses of Southgate Square. (2)


•	Statements of Revenues and Certain Operating Expenses of Southshore Shops for the six months ended June 30, 2016 (unaudited) and the year ended December 31, 2015 (audited). (3)


•	Notes to Statements of Revenues and Certain Operating Expenses of Southshore Shops. (3)

(b) Pro forma financial information.


•	Unaudited Pro Forma Consolidated Balance Sheet of the Company as of June 30, 2016. (4)


•	Unaudited Pro Forma Consolidated Statement of Operations of the Company for the six months ended June 30, 2016. (4)


•	Unaudited Pro Forma Consolidated Statement of Operations of the Company for the year ended December 31, 2015. (4)

(1) Filed as Exhibit 99.1 and incorporated herein by reference.

(2) Filed as Exhibit 99.2 and incorporated herein by reference.

(3) Filed as Exhibit 99.3 and incorporated herein by reference.

(4) Filed as Exhibit 99.4 and incorporated herein by reference.

(d) Exhibits.



Exhibit No.		Description

23.1		Consent of PricewaterhouseCoopers LLP.
23.2		Consent of Cherry Bekaert LLP.
99.1		Financial Statement of the Retail Portfolio.
99.2		Financial Statements of Southgate Square.
99.3		Financial Statements of Southshore Shops.
99.4		Pro Forma Financial Information.

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: October 19, 2016	By: /s/ Michael P. O’Hara__________________

Michael P. O’Hara

Chief Financial Officer and Treasurer

EXHIBIT INDEX



Exhibit No.		Description

23.1		Consent of PricewaterhouseCoopers LLP.
23.2		Consent of Cherry Bekaert LLP.
99.1		Financial Statement of the Retail Portfolio.
99.2		Financial Statements of Southgate Square.
99.3		Financial Statements of Southshore Shops.
99.4		Pro Forma Financial Information.

Exhibit

Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-196473 and 333-204063) and Form S-8 (No. 333-188545) of Armada Hoffler Properties, Inc. of our report dated October 19, 2016 relating to the combined statement of revenues and certain operating expenses of the Retail Portfolio, which appears in this Current Report on Form 8-K of Armada Hoffler Properties, Inc.

/s/ PricewaterhouseCoopers LLP

Cleveland, OH
October 19, 2016

Exhibit

Exhibit 23.2

Consent of Independent Auditor

Armada Hoffler Properties, Inc.

Virginia Beach, Virginia

We hereby consent to the incorporation by reference in the Registration Statements of Armada Hoffler Properties, Inc., on Form S-3 (Nos. 333-196473 and 333-204063) and Form S-8 (No. 333-188545) of our reports dated October 19, 2016, with respect to the (i) Statement of Revenues and Certain Operating Expenses of Southgate Square and the (ii) Statement of Revenues and Certain Operating Expenses of Southshore Shops for the year ended December 31, 2015, which reports appear in the accompanying Current Report on Form 8-K of Armada Hoffler Properties, Inc.

/s/ Cherry Bekaert LLP

Virginia Beach, Virginia

October 19, 2016

Exhibit

Exhibit 99.1

Independent Auditor’s Report

To the Board of Directors and Stockholders of

Armada Hoffler Properties, Inc.:

We have audited the accompanying combined statement of revenues and certain operating expenses of the Retail Portfolio described in Note 1 for the year ended December 31, 2015.

Management's Responsibility for the Combined Statement of Revenues and Certain Operating Expenses

Management is responsible for the preparation and fair presentation of the combined statement of revenues and certain operating expenses in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the combined statement of revenues and certain operating expenses that is free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on the combined statement of revenues and certain operating expenses based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined statement of revenues and certain operating expenses is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined statement of revenues and certain operating expenses. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the combined statement of revenues and certain operating expenses, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation and fair presentation of the combined statement of revenues and certain operating expenses in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the combined statement of revenues and certain operating expenses. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the combined statement of revenues and certain operating expenses referred to above presents fairly, in all material respects, the revenues and certain operating expenses of the Retail Portfolio for the year ended December 31, 2015 in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter

The accompanying combined statement of revenues and certain operating expenses of the Retail Portfolio was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in Note 1 and is not intended to be a complete presentation of the Retail Portfolio’s revenues and expenses. Our opinion is not modified with respect to this matter.

