UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 31, 2019
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
, | |||||
, | |||||
(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:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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 October 31, 2019, Armada Hoffler Properties, Inc. (the “Company”) issued a press release announcing its financial position as of September 30, 2019, results of operations for the three months ended September 30, 2019, and other related information. Also on October 31, 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 months ended September 30, 2019. 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.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. | Description | |
104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ARMADA HOFFLER PROPERTIES, INC. | ||
Date: October 31, 2019 | By: | /s/ Michael P. O’Hara |
Michael P. O’Hara | ||
Chief Financial Officer, Treasurer and Secretary | ||
Exhibit 99.1
 | PRESS RELEASE | |
ARMADA HOFFLER PROPERTIES REPORTS THIRD QUARTER 2019 RESULTS
Net Income of $0.13 Per Diluted Share
Normalized FFO of $0.30 Per Diluted Share
Updated 2019 Full-Year Normalized FFO Guidance
VIRGINIA BEACH, VA, October 31, 2019 – Armada Hoffler Properties, Inc. (NYSE:AHH) today announced its results for the quarter ended September 30, 2019 and provided an update on current events.
Highlights include:
• | Net income attributable to common stockholders and OP Unit holders of $9.9 million, or $0.13 per diluted share, compared to $5.7 million, or $0.09 per diluted share, for the three months ended September 30, 2018. |
• | Funds from operations attributable to common stockholders and OP Unit holders ("FFO") of $21.7 million, or $0.29 per diluted share, compared to $15.9 million, or $0.24 per diluted share, for the three months ended September 30, 2018. See "Non-GAAP Financial Measures." |
• | Normalized funds from operations attributable to common stockholders and OP Unit holders ("Normalized FFO") of $22.4 million, or $0.30 per diluted share, compared to $15.7 million, or $0.24 per diluted share, for the three months ended September 30, 2018. |
• | Updated 2019 full-year Normalized FFO guidance to $1.16 to $1.18 per diluted share from $1.15 to $1.19 per diluted share. |
• | Core operating property portfolio occupancy at 96.5% as of September 30, 2019 compared to 95.6% as of June 30, 2019. |
• | Same Store Net Operating Income (“NOI”) increased for the 6th consecutive quarter with over 6% growth on both a GAAP and cash basis compared to the quarter ended September 30, 2018. Same Store NOI increased across all segments on both a GAAP and cash basis led by the office and multifamily segments where cash NOI was up 16.0% and 7.5%, respectively. |
• | Positive releasing spreads on office lease renewals during the third quarter of 4.1% on both a GAAP and cash basis. Positive releasing spreads on retail lease renewals during the third quarter of 6.3% on a GAAP basis and 3.9% on a cash basis. |
• | Announced that the Board of Directors appointed Dorothy S. McAuliffe as an independent director. |
• | Announced Southern Post, a new $95 million mixed-use development in historic downtown Roswell, Georgia. The Company will be the majority partner in a joint venture to develop the project and anticipates commencing construction in the spring of 2020. |
• | Completed the sale of Lightfoot Marketplace for gross proceeds of $30.3 million, representing a 5.8% cap rate on in-place net operating income. |
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• | Received payment in full of the $20.0 million balance outstanding under the North Decatur Square note receivable. |
• | Subsequent to quarter end, announced that Apex Entertainment agreed to a long-term lease for all 84,000 square feet currently occupied by Dick's Sporting Goods in the Town Center of Virginia Beach. |
• | Subsequent to quarter end, extended the maturity of our credit facility to 2024 for the senior unsecured revolving component and 2025 for the senior unsecured term loan component. |
• | Raised $34.6 million of gross proceeds through our at-the-market equity offering program at an average price of $17.72 per share during the quarter ended September 30, 2019. Raised $82.7 million of gross proceeds at an average price of $16.48 per share year-to-date through October 31, 2019. |
"We are pleased to report another quarter of strong financial results," said Louis Haddad, President & CEO. "Our portfolio continues to perform at a high level with increases in occupancy, Same Store NOI, and releasing spreads. High occupancy and steadily increasing income have long been hallmarks of our portfolio, as demonstrated by this, our sixth consecutive quarter of positive Same Store results. And given the strength and quality of our portfolio, we expect these trends to continue over the long term."
Financial Results
Net income attributable to common stockholders and OP Unit holders for the third quarter increased to $9.9 million compared to $5.7 million for the third quarter of 2018. The period-over-period change was primarily due to increased operating income from the property portfolio as a result of property acquisitions and the completion of development projects. Interest income also increased period over period. This was partially offset by increases in interest expense and changes in the fair value of interest rate derivatives.
Normalized FFO attributable to common stockholders and OP Unit holders for the third quarter increased to $22.4 million compared to $15.7 million for the third quarter of 2018. FFO attributable to common stockholders and OP Unit holders for the third quarter increased to $21.7 million compared to $15.9 million for the third quarter of 2018. The period-over-period changes in Normalized FFO and FFO were positively impacted by property acquisitions, completion of development projects, and higher interest income. These increases in Normalized FFO and FFO were partially offset by increased interest expense.
Operating Performance
At the end of the third quarter, the Company’s office, retail and multifamily core operating property portfolios were 96.6%, 96.8% and 95.8% occupied, respectively.
Total construction contract backlog was $173.1 million at the end of the third quarter.
Balance Sheet and Financing Activity
As of September 30, 2019, the Company had $951.9 million of total debt outstanding, including $110.0 million outstanding under its revolving credit facility. Total debt outstanding excludes unamortized GAAP fair value adjustments and deferred financing costs. Approximately 47.9% of the Company’s debt had fixed interest rates or was subject to interest rate swaps as of September 30, 2019. After considering LIBOR interest rate caps with strike prices at or below 275 basis points as of September 30, 2019, 84.7% of the Company’s debt was either fixed or hedged.
The Company has no debt maturing during the remainder of 2019.
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Outlook
The Company is updating its 2019 full-year Normalized FFO guidance range to $1.16 to $1.18 per diluted share from $1.15 to $1.19 per diluted share. The following table updates the Company's assumptions underpinning this forecast. 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 | $102.8M | $103.2M | ||||||
Construction Segment Gross Profit | $4.5M | $5.1M | ||||||
G&A Expenses | $12.3M | $12.6M | ||||||
Mezzanine Interest Income (Net of Interest Expense) [2] [3] | $16.3M | $17.6M | ||||||
Interest Expense (Net of Mezzanine Interest Expense) [3] | $25.1M | $25.6M | ||||||
Normalized FFO per diluted share [4] | $1.16 | $1.18 | ||||||
[1] Includes the following assumptions:
• | Interest expense is calculated based on Forward LIBOR Curve, which forecasts LIBOR ending the year at 1.74%. |
• | Assuming favorable market conditions, raising an additional $20 million though the ATM program during the fourth quarter for a full year total of $95 million. |
• | Full year weighted average share count of 72.6 million. |
[2] Includes $4.5 million of Annapolis Junction loan modification fee.
[3] Net of $5.5 million of interest expense associated with funding the Company's mezzanine program.
[4] Normalized FFO excludes certain items, including debt extinguishment losses, acquisition, development and other pursuit costs, mark-to-market adjustments for interest rate derivatives, amortization of right-of-use assets attributable to finance leases, severance related costs, and other non-comparable items. See "Non-GAAP Financial Measures." The Company does not provide a reconciliation for its guidance range of Normalized FFO per diluted share to net income per diluted share, the most directly comparable forward-looking GAAP financial measure, because it is unable to provide a meaningful or accurate estimate of reconciling items and the information is not available without unreasonable effort as a result of the inherent difficulty of forecasting the timing and/or amounts of various items that would impact net income per diluted share. For the same reasons, the Company is unable to address the probable significance of the unavailable information and believes that providing a reconciliation for its guidance range of Normalized FFO per diluted share would imply a degree of precision for its forward-looking net income per diluted share that could be misleading to investors.
Supplemental Financial Information
Further details regarding operating results, properties and leasing statistics can be found in the Company’s supplemental financial package available at www.ArmadaHoffler.com.
Webcast and Conference Call
The Company will host a webcast and conference call on Thursday, October 31, 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 Saturday, November 30, 2019 by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the pass code 13694435.
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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 construction and development business, including backlog and timing of deliveries, financing activities, as well as acquisitions, dispositions and the Company’s financial outlook 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, 2018 and the other documents filed by the Company with the Securities and Exchange Commission from time to time.
Non-GAAP Financial Measures
The Company calculates FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts ("Nareit"). Nareit defines FFO as net income (loss) (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains or losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.
FFO is a supplemental non-GAAP financial measure. The Company uses FFO as a supplemental performance measure because it believes that FFO is beneficial to investors as a starting point in measuring the Company’s operational performance. Specifically, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, which do not relate to or are not indicative of operating performance, FFO provides a performance measure that, when compared period-over-period, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare the Company’s operating performance with that of other REITs.
However, because FFO excludes depreciation and amortization and captures neither the changes in the value of the Company’s properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of the Company’s properties, all of which have real economic effects and could materially impact the Company’s results from operations, the utility of FFO as a measure of the Company’s performance is limited. In addition, other equity REITs may not calculate FFO in accordance with the Nareit definition as the Company does, and, accordingly, the Company’s FFO may not be comparable to such other REITs’ FFO. Accordingly, FFO should be considered only as a supplement to net income as a measure of the Company’s performance.
