UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 7, 2019
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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ◻
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Item 2.02. Results of Operations and Financial Condition.
On February 7, 2019, Armada Hoffler Properties, Inc. (the “Company”) issued a press release announcing its financial position as of December 31, 2018, results of operations for the three and twelve months ended December 31, 2018, and other related information. Also on February 7, 2019, the Company made available on its website at www.ArmadaHoffler.com certain supplemental information concerning the Company’s financial results and operations for the three and twelve months ended December 31, 2018. Copies of such press release and supplemental information are furnished as Exhibits 99.1 and 99.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
In accordance with General Instructions B.2 and B.6 of Form 8-K, the information included in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing made by the Company under the Exchange Act or Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
Item 7.01. Regulation FD Disclosure.
The disclosure contained in Item 2.02 is incorporated herein by reference.
On February 7, 2019, the Company made available a presentation regarding its 2019 full-year guidance, which is furnished as Exhibit 99.3 to this Current Report on Form 8-K.
In accordance with General Instructions B.2 and B.6 of Form 8-K, the information included in this Current Report on Form 8-K, including exhibits 99.1, 99.2, and 99.3 hereto, shall not be deemed “filed” for purposes of Section 18 of the 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 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. | Description | |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ARMADA HOFFLER PROPERTIES, INC. | ||
Date: February 7, 2019 | /s/ MICHAEL P. O’HARA | |
Michael P. O’Hara | ||
Chief Financial Officer and Treasurer | ||
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Exhibit 99.1
 | PRESS RELEASE | |
ARMADA HOFFLER PROPERTIES REPORTS FOURTH QUARTER AND FULL YEAR 2018 RESULTS
Net Income of $0.07 per Diluted Share for the Fourth Quarter
and $0.36 per Diluted Share for the Full Year
Normalized FFO of $0.30 per Diluted Share for the Fourth Quarter
and $1.03 per Diluted Share for the Full Year
Company Introduces 2019 Full-Year Normalized FFO Guidance of $1.11 to $1.17 per Diluted Share
VIRGINIA BEACH, VA, February 7, 2019 – Armada Hoffler Properties, Inc. (NYSE: AHH) today announced its results for the quarter and year ended December 31, 2018 and provided an update on current events.
Highlights include:
• | Net income of $4.9 million, or $0.07 per diluted share, for the quarter ended December 31, 2018 compared to net income of $5.8 million, or $0.09 per diluted share, for the quarter ended December 31, 2017. Net income of $23.5 million, or $0.36 per diluted share, for the year ended December 31, 2018 compared to net income of $29.9 million, or $0.50 per diluted share, for the year ended December 31, 2017. |
• | Normalized Funds From Operations (“FFO”) of $20.2 million, or $0.30 per diluted share, for the quarter ended December 31, 2018 compared to Normalized FFO of $14.5 million, or $0.23 per diluted share, for the quarter ended December 31, 2017. Normalized FFO of $66.5 million, or $1.03 per diluted share, for the year ended December 31, 2018 compared to Normalized FFO of $59.3 million, or $0.99 per diluted share, for the year ended December 31, 2017. |
• | FFO of $17.1 million, or $0.26 per diluted share, for the quarter ended December 31, 2018 compared to FFO of $15.1 million, or $0.24 per diluted share, for the quarter ended December 31, 2017. FFO of $64.3 million, or $0.99 per diluted share, for the year ended December 31, 2018 compared to FFO of $59.7 million, or $0.99 per diluted share, for the year ended December 31, 2017. |
• | Introduced 2019 full-year Normalized FFO guidance in the range of $1.11 to $1.17 per diluted share, as set forth in the presentation that can be found on the Investors page of the Company's website at www.ArmadaHoffler.com. The Company's executive management will provide further details regarding its 2019 earnings guidance during today's webcast and conference call. |
• | Core operating property portfolio occupancy at 95.8% as of December 31, 2018 compared to 94.2% as of December 31, 2017. |
• | Same Store Net Operating Income ("NOI") for both the quarter and the year ended December 31, 2018 increased on a GAAP and on a cash basis compared to the quarter and the year ended December 31, 2017. |
• | Positive releasing spreads on office renewals during the fourth quarter of 5% on a GAAP basis and 1% on a cash basis. Positive releasing spreads on retail renewals during the fourth quarter of 5% on a GAAP basis and 3% on a cash basis. |
• | Completed the sale of the new build-to-suit distribution facility in Richmond, Virginia for $25.9 million, representing a profit of over 15% based on total development and construction costs. |
• | Sold our at-cost purchase option to the developer of The Residences at Annapolis Junction for $5.0 million and received $11.1 million as partial repayment on the Company’s outstanding mezzanine loan. |
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• | Added $153 million in new contracts to third-party construction backlog during the quarter ended December 31, 2018. |
• | Raised $5.9 million of gross proceeds through our at-the-market equity offering program at an average price of $15.05 per share during the quarter ended December 31, 2018. Raised $66.5 million of gross proceeds through our at-the-market equity offering program at an average price of $14.39 per share during the year ended December 31, 2018. |
• | Closed on our initial investment in the office, retail, and apartment components of The Interlock, a new mixed-use development in West Midtown Atlanta. The Company has agreed to invest up to $65 million of principal through a mezzanine loan on the commercial office and retail portions of the project as well as another $23 million of principal through a mezzanine loan on the multifamily apartment component of the project. In addition to providing development services, the Company will also serve as the general contractor for the majority of the project. |
• | Closed on our investment in Nexton Square, a new open-air lifestyle center under construction in Summerville, South Carolina. The Company has agreed to invest approximately $15 million of principal through a mezzanine loan as well as provide construction management and development services to the project. The Company also holds a below market option to purchase the project upon completion. |
Commenting on the Company's results and 2019 outlook, Louis Haddad, President & CEO, said, "At the beginning of the year, we said that 2018 would yield respectable year-over-year per share earnings growth while setting the stage for significantly higher earnings in 2019. We believe that we are delivering on these promises with over 4% earnings growth in 2018 and a projected increase of over 10% in 2019. More importantly, with over a half billion dollars in various stages of development, we believe that our Company is poised for continued growth over the next few years."
Financial Results
The fourth quarter changes in net income, Normalized FFO, and FFO as compared to the fourth quarter of 2017 were positively impacted by higher interest income from mezzanine lending activities, higher property operating income due to acquisitions and developments, and the gain on the sale of the build-to-suit distribution facility (a non-operating property sale). Fourth quarter changes in net income and FFO were negatively impacted by changes in the fair value of interest rate derivatives.
Full year changes in net income, Normalized FFO, and FFO as compared to 2017 were positively impacted by higher interest income from mezzanine lending activities, higher property operating income due to acquisitions and developments, and the gain on the sale of the build-to-suit distribution facility (a non-operating property sale), and were negatively impacted by lower construction segment gross profits and higher interest expense. Full year net income and FFO were negatively impacted by mark-to-market losses on interest rate derivatives. The full year change in net income was negatively impacted by lower gains on operating real estate dispositions.
Operating Performance
At the end of the fourth quarter, the Company’s office, retail and multifamily core operating property portfolios were 93.3%, 96.2%, and 97.3% occupied, respectively.
Total construction contract backlog was $165.9 million at the end of the year.
Balance Sheet and Financing Activity
As of December 31, 2018, the Company had $701 million of total debt outstanding, including $126 million outstanding under its revolving credit facility. Total debt outstanding excludes unamortized GAAP fair value adjustments and deferred financing costs. Approximately 50% of the Company’s debt had fixed interest rates or were subject to interest rate swaps as of December 31, 2018. After considering LIBOR interest rate caps with strike prices at or below 275 basis points, as of December 31, 2018, 100% of the Company’s debt was fixed or hedged.
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Outlook
The Company is introducing its 2019 full-year Normalized FFO guidance in the range of $1.11 to $1.17 per diluted share, as set forth in the presentation that can be found on the Investors page of the Company's website at www.ArmadaHoffler.com. The following table outlines the Company's assumptions along with Normalized FFO per diluted share estimates for 2019. The Company's executive management will provide further details regarding its 2019 earnings guidance during today's webcast and conference call.
Full-year 2019 Guidance [1] | Expected Ranges | |||||||
Total NOI | $93.7M | $94.6M | ||||||
Construction Segment Gross Profit | $4.9M | $5.7M | ||||||
Mezzanine Interest Income (Net of Interest Expense) [2] | $16.0M | $16.5M | ||||||
G&A Expenses | $10.8M | $11.5M | ||||||
Interest Expense (Net of Mezzanine Interest Expense) | $25.5M | $26.5M | ||||||
Normalized FFO per diluted share [3] | $1.11 | $1.17 | ||||||
[1] Includes the following assumptions:
• | Sale of grocery-anchored shopping center with expected proceeds of approximately $25 million in the fourth quarter of 2019. |
• | Acquisition of 79% partnership interest of 1405 Point apartments in the second quarter of 2019. |
• | Acquisition of the commercial component of One City Center from the joint venture in the first quarter of 2019. |
• | Interest expense is calculated based on the Forward LIBOR Curve, which forecasts rates ending the year at 2.57%. |
• | Opportunistic sale of approximately $50 million through the ATM program, for full year weighted average shares outstanding of 69.3 million. |
[2] Includes $4.5 million of Annapolis Junction purchase option proceeds.
[3] Normalized FFO excludes certain items, including debt extinguishment losses, acquisition, development and other pursuit costs, mark-to-market adjustments for interest rate derivatives, severance related costs, and other non-comparable items. See "Non-GAAP Financial Measures." The Company does not provide a reconciliation for its guidance range of Normalized FFO per diluted share to net income per diluted share, the most directly comparable forward-looking GAAP financial measure, because it is unable to provide a meaningful or accurate estimate of reconciling items and the information is not available without unreasonable effort as a result of the inherent difficulty of forecasting the timing and/or amounts of various items that would impact net income per diluted share. For the same reasons, the Company is unable to address the probable significance of the unavailable information and believes that providing a reconciliation for its guidance range of Normalized FFO per diluted share would imply a degree of precision for its forward-looking net income per diluted share that could be misleading to investors.
Supplemental Financial Information
Further details regarding operating results, properties and leasing statistics can be found in the Company’s supplemental financial package available on the Investors page at www.ArmadaHoffler.com.
Webcast and Conference Call
The Company will host a webcast and conference call on Thursday, February 7, 2019 at 8:30 a.m. Eastern Time to review financial results and discuss recent events. The live webcast will be available through the Investors page of the Company’s website, www.ArmadaHoffler.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 Thursday, March 7, 2019 by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the pass code 13685611.
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About Armada Hoffler Properties, Inc.
Armada Hoffler Properties, Inc. (NYSE: AHH) is a vertically-integrated, self-managed real estate investment trust ("REIT") with four decades of experience developing, building, acquiring, and managing high-quality, institutional-grade office, retail, and multifamily properties located primarily in the Mid-Atlantic and Southeastern United States. In addition to developing and building properties for its own account, the Company also provides development and general contracting construction services to third-party clients. Founded in 1979 by Daniel A. Hoffler, the Company has elected to be taxed as a REIT for U.S. federal income tax purposes.
Forward-Looking Statements
Certain matters within this press release are discussed using forward-looking language as specified in the Private Securities Litigation Reform Act of 1995, and, as such, may involve known and unknown risks, uncertainties, and other factors that may cause the actual results or performance to differ from those projected in the forward-looking statement. These forward-looking statements may include comments relating to the current and future performance of the Company’s operating property portfolio, the Company’s development pipeline, the Company's mezzanine program, the Company’s construction and development business, including backlog and timing of deliveries, financing activities, as well as acquisitions, dispositions and the Company’s financial outlook, guidance and expectations. For a description of factors that may cause the Company’s actual results or performance to differ from its forward-looking statements, please review the information under the heading “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, and the 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), impairment of real estate assets, 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 period-over-period, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare the Company’s operating performance with that of other REITs.
However, because FFO excludes depreciation and amortization and captures neither the changes in the value of the Company’s properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of the Company’s properties, all of which have real economic effects and could materially impact the Company’s results from operations, the utility of FFO as a measure of the Company’s performance is limited. In addition, other equity REITs may not calculate FFO in accordance with the Nareit definition as the Company does, and, accordingly, the Company’s FFO may not be comparable to such other REITs’ FFO. Accordingly, FFO should be considered only as a supplement to net income as a measure of the Company’s performance.