/s/ PricewaterhouseCoopers LLP

Cleveland, OH

October 19, 2016

Retail Portfolio

Combined Statement of Revenues and Certain Operating Expenses

(In thousands)



			Year Ended
			December 31, 2015
Revenues
	Rental revenue		$	12,308
	Tenant recoveries		3,456
	Ancillary and other income		125
		Total revenues	15,889

Certain operating expenses
	Real estate taxes and insurance		2,111
	Operating and maintenance		1,998
	Management fees		696
		Total certain operating expenses	4,805
Revenues in excess of certain operating expenses			$	11,084

See accompanying Notes to Combined Statement of Revenues and Certain Operating Expenses.

Retail Portfolio

Notes to Combined Statement of Revenues and Certain Operating Expenses

1. Basis of Presentation

The accompanying combined statement of revenues and certain operating expenses includes the operations of a portfolio of 11 retail centers located throughout the Mid-Atlantic and Southeastern United States (the “Retail Portfolio”), which Armada Hoffler Properties, Inc. (the “Company”) acquired on January 14, 2016.

The accompanying combined statement of revenues and certain operating expenses has been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended. Accordingly, the statement is not representative of the actual operations for the period presented, as revenues and certain operating expenses, which may not be directly attributable to the revenues and expenses expected to be incurred in the future operations of the Retail Portfolio, have been excluded. Such items include depreciation, amortization, interest expense, interest income and amortization of above- and below-market leases. The Company is not aware of any material factors during the year ended December 31, 2015 that would cause the reported financial information not to be indicative of future operating results.

The accompanying combined statement of revenues and certain operating expenses of the Retail Portfolio has been presented on a combined basis as the 11 retail centers were under common management and ownership during the period presented.

2. Summary of Significant Accounting Policies

Revenue Recognition

The Retail Portfolio recognizes rental revenue from tenants on a straight-line basis over the lease term when collectability is reasonably assured and the tenant has taken possession or controls the physical use of the leased asset.

Tenant recoveries related to reimbursement of real estate taxes, insurance, repairs and maintenance, and other operating expenses are recognized as revenue in the period the applicable expenses are incurred. Tenant recoveries and reimbursable expenses are recognized and presented gross, as the Retail Portfolio is generally the primary obligor with respect to purchasing goods and services from third-party suppliers, has discretion in selecting the supplier and bears the associated credit risk.

Use of Estimates

Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenues and certain expenses during the reporting period to present the combined statement of revenues and certain operating expenses in conformity with accounting principles generally accepted in the United States. Actual results could differ from those estimates.

3. Minimum Future Lease Rentals

There are various lease agreements in place with tenants to lease space in the Retail Portfolio. As of December 31, 2015, the minimum future cash rents receivable under noncancelable operating leases in each of the next five years and thereafter are as follows:



	(In thousands)
2016	$	12,142
2017	11,290
2018	10,568
2019	9,363
2020	5,912
Thereafter	13,304
	$	62,579

Leases generally require reimbursement of the tenant’s proportional share of common area, real estate taxes and other operating expenses, which are excluded from the amounts above.

4. Tenant Concentrations

Two tenants represented approximately 20% of the Retail Portfolio’s rental revenue for the year ended December 31, 2015.

5. Related Party Transactions

The prior owner of the Retail Portfolio arranged for property and liability insurance for each of the properties comprising the Retail Portfolio. Insurance premiums incurred by the prior owner on behalf of the Retail Portfolio and reimbursed to the prior owner were approximately $271,000 for the year ended December 31, 2015.

The prior owner of the Retail Portfolio provided certain maintenance services to the properties comprising the Retail Portfolio. For the year ended December 31, 2015, maintenance services costs of approximately $102,000 were included in operating and maintenance expenses in the combined statement of revenues and certain operating expenses.

The prior owner of the Retail Portfolio provided management services to the properties comprising the Retail Portfolio. For the year ended December 31, 2015, management fees of approximately $696,000 were included in the combined statement of revenues and certain operating expenses.

6. Commitments and Contingencies

The Retail Portfolio is subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. Management believes that the ultimate settlement of these actions will not have a material adverse effect on the Retail Portfolio’s results of operations.

7. Subsequent Events

Management evaluated subsequent events through October 19, 2016, the date the financial statement was available to be issued.

Exhibit

Exhibit 99.2

Report of Independent Auditor

To the Board of Directors and Stockholders of

Armada Hoffler Properties, Inc.