Management also believes that the computation of FFO in accordance with Nareit’s definition includes certain items that are not indicative of the results provided by the Company’s operating property portfolio and affect the comparability of the Company’s period-over-period performance. Accordingly, management believes that Normalized FFO is a more useful performance measure that excludes certain items, including but not limited to, acquisition, development and other pursuit costs, gains or losses from the early extinguishment of debt, impairment of intangible assets and liabilities, mark-to-market adjustments for interest rate derivatives, amortization of right-of-use assets attributable to finance leases, 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)
September 30, 2019 | December 31, 2018 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Real estate investments: | ||||||||
Income producing property | $ | 1,442,809 | $ | 1,037,917 | ||||
Held for development | 1,246 | 2,994 | ||||||
Construction in progress | 129,830 | 135,675 | ||||||
1,573,885 | 1,176,586 | |||||||
Accumulated depreciation | (214,146 | ) | (188,775 | ) | ||||
Net real estate investments | 1,359,739 | 987,811 | ||||||
Real estate investments held for sale | — | 929 | ||||||
Cash and cash equivalents | 44,195 | 21,254 | ||||||
Restricted cash | 3,411 | 2,797 | ||||||
Accounts receivable, net | 22,850 | 19,016 | ||||||
Notes receivable | 148,744 | 138,683 | ||||||
Construction receivables, including retentions | 19,605 | 16,154 | ||||||
Construction contract costs and estimated earnings in excess of billings | 624 | 1,358 | ||||||
Equity method investments | — | 22,203 | ||||||
Operating lease right-of-use assets | 33,179 | — | ||||||
Finance lease right-of-use assets | 24,277 | — | ||||||
Other assets | 104,435 | 55,177 | ||||||
Total Assets | $ | 1,761,059 | $ | 1,265,382 | ||||
LIABILITIES AND EQUITY | ||||||||
Indebtedness, net | $ | 943,371 | $ | 694,239 | ||||
Accounts payable and accrued liabilities | 18,339 | 15,217 | ||||||
Construction payables, including retentions | 36,516 | 50,796 | ||||||
Billings in excess of construction contract costs and estimated earnings | 3,333 | 3,037 | ||||||
Operating lease liabilities | 41,387 | — | ||||||
Finance lease liabilities | 17,891 | — | ||||||
Other liabilities | 63,637 | 46,203 | ||||||
Total Liabilities | 1,124,474 | 809,492 | ||||||
Total Equity | 636,585 | 455,890 | ||||||
Total Liabilities and Equity | $ | 1,761,059 | $ | 1,265,382 | ||||
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ARMADA HOFFLER PROPERTIES, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share amounts)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(Unaudited) | ||||||||||||||||
Revenues | ||||||||||||||||
Rental revenues | $ | 42,220 | $ | 28,930 | $ | 109,507 | $ | 86,227 | ||||||||
General contracting and real estate services revenues | 27,638 | 19,950 | 66,118 | 63,654 | ||||||||||||
Total revenues | 69,858 | 48,880 | 175,625 | 149,881 | ||||||||||||
Expenses | ||||||||||||||||
Rental expenses | 9,924 | 7,103 | 24,615 | 20,049 | ||||||||||||
Real estate taxes | 4,180 | 2,840 | 10,759 | 8,388 | ||||||||||||
General contracting and real estate services expenses | 26,446 | 18,973 | 62,855 | 61,474 | ||||||||||||
Depreciation and amortization | 15,452 | 10,196 | 38,834 | 28,653 | ||||||||||||
Amortization of right-of-use assets - finance leases | 107 | — | 168 | — | ||||||||||||
General and administrative expenses | 2,977 | 2,367 | 9,329 | 8,092 | ||||||||||||
Acquisition, development and other pursuit costs | 93 | 69 | 550 | 162 | ||||||||||||
Impairment charges | — | 3 | — | 101 | ||||||||||||
Total expenses | 59,179 | 41,551 | 147,110 | 126,919 | ||||||||||||
Gain on real estate dispositions | 4,699 | — | 4,699 | — | ||||||||||||
Operating income | 15,378 | 7,329 | 33,214 | 22,962 | ||||||||||||
Interest income | 5,710 | 2,545 | 16,622 | 7,152 | ||||||||||||
Interest expense on indebtedness | (8,828 | ) | (4,677 | ) | (22,205 | ) | (13,547 | ) | ||||||||
Interest expense on finance leases | (228 | ) | — | (340 | ) | — | ||||||||||
Equity in income of unconsolidated real estate entities | — | — | 273 | — | ||||||||||||
Loss on extinguishment of debt | — | (11 | ) | — | (11 | ) | ||||||||||
Change in fair value of interest rate derivatives | (530 | ) | 298 | (3,926 | ) | 1,256 | ||||||||||
Other income | 362 | 65 | 426 | 233 | ||||||||||||
Income before taxes | 11,864 | 5,549 | 24,064 | 18,045 | ||||||||||||
Income tax benefit | 199 | 120 | 339 | 552 | ||||||||||||
Net income | 12,063 | 5,669 | 24,403 | 18,597 | ||||||||||||
Net income attributable to noncontrolling interests in investment entities | (960 | ) | — | (640 | ) | — | ||||||||||
Preferred stock dividends | (1,234 | ) | — | (1,388 | ) | — | ||||||||||
Net income attributable to common stockholders and OP Unit holders | $ | 9,869 | $ | 5,669 | $ | 22,375 | $ | 18,597 | ||||||||
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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 September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(Unaudited) | ||||||||||||||||
Net income attributable to common stockholders and OP Unit holders | $ | 9,869 | $ | 5,669 | $ | 22,375 | $ | 18,597 | ||||||||
Depreciation and amortization(1) | 15,044 | 10,196 | 38,291 | 28,653 | ||||||||||||
Gain on operating real estate dispositions(2) | (3,220 | ) | — | (3,220 | ) | — | ||||||||||
FFO attributable to common stockholders and OP Unit holders | $ | 21,693 | $ | 15,865 | $ | 57,446 | $ | 47,250 | ||||||||
Acquisition, development and other pursuit costs | 93 | 69 | 550 | 162 | ||||||||||||
Impairment of intangible assets and liabilities | — | 3 | — | 101 | ||||||||||||
Loss on extinguishment of debt | — | 11 | — | 11 | ||||||||||||
Amortization of right-of-use assets - finance leases | 107 | — | 168 | — | ||||||||||||
Change in fair value of interest rate derivatives | 530 | (298 | ) | 3,926 | (1,256 | ) | ||||||||||
Normalized FFO available to common stockholders and OP Unit holders | $ | 22,423 | $ | 15,650 | $ | 62,090 | $ | 46,268 | ||||||||
Net income attributable to common stockholders and OP Unit holders per diluted share and unit | $ | 0.13 | $ | 0.09 | $ | 0.31 | $ | 0.29 | ||||||||
FFO per diluted share and unit attributable to common stockholders and OP Unit holders | $ | 0.29 | $ | 0.24 | $ | 0.81 | $ | 0.74 | ||||||||
Normalized FFO per diluted share and unit attributable to common stockholders and OP Unit holders | $ | 0.30 | $ | 0.24 | $ | 0.87 | $ | 0.72 | ||||||||
Weighted average common shares and units - diluted | 74,543 | 66,362 | 71,256 | 64,052 | ||||||||||||
________________________________________
(1) The adjustment for depreciation and amortization for the nine months ended September 30, 2019 includes $0.2 million of depreciation attributable to the Company's investment in One City Center from January 1, 2019 to March 14, 2019, which was an unconsolidated real estate investment during this period. Additionally, the adjustment for depreciation and amortization for the three and nine months ended September 30, 2019 excludes $0.4 million and $0.8 million, respectively, of depreciation attributable to the Company's joint venture partners. |
(2) The adjustment for gain on operating real estate dispositions for the three and nine months ended September 30, 2019 excludes the portion of the gain on Lightfoot Marketplace that was allocated to our joint venture partner and excludes the gain on sale of a non-operating land 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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2Q19 Supplemental Financial Package Thames Street Wharf
Table of Contents 2 Forward Looking Statements 03 Corporate Profile 04 Highlights 05 2019 Outlook & Assumptions 06 Summary Information 07 Net Asset Value Component Data 08 Summary Balance Sheet 09 Summary Income Statement 10 FFO, Normalized FFO & Adjusted FFO 11 Outstanding Debt 12 Debt Information 13 Core Debt to Core EBITDA 14 Capitalization & Financial Ratios 15 Property Portfolio 16 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 28 Same Store vs Non-Same Store Properties 32 Reconciliation to Property Portfolio NOI 33 Reconciliation to GAAP Net Income 35
3 FORWARD- LOOKING STATEMENTS Armada Hoffler This Supplemental Financial Package should be read in conjunction with the unaudited condensed consolidated financial statements appearing in our press release dated October 31, 2019, which has been furnished as Exhibit 99.1 to our Form 8-K filed on October 31, 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 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. BOARD OF DIRECTORS Daniel A. Hoffler, Executive Chairman of the Board Eva S. Hardy, Independent Director Louis S. Haddad, Vice Chairman of the Board A. Russell Kirk, Director James C. Cherry, Lead Independent Director Dorothy S. McAuliffe, Independent Director George F. Allen, Independent Director John W. Snow, Independent Director James A. Carroll, Independent Director Corporate Officers Investor Relations Louis S. Haddad, President and Chief Executive Officer Michael P. O’Hara, Chief Financial Officer Michael P. O’Hara, Chief Financial Officer 757-366-6684 Eric E. Apperson, President of Construction mohara@armadahoffler.com Shelly R. Hampton, President of Asset Management 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. Barry Oxford Craig Kucera David Rodgers (212) 240-9871 (540) 277-3366 (216) 737-7341 boxford@dadco.com craigkucera@brileyfbr.com drodgers@rwbaird.com
Highlights 5 • Net income attributable to common stockholders and OP Unit holders of $9.9 million, or $0.13 per diluted share, compared to $5.7 million, or $0.09 per diluted share, for the three months ended September 30, 2018. • Funds from operations attributable to common stockholders and OP Unit holders ("FFO") of $21.7 million, or $0.29 per diluted share, compared to $15.9 million, or $0.24 per diluted share, for the three months ended September 30, 2018. See "Non-GAAP Financial Measures." • Normalized funds from operations attributable to common stockholders and OP Unit holders ("Normalized FFO") of $22.4 million, or $0.30 per diluted share, compared to $15.7 million, or $0.24 per diluted share, for the three months ended September 30, 2018. • Updated 2019 full-year Normalized FFO guidance to $1.16 to $1.18 per diluted share from $1.15 to $1.19 per diluted share. • Core operating property portfolio occupancy at 96.5% as of September 30, 2019 compared to 95.6% as of June 30, 2019. • Same Store Net Operating Income (“NOI”) increased for the 6th consecutive quarter with over 6% growth on both a GAAP and cash basis compared to the quarter ended September 30, 2018. Same Store NOI increased across all segments on both a GAAP and cash basis led by the office and multifamily segments where cash NOI was up 16.0% and 7.5%, respectively. • Positive releasing spreads on office lease renewals during the third quarter of 4.1% on both a GAAP and cash basis. Positive releasing spreads on retail lease renewals during the third quarter of 6.3% on a GAAP basis and 3.9% on a cash basis. • Announced that the Board of Directors appointed Dorothy S. McAuliffe as an independent director. • Announced Southern Post, a new $95 million mixed-use development in historic downtown Roswell, Georgia. The Company will be the majority partner in a joint venture to develop the project and anticipates commencing construction in the spring of 2020. • Completed the sale of Lightfoot Marketplace for gross proceeds of $30.3 million, representing a 5.8% cap rate on in-place net operating income. • Received payment in full of the $20.0 million balance outstanding under the North Decatur Square note receivable. • Subsequent to quarter end, announced that Apex Entertainment agreed to a long-term lease for all 84,000 square feet currently occupied by Dick's Sporting Goods in the Town Center of Virginia Beach. • Subsequent to quarter end, extended the maturity of our credit facility to 2024 for the senior unsecured revolving component and 2025 for the senior unsecured term loan component. • Raised $34.6 million of gross proceeds through our at-the-market equity offering program at an average price of $17.72 per share during the quarter ended September 30, 2019. Raised $82.7 million of gross proceeds at an average price of $16.48 per share year-to-date through October 31, 2019.