Management also believes that the computation of FFO in accordance with Nariet’s definition includes certain items that are not indicative of the results provided by the Company’s operating property portfolio and affect the comparability of the Company’s period-over-period performance. Accordingly, management believes that Normalized FFO is a more useful performance measure that excludes certain items, including but not limited to, acquisition, development, and other pursuit costs, gains or losses from the early extinguishment of debt, impairment of intangible assets and liabilities, mark-to-market adjustments on interest rate derivatives, severance related costs, and other non-comparable items.
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For reference, as an aid in understanding the Company’s computation of FFO and Normalized FFO, a reconciliation of net income calculated in accordance with GAAP to FFO and Normalized FFO has been included in the final page of this release.
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ARMADA HOFFLER PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
December 31, | ||||||||
2018 | 2017 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Real estate investments: | ||||||||
Income producing property | $ | 1,037,917 | $ | 910,686 | ||||
Held for development | 2,994 | 680 | ||||||
Construction in progress | 135,675 | 83,071 | ||||||
Accumulated depreciation | (188,775 | ) | (164,521 | ) | ||||
Net real estate investments | 987,811 | 829,916 | ||||||
Real estate investments held for sale | 929 | — | ||||||
Cash and cash equivalents | 21,254 | 19,959 | ||||||
Restricted cash | 2,797 | 2,957 | ||||||
Accounts receivable, net | 19,016 | 15,691 | ||||||
Notes receivable | 138,683 | 83,058 | ||||||
Construction receivables, including retentions | 16,154 | 23,933 | ||||||
Construction contract costs and estimated earnings in excess of billings | 1,358 | 245 | ||||||
Equity method investments | 22,203 | 11,411 | ||||||
Other assets | 55,177 | 55,953 | ||||||
Total Assets | $ | 1,265,382 | $ | 1,043,123 | ||||
LIABILITIES AND EQUITY | ||||||||
Indebtedness, net | $ | 694,239 | $ | 517,272 | ||||
Accounts payable and accrued liabilities | 15,217 | 15,180 | ||||||
Construction payables, including retentions | 50,796 | 47,445 | ||||||
Billings in excess of construction contract costs and estimated earnings | 3,037 | 3,591 | ||||||
Other liabilities | 46,203 | 39,352 | ||||||
Total Liabilities | 809,492 | 622,840 | ||||||
Total Equity | 455,890 | 420,283 | ||||||
Total Liabilities and Equity | $ | 1,265,382 | $ | 1,043,123 | ||||
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ARMADA HOFFLER PROPERTIES, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share amounts)
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(Unaudited) | ||||||||||||||||
Revenues | ||||||||||||||||
Rental revenues | $ | 30,731 | $ | 27,654 | $ | 116,958 | $ | 108,737 | ||||||||
General contracting and real estate services revenues | 12,705 | 32,643 | 76,359 | 194,034 | ||||||||||||
Total revenues | 43,436 | 60,297 | 193,317 | 302,771 | ||||||||||||
Expenses | ||||||||||||||||
Rental expenses | 7,173 | 6,353 | 27,222 | 25,422 | ||||||||||||
Real estate taxes | 2,995 | 2,731 | 11,383 | 10,528 | ||||||||||||
General contracting and real estate services expenses | 12,154 | 32,002 | 73,628 | 186,590 | ||||||||||||
Depreciation and amortization | 11,260 | 9,303 | 39,913 | 37,321 | ||||||||||||
General and administrative expenses | 3,339 | 2,673 | 11,431 | 10,435 | ||||||||||||
Acquisition, development and other pursuit costs | 190 | 171 | 352 | 648 | ||||||||||||
Impairment charges | 1,518 | 60 | 1,619 | 110 | ||||||||||||
Total expenses | 38,629 | 53,293 | 165,548 | 271,054 | ||||||||||||
Gain on real estate dispositions | 4,254 | — | 4,254 | 8,087 | ||||||||||||
Operating income | 9,061 | 7,004 | 32,023 | 39,804 | ||||||||||||
Interest income | 3,577 | 2,111 | 10,729 | 7,077 | ||||||||||||
Interest expense | (5,540 | ) | (4,157 | ) | (19,087 | ) | (17,439 | ) | ||||||||
Equity in income of unconsolidated real estate entities | 372 | — | 372 | — | ||||||||||||
Loss on extinguishment of debt | — | (50 | ) | (11 | ) | (50 | ) | |||||||||
Change in fair value of interest rate derivatives | (2,207 | ) | 827 | (951 | ) | 1,127 | ||||||||||
Other income (loss) | 155 | (23 | ) | 388 | 131 | |||||||||||
Income before taxes | 5,418 | 5,712 | 23,463 | 30,650 | ||||||||||||
Income tax benefit (provision) | (523 | ) | 56 | 29 | (725 | ) | ||||||||||
Net income | 4,895 | 5,768 | 23,492 | 29,925 | ||||||||||||
Net income attributable to noncontrolling interests | (1,253 | ) | (1,616 | ) | (6,289 | ) | (8,878 | ) | ||||||||
Net income attributable to stockholders | $ | 3,642 | $ | 4,152 | $ | 17,203 | $ | 21,047 | ||||||||
Net Income per basic and diluted share and unit | $ | 0.07 | $ | 0.09 | $ | 0.36 | $ | 0.50 | ||||||||
Weighted average shares and units outstanding | 66,836 | 62,427 | 64,754 | 60,181 | ||||||||||||
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ARMADA HOFFLER PROPERTIES, INC.
RECONCILIATION OF NET INCOME TO FFO & NORMALIZED FFO
(in thousands, except per share amounts)
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net income | $ | 4,895 | $ | 5,768 | $ | 23,492 | $ | 29,925 | ||||||||
Depreciation and amortization (1) | 11,525 | 9,303 | 40,178 | 37,321 | ||||||||||||
Gain on operating real estate dispositions (2) | (833 | ) | — | (833 | ) | (7,595 | ) | |||||||||
Impairment of real estate assets | 1,502 | — | 1,502 | — | ||||||||||||
Funds From Operations (FFO) | $ | 17,089 | $ | 15,071 | $ | 64,339 | $ | 59,651 | ||||||||
Acquisition, development, and other pursuit costs | 190 | 171 | 352 | 648 | ||||||||||||
Impairment of intangible assets and liabilities | 16 | 60 | 117 | 110 | ||||||||||||
Loss on extinguishment of debt | — | 50 | 11 | 50 | ||||||||||||
Change in fair value of interest rate derivatives | 2,207 | (827 | ) | 951 | (1,127 | ) | ||||||||||
Severance related costs | 688 | — | 688 | — | ||||||||||||
Normalized FFO | $ | 20,190 | $ | 14,525 | $ | 66,458 | $ | 59,332 | ||||||||
Net income per diluted share and unit | $ | 0.07 | $ | 0.09 | $ | 0.36 | $ | 0.50 | ||||||||
FFO per diluted share and unit | $ | 0.26 | $ | 0.24 | $ | 0.99 | $ | 0.99 | ||||||||
Normalized FFO per diluted share and unit | $ | 0.30 | $ | 0.23 | $ | 1.03 | $ | 0.99 | ||||||||
Weighted average shares and units outstanding-Diluted | 66,836 | 62,427 | 64,754 | 60,181 | ||||||||||||
(1) The adjustment for depreciation and amortization includes depreciation attributable to the Company's investment in One City Center, which is an unconsolidated real estate investment.
(2) The adjustment for gain on operating real estate dispositions for the three months and year ended December 31, 2018 excludes the gain on the River City industrial development project because this project was sold before being placed into service. Additionally, the adjustment for gain on real estate dispositions for the year ended December 31, 2017 excludes the gain on the land outparcel at Sandbridge Commons because this was a non-operating parcel.
Contact:
Michael P. O’Hara
Armada Hoffler Properties, Inc.
Chief Financial Officer and Treasurer
Email: MOHara@ArmadaHoffler.com
Phone: (757) 366-6684
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Table of Contents 2 3 Forward Looking Statements 4 Corporate Profile 5 Highlights 6 Summary Information 7 Net Asset Value Component Data 8 Summary Balance Sheet 9 Summary Income Statement 10 FFO, Normalized FFO & Adjusted FFO 11 Outstanding Debt 12 Core Debt to Core EBITDA 13 Debt Information 14 Capitalization & Financial Ratios 15 Property Portfolio 17 Development & Redevelopment Pipeline 18 Mezzanine Investments 19 Acquisitions & Dispositions 20 Construction Business Summary 21 Same Store NOI by Segment 22 Top 10 Tenants by Annualized Base Rent 23 Office Lease Summary 24 Office Lease Expirations 25 Retail Lease Summary 26 Retail Lease Expirations 27 Appendix – Definitions & Reconciliations 31 Same Store vs Non-Same Store Properties 32 Reconciliation to Property Portfolio NOI 34 Reconciliation to GAAP Net Income
Forward Looking Statements 3 This Supplemental Financial Package should be read in conjunction with the unaudited condensed consolidated financial statements appearing in our press release dated February 7, 2019, which has been furnished as Exhibit 99.1 to our Form 8-K filed on February 7, 2019. The Company makes statements in this Supplemental financial package that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). In particular, statements pertaining to our capital resources, portfolio performance, mezzanine loan program, development pipeline and results of operations contain forward-looking statements. Likewise, all of our statements regarding anticipated growth in our funds from operations, normalized funds from operations, adjusted funds from operations, and net operating income are forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, estimates, data or methods, which may be incorrect or imprecise, and actual results may vary materially from those anticipated, estimated or projected. The Company does not guarantee that the transactions and events described will happen as described (or that they will happen at all). For further discussion of risk factors and other events that could impact our future results, please refer to the section entitled “Risk Factors” in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”), and the documents subsequently filed by us from time to time with the SEC.
Corporate Profile 4 Armada Hoffler Properties, Inc. (NYSE:AHH) is a full service real estate company that develops, constructs, acquires and manages institutional-grade office, retail and multifamily properties in the Mid-Atlantic and Southeastern United States. The Company also provides general contracting and development services to third-party clients, in addition to developing and building properties to be placed in its stabilized portfolio. Armada Hoffler Properties, Inc. was founded in 1979 and is headquartered in Virginia Beach, VA. The Company has elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes. Board of Directors Corporate Officers Daniel A. Hoffler Executive Chairman of Board Louis S. Haddad President and Chief Executive Officer A. Russell Kirk Vice Chairman of the Board Louis S. Haddad Director Michael P. O’Hara Chief Financial Officer John W. Snow Lead Independent Director Eric E. Apperson President of Construction George F. Allen Independent Director James A. Carroll Independent Director Shelly R. Hampton President of Asset Management James C. Cherry Independent Director Investor Relations Eva S. Hardy Independent Director Michael P. O’Hara Chief Financial Officer (757) 366-6684 mohara@armadahoffler.com Analyst Coverage Bank of America Merrill Lynch Janney, Montgomery, & Scott LLC Raymond James & Associates Stifel, Nicolaus & Company Inc. James Feldman Robert Stevenson Bill Crow John Guinee (646) 855-5808 (646) 840-3217 (727) 567-2594 (443) 224-1307 james.feldman@baml.com robertstevenson@janney.com bill.crow@raymondjames.com jwguinee@stifel.com D. A. Davidson & Co. B. Riley FBR Robert W. Baird & Co. James O. Lykins Craig Kucera David Rodgers (503) 603-3041 (703) 862-5249 (216) 737-7341 jlykins@dadco.com craigkucera@fbr.com drodgers@rwbaird.com
Highlights 5 • Net income of $4.9 million, or $0.07 per diluted share, for the quarter ended December 31, 2018 compared to net income of $5.8 million, or $0.09 per diluted share, for the quarter ended December 31, 2017. Net income of $23.5 million, or $0.36 per diluted share, for the year ended December 31, 2018 compared to net income of $29.9 million, or $0.50 per diluted share, for the year ended December 31, 2017. • Normalized Funds From Operations (“FFO”) of $20.2 million, or $0.30 per diluted share, for the quarter ended December 31, 2018 compared to Normalized FFO of $14.5 million, or $0.23 per diluted share, for the quarter ended December 31, 2017. Normalized FFO of $66.5 million, or $1.03 per diluted share, for the year ended December 31, 2018 compared to Normalized FFO of $59.3 million, or $0.99 per diluted share, for the year ended December 31, 2017. • FFO of $17.1 million, or $0.26 per diluted share, for the quarter ended December 31, 2018 compared to FFO of $15.1 million, or $0.24 per diluted share, for the quarter ended December 31, 2017. FFO of $64.3 million, or $0.99 per diluted share, for the year ended December 31, 2018 compared to FFO of $59.7 million, or $0.99 per diluted share, for the year ended December 31, 2017. • Introduced 2019 full-year Normalized FFO guidance in the range of $1.11 to $1.17 per diluted share, as set forth in the presentation that can be found on the Investors page of the Company's website at www.ArmadaHoffler.com. The Company's executive management will provide further details regarding its 2019 earnings guidance during today's webcast and conference call. • Core operating property portfolio occupancy at 95.8% as of December 31, 2018 compared to 94.2% as of December 31, 2017. • Same Store Net Operating Income ("NOI") for both the quarter and the year ended December 31, 2018 increased on a GAAP and on a cash basis compared to the quarter and the year ended December 31, 2017. • Positive releasing spreads on office renewals during the fourth quarter of 5% on a GAAP basis and 1% on a cash basis. Positive releasing spreads on retail renewals during the fourth quarter of 5% on a GAAP basis and 3% on a cash basis. • Completed the sale of the new build-to-suit distribution facility in Richmond, Virginia for $25.9 million, representing a profit of over 15% based on total development and construction costs. • Sold our at-cost purchase option to the developer of The Residences at Annapolis Junction for $5.0 million and received $11.1 million as partial repayment on the Company’s outstanding mezzanine loan. • Added $153 million in new contracts to third-party construction backlog during the quarter ended December 31, 2018. • Raised $5.9 million of gross proceeds through our at-the-market equity offering program at an average price of $15.05 per share during the quarter ended December 31, 2018. Raised $66.5 million of gross proceeds through our at-the-market equity offering program at an average price of $14.39 per share during the year ended December 31, 2018. • Closed on our initial investment in the office, retail, and apartment components of The Interlock, a new mixed-use development in West Midtown Atlanta. The Company has agreed to invest up to $65 million of principal through a mezzanine loan on the commercial office and retail portions of the project as well as another $23 million of principal through a mezzanine loan on the multifamily apartment component of the project. In addition to providing development services, the Company will also serve as the general contractor for the majority of the project. • Closed on our investment in Nexton Square, a new open-air lifestyle center under construction in Summerville, South Carolina. The Company has agreed to invest approximately $15 million of principal through a mezzanine loan as well as provide construction management and development services to the project. The Company also holds a below market option to purchase the project upon completion.