We have audited the accompanying statement of revenues and certain operating expenses (the “Statement”) of Southgate Square (the “Property”), as defined in Note 1 of the Statement, for the year ended December 31, 2015.

Management’s Responsibility for the Statement

Management is responsible for the preparation and fair presentation of this Statement, in accordance with accounting principles generally accepted in the United States of America, that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on this Statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statement is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Statement. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the Statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the Statement.

We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the Statement referred to above presents fairly, in all material respects, the revenues and certain operating expenses of the Property for the year ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America.

Emphasis of Matter

As further discussed in Note 1, Armada Hoffler Properties, Inc. acquired the Property on April 29, 2016.

The accompanying Statement was prepared as described in Note 1 for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and is not intended to be a complete presentation of the Property’s revenues and expenses. Our opinion is not modified with respect to this matter.

/s/ Cherry Bekaert LLP

Virginia Beach, Virginia

October 19, 2016

Southgate Square

Statements of Revenues and Certain Operating Expenses

(In thousands)



		(Unaudited)
		Three Months Ended		Year Ended
		March 31, 2016		December 31, 2015
Revenues
	Rental revenue	$	606	$	2,456
	Tenant recoveries	60		231
	Ancillary and other income	3		9
	Total revenues	669		2,696

Certain operating expenses
	Real estate taxes and insurance	60		306
	Operating and maintenance	66		218
	Management fees	13		50
	Total certain operating expenses	139		574
Revenues in excess of certain operating expenses		$	530	$	2,122

See accompanying Notes to Statements of Revenues and Certain Operating Expenses.

Southgate Square

Notes to Statements of Revenues and Certain Operating Expenses

1. Basis of Presentation

The accompanying statements of revenues and certain operating expenses include the operations of Southgate Square, a retail property (the “Property”), which Armada Hoffler Properties, Inc. (the “Company”) acquired on April 29, 2016.

The accompanying statements of revenues and certain operating expenses have been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended. Accordingly, the statements are not representative of the actual operations for the periods presented, as revenues and certain operating expenses, which may not be directly attributable to the revenues and expenses expected to be incurred in the future operations of the Property, have been excluded. Such items include depreciation, amortization, interest expense, interest income and amortization of above- and below-market leases. The Company is not aware of any material factors during the year ended December 31, 2015 or the three months ended March 31, 2016 that would cause the reported financial information not to be indicative of future operating results.

The accompanying interim statement of revenues and certain operating expenses for the three months ended March 31, 2016 is unaudited. In the opinion of management, all adjustments, consisting only of normal and recurring adjustments considered necessary for a fair statement, have been included. The reported results are not necessarily indicative of the results that may be expected for the full year.

2. Summary of Significant Accounting Policies

Revenue Recognition

The Property recognizes rental revenue from tenants on a straight-line basis over the lease term when collectability is reasonably assured and the tenant has taken possession or controls the physical use of the leased asset.

Tenant recoveries related to reimbursement of real estate taxes, insurance, repairs and maintenance, and other operating expenses are recognized as revenue in the period the applicable expenses are incurred. Tenant recoveries and reimbursable expenses are recognized and presented gross, as the Property is generally the primary obligor with respect to purchasing goods and services from third-party suppliers, has discretion in selecting the supplier and bears the associated credit risk.

Use of Estimates

Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenues and certain expenses during the reporting periods to present the statements of revenues and certain operating expenses in conformity with accounting principles generally accepted in the United States. Actual results could differ from those estimates.

3. Minimum Future Lease Rentals (unaudited)

There are various lease agreements in place with tenants to lease space in the Property. As of March 31, 2016, the minimum future cash rents receivable under noncancelable operating leases in each of the next five years and thereafter are as follows:



	(In thousands)
Nine months ending December 31, 2016	$	2,109
2017	2,333
2018	1,900
2019	1,679
2020	1,504
2021	1,336
Thereafter	8,592
	$	19,453

Leases generally require reimbursement of the tenant’s proportional share of common area, real estate taxes and other operating expenses, which are excluded from the amounts above.

4. Tenant Concentrations

For the three months ended March 31, 2016 (unaudited) and the year ended December 31, 2015, three tenants represented approximately 34% of the Property’s rental revenues.

5. Commitments and Contingencies

The Property is subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. Management believes that the ultimate settlement of these actions will not have a material adverse effect on the Property’s results of operations.

6. Subsequent Events

Management evaluated subsequent events through October 19, 2016, the date the financial statements were available to be issued.

