FORM 10-Q |
Maryland | 46-1214914 |
(State of Organization) | (IRS Employer Identification No.) |
222 Central Park Avenue, Suite 2100 Virginia Beach, Virginia | 23462 |
(Address of Principal Executive Offices) | (Zip Code) |
Large Accelerated Filer | ◻ | Accelerated Filer | ☒ |
Non-Accelerated Filer | ◻ (Do not check if a smaller reporting company) | Smaller Reporting Company | ◻ |
Emerging Growth Company | ☒ |
Page | |||
March 31, 2017 | December 31, 2016 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Real estate investments: | ||||||||
Income producing property | $ | 898,526 | $ | 894,078 | ||||
Held for development | 8,042 | 680 | ||||||
Construction in progress | 19,198 | 13,529 | ||||||
925,766 | 908,287 | |||||||
Accumulated depreciation | (145,981 | ) | (139,553 | ) | ||||
Net real estate investments | 779,785 | 768,734 | ||||||
Cash and cash equivalents | 10,039 | 21,942 | ||||||
Restricted cash | 3,649 | 3,251 | ||||||
Accounts receivable, net | 14,122 | 15,052 | ||||||
Notes receivable | 60,959 | 59,546 | ||||||
Construction receivables, including retentions | 50,151 | 39,433 | ||||||
Construction contract costs and estimated earnings in excess of billings | 812 | 110 | ||||||
Equity method investments | 10,794 | 10,235 | ||||||
Other assets | 62,593 | 64,165 | ||||||
Total Assets | $ | 992,904 | $ | 982,468 | ||||
LIABILITIES AND EQUITY | ||||||||
Indebtedness, net | $ | 522,394 | $ | 522,180 | ||||
Accounts payable and accrued liabilities | 11,008 | 10,804 | ||||||
Construction payables, including retentions | 57,457 | 51,130 | ||||||
Billings in excess of construction contract costs and estimated earnings | 9,823 | 10,167 | ||||||
Other liabilities | 39,107 | 39,209 | ||||||
Total Liabilities | $ | 639,789 | $ | 633,490 | ||||
Redeemable noncontrolling interest | 2,000 | — | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued and outstanding as of March 31, 2017 and December 31, 2016, respectively | — | — | ||||||
Common stock, $0.01 par value, 500,000,000 shares authorized, 37,813,127 and 37,490,361 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively | 377 | 374 | ||||||
Additional paid-in capital | 199,923 | 197,114 | ||||||
Distributions in excess of earnings | (50,629 | ) | (49,345 | ) | ||||
Total stockholders’ equity | 149,671 | 148,143 | ||||||
Noncontrolling interests | 201,444 | 200,835 | ||||||
Total Equity | 351,115 | 348,978 | ||||||
Total Liabilities and Equity | $ | 992,904 | $ | 982,468 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
Revenues | ||||||||
Rental revenues | $ | 27,232 | $ | 23,283 | ||||
General contracting and real estate services revenues | 63,519 | 36,803 | ||||||
Total revenues | 90,751 | 60,086 | ||||||
Expenses | ||||||||
Rental expenses | 6,068 | 5,329 | ||||||
Real estate taxes | 2,509 | 2,349 | ||||||
General contracting and real estate services expenses | 61,196 | 35,037 | ||||||
Depreciation and amortization | 9,475 | 8,149 | ||||||
General and administrative expenses | 2,986 | 2,484 | ||||||
Acquisition, development and other pursuit costs | 47 | 704 | ||||||
Impairment charges | 4 | 35 | ||||||
Total expenses | 82,285 | 54,087 | ||||||
Operating income | 8,466 | 5,999 | ||||||
Interest income | 1,398 | 182 | ||||||
Interest expense | (4,535 | ) | (3,791 | ) | ||||
Gain on real estate dispositions | 3,395 | 26,674 | ||||||
Change in fair value of interest rate derivatives | 294 | (2,389 | ) | |||||
Other income | 37 | 76 | ||||||
Income before taxes | 9,055 | 26,751 | ||||||
Income tax provision | (302 | ) | (218 | ) | ||||
Net income | 8,753 | 26,533 | ||||||
Net income attributable to noncontrolling interests | (2,817 | ) | (9,163 | ) | ||||
Net income attributable to stockholders | $ | 5,936 | $ | 17,370 | ||||