Summary Information 6 $ in thousands, except per share data Three months ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 OPERATIONAL METRICS Net income $4,895 $5,669 $5,945 $6,983 $5,768 Net income per diluted share $0.07 $0.09 $0.09 $0.11 $0.09 Rental properties Net Operating Income (NOI) 20,563 18,987 19,341 19,462 18,570 General contracting and real estate services gross profit 551 977 567 636 641 Adjusted EBITDA(1)(2) 25,110 20,124 19,466 19,399 18,345 Funds From Operations (FFO) 17,089 15,865 15,124 16,261 15,071 FFO per diluted share $0.26 $0.24 $0.24 $0.26 $0.24 Normalized FFO 20,190 15,650 15,242 15,376 14,525 Normalized FFO per diluted share $0.30 $0.24 $0.24 $0.25 $0.23 Annualized dividend yield 5.69% 5.29% 5.37% 5.84% 4.89% CAPITALIZATION Total common shares outstanding 50,014 49,576 48,768 45,205 44,938 Operating Partnership units outstanding 17,110 17,167 17,291 17,441 17,486 Common shares and OP units outstanding 67,124 66,743 66,059 62,646 62,424 Market price per common share $14.06 $15.11 $14.90 $13.69 $15.53 Equity market capitalization(3) $943,763 $1,008,487 $984,279 $857,624 $969,445 Total debt(4) 700,722 660,608 586,821 595,637 523,412 Total market capitalization 1,644,485 1,669,095 1,571,100 1,453,261 1,492,857 Less: cash (24,051) (20,648) (15,418) (19,306) (22,916) Total enterprise value $1,620,434 $1,648,447 $1,555,682 $1,433,955 $1,469,941 BALANCE SHEET METRICS Core Debt/enterprise value 36.7% 34.9% 34.1% 38.4% 33.0% Fixed charge coverage ratio 3.7x 3.5x 3.5x 3.6x 3.5x Core Debt/Annualized Core EBITDA 6.5x 7.1x 6.8x 7.0x 6.6x CORE PORTFOLIO OCCUPANCY Office(5) 93.3% 93.8% 93.7% 92.2% 89.9% Retail(5) 96.2% 96.6% 96.7% 96.7% 96.5% Multifamily(6) 97.3% 97.1% 89.2% (7) 96.1% 92.9% (8) Weighted Average 95.8% 96.1% 94.8% 95.6% 94.2% (1) Excludes gains on dispositions of real estate and mark-to-market adjustments on interest rate derivatives (2) Includes gain on non-operating real estate of $3.4M and approximately $688K of severance for the three months ended 12/31/18. (3) Includes common shares and OP units (4) Excludes unamortized GAAP adjustments (5) Office and retail occupancy based on leased square feet as a % of respective total (6) Multifamily occupancy based on occupied units as a % of respective total (7) Includes impact of seasonality, attributed to the reduced summer occupancy at the JHU student housing property (8) Total occupancy weighted by annualized base rent
Net Asset Value Component Data 7 In thousands Stabilized Portfolio NOI (Cash) Taxable REIT Subsidiary (TRS) Three months ended Annualized Trailing 12 Months 12/31/2018 12/31/2018 General contracting gross profit(2) $6,147 Diversified Portfolio Office $0 $0 Retail 10,657 42,628 Non-Property Assets Multifamily 2,533 10,132 Non-Property Assets As of 12/31/2018 Total diversified portfolio NOI $13,190 $52,760 Cash and cash equivalents $21,254 Restricted cash 2,797 Virginia Beach Town Center Accounts receivable 19,016 Office(1) $2,944 $11,776 Notes receivable, including mezzanine investments 138,683 Retail(1) 2,094 8,376 Construction receivables, including retentions 16,154 Multifamily 1,489 5,956 Equity method investments (Durham City Center JV) 22,203 Total Virginia Beach Town Center NOI $6,527 $26,108 Other assets 56,535 Land held for development 2,994 Stabilized portfolio NOI - cash basis $19,717 $78,868 Total non-property assets $279,636 Signed leases not yet occupied or in free rent period $1,030 $4,120 Liabilities & Share Count As of 12/31/2018 Total $20,747 $82,988 Liabilities Mortgages and notes payable $694,239 Accounts payable and accrued liabilities 15,217 Development Pipeline Construction payables, including retentions 50,796 12/31/2018 Other liabilities 49,240 Income producing property $88,000 Total liabilities $809,492 Construction in progress 132,200 Other assets 1,800 Share Count Total cost to date $222,000 Total common shares outstanding 50,014 Total OP units outstanding 17,110 Total common shares & OP units outstanding 67,124 (1) Includes leases for space occupied by Armada Hoffler which are eliminated for GAAP purposes (2) Includes $3.4M sale of distribution center
Summary Balance Sheet 8 As of $ in thousands 12/31/2018 12/31/2017 Assets (Unaudited) Real estate investments: Income producing property $1,037,917 $910,686 Held for development 2,994 680 Construction in progress 135,675 83,071 Accumulated depreciation (188,775) (164,521) Net real estate investments 987,811 829,916 Real estate investments held for sale 929 - Cash and cash equivalents 21,254 19,959 Restricted cash 2,797 2,957 Accounts receivable, net 19,016 15,691 Notes receivable 138,683 83,058 Construction receivables, including retentions 16,154 23,933 Costs and estimated earnings in excess of billings 1,358 245 Equity method investments 22,203 11,411 Other assets 55,177 55,953 Total Assets $1,265,382 $1,043,123 Liabilities and Equity Indebtedness, net $694,239 $517,272 Accounts payable and accrued liabilities 15,217 15,180 Construction payables, including retentions 50,796 47,445 Billings in excess of costs and estimated earnings 3,037 3,591 Other liabilities 46,203 39,352 Total Liabilities 809,492 622,840 Total Equity 455,890 420,283 Total Liabilities and Equity $1,265,382 $1,043,123
Summary Income Statement 9 In thousands, except per share data Three months ended Year ended 12/31/2018 12/31/2017 12/31/2018 12/31/2017 Revenues (Unaudited) Rental revenues $30,731 $27,654 $116,958 $108,737 General contracting and real estate services 12,705 32,643 76,359 194,034 Total Revenues 43,436 60,297 193,317 302,771 Expenses Rental expenses 7,173 6,353 27,222 25,422 Real estate taxes 2,995 2,731 11,383 10,528 General contracting and real estate services 12,154 32,002 73,628 186,590 Depreciation and amortization 11,260 9,303 39,913 37,321 General and administrative 3,339 2,673 11,431 10,435 Acquisition, development & other pursuit costs 190 171 352 648 Impairment charges 1,518 60 1,619 110 Total Expenses 38,629 53,293 165,548 271,054 Gain on real estate dispositions 4,254 - 4,254 8,087 Operating Income 9,061 7,004 32,023 39,804 Interest income 3,577 2,111 10,729 7,077 Interest expense (5,540) (4,157) (19,087) (17,439) Equity in income of unconsolidated real estate entities 372 - 372 - Loss on extinguishment of debt - (50) (11) (50) Change in fair value of interest rate derivatives (2,207) 827 (951) 1,127 Other income 155 (23) 388 131 Income before taxes 5,418 5,712 23,463 30,650 Income tax benefit (provision) (523) 56 29 (725) Net Income $4,895 $5,768 $23,492 $29,925 Per Diluted Share & Unit $0.07 $0.09 $0.36 $0.50 Weighted Average Shares & Units - Diluted 66,836 62,427 64,754 60,181
FFO, Normalized FFO & Adjusted FFO(1) 10 $ in thousands, except per share data Three months ended (Unaudited) Year Ended (Unaudited) 12/31/2018 9/30/2018 6/30/2018 3/31/2018 2018 2017 Funds From Operations Net income $4,895 $5,669 $5,945 $6,983 $23,492 $29,925 Earnings per diluted share $0.07 $0.09 $0.09 $0.11 $0.36 $0.50 Depreciation and amortization(2) 11,525 10,196 9,179 9,278 40,178 37,321 Gains on dispositions of operating real estate(3) (833) - - - (833) (7,595) Impairment of real estate assets(4) 1,502 - - - 1,502 - FFO $17,089 $15,865 $15,124 $16,261 $64,339 $59,651 FFO per diluted share $0.26 $0.24 $0.24 $0.26 $0.99 $0.99 Normalized FFO Acquisition, development & other pursuit costs 190 69 9 84 352 648 Loss on extinguishment of debt - 11 - - 11 50 Impairment of intangible assets and liabilities 16 3 98 - 117 110 Severance related costs 688 - - - 688 - Change in fair value of interest rate derivatives 2,207 (298) 11 (969) 951 (1,127) Normalized FFO $20,190 $15,650 $15,242 $15,376 $66,458 $59,332 Normalized FFO per diluted share $0.30 $0.24 $0.24 $0.25 $1.03 $0.99 Adjusted FFO Non-cash stock compensation 55 252 271 555 1,133 1,323 Acquisition, development & other pursuit costs (190) (69) (9) (84) (352) (648) Tenant improvements, leasing commissions, lease incentives(5) (2,447) (899) (1,102) (1,058) (5,506) (3,660) Property related capital expenditures (2,961) (884) (1,098) (1,321) (6,264) (3,923) Adjustment for Annapolis Junction purchase option 4,489 - - - 4,489 - Non-cash interest expense 289 270 231 326 1,116 1,274 Net effect of straight-line rents (915) (709) (415) (478) (2,517) (692) Amortization of leasing incentives & above (below) market rents (29) (43) (46) (56) (174) (195) AFFO $18,481 $13,568 $13,074 $13,260 $58,383 $52,811 Weighted Average Common Shares Outstanding 49,726 49,194 45,928 45,132 47,512 42,423 Weighted Average Operating Partnership ("OP") Units Outstanding 17,110 17,168 17,286 17,406 17,242 17,758 Total Weighted Average Common Shares and OP Units Outstanding 66,836 66,362 63,214 62,538 64,754 60,181 (1) See definitions on pages 28-29 (2) The adjustment for depreciation and amortization includes depreciation attributable to the Company’s investment in One City Center, which is an unconsolidated real estate investment. (3) Excludes gain on non-operating real estate of $3.4M for the three months ended 12/31/18, and $0.5M for the three months ended 9/30/2017 (4) Disposition of Waynesboro Commons (5) Excludes development, redevelopment, and first generation space