Exhibit

Exhibit 99.3

Report of Independent Auditor

To the Board of Directors and Stockholders of

Armada Hoffler Properties, Inc.

We have audited the accompanying statement of revenues and certain operating expenses (the “Statement”) of Southshore Shops (the “Property”), as defined in Note 1 of the Statement, for the year ended December 31, 2015.

Management’s Responsibility for the Statement

Auditor’s Responsibility

We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

Emphasis of Matter

As further discussed in Note 1, Armada Hoffler Properties, Inc. acquired the Property on August 4, 2016.

/s/ Cherry Bekaert LLP

Virginia Beach, Virginia

October 19, 2016

Southshore Shops

Statements of Revenues and Certain Operating Expenses

(In thousands)



			(Unaudited)
			Six Months Ended		Year Ended
			June 30, 2016		December 31, 2015
Revenues
	Rental revenue		$	359	$	681
	Tenant recoveries		90		151
	Ancillary and other income		—		1
		Total revenues	449		833

Certain operating expenses
	Real estate taxes and insurance		40		82
	Operating and maintenance		44		85
	Management fees		18		33
		Total certain operating expenses	102		200
Revenues in excess of certain operating expenses			$	347	$	633

See accompanying Notes to Statements of Revenues and Certain Operating Expenses.

Southshore Shops

Notes to Statements of Revenues and Certain Operating Expenses

1. Basis of Presentation

The accompanying statements of revenues and certain operating expenses include the operations of Southshore Shops, a retail property (the “Property”), which Armada Hoffler Properties, Inc. (the “Company”) acquired on August 4, 2016.

The accompanying statements of revenues and certain operating expenses have been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended. Accordingly, the statements are not representative of the actual operations for the periods presented, as revenues and certain operating expenses, which may not be directly attributable to the revenues and expenses expected to be incurred in the future operations of the Property, have been excluded. Such items include depreciation, amortization, interest expense, interest income and amortization of above- and below-market leases. The Company is not aware of any material factors during the year ended December 31, 2015 or the six months ended June 30, 2016 that would cause the reported financial information not to be indicative of future operating results.

The accompanying interim statement of revenues and certain operating expenses for the six months ended June 30, 2016 is unaudited. In the opinion of management, all adjustments, consisting only of normal and recurring adjustments considered necessary for a fair statement, have been included. The reported results are not necessarily indicative of the results that may be expected for the full year.

2. Summary of Significant Accounting Policies

Revenue Recognition

Tenant recoveries related to reimbursement of real estate taxes, insurance, repairs and maintenance, and other operating expenses are recognized as revenue in the period the applicable expenses are incurred. Tenant recoveries and reimbursable expenses are recognized and presented gross, as the Property is generally the primary obligor with respect to purchasing goods and services from third-party suppliers, has discretion in selecting the supplier and bears the associated credit risk.

Use of Estimates

3. Minimum Future Lease Rentals (unaudited)

There are various lease agreements in place with tenants to lease space in the Property. As of June 30, 2016, the minimum future cash rents receivable under noncancelable operating leases in each of the next five years and thereafter are as follows:



	(In thousands)
Six months ending December 31, 2016	$	299
2017	702
2018	628
2019	439
2020	284
2021	229
Thereafter	662
	$	3,243

Leases generally require reimbursement of the tenant’s proportional share of common area, real estate taxes and other operating expenses, which are excluded from the amounts above.

4. Tenant Concentrations

For the six months ended June 30, 2016 (unaudited) and the year ended December 31, 2015, one tenant represented approximately 20% and 21%, respectively, of the Property’s rental revenues.

5. Related Party Transactions

An affiliate of the prior owner of the Property provided management services to the Property. For the six months ended June 30, 2016 (unaudited) and the year ended December 31, 2015, management fees of approximately $18,000 and $33,000, respectively, were included in the statements of revenues and certain operating expenses.

6. Commitments and Contingencies

7. Subsequent Events

Management evaluated subsequent events through October 19, 2016, the date the financial statements were available to be issued.

Exhibit

Exhibit 99.4

ARMADA HOFFLER PROPERTIES, INC.

PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

On January 14, 2016, a wholly owned subsidiary of Armada Hoffler Properties, Inc. (the “Company”) completed the previously announced acquisition of a portfolio of 11 retail properties aggregating 1.1 million square feet (the “Retail Portfolio”) for a total purchase price of $170.5 million in cash. The Company funded the acquisition of the Retail Portfolio with the net proceeds from the sale of the Richmond Tower office building, which closed on January 8, 2016, the sale of the Oceaneering office building, which closed on October 30, 2015, and borrowings under the Company’s unsecured credit facility. On December 9, 2015, the Company completed an underwritten public offering of 3.5 million shares of common stock (the “Offering”). The net proceeds to the Company from the Offering after deducting the underwriting discount and related offering costs were $35.1 million, of which the Company used $34.0 million to repay amounts borrowed under its unsecured credit facility.

On April 29, 2016, the Company completed the previously announced acquisition of Southgate Square, a retail center located in Colonial Heights, Virginia for total consideration of $39.5 million, consisting of the assumption of $21.1 million of debt and the issuance of 1,575,185 Class A units of limited partnership interest (“Class A Units”) in Armada Hoffler, L.P., the Company's operating partnership.

On August 4, 2016, the Company completed the previously announced acquisition of Southshore Shops, a retail center located in Midlothian, Virginia for total consideration of $9.3 million, consisting of $6.7 million of cash and the issuance of 189,160 Class A Units.

The accompanying unaudited pro forma consolidated financial statements of the Company have been prepared to reflect the impacts of the acquisitions of the Retail Portfolio, Southgate Square and Southshore Shops, the sales of the Richmond Tower and Oceaneering office buildings and the Offering on the Company’s historical consolidated financial statements.

The unaudited pro forma consolidated balance sheet as of June 30, 2016 is based on the Company’s historical consolidated balance sheet as of the same date and gives effect to the acquisition of Southshore Shops as if it had occurred on June 30, 2016. The unaudited pro forma consolidated statements of operations for the six months ended June 30, 2016 and the year ended December 31, 2015 are based on the historical consolidated statements of operations of the Company for the same periods and give effect to the acquisitions of the Retail Portfolio, Southgate Square and Southshore Shops, the sales of the Richmond Tower and Oceaneering office buildings and the Offering as if each had occurred on January 1, 2015. The Company has based the unaudited pro forma adjustments on available information and assumptions that the Company believes are reasonable.

The accompanying unaudited pro forma consolidated financial information is presented for illustrative purposes only and is not necessarily indicative of what the Company’s actual financial condition or results of operations would have been had the acquisitions of the Retail Portfolio, Southgate Square and Southshore Shops, the sales of the Richmond Tower and Oceaneering office buildings and the Offering been completed on the dates indicated, nor does it purport to be indicative of the Company’s financial condition as of any future date or the Company’s results of operations for any future period.

The accompanying unaudited pro forma consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016 and the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

ARMADA HOFFLER PROPERTIES, INC.

PRO FORMA CONSOLIDATED BALANCE SHEET

(In thousands, except par value and share data)

(Unaudited)



		Historical			Southshore				Pro Forma
		June 30, 2016			Shops				June 30, 2016
ASSETS
Real estate investments:
	Income producing property	$	752,783		$	8,279		(a)	$	761,062
	Held for development	2,032			—				2,032
	Construction in progress	79,258			—				79,258
		834,073			8,279				842,352
	Accumulated depreciation	(127,337		)	—				(127,337		)
	Net real estate investments	706,736			8,279				715,015
Real estate investments held for sale		5,829			—				5,829
Cash and cash equivalents		19,984			(6,717		)	(b)	13,267
Restricted cash		3,158			—				3,158
Accounts receivable, net		14,366			—				14,366
Notes receivable		39,311			—				39,311
Construction receivables, including retentions		31,277			—				31,277
Construction contract costs and estimated earnings in excess of billings		1,756			—				1,756
Other assets		72,055			1,260			(a)	73,315
	Total Assets	$	894,472		$	2,822			$	897,294
LIABILITIES AND EQUITY
Indebtedness, net		$	501,940		—				$	501,940
Debt secured by real estate investments held for sale		6,380			—				6,380
Accounts payable and accrued liabilities		6,379			—				6,379
Construction payables, including retentions		49,203			—				49,203
Billings in excess of construction contract costs and estimated earnings		2,893			—				2,893
Other liabilities		38,935			231			(c)	39,166
	Total Liabilities	605,730			231				605,961
Stockholders' equity:
Common stock, $0.01 par value, 500,000,000 shares authorized, 32,825,063 shares issued and outstanding		328			—				328
Additional paid-in capital		133,915			—				133,915
Distributions in excess of earnings		(45,114		)	(37		)	(d)	(45,151		)
Total stockholders' equity		89,129			(37		)		89,092
Noncontrolling interests		199,613			2,628			(e)	202,241
	Total Equity	288,742			2,591				291,333
	Total Liabilities and Equity	$	894,472		$	2,822			$	897,294

See accompanying notes to unaudited pro forma consolidated financial statements.