2019 Outlook & Assumptions 6 Outlook Low High Total NOI $102.8M $103.2M Construction Segment Gross Profit $4.5M $5.1M G&A expenses $12.3M $12.6M Mezzanine Interest Income (Net of Interest Expense)(1)(2) $16.3M $17.6M Interest Expense (Net of Mezzanine Interest Expense)(2) $25.1M $25.6M Normalized FFO per diluted share $1.16 $1.18 (1) Includes $4.5M of Annapolis Junction Loan Modification Fee. (2) Net of $5.5M of interest expense associated with funding the Company’s mezzanine program. GUIDANCE ASSUMPTIONS • Interest expense is calculated based on Forward LIBOR Curve, which forecasts LIBOR ending the year at 1.74%. • Assuming favorable market conditions, raising an additional $20M through the ATM program during the fourth quarter for a full year total of $95M. • Full-year weighted average share count of 72.6M.
Summary Information 7 $ in thousands, except per share data Three months ended 9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018 OPERATIONAL METRICS Net income attributable to AHH and OP Unitholders $9,869 $5,992 $6,514 $4,895 $5,669 Net income attributable to AHH and OP Unitholders per diluted share $0.13 $0.08 $0.10 $0.07 $0.09 Rental properties Net Operating Income (NOI) 28,116 24,900 21,056 20,563 18,987 General contracting and real estate services gross profit 1,192 1,321 750 551 977 Adjusted EBITDA(1) 31,099 28,861 24,727 25,566 (2) 20,387 Funds From Operations (FFO) attributable to common stockholders and OP unit holders 21,693 19,110 16,643 17,089 15,865 FFO per diluted share attributable to common stockholders and OP unit holders $0.29 $0.27 $0.25 $0.26 $0.24 Normalized FFO attributable to common stockholders and OP unit holders 22,423 21,161 18,506 20,190 15,650 Normalized FFO per diluted share attributable to common stockholders and OP unit holders $0.30 $0.30 $0.27 $0.30 $0.24 Annualized dividend yield 4.64% 5.08% 5.39% 5.69% 5.29% CAPITALIZATION Common shares outstanding 54,875 52,794 52,327 50,014 49,576 Operating Partnership units outstanding 21,167 21,178 16,992 17,110 17,167 Common shares and OP units outstanding 76,042 73,972 69,319 67,124 66,743 Market price per common share $18.09 $16.55 $15.59 $14.06 $15.11 Common equity capitalization(3) $1,375,600 $1,224,237 $1,080,683 $943,763 $1,008,487 Preferred equity capitalization 63,250 63,250 - - - Total equity capitalization $1,438,850 $1,287,487 $1,080,683 $943,763 $1,008,487 Total debt(4) 951,891 956,068 744,123 700,722 660,608 Total capitalization 2,390,741 2,243,555 1,824,806 1,644,485 1,669,095 Less: cash (47,606) (25,961) (18,959) (24,051) (20,648) Total enterprise value $2,343,135 $2,217,594 $1,805,847 $1,620,434 $1,648,447 BALANCE SHEET METRICS Core debt / enterprise value 35.2% 29.0% 32.5% 36.7% 34.9% Core debt + preferred equity / enterprise value 37.9% 31.8% 32.5% 36.7% 34.9% Fixed charge coverage ratio 2.7x 2.8x 3.3x 3.7x 3.5x Core debt / Annualized core EBITDA 6.8x 6.2x 6.3x 6.6x 7.1x Core debt + preferred equity / Annualized core EBITDA 7.3x 6.9x 6.3x 6.6x 7.1x CORE PORTFOLIO OCCUPANCY Office(5) 96.6% 94.6% 94.9% 93.3% 93.8% Retail (5) 96.8% 96.6% 96.1% 96.2% 96.6% Multifamily(6) 95.8% 94.7% (7) 97.2% 97.3% 97.1% Weighted Average(8) 96.5% 95.6% 96.0% 95.8% 96.1% (1) See definition 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. (3) Includes common shares and OP units. (4) Excludes 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 8 In thousands Stabilized Portfolio NOI (Cash)(1) Third-Party General Contracting and Real Estate Services Three months ended Annualized Trailing 12 Months 9/30/2019 9/30/2019 General Contracting Gross Profit(4) $7,230 Stabilized Virginia Beach (VB) Town Center(1) Office(2) $3,324 $13,296 Non-Property Assets(5) Retail (2) 2,020 8,080 As of 9/30/2019 Multifamily 1,862 7,448 Cash and Cash Equivalents $44,195 Total Stabilized VB Town Center NOI $7,206 $28,824 Restricted cash 3,411 Accounts Receivable 22,850 (1) Stabilized Portfolio (Excludes VB Town Center) Notes Receivable, Including Mezzanine Investments(6) 143,042 Office(2) $2,783 $11,132 Construction receivables, including retentions 19,605 Retail 12,897 51,588 Other Assets 105,059 Multifamily 3,921 15,684 Land Held for Development (Book Value) 1,246 Total Stabilized Portfolio (Excludes VB Town Center) $19,601 $78,404 Total Non-Property Assets $339,408 Combined Stabilized Portfolio NOI $26,807 $107,228 Liabilities(5) As of 9/30/2019 Run Rate Adjustments(1) Mortgages and Notes Payable(6) $951,891 Signed Leases Not Yet Occupied or In Free Rent Period $843 $3,372 Accounts Payable and Accrued Liabilities 18,339 Net Dispositions Completed Intra-Quarter (217) (868) Construction Payables, Including Retentions 36,516 Total Run Rate Adjustments $626 $2,504 Other Liabilities 66,970 Total Liabilities $1,073,716 Total $27,433 $109,732 Preferred Equity Non-Stabilized Portfolio and Development Pipeline (Cost Basis)(3) Liquidation Value See page 18 for a list of properties Series A Cumulative Redeemable Perpetual Preferred Stock $63,250 As of 9/30/2019 Income Producing Properties $61,000 Construction In Process 120,000 Common Equity Other Assets 5,000 As of 9/30/2019 Total Non-Stabilized Development Portfolio 186,000 Total common shares outstanding 54,875 Total OP units outstanding 21,167 Redevelopment in Process 12,000 Total Common Shares & OP Units Outstanding 76,042 Total Non-Stabilized Redevelopment and Development Portfolio $198,000 (1) NOI from non-stabilized portfolio and development pipeline excluded from stabilized portfolio. (2) Includes leases for space occupied by Armada Hoffler which are eliminated for GAAP purposes. (3) NOI not included in Stabilized Portfolio. (4) Includes $3.4 million from the sale of a distribution center. (5) Excludes lease right of use assets and lease liabilities. (6) Excludes GAAP adjustments.