Outstanding Debt 11 $ in thousands Debt Maturities & Principal Payments Effective Rate as of Outstanding as of Debt Stated Rate 12/31/2018 Maturity Date 2019 2020 2021 2022 2023 Thereafter 12/31/2018 Secured Notes Payable - Core Debt North Point Center Note 1(1) 6.45% 6.45% 2/5/2019 $9,352 $9,352 Southgate Square L+1.60% 4.10% 4/29/2021 880 880 19,682 21,442 Encore Apartments 3.25% 3.25% 9/10/2021 124 504 24,338 24,966 4525 Main Street 3.25% 3.25% 9/10/2021 158 646 31,230 32,034 Hanbury Village 3.78% 3.78% 8/15/2022 504 522 544 17,449 19,019 Socastee Commons 4.57% 4.57% 1/6/2023 105 109 115 120 4,222 4,671 Sandbridge Commons L+1.75% 4.25% 1/17/2023 238 247 257 268 7,248 8,258 249 Central Park Retail L+1.60% 4.10% 8/10/2023 217 230 245 260 16,093 17,045 South Retail L+1.60% 4.10% 8/10/2023 95 101 107 114 7,066 7,483 Fountain Plaza Retail L+1.60% 4.10% 8/10/2023 131 139 147 156 9,684 10,257 Lightfoot Marketplace L+1.75% 4.77% (2) 10/12/2023 10,500 10,500 Johns Hopkins Village L+1.25% 4.19% (2) 8/7/2025 908 941 988 1,031 1,075 47,765 52,708 North Point Center Note 2 7.25% 7.25% 9/15/2025 121 130 140 151 162 1,642 2,346 Lexington Square 4.50% 4.50% 9/1/2028 245 256 268 280 293 13,598 14,940 Smith's Landing 4.05% 4.05% 6/1/2035 822 856 892 928 963 14,524 18,985 Liberty Apartments 5.66% 5.66% 11/1/2043 260 273 291 308 326 12,979 14,437 The Cosmopolitan 3.35% 3.35% 7/1/2051 766 792 819 847 876 40,368 44,468 Total - Secured Core Debt $14,926 $6,626 $80,063 $21,912 $58,508 $130,876 312,911 Secured Notes Payable - Development Pipeline Greenside L+2.95% 5.45% 2/24/2020 25,902 25,902 Premier L+3.50% 6.00% 6/29/2020 19,214 19,214 Summit Place L+3.24% 5.74% 1/1/2021 11,057 11,057 Hoffler Place L+3.24% 5.74% 1/1/2021 11,445 11,445 Market at Mill Creek L+1.55% 4.05% 7/12/2025 7,283 7,283 Brooks Crossing Office L+1.60% 4.10% 7/1/2025 6,910 6,910 Total - Development Pipeline - 45,116 22,502 - - 14,193 81,811 Total Secured Notes Payable $14,926 $51,742 $102,565 $21,912 $58,508 $145,069 $394,722 Unsecured Core Debt Senior unsecured line of credit L+1.40% - 2.00% 4.05% 10/26/2021 126,000 126,000 Senior unsecured term loan L+1.35% - 1.95% 4.00% 10/26/2022 80,000 80,000 Senior unsecured term loan L+1.35% - 1.95% 3.50% (2) 10/26/2022 50,000 50,000 Senior unsecured term loan L+1.35% - 1.95% 4.28% (2) 10/26/2022 50,000 50,000 Total - Unsecured Core Debt - - 126,000 180,000 - - 306,000 Total Notes Payable excluding GAAP Adjustments $14,926 $51,742 $228,565 $201,912 $58,508 $145,069 $700,722 Weighted Average Interest Rate 5.6% 5.5% 4.0% 3.9% 4.3% 4.1% 4.2% Balloon Payments 9,333 45,116 222,744 197,109 47,244 73,594 595,140 Principal amortization 5,593 6,626 5,821 4,803 11,264 71,475 105,582 Total Consolidated Debt $14,926 $51,742 $228,565 $201,912 $58,508 $145,069 $700,722 Fixed-rate Debt(3) 13,365 5,029 59,625 121,114 18,417 130,876 348,426 Variable-rate Debt(4) 1,561 46,713 168,940 80,798 40,091 14,193 352,296 Total Consolidated Debt $14,926 $51,742 $228,565 $201,912 $58,508 $145,069 $700,722 GAAP Adjustments (6,483) Total Notes Payable $694,239 (1) Subsequent event – North Point 1 was paid off in January and added to unencumbered borrowing base (2) Subject to an interest rate swap lock 30 Day LIBOR as of (3) Includes debt subject to interest rate swap locks 2.503% (4) Excludes debt subject to interest rate swap locks 12/31/2018
Core Debt to Core EBITDA(1) 12 $ in thousands Three months ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 Net Income $4,895 $5,669 $5,945 $6,983 $5,768 Excluding: Interest expense 5,540 4,677 4,497 4,373 4,157 Income tax provision (benefit) 523 (120) (166) (266) (56) Depreciation and amortization 11,260 10,196 9,179 9,278 9,303 (Gain) Loss on operating real estate dispositions (833) - - - - Impairment charges 1,518 - - - - Change in fair value of interest rate derivatives 2,207 (298) 11 (969) (827) Adjusted EBITDA(2) $25,110 $20,124 $19,466 $19,399 $18,345 Other adjustments: Loss on extinguishment of debt - 11 - - 50 Non-cash stock compensation 55 252 271 555 276 Development Pipeline (340) (94) (106) (219) (339) Total Other Adjustments (285) 169 165 336 (13) Core EBITDA $24,825 $20,293 $19,631 $19,735 $18,332 Total Debt(3) $700,722 $660,608 $586,821 $595,637 $523,412 Adjustments to Debt: (Less) Development Pipeline(3) (81,811) (64,365) (40,232) (25,377) (15,879) (Less) Cash & restricted cash (24,051) (20,648) (15,418) (19,306) (22,916) Core Debt $594,860 $575,595 $531,171 $550,954 $484,617 Core Debt/Annualized Core EBITDA 6.5x 7.1x 6.8x 7.0x 6.6x (1) See definitions on page 30 (2) Includes gain on non-operating real estate of $3.4M and approximately $688K of severance for the three months ended 12/31/18. These amounts are not annualized in the Core Debt/Annualized Core EBITDA calculation. (3) Excludes GAAP Adjustments
Debt Information 13 $ in thousands Total Debt Composition Weighted Average Percent of Debt Interest Rate Maturity Secured vs. Unsecured Debt Unsecured Debt 43.7% 4.0% 3.4 Yrs Unencumbered Summary Secured Debt 56.3% 4.3% 8.5 Yrs Variable vs. Fixed-rate Debt 12/31/2018 (1) Variable-rate Debt 50.3% 4.4% 3.1 Yrs % of Total Properties 66.7% (2)(3) Fixed-rate Debt 49.7% 4.0% 9.5 Yrs % of Annualized Base Rent 52.4% Fixed-rate and Hedged Debt(2)(3) 99.7% Total 4.2% 6.3 Yrs Interest Rate Cap Agreements Effective Date Maturity Date Strike Rate Notional Amount February 7, 2017 March 1, 2019 1.50% $50,000 June 23, 2017 July 1, 2019 1.50% 50,000 September 18, 2017 October 1, 2019 1.50% 50,000 November 28, 2017 December 1, 2019 1.50% 50,000 March 7, 2018 April 1, 2020 2.25% 50,000 July 16, 2018 August 1, 2020 2.50% 50,000 December 11, 2018 January 1, 2021 2.75% 50,000 Total Interest Rate Caps 350,000 Fixed-rate Debt(2)(3) 348,426 Fixed-rate and Hedged Debt $698,426 (4) % of Total(3) 99.7% (1) Excludes debt subject to interest rate swap locks (2) Includes debt subject to interest rate swap locks (3) Excludes GAAP adjustments (4) Paid off January 2019
Capitalization & Financial Ratios 14 $ in thousands
Property Portfolio 15 As of December 31, 2018 Net Rentable Square Feet (RSF)(1) Town Unencumbered Core Development Core Development ABR per Property Anchor Tenant(s) Location Center ABR Year Built Properties Properties Total Occupancy(2) Leased(2) ABR(3) Leased SF(3) Retail Properties Cheesecake Factory, Brooks Brothers, 249 Central Park Retail(4) Virginia Beach, VA - 2004 92,710 - 92,710 97.9% - $2,597,881 $28.63 Gordon Biersch Alexander Pointe Harris Teeter Salisbury, NC 100% 1997 57,710 - 57,710 95.1% - 636,019 11.58 Bermuda Crossroads(6) Food Lion, OfficeMax Chester, VA 100% 2001 122,566 - 122,566 98.4% - 1,713,928 14.22 Broad Creek Shopping Center(6)(9) Food Lion, PetSmart Norfolk, VA 100% 1997/2001 121,504 - 121,504 95.5% - 2,046,360 17.63 Broadmoor Plaza Kroger, Staples, Jo-Ann Fabrics South Bend, IN 100% 1980 115,059 - 115,059 96.5% - 1,356,291 12.21 Brooks Crossing Retail Various Small Shops Newport News, VA 100% 2016 - 18,349 18,349 - 66.3% 169,380 13.92 Columbus Village Barnes & Noble, Shake Shack Virginia Beach, VA 100% 1980/2013 62,362 - 62,362 100.0% - 1,422,244 22.81 Columbus Village II Regal Cinemas, BB&B Virginia Beach, VA 100% 1995/1996 92,061 - 92,061 96.7% - 1,595,334 17.92 Commerce Street Retail(5) Yard House Virginia Beach, VA 100% 2008 19,173 - 19,173 100.0% - 863,799 45.05 Courthouse 7-Eleven 7-Eleven Virginia Beach, VA 100% 2011 3,177 - 3,177 100.0% - 139,311 43.85 Dick's at Town Center Dick's Sporting Goods, USI Virginia Beach, VA 100% 2002 103,335 - 103,335 100.0% - 1,251,255 12.11 Dimmock Square Best Buy, Old Navy Colonial Heights, VA 100% 1998 106,166 - 106,166 97.2% - 1,768,353 17.14 Fountain Plaza Retail Ruth's Chris, Ann Taylor Virginia Beach, VA - 2004 35,961 - 35,961 100.0% - 1,019,584 28.35 Gainsborough Square Food Lion, Rite Aid Chesapeake, VA 100% 1999 88,862 - 88,862 92.5% - 1,261,426 15.35 Greentree Shopping Center Various Small Shops Chesapeake, VA 100% 2014 15,719 - 15,719 83.7% - 266,752 20.28 Hanbury Village(6) Harris Teeter, Walgreens Chesapeake, VA 32% 2006/2009 116,635 - 116,635 98.6% - 2,486,153 21.61 Harper Hill Commons(6) Harris Teeter Winston-Salem, NC 100% 2004 96,914 - 96,914 85.4% - 942,167 11.38 Harrisonburg Regal Regal Cinemas Harrisonburg, VA 100% 1999 49,000 - 49,000 100.0% - 683,550 13.95 Indian Lakes Crossing(6) Harris Teeter Virginia Beach, VA 100% 2008 64,973 - 64,973 95.0% - 839,174 13.60 Lexington Square Lowes Foods Lexington, SC - 2017 85,531 - 85,531 93.3% - 1,698,782 21.29 Lightfoot Marketplace(6) Harris Teeter, CHKD Williamsburg, VA - 2016 124,735 - 124,735 85.6% - 1,819,389 17.03 North Hampton Market PetSmart, Hobby Lobby Taylors, SC 100% 2004 114,935 - 114,935 100.0% - 1,473,083 12.82 Harris Teeter, PetSmart, Home Depot, North Point Center(6) Durham, NC 67% 1998/2009 494,746 - 494,746 100.0% - 3,812,818 7.71 Costco Oakland Marketplace(6) Kroger Oakland, TN 100% 2004 64,538 - 64,538 100.0% - 475,387 7.37 Parkway Centre Publix Moultrie, GA 100% 2017 61,200 - 61,200 98.0% - 809,016 13.48 Parkway Marketplace Rite Aid Virginia Beach, VA 100% 1998 37,804 - 37,804 100.0% - 770,911 20.39 Patterson Place BB&B, PetSmart, DSW, AC Moore Durham, NC 100% 2004 160,942 - 160,942 94.6% - 2,384,886 15.67 Perry Hall Marketplace Safeway Perry Hall, MD 100% 2001 74,256 - 74,256 100.0% - 1,261,436 16.99 Premier Retail Williams Sonoma, Pottery Barn Virginia Beach, VA - 2018 - 38,586 38,586 - 63.9% 528,714 21.45 Providence Plaza Cranfill, Sumner & Hartzog, Chipotle Charlotte, NC 100% 2007/2008 103,118 - 103,118 97.5% - 2,699,780 26.86 Renaissance Square Harris Teeter Davidson, NC 100% 2008 80,467 - 80,467 88.0% - 1,220,638 17.23 Sandbridge Commons(6) Harris Teeter Virginia Beach, VA - 2015 69,417 - 69,417 100.0% - 915,773 13.19 Socastee Commons Bi-Lo Myrtle Beach, SC - 2000/2014 57,273 - 57,273 96.7% - 630,451 11.39 Southgate Square Burlington, PetSmart, Michaels Colonial Heights, VA - 1991/2016 220,131 - 220,131 89.7% - 2,699,553 13.68 South Retail lululemon, free people, CPK Virginia Beach, VA - 2002 38,515 - 38,515 100.0% - 967,788 25.13 South Square(6) Ross, Petco, Office Depot Durham, NC 100% 1977/2005 109,590 - 109,590 95.3% - 1,790,877 17.14 Southshore Shops Buffalo Wild Wings Chesterfield, VA 100% 2006 40,333 - 40,333 93.2% - 768,665 20.44 Stone House Square(6) Weis Markets Hagerstown, MD 100% 2008 112,274 - 112,274 93.1% - 1,787,198 17.10 Studio 56 Retail McCormick & Schmick's Virginia Beach, VA 100% 2007 11,594 - 11,594 84.8% - 419,296 42.65 Tyre Neck Harris Teeter(9) Harris Teeter Portsmouth, VA 100% 2011 48,859 - 48,859 100.0% - 533,052 10.91 Wendover Village BB&B, T.J. Maxx, Petco Greensboro, NC 100% 2004 171,653 - 171,653 99.1% - 3,154,273 18.54 Total / Weighted Avg Retail Portfolio 72% 3,645,798 56,935 3,702,733 96.2% 64.7% $55,680,727 $15.72