Net income attributable to stockholders per share (basic and diluted) | $ | 0.16 | $ | 0.57 | ||||
Weighted-average common shares outstanding (basic and diluted) | 37,622 | 30,191 | ||||||
Dividends and distributions declared per common share and unit | $ | 0.19 | $ | 0.18 |
Shares of common stock | Common Stock | Additional paid-in capital | Distributions in excess of earnings | Total stockholders' equity | Noncontrolling interests | Total Equity | |||||||||||||||||||||
Balance, January 1, 2017 | 37,490,361 | $ | 374 | $ | 197,114 | $ | (49,345 | ) | $ | 148,143 | $ | 200,835 | $ | 348,978 | |||||||||||||
Net income | — | — | — | 5,936 | 5,936 | 2,817 | 8,753 | ||||||||||||||||||||
Net proceeds from sales of common stock | 248,559 | 2 | 3,360 | — | 3,362 | — | 3,362 | ||||||||||||||||||||
Restricted stock awards | 94,991 | 1 | 735 | — | 736 | — | 736 | ||||||||||||||||||||
Restricted stock award forfeitures | (20,784 | ) | — | (289 | ) | — | (289 | ) | — | (289 | ) | ||||||||||||||||
Acquisitions of noncontrolling interests in real estate investments | — | — | (987 | ) | — | (987 | ) | 982 | (5 | ) | |||||||||||||||||
Redemption of operating partnership units | — | — | (10 | ) | — | (10 | ) | (40 | ) | (50 | ) | ||||||||||||||||
Dividends and distributions declared | — | — | — | (7,220 | ) | (7,220 | ) | (3,150 | ) | (10,370 | ) | ||||||||||||||||
Balance, March 31, 2017 | 37,813,127 | $ | 377 | $ | 199,923 | $ | (50,629 | ) | $ | 149,671 | $ | 201,444 | $ | 351,115 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 8,753 | $ | 26,533 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation of buildings and tenant improvements | 6,473 | 5,468 | ||||||
Amortization of leasing costs and in-place lease intangibles | 3,002 | 2,681 | ||||||
Accrued straight-line rental revenue | (383 | ) | (188 | ) | ||||
Amortization of leasing incentives and above or below-market rents | (47 | ) | 6 | |||||
Accrued straight-line ground rent expense | 138 | 66 | ||||||
Bad debt expense | 68 | 45 | ||||||
Noncash stock compensation | 411 | 437 | ||||||
Impairment charges | 4 | 35 | ||||||
Noncash interest expense | 277 | 191 | ||||||
Gain on real estate dispositions | (3,395 | ) | (26,674 | ) | ||||
Change in the fair value of derivatives | (294 | ) | 2,389 | |||||
Changes in operating assets and liabilities: | ||||||||
Property assets | 1,024 | 218 | ||||||
Property liabilities | (875 | ) | (686 | ) | ||||
Construction assets | (13,137 | ) | 4,857 | |||||
Construction liabilities | 5,888 | (4,070 | ) | |||||
Net cash provided by operating activities | 7,907 | 11,308 | ||||||
INVESTING ACTIVITIES | ||||||||
Development of real estate investments | (6,456 | ) | (19,777 | ) | ||||
Tenant and building improvements | (2,069 | ) | (1,309 | ) | ||||
Acquisitions of real estate investments, net of cash received | (6,767 | ) | (165,161 | ) | ||||
Dispositions of real estate investments | 4,441 | 83,748 | ||||||
Notes receivable issuances | (1,413 | ) | (2,639 | ) | ||||
(Decrease) increase in restricted cash | (31 | ) | (13 | ) | ||||
Leasing costs | (493 | ) | (490 | ) | ||||
Leasing incentives | — | (22 | ) | |||||
Contributions to equity method investments | (559 | ) | (5,440 | ) | ||||
Net cash used for investing activities | (13,347 | ) | (111,103 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Proceeds from sales of common stock | 3,523 | 10,089 | ||||||
Offering costs | (161 | ) | (273 | ) | ||||
Debt issuances, credit facility and construction loan borrowings | 44,952 | 144,684 | ||||||
Debt and credit facility repayments, including principal amortization | (44,530 | ) | (54,821 | ) | ||||
Debt issuance costs | (471 | ) | (442 | ) | ||||
Redemption of operating partnership units | (50 | ) | — | |||||
Dividends and distributions | (9,726 | ) | (7,621 | ) | ||||