ARMADA HOFFLER PROPERTIES, INC.

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except per share data)

(Unaudited)



									Acquisitions
		Historical Six Months Ended June 30, 2016			Richmond Tower Disposition				Retail Portfolio				Southgate Square				Southshore Shops				Pro Forma Six Months Ended June 30, 2016
Revenues
	Rental revenues	$	47,534		$	(156	)	(f)	$	447		(g)	$	924		(j)	$	449		(k)	$	49,198
	General contracting and real estate services revenues	70,003			—				—				—				—				70,003
	Total revenues	117,537			(156		)		447				924				449				119,201
Expenses
	Rental expenses	10,400			(30		)	(f)	72			(g)	101			(j)	65			(k)	10,608
	Real estate taxes	4,731			(14		)	(f)	62			(g)	73			(j)	37			(k)	4,889
	General contracting and real estate services expenses	67,062			—				—				—				—				67,062
	Depreciation and amortization	16,751			—				356			(g)	560			(j)	197			(k)	17,864
	General and administrative expenses	4,708			—				—				—				—				4,708
	Acquisition, development and other pursuit costs	1,141			—				(671		)	(h)	(346		)	(h)	(17		)	(h)	107
	Impairment charges	35			—				—				—				—				35
	Total expenses	104,828			(44		)		(181		)		388				282				105,273
	Operating income (loss)	12,709			(112		)		628				536				167				13,928
	Interest income	904			—				—				—				—				904
	Interest expense	(7,769		)	—				(63		)	(i)	(171		)	(j)	—				(8,003		)
	Gain on real estate dispositions	26,687			(26,244		)	(f)	—				—				—				443
	Change in fair value of interest rate derivatives	(2,762		)	—				—				—				—				(2,762		)
	Other income	119			—				—				—				—				119
Income before taxes		29,888			(26,356		)		565				365				167				4,629
Income tax provision		(224		)	—				—				—				—				(224		)
Net income		29,664			(26,356		)		565				365				167				4,405
Net income attributable to noncontrolling interests		(10,260		)																	(1,607		)
Net income attributable to stockholders		$	19,404																		$	2,798
Net income per share and unit:
	Basic and diluted	$	0.62																		$	0.09
Weighted average outstanding:
	Common shares	30,964																			30,964
	Operating partnership units	16,570																			17,789			(l)
	Basic and diluted	47,534																			48,753

See accompanying notes to unaudited pro forma consolidated financial statements.

ARMADA HOFFLER PROPERTIES, INC.

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except per share data)

(Unaudited)




					Dispositions								Acquisitions
		Historical Year Ended December 31, 2015			Richmond Tower				Oceaneering				Retail Portfolio				Southgate Square				Southshore Shops			Pro Forma Year Ended December 31, 2015
Revenues
	Rental revenues	$	81,172		$	(8,611	)	(f)	$	(1,661	)	(m)	$	16,601		(n)	$	2,882		(j)	$	833	(k)	$	91,216
	General contracting and real estate services revenues	171,268			—				—				—				—				—			171,268
	Total revenues	252,440			(8,611		)		(1,661		)		16,601				2,882				833			262,484
Expenses
	Rental expenses	19,204			(1,148		)	(f)	(72		)	(m)	2,965			(n)	290			(j)	126		(k)	21,365
	Real estate taxes	7,782			(685		)	(f)	(117		)	(m)	1,840			(n)	284			(j)	74		(k)	9,178
	General contracting and real estate services expenses	165,344			—				—				—				—				—			165,344
	Depreciation and amortization	23,153			(1,584		)	(f)	(678		)	(m)	8,466			(n)	1,680			(j)	393		(k)	31,430
	General and administrative expenses	8,397			(4		)	(f)	(4		)	(m)	—				—				—			8,389
	Acquisition, development and other pursuit costs	1,935			—				—				(402		)	(h)	—				—			1,533
	Impairment charges	41			—				—				—				—				—			41
	Total expenses	225,856			(3,421		)		(871		)		12,869				2,254				593			237,280
	Operating income	26,584			(5,190		)		(790		)		3,732				628				240			25,204
	Interest income	126			—				—				—				—				—			126
	Interest expense	(13,333		)	—				259			(m)	(956		)	(i)	(463		)	(j)	—			(14,493		)
	Loss on extinguishment of debt	(512		)	—				102			(m)	—				—				—			(410		)
	Gain on real estate dispositions	18,394			—				(4,987		)	(m)	—				—				—			13,407
	Change in fair value of interest rate derivatives	(229		)	—				—				—				—				—			(229		)
	Other income	119			—				—				—				—				—			119
Income before taxes		31,149			(5,190		)		(5,416		)		2,776				165				240			23,724
Income tax benefit		34			—				—				—				—				—			34
Net income		31,183			(5,190		)		(5,416		)		2,776				165				240			23,758
Net income attributable to noncontrolling interests		(11,541		)																				(8,780		)
Net income attributable to stockholders		$	19,642																					$	14,978
Net income per share and unit:
	Basic and diluted	$	0.75																					$	0.51
Weighted average outstanding:
	Common shares	26,006																						29,239			(o)
	Operating partnership units	15,377																						17,141			(l)
	Basic and diluted	41,383																						46,380