Property Portfolio - Continued 16 As of December 31, 2018 Net Rentable Square Feet (RSF)(1) Town Unencumbered Core Development Core Development ABR per Leased Property Anchor Tenant Location Center ABR Year Built Properties Properties Total Occupancy(2) Leased(2) ABR(3) SF(3) Office Properties 4525 Main Street Clark Nexsen, Anthropologie, Mythics Virginia Beach, VA - 2014 234,938 - 234,938 96.0% - $6,434,782 $28.53 Armada Hoffler Tower(4)(5) AHH, Troutman Sanders, Williams Mullen Virginia Beach, VA 100% 2002 324,247 - 324,247 91.4% - 8,606,013 29.05 One Columbus(5) BB&T, HBA Virginia Beach, VA 100% 1984 128,876 - 128,876 92.2% - 2,934,268 24.68 Two Columbus The Art Institute Virginia Beach, VA 100% 2009 108,448 - 108,448 94.2% - 2,672,688 26.17 Total / Weighted Average Office Portfolio 69% 796,509 - 796,509 93.3% - $20,647,751 $27.80 Units Development/ Development/ Town Unencumbered Core Redevelopment Core Redevelopment Monthly Rent per Multifamily Location Center ABR Year Built Properties Properties Total Occupancy (2) Occupancy(2) ABR (7) Occupied Unit Encore Apartments Virginia Beach, VA - 2014 286 - 286 94.4% - $4,221,756 $1,303.01 Greenside Apartments Charlotte, NC - 2018 - 225 225 - 38.7% 1,670,585 1,600.18 Johns Hopkins Village(8)(9)(10) Baltimore, MD - 2016 157 - 157 99.8% - 7,665,480 1,126.61 Liberty Apartments(8)(10) Newport News, VA - 2013 197 - 197 96.2% - 2,388,808 1,050.41 Premier Apartments Virginia Beach, VA - 2018 - 131 131 - 58.8% 1,280,532 1,385.86 Smith's Landing(9) Blacksburg, VA - 2009 284 - 284 99.6% - 4,056,060 1,194.36 The Cosmopolitan(8)(11) Virginia Beach, VA - 2006 - 306 306 - 92.5% 5,520,375 1,625.55 Total / Weighted Avg Multifamily Portfolio - 924 662 1,586 97.3% 67.5% $26,803,596 $1,315.83 Square Footage Number of Leased Pursuant to Properties Subject to Ground Lease Ground Leases Ground Leases ABR (1) The net rentable square footage for each of our retail & office properties is the sum of (a) the square footage of Bermuda Crossroads 2 11,000 $179,685 existing leases, plus (b) for available space, management’s estimate of net rentable square footage based, in Broad Creek Shopping Center 6 23,825 639,988 part, on past leases. The net rentable square footage included in office leases is generally consistent with the Columbus Village 1 3,403 200,000 Building Owners and Managers Association, or BOMA, 1996 measurement guidelines. Hanbury Village 2 55,586 1,082,118 (2) Occupancy for each of our retail & office properties is calculated as (a) square footage under executed leases as Harper Hill Commons 1 41,520 373,680 Indian Lakes 1 50,311 592,385 of December 31, 2018, divided by (b) net rentable square feet, expressed as a percentage. Occupancy for our Lightfoot Marketplace 3 60,442 660,375 multifamily properties is calculated as (a) total units occupied as of December 31, 2018, divided by (b) total units North Point Center 4 280,556 1,139,610 available, as of such date expressed as a percentage. Oakland Marketplace 1 45,000 186,300 (3) For the properties in our office and retail portfolios, annualized base rent, or ABR, is calculated by multiplying (a) Sandbridge Commons 1 53,288 583,000 monthly base rent (defined as cash base rent, before contractual tenant concessions and abatements, and South Square 1 1,778 60,000 excluding tenant reimbursements for expenses paid by us) as of December 31, 2018 for in-place leases as of such Stone House Square 1 3,650 181,500 date by (b) 12, and does not give effect to periodic contractual rent increases or contingent rental revenue (e.g., Tyre Neck Harris Teeter 1 48,859 533,052 Total / Weighted Avg 25 679,218 $6,411,693 percentage rent based on tenant sales thresholds). ABR per leased square foot is calculated by dividing (a) ABR by (b) square footage under in-place leases as of December 31, 2018. In the case of triple net or modified gross (7) For the properties in our multifamily portfolio, ABR is calculated by multiplying (a) base rental payments for the leases, our calculation of ABR does not include tenant reimbursements for real estate taxes, insurance, common month ended December 31, 2018 by (b) 12. area or other operating expenses. (8) The ABR for Liberty, Cosmopolitan, and Johns Hopkins Village excludes $293K, $746K and $1.2M from ground (4) As of December 31, 2018, the Company occupied 41,103 square feet at these two properties at an ABR of floor retail leases, respectively. $1.3M, or $31.21 per leased square foot, which amounts are reflected in this table. The rent paid by us is (9) The Company leases the land underlying this property pursuant to a ground lease. eliminated in accordance with GAAP in the consolidated financial statements. (10) Monthly rent per occupied unit is calculated by dividing total base rental payments for the month ended (5) Includes ABR pursuant to a rooftop lease. December 31, 2018 by the number of occupied beds. (6) Net rentable square feet at certain of our retail properties includes pad sites leased pursuant to the ground (11) Excludes 36 units offline for redevelopment. leases in the table to the right:
Development and Redevelopment Pipeline 17 (1) $ in thousands Schedule Property % Leased Construction Initial Stabilized Estimated Construction Loan Cost to AHH Development, Not Delivered Type Estimated(1) or LOI Start Occupancy Operation(2) Cost(1) Commitment Date Ownership % Anchor Tenants & Other Notes Summit Place (Meeting Street) Multifamily 114 units 2% 3Q17 3Q19 3Q19 $53,000 $34,750 $35,000 90% NA Charleston, SC Hoffler Place (King Street) Multifamily 74 units 7% 3Q17 3Q19 3Q19 48,000 31,750 34,500 93% NA Charleston, SC Market at Mill Creek Retail 73,000 SF 92% 1Q18 1Q19 2Q19 23,000 16,185 19,500 70%(3) Lowes Foods Mt. Pleasant, SC Brooks Crossing - Office Office 100,000 sf 100% 1Q18 2Q19 3Q19 20,000 15,625 15,000 65%(3) Huntington Ingalls Industries Newport News, VA Wills Wharf Office 325,000 sf 60% 3Q18 1Q20 3Q20 119,000 - (4) 20,000 100% WeWork, Canopy by Hilton Baltimore, MD Total Development, Not Delivered 263,000 98,310 124,000 Development, Delivered Not Stabilized Brooks Crossing - Retail Retail 18,000 sf 66% 3Q15 3Q16 4Q19 3,000 - 3,000 65%(3) Misc. small shops Newport News, VA Greenside (Harding Place) Multifamily 225 Units 47% 3Q16 3Q18 4Q19 50,000 29,750 50,000 80%(3) NA Charlotte, NC Premier Apartments (Town Center Phase VI) Multifamily 131 Units 65% 4Q16 3Q18 3Q19 30,000 16,666 29,000 100% NA Virginia Beach, VA Premier Retail (Town Center Phase VI) Retail 39,000 sf 75% 4Q16 3Q18 1Q20 15,000 8,334 12,000 100% Williams Sonoma, Pottery Barn Virginia Beach, VA Lightfoot Outparcel Retail NA 100% 1Q18 3Q18 1Q19 4,000 3,000 4,000 70%(3) Panera Williamsburg, VA Total Development, Delivered Not Stabilized 102,000 57,750 98,000 Total $365,000 $156,060 222,000 Construction Loan Equity Joint Ventures - Minority Partner Project Cost Commitment Investment One City Center - 37% JV Office 153,000 sf 85% 1Q16 3Q18 2Q19 $46,000 $25,250 $20,750 100% Duke University , WeWork Durham, NC Schedule(1) Property Units Out of Construction Anticipated Same-Store Estimated Construction Loan Cost to Redevelopment Type Service % Leased Start Completion Sales Cost(1) Commitment Date The Cosmopolitan Multifamily 36 units 92% 1Q18 1Q20 1Q21 $10,000 - $1,200 Virginia Beach, VA Q4 2018 YTD Capitalized Interest $1,493 $5,010 Capitalized Overhead $836 $3,116 (1) Represents estimates that may change as the development process proceeds (2) First full stabilized quarter (3) AHH earns a preferred return on equity prior to any distributions to JV Partners Premier Summit Place One City Center (4) $76M loan scheduled to close 2Q19
Mezzanine Investments 18 $ in thousands Schedule(1) Full Year 2018 Property % Leased Initial Option to Loan Mezzanine Mezzanine Mezzanine Investments Type Estimated(1) or LOI Occupancy Loan Maturity Interest Rate Purchase Balance Interest QTD Interest The Residences at Annapolis Junction Multifamily 416 units 76% 3Q17 4Q19 10% - $36,000 $1,054 $4,428 Annapolis Junction, MD 1405 Point (Point Street Apartments)(3) Multifamily 289 units 91% 1Q18 3Q21 8% 99,000 30,000 597 2,080 Baltimore, MD North Decatur Square (Whole Foods) Retail 86,000 sf 100% 4Q18 2Q22 15% - 19,000 651 2,212 Decatur, GA Nexton Square(3) Retail 135,000 sf 79% 2Q19 4Q20 15% 42,000 15,000 216 235 Summerville, SC Delray Plaza (Whole Foods) Retail 83,000 sf 94% 3Q19 4Q20 15% - 7,000 253 928 Delray Beach, FL Solis Apartments at Interlock Multifamily 345 units NA 3Q20 3Q22 13% - 14,000 55 55 Atlanta, GA The Interlock Mixed-use 300,000 sf 63% 3Q20 3Q22 15% - 18,000 202 203 Atlanta, GA Total Mezzanine Investment $141,000 $139,000 $3,028 $10,141 (1) Represents estimates that may change as the development process proceeds (2) Sold our at-cost purchase option to the developer of Annapolis Junction (3) Intend to exercise discounted purchase option 1405 Point North Decatur Square Nexton Square
Acquisitions & Dispositions 19 $ in thousands ACQUISITIONS Reinvested $ Value of Cash Cap Properties Location Square Feet Purchase Price(1) 1031 Proceeds OP Units/Stock(2) Rate Purchase Date Anchor Tenants Lexington Square(3) Lexington, SC 85,531 $26,758 - $2,624 6.7% 3Q18 Lowes Foods Parkway Centre Moultrie, GA 61,200 11,200 - 1,624 6.4% 1Q18 Publix Indian Lakes Virginia Beach, VA 71,020 14,700 - - 7.1% 1Q18 Harris Teeter, Wawa Wendover Village Outparcel Greensboro, NC 35,895 14,300 7,900 - 7.7% 3Q17 Panera, Rooms to Go Kids Renaissance Square Davidson, NC 80,468 17,085 - - 7.1% 4Q16 Harris Teeter Columbus Village II Virginia Beach, VA 92,061 26,200 - 26,200 5.6% 4Q16 Regal, Bed Bath & Beyond Southshore Shops Midlothian, VA 40,333 9,160 - 2,475 7.8% 3Q16 Buffalo Wild Wings Southgate Square Colonial Heights, VA 220,131 38,585 - 17,485 7.3% 2Q16 PetSmart, Michael's, Burlington Retail Portfolio (11 properties) Mid-Atlantic 1,082,681 170,500 87,000 - 7.2% 1Q16 Harris Teeter, Bed Bath & Beyond Providence Plaza Charlotte, NC 103,118 26,200 14,000 - 7.3% 3Q15 Chipotle Socastee Commons Myrtle Beach, SC 57,573 8,600 3,600 - 7.3% 3Q15 BiLo Columbus Village Virginia Beach, VA 65,746 21,025 - 14,025 6.4% 3Q15 Barnes & Noble Perry Hall Marketplace & Maryland 182,949 39,555 15,200 4,155 7.4% 2Q15 Safeway & Weis Markets Stone House Square Dimmock Square Colonial Heights, VA 106,166 19,662 - 9,662 7.3% 3Q14 Old Navy, Best Buy, Pier 1 Total/Weighted Average 2,284,872 $443,530 $127,700 $78,250 7.1% DISPOSITIONS Square Cash Cap Properties Location Feet/Units Sale Price Cash Proceeds Gain on Sale Rate Disposition Date Anchor Tenants Indian Lakes Wawa Virginia Beach, VA 6,047 $4,400 $4,400 $0 5.4% 2Q18 Wawa Commonwealth of VA Buildings Virginia Beach & Chesapeake, VA 47,366 13,150 8,000 4,194 6.8% 3Q17 Commonwealth of VA Greentree Wawa Chesapeake, VA 5,088 4,600 4,400 3,396 5.0% 1Q17 Wawa Oyster Point(4) Newport News, VA 100,139 6,500 - 3,793 16.4% 3Q16 GSA Non-Core Retail Portfolio Various 174,758 12,850 12,600 (27) 7.1% 2Q16 - 3Q16 Kroger, Family Dollar Richmond Tower Richmond, VA 206,969 78,000 77,000 26,674 7.9% 1Q16 Williams Mullen Oceaneering Chesapeake, VA 154,000 30,000 10,000 4,987 6.7% 4Q15 Oceaneering International Whetstone Apartments Durham, NC 203 units 35,625 17,600 7,210 5.7% 2Q15 NA Sentara Williamsburg Williamsburg, VA 49,200 15,450 15,200 6,197 6.3% 1Q15 Sentara Virginia Natural Gas Virginia Beach, VA 31,000 8,900 7,400 2,211 6.3% 4Q14 Virginia Natural Gas Total/Weighted Average 774,567 sf/ $209,475 $156,600 $58,635 7.2% 203 units (1) Contractual purchase price (2) Value of OP Units/Stock at issuance (3) Units are issuable contingent on the achievement of certain further occupancy requirements (4) Anchor tenant vacated 12/31/16, which would represent a 2.5% Cash Cap Rate