Summary Balance Sheet 9 $ in thousands As of 9/30/2019 12/31/2018 Assets (Unaudited) Real estate investments: Income producing property $1,442,809 $1,037,917 Held for development 1,246 2,994 Construction in progress 129,830 135,675 Accumulated depreciation (214,146) (188,775) Net real estate investments 1,359,739 987,811 Real estate investments held for sale - 929 Cash and cash equivalents 44,195 21,254 Restricted cash 3,411 2,797 Accounts receivable, net 22,850 19,016 Notes receivable 148,744 138,683 Construction receivables, including retentions 19,605 16,154 Construction contract costs and estimated earnings in excess of billings 624 1,358 Equity method investments - 22,203 Operating lease right-of-use assets 33,179 - Finance lease right-of-use assets 24,277 - Other assets 104,435 55,177 Total Assets $1,761,059 $1,265,382 Liabilities and Equity Indebtedness, net $943,371 $694,239 Accounts payable and accrued liabilities 18,339 15,217 Construction payables, including retentions 36,516 50,796 Billings in excess of costs and estimated earnings 3,333 3,037 Operating lease liabilities 41,387 - Finance lease liabilities 17,891 - Other liabilities 63,637 46,203 Total Liabilities 1,124,474 809,492 Total Equity 636,585 455,890 Total Liabilities and Equity $1,761,059 $1,265,382
Summary Income Statement 10 In thousands, except per share data Three months ended Nine months ended 9/30/2019 9/30/2018 9/30/2019 9/30/2018 Revenues (Unaudited) Rental revenues $42,220 $28,930 $109,507 $86,227 General contracting and real estate services revenues 27,638 19,950 66,118 63,654 Total Revenues 69,858 48,880 175,625 149,881 Expenses Rental expenses 9,924 7,103 24,615 20,049 Real estate taxes 4,180 2,840 10,759 8,388 General contracting and real estate services expenses 26,446 18,973 62,855 61,474 Depreciation and amortization 15,452 10,196 38,834 28,653 Amortization of right-of-use assets - finance leases 107 - 168 - General and administrative expenses 2,977 2,367 9,329 8,092 Acquisition, development and other pursuit costs 93 69 550 162 Impairment charges - 3 - 101 Total Expenses 59,179 41,551 147,110 126,919 Gain on real estate dispositions 4,699 - 4,699 - Operating Income 15,378 7,329 33,214 22,962 Interest income 5,710 2,545 16,622 7,152 Interest expense on indebtedness (8,828) (4,677) (22,205) (13,547) Interest expense on finance leases (228) - (340) - Loss on extinguishment of debt - (11) - (11) Change in fair value of interest rate derivatives (530) 298 (3,926) 1,256 Equity in income of unconsolidated real estate entities - - 273 - Other income 362 65 426 233 Income before taxes 11,864 5,549 24,064 18,045 Income tax benefit 199 120 339 552 Net Income $12,063 $5,669 $24,403 $18,597 Net income attributable to noncontrolling interest in investment entities (960) - (640) - Preferred stock dividends (1,234) - (1,388) - Net income attributable to AHH and OP Unitholders $9,869 $5,669 $22,375 $18,597 Net income attributable to AHH and OP Unit Holders per diluted share and unit $0.13 $0.09 $0.31 $0.29 Weighted Average Shares & Units - Diluted 74,543 66,362 71,256 64,052
FFO, Normalized FFO & AFFO(1) 11 $ in thousands, except per share data Three months ended (Unaudited) 9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018 Funds From Operations Net income attributable to AHH and OP Unitholders $9,869 $5,992 $6,514 $4,895 $5,669 Earnings per diluted share $0.13 $0.08 $0.10 $0.07 $0.09 Depreciation and amortization(2) 15,044 13,118 10,129 11,525 10,196 Gains on dispositions of operating real estate (3,220) (3) - - (833) - Impairment of real estate assets (4) - - - 1,502 - FFO 21,693 $19,110 $16,643 $17,089 $15,865 FFO per diluted share $0.29 $0.27 $0.25 $0.26 $0.24 Normalized FFO Acquisition, development & other pursuit costs 93 57 400 190 69 Loss on extinguishment of debt - - - - 11 Impairment of intangible assets and liabilities - - - 16 3 Severance related costs - - - 688 - Amortization of right-of-use assets - finance leases 107 61 - - - Change in fair value of interest rate derivatives 530 1,933 1,463 2,207 (298) Normalized FFO $22,423 $21,161 $18,506 $20,190 $15,650 Normalized FFO per diluted share $0.30 $0.30 $0.27 $0.30 $0.24 Adjusted FFO Non-cash stock compensation 323 327 689 55 252 Acquisition, development & other pursuit costs (93) (57) (400) (190) (69) Tenant improvements, leasing commissions, lease incentives (5) (2,057) (841) (809) (2,447) (899) Property related capital expenditures (1,565) (1,983) (1,494) (2,961) (884) Adjustment for Annapolis Junction loan modification fee (1,371) (1,238) (1,118) 4,489 - Non-cash interest expense(6) 425 509 304 289 270 Cash ground rent payment - finance lease (207) (112) - - - GAAP Adjustments (1,648) (1,398) (850) (944) (752) AFFO $16,230 $16,368 $14,828 $18,481 $13,568 AFFO per diluted share $0.22 $0.23 $0.22 $0.28 $0.20 Weighted Average Common Shares Outstanding 53,463 52,451 50,926 49,726 49,194 Weighted Average Operating Partnership ("OP") Units Outstanding 21,080 18,781 16,993 17,110 17,168 Total Weighted Average Common Shares and OP Units Outstanding 74,543 71,232 67,919 66,836 66,362 (1) See definitions on pages 29-30. (2) Adjusted for the depreciation attributable to noncontrolling interests in consolidated investments and unconsolidated entities. (3) The adjustment for gain on operating real estate dispositions for the 3 months ended 9/30/2019 excludes the portion of the gain on Lightfoot Marketplace that was allocated to our joint venture partner and excludes the gain on sale of a non-operating land parcel. (4) Impairment of Waynesboro Commons, which was disposed on 4/1/19. (5) Excludes development, redevelopment, and first generation space. (6) Includes non-cash interest expense relating to indebtedness and interest expense on finance leases.
Outstanding Debt 12 $ in thousands Debt Maturities & Principal Payments Effective Rate as Outstanding as of Debt Stated Rate of 9/30/2019 Maturity Date 2019 2020 2021 2022 2023 Thereafter 9/30/2019 Secured Notes Payable - Core Debt Greenside Apartments L+2.95% 4.97% Feb-2020 - $28,875 $28,875 1405 Point L+2.75% 4.77% May-2020 - 64,902 64,902 Southgate Square L+1.60% 3.62% Apr-2021 220 880 19,682 20,782 Encore Apartments 3.25% 3.25% Sep-2021 123 504 24,339 24,966 4525 Main Street 3.25% 3.25% Sep-2021 158 647 31,229 32,034 Red Mill West 4.23% 4.23% Jun-2022 108 445 465 10,387 11,405 Thames Street Wharf L+1.30% 3.32% Jun-2022 - - - 70,000 70,000 Hanbury Village 3.78% 3.78% Aug-2022 128 521 544 17,450 18,643 Marketplace at Hilltop 4.42% 4.42% Oct-2022 96 397 414 9,706 10,613 Socastee Commons 4.57% 4.57% Jan-2023 27 109 115 120 4,223 4,594 Sandbridge Commons L+1.75% 3.77% Jan-2023 60 247 257 268 7,248 8,080 249 Central Park Retail L+1.60% 3.85% (1) Aug-2023 56 230 245 260 16,093 16,884 Fountain Plaza Retail L+1.60% 3.85% (1) Aug-2023 34 139 147 156 9,684 10,160 South Retail L+1.60% 3.85% (1) Aug-2023 25 101 107 114 7,065 7,412 One City Center L+1.85% 3.87% Apr-2024 127 574 628 659 691 22,734 25,413 Red Mill Central 4.80% 4.80% Jun-2024 44 175 175 175 175 1,837 2,581 Premier Apartments (2) L+1.55% 3.57% Oct-2024 - 36 220 233 247 14,145 14,881 Red Mill South 3.57% 3.57% May-2025 74 304 315 327 338 4,853 6,211 Brooks Crossing Office L+1.60% 3.62% Jul-2025 - 237 587 609 631 12,335 14,399 Market at Mill Creek L+1.55% 3.57% Jul-2025 86 351 365 379 392 13,816 15,389 Johns Hopkins Village L+1.25% 4.19% (1) Aug-2025 232 941 988 1,031 1,075 47,765 52,032 North Point Center Note 2 7.25% 7.25% Sep-2025 31 130 140 151 162 1,642 2,256 Lexington Square 4.50% 4.50% Sep-2028 62 256 268 280 293 13,599 14,758 Red Mill North 4.73% 4.73% Dec-2028 24 100 105 110 116 3,954 4,409 Smith's Landing 4.05% 4.05% Jun-2035 206 843 880 917 956 14,579 18,381 Liberty Apartments 5.66% 5.66% Nov-2043 69 288 304 322 341 12,910 14,234 The Cosmopolitan 3.35% 3.35% Jul-2051 194 792 819 847 876 40,368 43,896 Total - Secured Core Debt $2,184 $103,024 $83,338 $114,501 $50,606 $204,537 $558,190 Secured Notes Payable - Development Pipeline Hoffler Place L+3.24% 5.26% Jan-2021 - - $26,597 $26,597 Summit Place L+3.24% 5.26% Jan-2021 - - 26,950 26,950 Wills Wharf L+2.25% 4.27% Jun-2023 - - - - 17,714 17,714 Premier Retail (2) L+1.55% 3.57% Oct-2024 - 18 110 117 124 7,071 7,440 Total - Development Pipeline - 18 53,657 117 17,838 7,071 78,701 Total Secured Notes Payable $2,184 $103,042 $136,995 $114,618 $68,444 $211,608 $636,891 Unsecured Core Debt Senior Unsecured Line of Credit(2) L+1.30%-1.85% 3.62% Jan-2024 - - - - - $110,000 $110,000 Senior Unsecured Term Loan(2) L+1.25%-1.80% 3.57% Jan-2025 - - - - - 44,500 44,500 Senior Unsecured Term Loan(2) L+1.25%-1.80% 3.55% - 4.57% (1) Jan-2025 - - - - - 160,500 160,500 Total - Unsecured Core Debt - - - - - 315,000 315,000 Total Notes Payable excluding GAAP Adjustments $2,184 $103,042 $136,995 $114,618 $68,444 $526,608 $951,891 GAAP Adjustments (8,520) Total Notes Payable $943,371 (1) Includes debt subject to interest rate swap locks. (2) Reflects refinancing closed subsequent to quarter end.