Net cash (used in) provided by financing activities | (6,463 | ) | 91,616 | |||||
Net decrease in cash and cash equivalents | (11,903 | ) | (8,179 | ) | ||||
Cash and cash equivalents, beginning of period | 21,942 | 26,989 | ||||||
Cash and cash equivalents, end of period | $ | 10,039 | $ | 18,810 | ||||
Supplemental Disclosures: | ||||||||
Noncash transactions: | ||||||||
Redeemable noncontrolling interest from development | $ | 2,000 | $ | — | ||||
Deferred payment for land acquisition | $ | 600 | $ | — |
Property | Segment | Location | Ownership Interest | ||||
4525 Main Street | Office | Virginia Beach, Virginia* | 100 | % | |||
Armada Hoffler Tower | Office | Virginia Beach, Virginia* | 100 | % | |||
Commonwealth of Virginia - Chesapeake | Office | Chesapeake, Virginia | 100 | % | |||
Commonwealth of Virginia - Virginia Beach | Office | Virginia Beach, Virginia | 100 | % | |||
One Columbus | Office | Virginia Beach, Virginia* | 100 | % | |||
Two Columbus | Office | Virginia Beach, Virginia* | 100 | % | |||
249 Central Park Retail | Retail | Virginia Beach, Virginia* | 100 | % | |||
Alexander Pointe | Retail | Salisbury, North Carolina | 100 | % | |||
Bermuda Crossroads | Retail | Chester, Virginia | 100 | % | |||
Broad Creek Shopping Center | Retail | Norfolk, Virginia | 100 | % | |||
Broadmoor Plaza | Retail | South Bend, Indiana | 100 | % | |||
Brooks Crossing(1) | Retail | Newport News, Virginia | 65 | % | |||
Columbus Village | Retail | Virginia Beach, Virginia* | 100 | % | |||
Columbus Village II | Retail | Virginia Beach, Virginia* | 100 | % | |||
Commerce Street Retail | Retail | Virginia Beach, Virginia* | 100 | % | |||
Courthouse 7-Eleven | Retail | Virginia Beach, Virginia | 100 | % | |||
Dick's at Town Center | Retail | Virginia Beach, Virginia* | 100 | % | |||
Dimmock Square | Retail | Colonial Heights, Virginia | 100 | % | |||
Fountain Plaza Retail | Retail | Virginia Beach, Virginia* | 100 | % | |||
Gainsborough Square | Retail | Chesapeake, Virginia | 100 | % | |||
Greentree Shopping Center | Retail | Chesapeake, Virginia | 100 | % | |||
Hanbury Village | Retail | Chesapeake, Virginia | 100 | % | |||
Harper Hill Commons | Retail | Winston-Salem, North Carolina | 100 | % | |||
Harrisonburg Regal | Retail | Harrisonburg, Virginia | 100 | % | |||
Lightfoot Marketplace(2) | Retail | Williamsburg, Virginia | 70 | % | |||
North Hampton Market | Retail | Taylors, South Carolina | 100 | % | |||
North Point Center | Retail | Durham, North Carolina | 100 | % | |||
Oakland Marketplace | Retail | Oakland, Tennessee | 100 | % | |||
Parkway Marketplace | Retail | Virginia Beach, Virginia | 100 | % | |||
Patterson Place | Retail | Durham, North Carolina | 100 | % | |||
Perry Hall Marketplace | Retail | Perry Hall, Maryland | 100 | % | |||
Providence Plaza | Retail | Charlotte, North Carolina | 100 | % |
Property | Segment | Location | Ownership Interest | ||||
Renaissance Square | Retail | Davidson, North Carolina | 100 | % | |||
Sandbridge Commons | Retail | Virginia Beach, Virginia | 100 | % | |||
Socastee Commons | Retail | Myrtle Beach, South Carolina | 100 | % | |||
Southgate Square | Retail | Colonial Heights, Virginia | 100 | % | |||
Southshore Shops | Retail | Chesterfield, Virginia | 100 | % | |||
South Retail | Retail | Virginia Beach, Virginia* | 100 | % | |||
South Square | Retail | Durham, North Carolina | 100 | % | |||
Stone House Square | Retail | Hagerstown, Maryland | 100 | % | |||
Studio 56 Retail | Retail | Virginia Beach, Virginia* | 100 | % | |||
Tyre Neck Harris Teeter | Retail | Portsmouth, Virginia | 100 | % | |||
Waynesboro Commons | Retail | Waynesboro, Virginia | 100 | % | |||
Wendover Village | Retail | Greensboro, North Carolina | 100 | % | |||
Encore Apartments | Multifamily | Virginia Beach, Virginia* | 100 | % | |||