Construction Business Summary 20 $ in thousands Total Contract Work in Place as Estimated Date Location Value of 12/31/2018 Backlog of Completion Highlighted Projects One City Center Durham, NC $69,044 $66,250 $2,794 1Q 2019 Dinwiddie Municipal Complex Dinwiddie, VA 24,178 22,668 1,510 2Q 2019 Interlock Commercial Atlanta, GA 84,922 323 84,599 4Q 2020 Solis Apartments at Interlock Atlanta, GA 62,300 71 62,229 1Q 2021 Sub Total 240,444 89,312 151,132 All Other Projects 564,928 550,197 14,731 Total $805,372 $639,509 $165,863 Gross Profit Summary Trailing 12 Q4 2018 Months (Unaudited) Revenue $12,705 $76,359 Expense (12,154) (73,628) Gross Profit $551 $2,731
Same Store NOI by Segment 21 $ in thousands (Reconciliation to GAAP located in appendix on pg. 34) Three months ended Year ended 12/31/2018 12/31/2017 $ Change % Change 12/31/2018 12/31/2017 $ Change % Change Office(1) (Unaudited) (Unaudited) Revenue $5,165 $4,779 $386 8.1% $14,125 $13,615 $510 3.7% Expenses(2) 1,836 1,741 95 5.5% 5,496 5,196 300 5.8% Net Operating Income 3,329 3,038 291 9.6% 8,629 8,419 210 2.5% Retail(1) Revenue 14,576 14,465 111 0.8% 56,693 56,348 345 0.6% Expenses(2) 3,441 3,291 150 4.6% 13,156 12,844 312 2.4% Net Operating Income 11,135 11,174 (39) -0.3% 43,537 43,504 33 0.1% Multifamily(1) Revenue 5,487 5,045 442 8.8% 11,834 11,473 361 3.1% Expenses(2) 2,128 2,036 92 4.5% 4,989 4,869 120 2.5% Net Operating Income 3,359 3,009 350 11.6% 6,845 6,604 241 3.6% Same Store Net Operating Income (NOI) $17,823 $17,221 $602 3.5% $59,011 $58,527 $484 0.8% Net effect of straight-line rents ($739) (257) (482) (487) (142) (345) Amortization of lease incentives and above (below) market rents ($15) (31) 16 (372) (365) (7) Same store portfolio NOI, cash basis $17,069 $16,933 $136 0.8% $58,152 $58,020 $132 0.2% NOI, Cash Basis: Office $2,818 $2,982 ($164) -5.5% $8,373 $9,102 ($729) -8.0% Retail 10,992 10,962 30 0.3% 42,887 42,267 620 1.5% Multifamily 3,259 2,989 270 9.0% 6,892 6,651 241 3.6% $17,069 $16,933 $136 0.8% $58,152 $58,020 $132 0.2% NOI: Office $3,329 $3,038 $291 9.6% $8,629 $8,419 $210 2.5% Retail 11,135 11,174 (39) -0.3% 43,537 43,504 33 0.1% Multifamily 3,359 3,009 350 11.6% 6,845 6,604 241 3.6% $17,823 $17,221 $602 3.5% $59,011 $58,527 $484 0.8% (1) See page 31 for Same Store vs. Non – Same Store Properties (2) Excludes expenses associated with the Company’s in house asset management division of $585K and $474K for the 3 months ended 12/31/18 & 12/31/17, respectively, as well as $2.1M and $1.9M for the 12 months ended 12/31/18 & 12/31/17, respectively.
Top 10 Tenants by Annualized Base Rent 22 $ in thousands As of December 31, 2018 Office Portfolio Number Lease Annualized Base % of Office Portfolio % of Total Portfolio Tenant of Leases Expiration Rent Annualized Base Rent Annualized Base Rent Clark Nexsen 1 2029 $ 2,588 12.5% 2.5% Mythics 1 2030 1,164 5.6% 1.1% Hampton University 2 2024 1,063 5.1% 1.0% Pender & Coward 1 2030 882 4.3% 0.9% Kimley-Horn 1 2027 876 4.2% 0.8% Troutman Sanders 1 2025 855 4.1% 0.8% The Art Institute 1 2019 852 4.1% 0.8% City of Va Beach Development Authority 1 2024 744 3.6% 0.7% Cherry Bekaert 1 2022 718 3.5% 0.7% Williams Mullen 1 2028 655 3.2% 0.6% Top 10 Total $ 10,397 50.2% 9.9% Retail Portfolio Number Lease Annualized Base % of Retail Portfolio % of Total Portfolio Tenant of Leases Expiration Rent Annualized Base Rent Annualized Base Rent Harris Teeter/Kroger 11 2020 - 2036 $ 6,188 11.1% 6.0% Regal Cinemas 2 2022 - 2024 1,679 3.0% 1.6% Bed, Bath, & Beyond 4 2020 - 2024 1,677 3.0% 1.6% PetSmart 5 2020 - 2022 1,438 2.6% 1.4% Food Lion 3 2019 - 2022 1,291 2.3% 1.3% Lowes Foods, LLC 1 2037 930 1.7% 0.9% Dick's Sporting Goods 1 2020 840 1.5% 0.8% Weis Markets 1 2028 802 1.4% 0.8% Ross Dress for Less 2 2020 - 2022 762 1.4% 0.7% Petco 3 2020 - 2027 743 1.3% 0.7% Top 10 Total $ 16,350 29.3% 15.8%
Office Lease Summary 23 Renewal Lease Summary GAAP Cash Number of Weighted Leases Net rentable SF Leases Net rentable Contractual Prior Rent Releasing Contractual Prior Rent Releasing Average Lease TI & LC Quarter Signed Signed Expiring SF Expiring Rent per SF per SF Spread Rent per SF per SF Spread Term (yrs) TI & LC per SF Q4 2018 3 5,490 2 1,915 $ 26.13 $ 24.97 4.6%$ 26.50 $ 26.27 0.9% 3.86 $ 165,800 $ 30.20 Q3 2018 - - 1 9,337 - - 0.0% - - 0.0% - - - Q2 2018 3 28,910 6 13,225 28.88 28.41 1.7% 27.68 30.86 -10.3% 8.77 2,169,711 75.05 Q1 2018 1 1,400 - - 27.22 23.99 13.5% 27.24 26.45 3.0% 3.00 2,428 1.73 New Lease Summary(1) Number of Cash Weighted Leases Net rentable SF Contractual Average Lease TI & LC Quarter Signed Signed Rent per SF Term (yrs) TI & LC per SF Q4 2018 1 1,242 $ 24.00 5.21 $ 13,585 $ 10.94 Q3 2018 1 1,806 26.00 5.00 14,958 8.28 Q2 2018 4 20,899 23.22 7.18 853,977 40.86 Q1 2018 3 17,668 23.59 8.28 930,376 52.66 (1) Excludes new leases from properties in development
Office Lease Expirations 24 As of December 31, 2018 Square Footage % Portfolio % of Portfolio Annualized Base Number of Leases of Leases Net Rentable Annualized Base Annualized Rent per Leased Year of Lease Expiration Expiring Expiring(1) Square Feet Rent Base Rent Square Foot Available - 53,704 6.7% $ - - $ - M-T-M 3 633 0.1% 20,400 0.1% 32.23 2019 16 75,516 9.5% 1,942,629 9.4% 25.72 2020 7 26,537 3.3% 765,538 3.7% 28.85 2021 8 46,798 5.9% 1,339,418 6.5% 28.62 2022 9 73,394 9.2% 2,083,571 10.1% 28.39 2023 11 63,441 8.0% 1,816,072 8.8% 28.63 2024 7 102,931 12.9% 2,796,210 13.5% 27.17 2025 7 70,062 8.8% 1,931,218 9.4% 27.56 2026 3 15,140 1.9% 331,665 1.6% 21.91 2027 3 49,081 6.2% 1,416,099 6.9% 28.85 2028 4 56,844 7.1% 1,512,745 7.3% 26.61 2029 2 86,759 10.9% 2,646,518 12.8% 30.50 Thereafter 2 75,669 9.5% 2,045,668 9.9% 27.03 Total / Weighted Average 82 796,509 100.0%$ 20,647,751 100.0%$ 27.80 Square Feet Under % of Portfolio Lease ABR 2,500 or less 3.3% 2,501-10,000 17.9% 10,001-20,000 29.5% 20,001-40,000 31.0% 40,001-100,000 18.2% Office Portfolio Total 100.0% (1) Includes new leases from the development properties that have been delivered, but not stabalized
Retail Lease Summary 25 Renewal Lease Summary GAAP Cash Number of Leases Net rentable Net rentable Contractual Prior Rent Releasing Contractual Prior Rent Releasing Weighted Average TI & LC Quarter Signed SF Signed Leases Expiring SF Expiring Rent per SF per SF Spread Rent per SF per SF Spread Lease Term (yrs) TI & LC per SF Q4 2018 23 169,261 13 67,429 $ 15.91 $ 15.14 5.0%$ 15.78 $ 15.36 2.8% 3.98 $ 175,816 $ 1.04 Q3 2018 10 28,101 11 19,775 29.36 27.23 7.8% 29.95 28.19 6.2% 5.23 115,732 4.12 Q2 2018 19 64,064 1 1,900 19.55 18.71 4.5% 19.33 19.13 1.0% 5.60 261,455 4.08 Q1 2018 19 61,029 3 9,700 21.14 19.65 7.6% 20.47 19.88 3.0% 6.33 433,976 7.11 New Lease Summary(1) Number of Weighted Leases Net rentable Cash Contractual Rent Average Lease TI & LC Quarter Signed SF Signed per SF Term (yrs) TI & LC per SF Q4 2018 7 60,363 $ 15.09 10.83 $ 2,710,665 $ 44.91 Q3 2018 7 10,444 19.60 5.95 366,032 35.05 Q2 2018 9 29,646 25.08 8.63 1,041,670 35.14 Q1 2018 5 14,196 15.57 5.10 223,542 15.75 (1) Excludes new leases from properties in development
Retail Lease Expirations 26 As of December 31, 2018 Square Footage % Portfolio % of Portfolio Annualized Base Number of Leases of Leases Net Rentable Annualized Base Annualized Rent per Leased Year of Lease Expiration Expiring Expiring(1) Square Feet Rent Base Rent Square Foot Available - 159,923 4.3% $ - - $ - M-T-M 2 2,600 0.1% 48,470 0.1% 18.64 2019 64 287,943 7.8% 4,922,077 8.8% 17.09 2020 77 589,349 15.9% 8,321,449 14.9% 14.12 2021 67 301,451 8.1% 5,439,595 9.8% 18.04 2022 59 422,280 11.4% 7,003,826 12.6% 16.59 2023 59 432,951 11.7% 6,632,066 11.9% 15.32 2024 39 305,397 8.2% 4,862,548 8.7% 15.92 2025 21 236,602 6.4% 2,666,200 4.8% 11.27 2026 20 169,355 4.6% 2,934,654 5.3% 17.33 2027 18 118,786 3.2% 2,544,828 4.6% 21.42 2028 25 270,005 7.3% 3,973,549 7.1% 14.72 2029 9 48,665 1.3% 1,042,083 1.9% 21.41 Thereafter 17 357,426 9.6% 5,289,383 9.4% 14.80 Total / Weighted Average 477 3,702,733 100.0%$ 55,680,728 100.0%$ 15.72 Square Feet % of Portfolio Under Lease ABR 2,500 or less 13.5% 2,501-10,000 29.5% 10,001-20,000 15.6% 20,001-40,000 14.9% 40,001-100,000 24.8% Greater than 100,000 1.7% Retail Portfolio Total 100.0% (1) Includes new leases from properties in development
27 Appendix Definitions & Reconciliations
Definitions 28 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). Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to such other REITs’ NOI. NOI is not a measure of operating income or cash flows from operating activities as measured by GAAP and is not indicative of cash available to fund cash needs. As a result, NOI should not be considered an alternative to cash flows as a measure of liquidity. We consider NOI to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the core operations of our real estate business. To calculate NOI on a cash basis, we adjust NOI to exclude the net effects of straight-line rent and the amortization of lease incentives and above/below market rents. Funds From Operations: We calculate Funds From Operations (“FFO”) in accordance with the standards established by the National Association of Real Estate Investment Trusts (“Nareit”). Nareit defines FFO as net income (loss) (calculated in accordance with accounting principles generally accepted in the United States (“GAAP”)), excluding gains (or losses) from sales of depreciable operating property, real estate related depreciation and amortization (excluding amortization of deferred financing costs), impairment of real estate assets, 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 period-over-period, captures trends in occupancy rates, rental rates and operating costs. Other equity REITs may not calculate FFO in accordance with the Nareit definition as we do, and, accordingly, our FFO may not be comparable to such other REITs’ FFO.