Debt Information 13 $ in thousands Debt Maturities $500,000 5.0% 4.7% $450,000 4.5% 4.1% $400,000 4.0% 4.0% 4.0% 3.6% $350,000 3.5% $300,000 3.0% $250,000 2.5% $200,000 2.0% $150,000 1.5% $100,000 1.0% $50,000 0.5% $0 0.0% 2019 2020 2021 2022 2023 Thereafter⁽¹⁾ Fixed-Rate Debt Variable-Rate Debt Weighted Average Interest Rate⁽²⁾ Total Debt Composition(1)(3) Interest Rate Cap Agreements Weighted Average Notional % of Debt Interest Rate Maturity Effective Date Maturity Date Strike Rate Amount Secured vs. Unsecured Debt September 2017 October 2019 1.50% $50,000 Unsecured Debt 33.1% 4.1% 4.9 Yrs November 2017 December 2019 1.50% 50,000 Secured Debt 66.9% 4.1% 5.9 Yrs March 2018 April 2020 2.25% 50,000 Variable vs. Fixed-rate Debt July 2018 August 2020 2.50% 50,000 Variable-rate Debt(4) 52.1% 4.0% 3.1 Yrs December 2018 January 2021 2.75% 50,000 Fixed-rate Debt(2) 47.9% 4.2% 8.3 Yrs May 2019 June 2022 2.50% 100,000 Fixed-rate and Hedged Debt(2) 84.7% Total Interest Rate Caps $350,000 Total 4.1% 5.6 Yrs Fixed-rate Debt(2)(3) 455,969 Fixed-rate and Hedged Debt $805,969 (1) Includes refinancing of the credit facility and Premier, which occurred (3) subsequent to quarter end. % of Total Debt 84.7% (2) Includes debt subject to interest rate swap locks. (3) Excludes GAAP adjustments. (4) Excludes debt subject to interest rate swap locks.
Core Debt to Core EBITDA(1) 14 $ in thousands Three months ended 9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018 Net income available to be allocated to AHH and OP Unitholders $9,869 $5,992 $6,514 $4,895 $5,669 Excluding: Change in fair value of interest rate derivatives 530 1,933 1,463 2,207 (298) Depreciation and amortization(2) 15,044 13,118 10,129 11,525 10,196 Amortization of right-of-use assets - finance leases 107 61 - - - (Gain) Loss on operating real estate dispositions (3,220) (3) - - (833) - Impairment of real estate assets - - - 1,502 - Income tax provision (benefit) (199) (30) (110) 523 (120) Interest expense(2) 8,624 7,460 6,042 5,692 4,677 Interest expense - finance leases 228 112 - - - Cash ground rent payment - finance leases (207) (112) - - - Loss on extinguishment of debt - - - - 11 Non-cash stock compensation 323 327 689 55 252 Adjusted EBITDA $31,099 $28,861 $24,727 $25,566 (4) $20,387 Other adjustments: Development pipeline(2) (546) (1,182) (1,362) (1,129) (94) (Less) Net Acquisitions/Dispositions Completed Intra-Quarter (226) (1,978) - - - Core EBITDA $30,327 $25,702 $23,365 $24,437 $20,293 Total Debt(5) $951,891 $956,068 $744,123 $719,179 $660,608 Adjustments to debt: (Less) Development pipeline (78,701) (117,440) (138,501) (100,268) (64,365) (Less) Net Acquisitions/Dispositions Completed Intra-Quarter - (170,476) - - - (Less) Cash & restricted cash (47,606) (25,961) (18,959) (24,051) (20,648) Core Debt $825,584 $642,191 $586,663 $594,860 $575,595 Core Debt/Annualized Core EBITDA 6.8x 6.2x 6.3x 6.6x 7.1x (1) See definitions on pages 30. (2) Adjusted for the depreciation and interest expense attributable to noncontrolling interests in consolidated investments and unconsolidated entities. (3) The adjustment for gain on operating real estate dispositions excludes the portion of the gain on Lightfoot Marketplace that was allocated to our joint venture partner and excludes the gain on sale of a non-operating land parcel. (4) 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. (5) Excludes GAAP Adjustments.
Capitalization & Financial Ratios 15 $ in thousands As of September 30, 2019 Debt % of Total Principal Balance Unsecured credit facility 12% $110,000 Unsecured term loans 22% 205,000 Mortgages payable 66% 636,891 Total debt $951,891 5% 16% 8% Debt Liquidation Value 40% Preferred Equity Shares Per Share Total Liquidation Value 6.75% Series A Cumulative Redeemable 2,530 $25.00 $63,250 Perpetual Preferred Stock (NYSE: AHHPrA) 27% Common Equity % of Total Shares/Units Stock Price Market Value Equity 41% Common stock (NYSE: AHH) 72% 54,875 $18.09 $992,689 60% Common units 28% 21,167 $18.09 382,911 3% Equity market capitalization 76,042 $1,375,600 Total capitalization $2,390,741 Financial Ratios Debt Service Coverage Ratio(1) 2.9x (2) Fixed Charge Coverage Ratio 2.7x Unsecured Credit Facility Unsecured Term Loans Mortgages Payable Net Debt to Adjusted EBITDA 7.7x Core Debt to Core EBITDA 6.8x Preferred Equity Common Units Core Debt + Preferred Equity to Core EBITDA 7.3x Debt/Market capitalization 40% Liquidity Unencumbered Properties Cash on hand $47,606 % of Total Properties 59% Availability under credit facility 39,694 % of Annualized Base Rent 40% Availability under construction loan 76,815 $164,115 (1) Reflects quarterly Adjusted EBITDA divided by total quarterly interest expense and required principal repayment. (2) Reflects quarterly Adjusted EBITDA divided by total quarterly interest expense. required principal repayment and preferred equity dividends.
Property Portfolio 16 As of September 30, 2019 Net Rentable Square Feet (RSF)(1) Development/ Development/ Town Unencumbered Core Redevelopment Core Redevelopment 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 82.9% - $2,325,959 $30.27 Gordon Biersch Alexander Pointe Harris Teeter Salisbury, NC 100% 1997 57,710 - 57,710 95.1% - 637,508 11.61 Bermuda Crossroads(6) Food Lion, OfficeMax Chester, VA 100% 2001 122,566 - 122,566 98.4% - 1,749,622 14.51 Broad Creek Shopping Center(6)(9) Food Lion, PetSmart Norfolk, VA 100% 1997/2001 121,504 - 121,504 95.5% - 2,060,879 17.76 Broadmoor Plaza Kroger South Bend, IN 100% 1980 115,059 - 115,059 97.5% - 1,382,468 12.32 Brooks Crossing Retail Various Small Shops Newport News, VA 100% 2016 - 18,349 18,349 - 66.3% 169,380 13.92 Columbus Village(6) Barnes & Noble, Shake Shack Virginia Beach, VA 100% 1980/2013 - 62,362 62,362 - 84.3% 1,556,163 29.59 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% - 869,292 45.34 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% - 1,261,503 12.21 Dimmock Square Best Buy, Old Navy Colonial Heights, VA 100% 1998 106,166 - 106,166 97.2% - 1,777,355 17.23 Fountain Plaza Retail Ruth's Chris, Ann Taylor Virginia Beach, VA - 2004 35,961 - 35,961 100.0% - 1,032,770 28.72 Gainsborough Square Food Lion Chesapeake, VA 100% 1999 88,862 - 88,862 95.6% - 1,311,772 15.44 Greentree Shopping Center Various Small Shops Chesapeake, VA 100% 2014 15,719 - 15,719 92.6% - 293,359 20.15 Hanbury Village(6) Harris Teeter, Walgreens Chesapeake, VA 32% 2006/2009 116,635 - 116,635 98.6% - 2,510,448 21.82 Harper Hill Commons(6) Harris Teeter Winston-Salem, NC 100% 2004 96,914 - 96,914 86.9% - 960,490 11.40 Harrisonburg Regal Regal Cinemas Harrisonburg, VA 100% 1999 49,000 - 49,000 100.0% - 717,850 14.65 Indian Lakes Crossing(6) Harris Teeter Virginia Beach, VA 100% 2008 64,973 - 64,973 95.0% - 843,073 13.66 Lexington Square Lowes Foods Lexington, SC - 2017 85,540 - 85,540 98.2% - 1,813,558 21.59 Market at Mill Creek Lowes Foods Mt. Pleasant, SC - 2018 73,391 - 73,391 93.2% - 1,637,522 23.94 Marketplace at Hilltop(6)(9) Total Wine, Panera Virginia Beach, VA - 2000/2001 117,753 - 117,753 100.0% - 2,680,607 22.76 North Hampton Market PetSmart, Hobby Lobby Taylors, SC 100% 2004 114,935 - 114,935 100.0% - 1,478,935 12.87 North Point Center(6) Harris Teeter, Home Depot, Costco Durham, NC 88% 1998/2009 494,746 - 494,746 100.0% - 3,842,617 7.77 Oakland Marketplace(6) Kroger Oakland, TN 100% 2004 64,538 - 64,538 100.0% - 478,857 7.42 Parkway Centre Publix Moultrie, GA 100% 2017 61,200 - 61,200 98.0% - 812,760 13.55 Parkway Marketplace Rite Aid Virginia Beach, VA 100% 1998 37,804 - 37,804 94.4% - 724,457 20.29 Patterson Place BB&B, PetSmart, DSW, AC Moore Durham, NC 100% 2004 160,942 - 160,942 94.3% - 2,411,632 15.89 Perry Hall Marketplace Safeway Perry Hall, MD 100% 2001 74,256 - 74,256 100.0% - 1,270,853 17.11 Premier Retail Williams Sonoma, Pottery Barn Virginia Beach, VA - 2018 - 38,798 38,798 - 75.4% 957,730 32.76 Providence Plaza Cranfill, Sumner & Hartzog, Chipotle Charlotte, NC 100% 2007/2008 103,118 - 103,118 98.8% - 2,784,362 27.34 Red Mill Commons(6) Homegoods, Walgreens Virginia Beach, VA 8% 2000-2005 373,808 - 373,808 98.0% - 6,524,072 17.80 Renaissance Square Harris Teeter Davidson, NC 100% 2008 80,467 - 80,467 90.4% - 1,265,360 17.40 Sandbridge Commons(6) Harris Teeter Virginia Beach, VA - 2015 77,993 - 77,993 98.5% - 1,055,748 13.74 Socastee Commons Bi-Lo Myrtle Beach, SC - 2000/2014 57,273 - 57,273 96.7% - 632,797 11.43 Southgate Square Burlington, PetSmart, Michaels Colonial Heights, VA - 1991/2016 260,131 - 260,131 93.5% - 3,333,235 13.70 South Retail lululemon, free people, CPK Virginia Beach, VA - 2002 38,515 - 38,515 100.0% - 977,399 25.38 South Square(6) Ross, Petco, Office Depot Durham, NC 100% 1977/2005 109,590 - 109,590 95.3% - 1,802,015 17.25 Southshore Shops Buffalo Wild Wings Chesterfield, VA 100% 2006 40,333 - 40,333 88.8% - 739,420 20.65 Stone House Square(6) Weis Markets Hagerstown, MD 100% 2008 112,274 - 112,274 93.1% - 1,769,631 16.93 Studio 56 Retail McCormick & Schmick's Virginia Beach, VA 100% 2007 11,594 - 11,594 100.0% - 473,695 40.86 Tyre Neck Harris Teeter(6)(9) Harris Teeter Portsmouth, VA 100% 2011 48,859 - 48,859 100.0% - 533,285 10.91 Wendover Village BB&B, T.J. Maxx, Petco Greensboro, NC 100% 2004 176,939 - 176,939 99.3% - 3,474,570 19.77 Total / Weighted Avg Retail Portfolio 63% 4,077,524 119,509 4,197,033 96.8% $66,669,653 $16.50