See accompanying notes to unaudited pro forma consolidated financial statements.

ARMADA HOFFLER PROPERTIES, INC.

Notes to Pro Forma Consolidated Financial Statements

(In thousands)

(Unaudited)


1.	Preliminary Purchase Price Allocation

The following table summarizes the estimated acquisition date fair values of the assets acquired and liabilities assumed of Southshore Shops:




Land	$	1,770
Site improvements	490
Buildings and improvements	6,019
In-place leases	1,140
Above-market leases	120
Below-market leases	(190)
Net assets acquired	$	9,349

The preceding represents the Company’s preliminary allocation of the purchase price of Southshore Shops. The Company is in the process of completing the allocation of the purchase price of Southshore Shops, which the Company expects to complete later this year. The final allocation of the purchase price of Southshore Shops will be based on the Company’s assessment of the fair value of the acquired assets and liabilities assumed. The Company’s final purchase price allocation could differ materially from that presented herein.


2.	Pro Forma Adjustments


(a)	Represents the acquired assets of Southshore Shops as described in Note 1.


(b)	Represents the cash paid as partial consideration to acquire Southshore Shops.


(c)	Represents the identified intangible liabilities of Southshore Shops as described in Note 1, as well as tenant security deposits.


(d)	Represents the attribution to stockholders of acquisition costs directly related to Southshore Shops.


(e)	Represents the fair value of the 189,160 Class A Units issued as partial consideration to acquire Southshore Shops and the attribution to noncontrolling interests of acquisition costs directly related to Southshore Shops.


(f)	Represents the elimination of the revenues, expenses, gains and losses directly attributable to the Richmond Tower office building.


(g)	Reflects the estimated revenues and expenses directly attributable to the acquired Retail Portfolio for the period January 1, 2016 through January 13, 2016.


(h)	Represents the acquisition costs recognized in the historical consolidated financial statements.


(i)	Reflects the estimated interest expense on the net borrowings under the Company’s unsecured credit facility to partially fund the acquisition of the Retail Portfolio.

(j)

Represents the historical operations of Southgate Square as presented in the accompanying statements of revenues and certain operating expenses and reflects estimated amortization of above (below) market leases, depreciation of real estate assets, amortization of in-place lease assets and interest expense on assumed debt. The interim pro forma statement of operations also reflects the estimated revenues and expenses directly attributable to Southgate Square for the period April 1, 2016 through April 28, 2016.


(k)	Represents the historical operations of Southshore Shops as presented in the accompanying statements of revenues and certain operating expenses and reflects estimated amortization of above (below) market leases, depreciation of real estate assets and amortization of in-place lease assets.


(l)	Reflects the Class A Units issued in connection with the acquisitions of Southgate Square and Southshore Shops.


(m)	Represents the elimination of the revenues, expenses, gains and losses directly attributable to the Oceaneering office building.


(n)	Represents the historical operations of Retail Portfolio as presented in the accompanying statement of revenues and certain operating expenses and reflects estimated amortization of above (below) market leases, depreciation of real estate assets and amortization of in-place lease assets.


(o)	Reflects the shares of common stock issued in the Offering.