Definitions 29 Normalized Funds From Operations: We calculate Normalized Funds From Operations (“Normalized FFO") as FFO calculated in accordance with the standards established by Nareit, adjusted for acquisition, development and other pursuit costs, gains or losses from the early extinguishment of debt, impairment of intangible assets and liabilities, mark-to-market adjustments on interest rate derivatives, severance related costs, and other non-comparable items. 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 Normalized FFO differs from Nareit's definition of FFO. Other equity REITs may not calculate Normalized FFO in the same manner as us, and, accordingly, our Normalized FFO may not be comparable to other REITs' Normalized FFO. Adjusted Funds From Operations: We calculate Adjusted Funds From Operations (“AFFO”) as Normalized FFO adjusted for the impact of non-cash stock compensation, tenant improvement, leasing commission and leasing incentive costs associated with second generation rental space, capital expenditures, non-cash interest expense, proceeds from the sale of a purchase option (in excess of amounts recognized in net income), straight-line rents, the amortization of leasing incentives and above (below) market rents and proceeds from government development grants. Management believes that AFFO provides useful supplemental information to investors regarding our operating performance as it provides a consistent comparison of our operating performance across time periods and allows investors to more easily compare our operating results with other REITs. However, other REITs may use different methodologies for calculating AFFO or similarly entitled FFO measures and, accordingly, our AFFO may not always be comparable to AFFO or other similarly entitled FFO measures of other REITs.
Definitions 30 Adjusted EBITDA: We calculate Adjusted EBITDA as net income (loss) (calculated in accordance with GAAP), excluding interest expense, income taxes, depreciation and amortization, gains (or losses) from sales of depreciable operating property and mark-to-market adjustments on interest rate derivates. Management believes Adjusted EBITDA is useful to investors in evaluating and facilitating comparisons of our operating performance between periods and between REITs by removing the impact of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from our operating results along with other non-comparable items. Core EBITDA: We calculate Core EBITDA as EBITDA, excluding certain items, including, but not limited to, debt extinguishment losses, mark-to- market adjustments on interest rate derivatives, non-cash stock compensation 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 loans associated with our development pipeline, cash & cash equivalents, and restricted cash. Same Store Portfolio: We define same store properties as those that we owned and operated and that were stabilized for the entirety of both periods compared. We generally consider a property to be stabilized upon the earlier of: (i) the quarter after the property reaches 80% occupancy or (ii) the thirteenth quarter after the property receives its certificate of occupancy. Additionally, any property that is fully or partially taken out of service for the purpose of redevelopment is no longer considered stabilized until the redevelopment activities are complete, the asset is placed back into service, and the stabilization criteria above are again met. A property may also be fully or partially taken out of service as a result of a disposition, depending on the significance of the portion of the property disposed. Finally, any property classified as Held for Sale is taken out of service for the purpose computing same store operating results. The following table shows the properties included in the same store and non-same store portfolio for the comparative periods presented.
Same Store vs. Non-Same Store Properties 31 Three Months Ended Year Ended Three Months Ended Year Ended 12/31/2018 to 2017 12/31/2018 to 2017 12/31/2018 to 2017 12/31/2018 to 2017 Same Non-Same Same Non-Same Same Non-Same Same Non-Same Store Store Store Store Store Store Store Store Retail Properties Retail Properties (Continued) 249 Central Park Retail X X Providence Plaza X X Alexander Pointe X X Renaissance Square X X Bermuda Crossroads X X Sandbridge Commons X X Broad Creek Shopping Center X X Socastee Commons X X Brooks Crossing (Retail) X X South Retail X X Broadmoor Plaza X X South Square X X Columbus Village X X Southgate Square X X Columbus Village II X X Southshore Shops X X Commerce Street Retail X X Stone House Square X X Courthouse 7-Eleven X X Studio 56 Retail X X Dick’s at Town Center X X Tyre Neck Harris Teeter X X Dimmock Square X X Waynesboro Commons X X Greentree Shopping Center X X Wendover Village X X Fountain Plaza Retail X X Wendover Village Outparcel X X Gainsborough Square X X Office Properties Hanbury Village X X 4525 Main Street X X Harper Hill Commons X X Armada Hoffler Tower X X Harrisonburg Regal X X Commonwealth of VA - Chesapeake X X Indian Lakes X X Commonwealth of VA - Virginia Beach X X Lexington Square X X One Columbus X X Lightfoot Marketplace X X Two Columbus X X North Hampton Market X X Multifamily Properties North Point Center X X Encore Apartments X X Oakland Marketplace X X Greenside Apartments X X Parkway Centre X X Liberty Apartments X X Parkway Marketplace X X Premier Apartments X X Patterson Place X X Smith’s Landing X X Perry Hall Marketplace X X The Cosmopolitan X X Premier Retail X X Johns Hopkins Village X X
Reconciliation to Property Portfolio NOI 32 $ in thousands Three months ended 12/31 Year ended 12/31 2018 2017 2018 2017 Office Same Store(1) Rental revenues $5,165 $4,779 $14,125 $13,615 Property expenses 1,836 1,741 5,496 5,196 NOI 3,329 3,038 8,629 8,419 Non-Same Store NOI(2) (103) (81) 4,180 3,446 Segment NOI $3,226 $2,957 $12,809 $11,865 Retail Same Store(1) Rental revenues $14,576 $14,465 $56,693 $56,348 Property expenses 3,441 3,291 13,156 12,844 NOI 11,135 11,174 43,537 43,504 Non-Same Store NOI(2) 1,884 692 6,718 3,196 Segment NOI $13,019 $11,866 $50,255 $46,700 Multifamily Same Store(1) Rental revenues $5,487 $5,045 $11,834 $11,473 Property expenses 2,128 2,036 $4,989 4,869 NOI 3,359 3,009 $6,845 6,604 Non-Same Store NOI(2) 959 738 $8,444 7,618 Segment NOI $4,318 $3,747 $15,289 $14,222 Total Property Portfolio NOI $20,563 $18,570 $78,353 $72,787 (1) See page 32 for the Same Store vs. Non-Same Store properties (2) Includes expenses associated with the company’s in house asset management division.
Reconciliation to Property Portfolio NOI 33 $ in thousands Three months ended 12/31/2018 Diversified Portfolio Office Retail Multifamily Total NOI - Cash Basis ($0) $10,657 $2,533 $13,189 Net effect of straight-line rents - 84 113 197 Amortization of lease incentives and (above) below market rents - 171 (13) 158 NOI ($0) $10,912 $2,633 $13,544 Town Center of Virginia Beach Office Retail Multifamily Total NOI - Cash Basis $2,944 $2,094 $1,489 $6,527 Net effect of straight-line rents 583 (68) 50 565 Amortization of lease incentives and (above) below market rents (72) (57) - (129) Elimination of AHH rent (225) (99) - (324) NOI $3,230 $1,870 $1,539 $6,639 NOI Office Retail Multifamily Total Diversified Portfolio ($0) $10,912 $2,633 $13,544 Town Center of Virginia Beach 3,230 1,870 1,539 6,639 Unstabilized Properties (4) 237 146 380 Total Property Portfolio NOI $3,226 $13,019 $4,318 $20,563
Reconciliation to GAAP Net Income 34 $ in thousands Three months ended 12/31/2018 Total Rental General Contracting & Office Retail Multifamily Properties Real Estate Services Total Segment revenues$ 5,165 $ 17,708 $ 7,860 $ 30,733 $ 12,705 $ 43,438 Segment expenses 1,939 4,689 3,542 10,170 12,154 22,324 Net operating income$ 3,226 $ 13,019 $ 4,318 $ 20,563 $ 551 $ 21,114 Depreciation and amortization (11,260) General and administrative expenses (3,339) Acquisition, development and other pursuit costs (190) Impairment charges (1,518) Interest income 3,577 Interest expense (5,540) Equity in income of unconsolidated real estate entities 372 Gain on real estate dispositions 4,254 Change in fair value of interest rate derivatives (2,207) Other income (loss) benefit 155 Income tax benefit (provision) (523) Net income$ 4,895 Year ended 12/31/2018 Total Rental General Contracting & Office Retail Multifamily Properties Real Estate Services Total Segment revenues$ 20,701 $ 67,959 $ 28,298 $ 116,958 $ 76,359 $ 193,317 Segment expenses 7,892 17,704 13,009 38,605 73,628 112,233 Net operating income$ 12,809 $ 50,255 $ 15,289 $ 78,353 $ 2,731 $ 81,084 Depreciation and amortization (39,913) General and administrative expenses (11,431) Acquisition, development and other pursuit costs (352) Impairment charges (1,619) Interest income 10,729 Interest expense (19,087) Equity in income of unconsolidated real estate entities 372 Loss on extinguishment of debt (11) Gain on real estate dispositions 4,254 Change in fair value of interest rate derivatives (951) Other income 388 Income tax benefit (provision) 29 Net income$ 23,492
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TABLE OF CONTENTS 2 PAGE SECTION 03 Forward Looking Statements 04 2019 Outlook & Assumptions 05 Evolving Portfolio NOI Composition 06 NOI Contribution by Location 07 Projects Under Development 08 Mezzanine Investment Program 09 General Contracting and Real Estate Services 10 Normalized FFO Components 4525 Main St 11 Balance Sheet Targets 12 Debt Maturities One City Center 13 Core Operating Portfolio Occupancy Armada Hoffler Tower 14 2019 Mezzanine Investment Guidance 15 2019 Outlook & Assumptions
FORWARD LOOKING STATEMENTS 3 This presentation should be read in conjunction with the unaudited condensed consolidated financial statements appearing in our press release dated February 7, 2019, which has been furnished as Exhibit 99.1 to our Form 8-K filed on February 7, 2019. The Company makes statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). In particular, statements pertaining to our capital resources, portfolio performance and results of operations contain forward-looking statements. Likewise, all of our statements regarding our 2019 outlook and related assumptions, projections, anticipated growth in our funds from operations, normalized funds from operations, adjusted funds from operations, funds available for distribution and net operating income are forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise and the Company may not be able to realize them. The Company does not guarantee that the transactions and events described will happen as described (or that they will happen at all). For further discussion of risk factors and other events that could impact our future results, please refer to the section entitled “Risk Factors” in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC), and the documents subsequently filed by us from time to time with the SEC. The Company does not provide a reconciliation for its guidance range of Normalized FFO per diluted share to net income per diluted share, the most directly comparable forward-looking GAAP financial measure, because it is unable to provide a meaningful or accurate estimate of reconciling items and the information is not available without unreasonable effort as a result of the inherent difficulty of forecasting the timing and/or amounts of various items that would impact net income per diluted share. For the same reasons, the Company is unable to address the probable significance of the unavailable information and believes that providing a reconciliation for its guidance range of Normalized FFO per diluted share would imply a degree of precision for its forward-looking net income per diluted share that could be misleading to investors.