Property Portfolio Cont. 17 As of September 30, 2019 Net Rentable Square Feet (RSF)(1) Town Unencumbered Core Development Core Development ABR per Leased Office Properties Anchor Tenant Location Center ABR Year Built Properties Properties Total Occupancy(2) Leased(2) ABR(3) SF(3) 4525 Main Street Clark Nexsen, Anthropologie, Mythics Virginia Beach, VA - 2014 234,938 - 234,938 98.1% - $6,720,307 $29.15 Armada Hoffler Tower(4)(5) AHH, Troutman Sanders, Williams Mullen Virginia Beach, VA 100% 2002 324,473 - 324,473 95.8% - 9,022,972 29.01 Brooks Crossing Office Huntington Ingalls Industries Newport News, VA - 2019 98,061 - 98,061 100.0% - 1,814,129 18.50 One Columbus(5) BB&T, HBA Virginia Beach, VA 100% 1984 128,876 - 128,876 96.6% - 3,125,306 25.10 One City Center Duke University, WeWork Durham, NC - 2019 152,815 - 152,815 85.2% - 4,142,424 31.82 Thames Street Wharf(4) Morgan Stanley, JHU Medical Baltimore, MD - 2010 263,426 - 263,426 100.0% - 7,128,202 27.06 Two Columbus Hazen and Sawyer Virginia Beach, VA 100% 2009 108,459 - 108,459 100.0% - 2,895,893 26.70 Total / Weighted Average Office Portfolio 43% 1,311,048 - 1,311,048 96.6% $34,849,233 $27.52 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 1405 Point(8)(9) Baltimore, MD - 2018 289 - 289 88.6% - $6,593,549 $2,146.34 Encore Apartments Virginia Beach, VA - 2014 286 - 286 98.3% - 4,476,648 1,327.59 Greenside Apartments Charlotte, NC - 2018 225 - 225 93.8% - 4,016,460 1,586.28 Hoffler Place(10) Charleston, SC - 2019 - 74 74 - 86.8% 3,496,472 1,129.35 Johns Hopkins Village(8)(9)(10) Baltimore, MD - 2016 157 - 157 99.5% - 7,750,968 1,143.21 Liberty Apartments (8) Newport News, VA - 2013 197 - 197 95.3% - 2,426,808 1,077.20 Premier Apartments Virginia Beach, VA - 2018 131 - 131 96.9% - 2,183,844 1,432.97 Smith's Landing(9) Blacksburg, VA - 2009 284 - 284 100.0% - 4,247,978 1,246.47 The Cosmopolitan(8) Virginia Beach, VA - 2006 - 342 342 - 88.4% (11) 5,037,396 1,627.07 Total / Weighted Avg Multifamily Portfolio - 1,569 416 1,985 95.8% $40,230,123 $1,472.96 Square Footage Properties with Tenants Number of Leased Pursuant to (1) The net rentable square footage for each of our retail & office properties is the sum of (a) the square footage of Subject to Ground Lease Ground Leases Ground Leases ABR existing leases, plus (b) for available space, management’s estimate of net rentable square footage based, in part, on Bermuda Crossroads 2 11,000 $179,685 Broad Creek Shopping Center 6 23,825 639,988 past leases. The net rentable square footage included in office leases is generally consistent with the Building Owners Columbus Village 1 3,403 200,000 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 of Harper Hill Commons 1 41,520 373,680 September 30, 2019, divided by (b) net rentable square feet, expressed as a percentage. Occupancy for our multifamily Indian Lakes Crossing 1 50,311 592,385 Marketplace at Hilltop 2 5,011 179,843 properties is calculated as (a) total units occupied as of September 30, 2019, divided by (b) total units available, as of North Point Center 4 280,556 1,146,700 such date expressed as a percentage. Oakland Marketplace 1 45,000 186,347 (3) For the properties in our office and retail portfolios, annualized base rent, or ABR, is calculated by multiplying (a) Red Mill Commons 8 33,961 773,609 Sandbridge Commons 3 61,864 738,500 monthly base rent (defined as cash base rent, before contractual tenant concessions and abatements, and excluding South Square 1 1,778 60,000 tenant reimbursements for expenses paid by us) as of September 30, 2019 for in-place leases as of such date by (b) 12, Stone House Square 1 3,650 181,500 and does not give effect to periodic contractual rent increases or contingent rental revenue (e.g., percentage rent Tyre Neck Harris Teeter 1 48,859 533,285 based on tenant sales thresholds). ABR per leased square foot is calculated by dividing (a) ABR by (b) square footage Total / Weighted Avg 34 666,324 $6,867,640 under in-place leases as of September 30, 2019. In the case of triple net or modified gross leases, our calculation of (7) For the properties in our multifamily portfolio, ABR is calculated by multiplying (a) base rental payments for the ABR does not include tenant reimbursements for real estate taxes, insurance, common area or other operating month ended September 30, 2019 by (b) 12. expenses. (8) The ABR for Liberty, Cosmopolitan, Johns Hopkins Village, Hoffler Place and 1405 Point excludes approximately (4) As of September 30, 2019, the Company occupied 50,583 square feet at these three properties at an ABR of $1.6M, $0.3M, $0.9M, $1.1M, $0.1M and $0.3M, respectively, from ground floor retail leases. or $31.13 per leased square foot, which amounts are reflected in this table. The rent paid by us is eliminated in (9) The Company leases all or a portion of the land underlying this property pursuant to a ground lease. 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. September 30, 2019 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 leases (11) Occupancy calculation excludes 50 units that are offline for redevelopment. in the table to the right.
18 Development and Redevelopment Pipeline $ in thousands Schedule(1) Property (1) % Leased or Construction Initial Stabilized Estimated Loan Cost to AHH Estimated (2) (1) Anchor Tenants Projects Type LOI Start Occupancy Operation Cost Commitment Date Ownership % Under Development Southern Post 138 units / Mixed-use - TBD TBD TBD $95,000 TBD $2,000 80%(3) TBD Roswell, GA 137,000 sf Summit Place (Meeting Street) Multifamily 127 units - 3Q17 3Q20 4Q20 58,000 34,750 49,000 90% NA Charleston, SC Wills Wharf Office 325,000 sf 68% 3Q18 1Q20 1Q21 120,000 76,000 71,000 100% WeWork, Canopy by Hilton Baltimore, MD Total Projects Under Development 273,000 110,750 122,000 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 Hoffler Place (King Street) Multifamily 74 units 87% 3Q17 3Q19 4Q19 48,000 31,750 47,000 93% NA Charleston, SC Premier Retail (Town Center Phase VI) Retail 39,000 sf 75% 4Q16 3Q18 4Q20 15,000 8,334 14,000 100% Williams-Sonoma, Pottery Barn Virginia Beach, VA Total Projects Delivered Not Stabilized 66,000 40,084 64,000 Total $339,000 $150,834 $186,000 Property Out of Construction Anticipated Restabilized Estimated Projected % Leased Cost to Date Scope Redevelopment Type Service Start Completion Operation(2) Cost(1) ROI(1) Renovate all 342 units including upgraded finishes, The Cosmopolitan new cabinetry and flooring, energy efficient Multifamily 88%(4) 50 units 1Q18 4Q20 1Q21 $14,100 $4,700 9% Virginia Beach, VA appliances, and LED lighting; modernize resident clubhouse, business center, and leasing office. Reposition 62,000 SF center to better incorporate Columbus Village I within Town Center and add Virginia Beach Boulevard Retail 85% 28,250 sf 2Q19 4Q20 1Q20 8,900 7,300 7% Virginia Beach, VA small shop frontage along with Shake Shack, Cava, and new Barnes & Noble prototype. Total Projects Under Redevelopment $23,000 $12,000 8% Q3 2019 YTD Capitalized Interest $1,512 $4,523 Capitalized Overhead $780 $2,285 (1) Represents estimates that may change as the development and redevelopment process proceeds. (2) First fully-stabilized quarter. See same store definition on page 31. (3) AHH earns a preferred return on equity prior to any distributions to JV Partners. (4) Excludes units out of service due to redevelopment.