2019 OUTLOOK & ASSUMPTIONS 4 LOW HIGH Total NOI $93.7M $94.6M Construction Segment Gross Profit $4.9M $5.7M Mezzanine Interest Income (Net of Interest Expense)(1) $16.0M $16.5M G&A Expenses $10.8M $11.5M Interest Expense (Net of Mezzanine Interest Expense) $25.5M $26.5M Normalized FFO Per Diluted Share $1.11 $1.17 (1) Includes $4.5M of Annapolis Junction purchase option proceeds GUIDANCE ASSUMPTIONS • Sale of grocery-anchored shopping center with expected proceeds of approximately $25M in the fourth quarter of 2019. • Acquisition of 79% partnership interest of 1405 Point apartments in the second quarter of 2019. • Acquisition of the commercial component of One City Center from the joint venture in the first quarter of 2019. • Interest expense is calculated based on Forward LIBOR Curve, which forecasts rates ending the year at 2.57%. • Opportunistic sale of approximately $50 million through the ATM program, for a full year weighted average share count of 69.3 million.
EVOLVING PORTFOLIO GAAP NOI COMPOSITION 5 2019 GUIDANCE FULLY PORTFOLIO COMPOSITION 2018 MIDPOINT STABILIZED(1) RETAIL $40M $42M $46M ENTERTAINMENT & MIXED-USE RETAIL $10M $11M $13M MULTIFAMILY $15M $23M $32M OFFICE $13M $18M $29M TOTAL $78M $94M $120M Fully stabilized portfolio expected to bring over 50% of NOI growth 2018 2019 Guidance Projected Property Segment Midpoint NOI Fully Stabilized (1) 20% 15% 19% 20% 18% 24% 21% 18% 29%28% 32% 51% 45% 38% 11% 16% 24% 10% 54% 53% 43% 9%27% 39% 13% 12% 11% Retail Entertainment & Multifamily Office Mixed Use Retail (1) Fully Stabilized Portfolio assumes announced pipeline is delivered and stabilized per schedule (see page 7 for schedule)
NOI CONTRIBUTION BY LOCATION 6 Other VA(1) Town Center of 23% Virginia Beach Town Center of 29% Virginia Beach 42% Other VA(1) 50% MD 18% Other 2% NC 18% NC SC 8% 10% PROJECTED PORTFOLIO (2) 24 properties2013 61 propertiesFULLY STABILIZED (1) Excludes properties in Town Center of Virginia Beach (2) Fully Stabilized Portfolio assumes announced pipeline is delivered and stabilized per schedule (see page 7 for schedule)
PROJECTS UNDER DEVELOPMENT 7 DEVELOPMENT PRODUCT EXPECTED SIZE DELIVERY(2) INVESTMENT(2) PROJECTS(1) TYPE STABILIZATION(2) 1405 Point(3)(4) Multifamily 289 units 1Q18 4Q18 $99M Baltimore, MD One City Center(6) Office 153,000 sf 3Q18 2Q19 $46M Durham, NC Premier Apartments & Retail Mixed-Use 131 units/39,000 sf 3Q18 2Q19 & 1Q20 $45M Virginia Beach, VA Greenside(5)(7) Multifamily 225 units 3Q18 4Q19 $50M Charlotte, NC Market at Mill Creek(5)(7) Retail 73,000 sf 1Q19 2Q19 $23M Mt. Pleasant, SC Brooks Crossing(5)(7) Office 100,000 sf 2Q19 3Q19 $20M Newport News, VA Hoffler Place(5) Multifamily 74 units/12,000 sf 3Q19 3Q19 $48M Charleston, SC Summit Place(5) Multifamily 114 units 3Q19 3Q19 $53M Charleston, SC Wills Wharf Office 325,000 sf 1Q20 3Q20 $119M Baltimore, MD Nexton Square(8) Retail 135,000 sf 2Q19 2Q20 $42M Summerville, SC TOTAL INVESTMENT ~ $545M (1) For or ownership structure, see page 17 & 18 of the 4Q18 Supplemental package (2) Timing and investment amounts are estimates and subject to change as the development process demands. (3) Mezzanine Investments with two-phase 100% purchase option (4) Intend to purchase in 2Q19 under existing AHH option (5) Majority Interest in joint venture (6) Minority Interest in joint venture due to be acquired 1Q19 (7) AHH earns a preferred return on equity prior to any distributions to JV Partners (8) Mezzanine investment with purchase option
MEZZANINE INVESTMENT PROGRAM 8 PROJECTED PROJECTED PROJECTED TOTAL PROJECTED PRODUCT PRINCIPAL TOTAL PROJECTED PROJECT LOCATION TOTAL GROSS INTEREST CONSTRUCTION TYPE MEZZANINE AHH INCOME (3) (2)(3) INCOME(3)(4) FEES(3) COST FINANCING(3) Intend to Exercise Discounted Purchase Option 1405 Point Multifamily Baltimore, MD $99M $25M $6M $2M $8M Nexton Square Retail Summerville, SC $42M $20M $2.6M $0.4M $3M Short-Term Investment Annapolis Junction Multifamily Howard County, MD $106M $37M $18M(1) $2M $20M Solis Interlock Multifamily Atlanta, GA $94M $23M $10M $2M $12M Interlock Commercial Mixed-Use Atlanta, GA $140M $65M $24M $3M $27M North Decatur Square Retail Decatur, GA $39M $15M $5M N/A $5M (Whole Foods) Delray Plaza Retail Delray Beach, FL $25M $11M $3M N/A $3M (Whole Foods) Total Projected AHH Income $78M Total Projected Mezzanine Interest Expense $(18)M Total Projected Net Mezzanine Interest Income $60M (1) Includes $5M of Annapolis Junction purchase option proceeds (2) Excludes mezzanine interest expense (3) Timing, investment, and income amounts are estimates and subject to change as the development process demands (4) Reflects projected pay off date that may be subject to change (page 14)
GENERAL CONTRACTING AND REAL ESTATE SERVICES 9 2018 2019 Guidance Midpoint Third-Party Construction and Development $2.7M $5.3M Distribution Center Build to Suit Sale Profit-Sold Dec. 2018 $3.4M - Annapolis Junction Option Sale Profit $0.5M $4.5M Total $6.6M $9.8M Third-Party Construction Backlog As of 12/31/18 $166M Interlock Commercial
NORMALIZED FFO COMPONENTS 10 2018 2019 Guidance Midpoint Property FFO(1) $62.4M $68.5M Construction/Build to Suit Net Profit(2) $6.1M $5.3M Annapolis Junction Purchase Option Sale $0.5M $4.5M Mezzanine Interest Income (Net of Interest Expense) $7.0M $11.8M NFFO/Share $1.03 $1.14 CONTRIBUTION TO NFFO/SHARE BY COMPONENT 2018 2019 Guidance Midpoint 1% 13% 9% 13% 8% 5% 5% 6% 6% 82% 77%76% Property FFO Construction/Build to Suit Net Profit AJ Purchase Option Sale Net Mezz Interest (1) Property NOI, less associated interest expense (2) 2018 General contracting and real estate services gross profit, plus gain on sale of build to suit distribution center
BALANCE SHEET TARGETS 11 $ in millions 10.0x 8.0x 8.0x 7.4x 7.3x 7.1x 7.3x 6.9x 6.8x 7.0x 6.8x 6.3x 6.6x 6.6x 6.5x 6.0x 5.8x 6.1x 5.9x 6.0x 5.3x 4.0x 2.0x 0.0x 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 1 2Q18 1 3Q18 1 4Q18 2 Debt/Annualized EBITDA Core Debt/Annualized Core EBITDA 2019 Capital Sources Timing $ Sale of grocery-anchored shopping center 4Q ~$25M Expected Mezzanine Loan Payoffs 2Q & 4Q ~$60M At The Market Program Full Year ~$50M TARGET 8X DEBT/EBITDA AND 6X CORE DEBT/CORE EBITDA (1) Elevated leverage due to construction of build-to-suit distribution center (sold in Dec 2018)
DEBT MATURITIES 12 $ in millions $250 CONSTRUCTION $200 UNSECURED LINE OF CREDIT $150 UNSECURED TERM LOAN $100 SECURED $50 $0 2019¹ 2020 2021 2022 2023 2024 and thereafter Weighted Average Maturity ~6.5 Years (1) North Point I loan paid off January 2019 Solis Interlock
13 CORE OPERATING PORTFOLIO OCCUPANCY(1) One City Center 100% 95% 90% 85% 80% 75% 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 70% 2 0 1 9 65% 60% 55% 50% (1) 2013 through 2018 occupancy as of year end and 2019 projected 12/31
2019 MEZZANINE INVESTMENT GUIDANCE 14 TOTAL 2019 PROJECTED PROJECT INTEREST RATE PROJECTED PAYOFF MIDPOINT AHH INCOME Intend to Exercise Discounted Purchase Option 1405 Point 8% 2Q 2019 $0.6M Nexton Square 10-15% 2Q 2020 $1.4M Short-Term Investments Annapolis Junction 10% 4Q 2019 $3.0M Annapolis Junction Amortization of Purchase Option Proceeds $4.5M Solis Interlock 13% 4Q 2021 $2.7M Interlock Commercial 15% 4Q 2021 $6.6M North Decatur Square (Whole Foods) 15% 2Q 2019 $1.3M Delray Plaza (Whole Foods) 15% 2Q 2020 $1.6M Total Projected Gross Mezzanine Interest Income $21.7M Total Projected Mezzanine Interest Expense ($5.5M) Total Projected Net Mezzanine Interest Income $16.2M
2019 OUTLOOK & ASSUMPTIONS 15 LOW HIGH Total NOI $93.7M $94.6M Construction Segment Gross Profit $4.9M $5.7M Mezzanine Interest Income (Net of Interest Expense)(1) $16.0M $16.5M G&A Expenses $10.8M $11.5M Interest Expense (Net of Mezzanine Interest Expense) $25.5M $26.5M Normalized FFO Per Diluted Share $1.11 $1.17 (1) Includes $4.5M of Annapolis Junction purchase option proceeds GUIDANCE ASSUMPTIONS • Sale of grocery-anchored shopping center with expected proceeds of approximately $25M in the fourth quarter of 2019. • Acquisition of 79% partnership interest of 1405 Point apartments in the second quarter of 2019. • Acquisition of the commercial component of One City Center from the joint venture in the first quarter of 2019. • Interest expense is calculated based on Forward LIBOR Curve, which forecasts rates ending the year at 2.57%. • Opportunistic sale of approximately $50 million through the ATM program, for a full year weighted average share count of 69.3 million.