Mezzanine Investments 19 $ in thousands Schedule(1) Principal Property % Leased Initial Mezzanine Mezzanine Mezzanine Option to Type Estimated(1) or LOI Occupancy Loan Maturity Interest Rate Financing Interest QTD Interest YTD Purchase Investments with Discounted Purchase Options Nexton Square-Phase I Retail 118,000 sf 95% 3Q19 4Q20 15% $15,000 $550 $1,583 $42,000 Summerville, SC Short Term Investments The Residences at Annapolis Junction Multifamily 416 units 91% 3Q17 4Q19 10% 38,000 969 2,809 - Annapolis Junction, MD $5M Annapolis Junction Loan Modification Fee - 1,371 3,727 - North Decatur Square (Whole Foods) Retail 86,000 sf 100% 4Q18 3Q19 15% 20,000 178 1,509 - Decatur, GA- Loan was paid off on 7/22/19 Delray Plaza (Whole Foods) Retail 83,000 sf 100% 3Q19 4Q20 15% 12,000 429 1,153 - Delray Beach, FL Solis Apartments at Interlock Multifamily 349 units NA 4Q20 3Q22 13% 20,000 595 1,567 - Atlanta, GA The Interlock Mixed-use 300,000 sf 81% 4Q20 3Q22 15% 47,000 1,595 3,425 - Atlanta, GA Total (2) $152,000 $5,687 $15,773 Mezzanine Interest Expense (1,185) (3,950) Net Mezzanine Interest Income $4,502 $11,823 (1) Represents estimates that may change as the development process proceeds. (2) Excludes GAAP adjustments.
Acquisitions & Dispositions 20 $ 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 Thames Street Wharf Baltimore, MD 263,426 $101,000 $ - $ - 7.1% 2Q19 Morgan Stanley, JHU Medical Red Mill Commons & T.J. Maxx, Homegoods, Total Wine, Virginia Beach, VA 488,865 105,000 - 63,755 7.7% 2Q19 Marketplace at Hilltop Walgreens Wendover Village III Greensboro, NC 5,286 2,783 2,424 - 9.2% 1Q19 Verizon 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 & Stone Maryland 182,949 39,555 15,200 4,155 7.4% 2Q15 Safeway & Weis Markets 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 3,042,449 $652,313 $130,124 $142,005 7.2% DISPOSITIONS Square Cash Cap Properties Location Feet/Units Sale Price Cash Proceeds Gain on Sale Rate Disposition Date Anchor Tenants Lightfoot Marketplace Williamsburg, VA 124,715 $30,275 $11,800 $4,477 (5) 5.8% 3Q19 Harris Teeter Indian Lakes Wawa Virginia Beach, VA 6,047 4,400 4,400 - 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 899,282 sf/ $239,750 $168,400 $63,112 7.0% 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. (5) Includes JV interest in the property.
Construction Business Summary 21 $ in thousands Total Contract Work in Place as Estimated Date Highlighted Projects Location Value of 9/30/2019 Backlog of Completion Interlock Commercial Atlanta, GA $87,921 $33,370 $54,551 3Q 2020 Solis Apartments at Interlock Atlanta, GA 63,208 8,025 55,183 1Q 2021 Boulders Lakeside Apartments Chesterfield, VA 35,282 2,392 32,890 1Q 2021 Sub Total 186,411 43,787 142,624 All Other Projects 390,089 359,621 30,468 Total $576,500 $403,408 $173,092 Gross Profit Summary Trailing 12 Q3 2019 Months(1) (Unaudited) Revenue $27,638 $82,239 Expense (26,446) (75,009) Gross Profit $1,192 $7,230 (1) Includes gain on non-operating real estate of $3.4M for the three months ended 12/31/18.
Same Store NOI by Segment 22 $ in thousands (Reconciliation to GAAP located in appendix on pg. 35) Three months ended Nine months ended 9/30/2019 9/30/2018 $ Change % Change 9/30/2019 9/30/2018 $ Change % Change Office(1) (Unaudited) (Unaudited) Revenue $5,394 $5,149 $245 4.8% $16,148 $15,537 $611 3.9% Expenses (2) 2,077 1,972 105 5.3% 5,798 5,670 128 2.3% Net Operating Income 3,317 3,177 140 4.4% 10,350 9,867 483 4.9% Retail(1) Revenue 15,006 14,529 477 3.3% 43,282 42,263 1,019 2.4% Expenses (2) 3,401 3,407 (6) -0.2% 9,865 9,698 167 1.7% Net Operating Income 11,605 11,122 483 4.3% 33,417 32,565 852 2.6% Multifamily(1) Revenue 5,474 4,876 598 12.3% 16,299 14,754 1,545 10.5% Expenses (2) 2,323 2,167 156 7.2% 6,452 6,204 248 4.0% Net Operating Income 3,151 2,709 442 16.3% 9,847 8,550 1,297 15.2% Same Store Net Operating Income (NOI) $18,073 $17,008 $1,065 6.3% $53,614 $50,982 $2,632 5.2% GAAP Adjustments (377) (373) (4) (1,508) (1,373) (135) Same store portfolio NOI, cash basis $17,696 $16,635 $1,061 6.4% $52,106 $49,609 $2,497 5.0% NOI, Cash Basis: Office $3,159 $2,724 $435 16.0% $9,486 $8,810 $676 7.7% Retail 11,429 11,021 408 3.7% 33,014 32,202 812 2.5% Multifamily 3,108 2,890 218 7.5% 9,606 8,597 1,009 11.7% $17,696 $16,635 $1,061 6.4% $52,106 $49,609 $2,497 5.0% NOI: Office 3,317 $3,177 $140 4.4% $10,350 $9,867 $483 4.9% Retail 11,605 11,122 483 4.3% 33,417 32,565 852 2.6% Multifamily 3,151 2,709 442 16.3% 9,847 8,550 1,297 15.2% $18,073 $17,008 $1,065 6.3% $53,614 $50,982 $2,632 5.2% (1) See page 32 for Same Store vs. Non – Same Store Properties. (2) Excludes expenses associated with the Company’s in house asset management division of $634K and $494K for the 3 months ended 9/30/2019 & 9/30/2018, respectively, and $1.8M and $1.5M for the 9 months ended 9/30/2019 & 9/30/2018, respectively.
Top 10 Tenants by ABR(1) 23 $ in thousands As of September 30, 2019 Office Portfolio Number Lease Annualized Base % of Office Portfolio % of Total Portfolio Tenant of Leases Expiration Rent Annualized Base Rent Annualized Base Rent Morgan Stanley 2 2023 ; 2027 $ 5,761 16.5% 4.1% Clark Nexsen 1 2029 2,639 7.6% 1.9% WeWork 1 2034 2,204 6.3% 1.6% Duke University 1 2029 1,540 4.4% 1.1% Huntington Ingalls 1 2029 1,513 4.3% 1.1% Mythics 1 2030 1,187 3.4% 0.8% Johns Hopkins Medicine 1 2023 1,118 3.2% 0.8% Hampton University 2 2019 ; 2024 1,085 3.1% 0.8% Pender & Coward 1 2030 904 2.6% 0.6% Kimley-Horn 1 2027 894 2.6% 0.6% Top 10 Total $ 18,845 54.0% 13.4% 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 10 2020 - 2035 $ 5,645 8.5% 4.0% Lowes Foods 2 2037 ; 2039 1,976 3.0% 1.4% Regal Cinemas 2 2022 ; 2024 1,713 2.6% 1.2% Bed, Bath, & Beyond 4 2022 - 2025 1,677 2.5% 1.2% PetSmart 5 2020 - 2025 1,438 2.2% 1.0% Food Lion 3 2022 - 2024 1,291 1.9% 0.9% Petco 4 2022 - 2030 877 1.3% 0.6% Dick's Sporting Goods⁽²⁾ 1 2020 840 1.3% 0.6% Weis Markets 1 2028 802 1.2% 0.6% Ross Dress for Less 2 2022 ; 2025 762 1.1% 0.5% Top 10 Total $ 17,021 25.6% 12.0% (1) Includes leases from the development properties that have been delivered, but not stabilized. (2) Dick’s Sporting Goods notified the Company it will not renew its lease beyond January 31, 2020.
Office Lease Summary 24 Renewal Lease Summary GAAP Cash Number of Weighted Leases Net Rentable Leases Net Rentable Contractual Prior Rent Releasing Contractual Prior Rent Releasing Average Lease TI & LC Quarter Signed SF Signed Expiring SF Expiring Rent per SF per SF Spread Rent per SF per SF Spread Term (yrs) TI & LC per SF Q3 2019 1 1,120 4 26,201 $38.50 $37.00 4.1% $38.50 $37.00 4.1% 2.00 $1,725 $1.54 Q2 2019 1 30,009 1 5,253 20.37 21.71 -6.1% 19.00 23.77 -20.1% 5.00 114,589 3.82 Q1 2019 1 11,995 3 15,865 24.92 21.30 17.0% 23.76 23.18 2.5% 5.00 164,879 13.75 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 New Lease Summary(1) Number of Cash Weighted Leases Net Rentable Contractual Average TI & LC Quarter Signed SF Signed Rent per SF Lease Term TI & LC per SF Q3 2019 7 21,345 $24.73 5.30 $716,641 $33.57 Q2 2019 4 22,712 27.11 8.60 1,122,865 49.44 Q1 2019 4 15,889 25.07 4.88 498,213 31.36 Q4 2018 1 1,242 24.00 5.21 13,585 10.94 (1) Excludes leases from properties in development.
Office Lease Expirations 25 As of September 30, 2019 Square Footage % Portfolio % of Portfolio Annualized Base Number of Leases of Leases Net Rentable Annualized Base Annualized Rent per Leased Year Expiring Expiring(1) Square Feet Rent(1) Base Rent Square Foot Available - 44,859 3.4% $ - - $ - M-T-M 2 - - 2,400 - - 2019 4 26,368 2.0% 843,453 2.4% 31.99 2020 11 29,014 2.2% 865,089 2.5% 29.82 2021 12 61,576 4.7% 1,738,218 5.0% 28.23 2022 11 77,259 5.9% 2,197,357 6.3% 28.44 2023 13 115,580 8.8% 3,128,967 9.0% 27.07 2024 11 136,575 10.4% 3,420,643 9.8% 25.05 2025 9 79,931 6.1% 2,223,357 6.4% 27.82 2026 7 34,500 2.6% 877,469 2.5% 25.43 2027 4 244,864 18.7% 6,921,178 19.9% 28.27 2028 6 63,319 4.8% 1,753,256 5.0% 27.69 2029 8 244,498 18.6% 6,187,929 17.8% 25.31 Thereafter 6 152,705 11.8% 4,689,916 13.4% 30.71 Total / Weighted Average 104 1,311,048 100.0% $34,849,232 100.0% $ 27.52 300,000 25.0% 250,000 20.0% Square Feet % of Portfolio 200,000 Under Lease ABR 15.0% 150,000 2,500 or less 3% 10.0% 2,501-10,000 14% 100,000 10,001-20,000 17% 50,000 5.0% 20,001-40,000 21% 40,001-100,000 29% - 0.0% Greater than 100,000 16% Office Portfolio Total 100% Leased Square Feet % ABR of Office Portfolio (1) Includes leases from the development properties that have been delivered, but not stabilized.
Retail Lease Summary 26 Renewal Lease Summary GAAP Cash Number of Weighted Leases Net Rentable Net Rentable SF Contractual Prior Rent per Releasing Contractual Prior Rent Releasing Average Lease TI & LC Quarter Signed SF Signed Leases Expiring Expiring Rent per SF SF Spread Rent per SF per SF Spread Term (yrs) TI & LC per SF Q3 2019 28 201,931 8 14,338 $16.44 $15.47 6.3% $16.32 $15.72 3.9% 5.14 $568,379 $2.81 Q2 2019 19 193,546 12 36,364 13.37 12.64 5.7% 13.37 12.84 4.1% 4.87 137,547 0.71 Q1 2019 24 128,088 11 30,729 16.08 15.25 5.5% 15.96 15.43 3.4% 5.36 123,414 0.96 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 New Lease Summary(1) Number of Weighted Leases Net Rentable Cash Contractual Average Lease TI & LC Quarter Signed SF Signed Rent per SF Term (yrs) TI & LC per SF Q3 2019 5 14,720 $20.60 9.60 $733,422 $49.82 Q2 2019 7 31,696 27.36 9.41 1,857,154 58.59 Q1 2019 3 4,001 16.10 4.89 22,127 5.53 Q4 2018 7 60,363 15.09 10.83 2,710,665 44.91 (1) Excludes leases from properties in development and redevelopment.
Retail Lease Expirations 27 As of September 30, 2019 Square Footage % Portfolio % of Portfolio Annualized Base Number of Leases of Leases Net Rentable Annualized Base Annualized Rent per Leased Year Expiring Expiring(1) Square Feet Rent(1) Base Rent Square Foot Available - 156,883 3.7% $ - - $ - M-T-M 3 5,300 0.1% 120,191 0.2% 22.68 2019 15 36,069 0.9% 814,697 1.2% 22.59 2020 70 437,232 10.4% 6,090,660 9.1% 13.93 2021 87 341,263 8.1% 6,636,755 10.0% 19.45 2022 91 522,320 12.4% 8,832,991 13.2% 16.91 2023 87 505,606 12.0% 8,319,940 12.5% 16.46 2024 83 523,166 12.5% 8,421,569 12.6% 16.10 2025 46 476,884 11.4% 6,360,447 9.5% 13.34 2026 28 172,729 4.1% 3,348,245 5.0% 19.38 2027 20 130,740 3.1% 2,796,397 4.2% 21.39 2028 25 254,999 6.1% 3,574,086 5.4% 14.02 2029 22 106,653 2.5% 2,112,930 3.2% 19.81 Thereafter 31 527,189 12.6% 9,240,746 13.9% 17.53 Total / Weighted Average 608 4,197,033 100.0% $66,669,654 100.0% $16.50 600,000 16.0% 14.0% 500,000 Square Feet % of Portfolio 12.0% Under Lease ABR 400,000 10.0% 2,500 or less 15% 300,000 8.0% 2,501-10,000 33% 10,001-20,000 15% 6.0% 200,000 20,001-40,000 14% 4.0% 40,001-100,000 22% 100,000 2.0% Greater than 100,000 1% - 0.0% Retail Portfolio Total 100% Leased Square Feet % ABR of Retail Portfolio (1) Includes leases from properties in development.
28 Appendix Definitions & Reconciliations
Definitions 29 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 depreciation and amortization related to real estate, gains or losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. FFO is a supplemental non-GAAP financial measure. Management uses FFO as a supplemental performance measure because it believes that FFO is beneficial to investors as a starting point in measuring our operational performance. Specifically, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, which do not relate to or are not indicative of operating performance, FFO provides a performance measure that, when compared period-over-period, captures trends in occupancy rates, rental rates and operating costs. Other equity REITs may not calculate FFO in accordance with the Nareit definition as we do, and, accordingly, our FFO may not be comparable to such other REITs’ FFO. 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, amortization of right-of-use assets attributable to finance leases, severance related costs, and other non-comparable items. Management believes that the computation of FFO in accordance 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.
Definitions 30 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, cash ground rent payments for finance leases, 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. 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, impairment of real estate assets, debt extinguishment losses, non-cash stock compensation and mark-to-market adjustments on interest rate derivates, and including cash ground rent payments for finance leases. 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, 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.
Definitions 31 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.
32 Same Store vs. Non-Same Store Properties Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended 9/30/2019 to 2018 9/30/2019 to 2018 9/30/2019 to 2018 9/30/2019 to 2018 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 Red Mill Commons 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 Broadmoor Plaza X X South Retail X X Brooks Crossing (Retail) 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 Wendover Village X X Greentree Shopping Center X X Wendover Village II X X Fountain Plaza Retail X X Wendover Village III 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 Brooks Crossing (Office) X X Indian Lakes Crossing X X One City Center X X Lexington Square X X One Columbus X X Market at Mill Creek X X Thames Street Wharf X X Marketplace at Hilltop X X Two Columbus X X North Hampton Market X X Multifamily Properties North Point Center X X 1405 Point X X Oakland Marketplace X X Encore Apartments X X Parkway Centre X X Greenside Apartments X X Parkway Marketplace X X Hoffler Place X X Patterson Place X X Johns Hopkins Village X X Perry Hall Marketplace X X Liberty Apartments X X Premier Retail X X Premier Apartments X X Providence Plaza X X Smith’s Landing X X The Cosmopolitan X X
33 Reconciliation to Property Portfolio NOI $ in thousands Three months ended 9/30 Nine months ended 9/30 2019 2018 2019 2018 Office Same Store(1) Rental revenues $5,394 $5,149 $16,148 $15,537 Property expenses 2,077 1,972 5,798 5,670 NOI 3,317 3,177 10,350 9,867 Non-Same Store NOI(2) 3,072 (94) 4,454 (284) Segment NOI $6,389 $3,083 $14,804 $9,583 Retail Same Store(1) Rental revenues $15,006 $14,529 $43,282 $42,263 Property expenses 3,401 3,407 9,865 9,698 NOI 11,605 11,122 33,417 32,565 Non-Same Store NOI(2) 3,840 1,346 9,350 4,671 Segment NOI $15,445 $12,468 $42,767 $37,236 Multifamily Same Store(1) Rental revenues $5,474 $4,876 $16,299 $14,754 Property expenses 2,323 2,167 6,452 6,204 NOI 3,151 2,709 9,847 8,550 Non-Same Store NOI(2) 3,131 727 6,715 2,421 Segment NOI $6,282 $3,436 $16,562 $10,971 Total Property Portfolio NOI $28,116 $18,987 $74,133 $57,790 (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.
34 Reconciliation to Property Portfolio NOI $ in thousands Three months ended 9/30/2019 Diversified Portfolio Office Retail Multifamily Total NOI - Cash Basis $2,783 $12,897 $3,921 $19,601 GAAP Adjustments 488 578 145 1,211 Elimination of intercompany rent (116) - - (116) NOI $3,155 $13,475 $4,066 $20,696 Town Center of Virginia Beach NOI - Cash Basis $3,324 $2,020 $1,862 $7,206 GAAP Adjustments 159 (129) (5) 25 Elimination of intercompany rent (246) (104) - (350) NOI $3,237 $1,787 $1,857 $6,881 NOI Diversified Portfolio $3,155 $13,475 $4,066 $20,696 Town Center of Virginia Beach 3,237 1,787 1,857 6,881 Unstabilized Properties (3) 183 359 539 Total Property Portfolio NOI $6,389 $15,445 $6,282 $28,116
Reconciliation to GAAP Net Income 35 $ in thousands Three months ended 9/30/2019 Total Rental General Contracting & Office Retail Multifamily Properties Real Estate Services Total Segment revenues $10,283 $20,780 $11,157 $42,220 $27,638 $69,858 Segment expenses 3,894 5,335 4,875 14,104 26,446 40,550 Net operating income $6,389 $15,445 $6,282 $28,116 $1,192 $29,308 Depreciation and amortization (15,452) Amortization of right-of-use assets - finance leases (107) General and administrative expenses (2,977) Acquisition, development and other pursuit costs (93) Gain on real estate dispositions 4,699 Interest income 5,710 Interest expense (8,828) Interest expense - finance leases (228) Change in fair value of interest rate derivatives (530) Other income 362 Income tax benefit (provision) 199 Net income $12,063 Net loss attributable to noncontrolling interest in investment entities (960) Preferred stock dividends (1,234) Net income attributable to AHH and OP Unitholders $9,869 Nine months ended 9/30/2019 Total Rental General Contracting & Office Retail Multifamily Properties Real Estate Services Total Segment revenues $23,220 $57,273 $29,014 $109,507 $66,118 $175,625 Segment expenses 8,416 14,506 12,452 35,374 62,855 98,229 Net operating income $14,804 $42,767 $16,562 $74,133 $3,263 $77,396 Depreciation and amortization (38,834) Amortization of right-of-use assets - finance leases (168) General and administrative expenses (9,329) Acquisition, development and other pursuit costs (550) Gain on real estate dispositions 4,699 Interest income 16,622 Interest expense (22,205) Interest expense - finance leases (340) Equity in income of unconsolidated real estate entities 273 Change in fair value of interest rate derivatives (3,926) Other income 426 Income tax benefit (provision) 339 Net income $24,403 Net loss attributable to noncontrolling interest in investment entities (640) Preferred stock dividends (1,388) Net income attributable to AHH and OP Unitholders $22,375