Johns Hopkins Village(3) | Multifamily | Baltimore, Maryland | 80 | % | |||
Liberty Apartments | Multifamily | Newport News, Virginia | 100 | % | |||
Smith's Landing | Multifamily | Blacksburg, Virginia | 100 | % | |||
The Cosmopolitan | Multifamily | Virginia Beach, Virginia* | 100 | % | |||
(1) | The Company is entitled to a preferred return of 8% on its investment in Brooks Crossing. As of March 31, 2017, the Company has not received the full amount of this return. |
(2) | The Company is entitled to a preferred return of 9% on its investment in Lightfoot Marketplace. As of March 31, 2017, the Company has not received the full amount of this return. |
(3) | See discussion of redeemable noncontrolling interest in Note 9 for additional information. The Company is entitled to a preferred return of 9% on its investment in Johns Hopkins Village. As of March 31, 2017, the Company has not received the full amount of this return. |
Property | Segment | Location | Ownership Interest | ||||||
Town Center Phase VI | Multifamily | Virginia Beach, Virginia* | 100 | % | |||||
Harding Place | Multifamily | Charlotte, North Carolina | 80 | % | |||||
595 King Street | Multifamily | Charleston, South Carolina | 92.5 | % | |||||
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
(Unaudited) | ||||||||
Office real estate | ||||||||
Rental revenues | $ | 4,906 | $ | 5,521 | ||||
Rental expenses | 1,325 | 1,456 | ||||||
Real estate taxes | 450 | 539 | ||||||
Segment net operating income | 3,131 | 3,526 | ||||||
Retail real estate | ||||||||
Rental revenues | 15,631 | 13,032 | ||||||
Rental expenses | 2,520 | 2,336 | ||||||
Real estate taxes | 1,450 | 1,284 | ||||||
Segment net operating income | 11,661 | 9,412 | ||||||
Multifamily residential real estate | ||||||||
Rental revenues | 6,695 | 4,730 | ||||||
Rental expenses | 2,223 | 1,537 | ||||||
Real estate taxes | 609 | 526 | ||||||
Segment net operating income | 3,863 | 2,667 | ||||||
General contracting and real estate services | ||||||||
Segment revenues | 63,519 | 36,803 | ||||||
Segment expenses | 61,196 | 35,037 | ||||||
Segment gross profit | 2,323 | 1,766 | ||||||
Net operating income | $ | 20,978 | $ | 17,371 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
(Unaudited) | ||||||||
Net operating income | $ | 20,978 | $ | 17,371 | ||||
Depreciation and amortization | (9,475 | ) | (8,149 | ) | ||||
General and administrative expenses | (2,986 | ) | (2,484 | ) | ||||
Acquisition, development and other pursuit costs | (47 | ) | (704 | ) | ||||
Impairment charges | (4 | ) | (35 | ) | ||||
Interest income | 1,398 | 182 | ||||||
Interest expense | (4,535 | ) | (3,791 | ) | ||||
Gain on real estate dispositions | 3,395 | 26,674 | ||||||
Change in fair value of interest rate derivatives | 294 | (2,389 | ) | |||||
Other income | 37 | 76 | ||||||
Income tax provision | (302 | ) | (218 | ) | ||||
Net income | $ | 8,753 | $ | 26,533 |
March 31, 2017 | December 31, 2016 | |||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
Notional Amount | Fair Value | Notional Amount | Fair Value | |||||||||||||||||||||
Asset | Liability | Asset | Liability | |||||||||||||||||||||
Interest rate swaps | $ | 56,214 | $ | — | $ | (568 | ) | $ | 56,901 | $ | — | $ | (829 | ) | ||||||||||
Interest rate caps | 270,000 | 479 | — | 270,000 | 259 | — | ||||||||||||||||||
Total | $ | 326,214 | $ | 479 | $ | (568 | ) | $ | 326,901 | $ | 259 | $ | (829 | ) |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
(Unaudited) | ||||||||
Interest rate swaps | $ | 261 | $ | (2,244 | ) | |||
Interest rate caps | 33 | (145 | ) | |||||
Total | $ | 294 | $ | (2,389 | ) | |||
Income statement presentation: | ||||||||
Change in fair value of interest rate derivatives | $ | 294 | $ | (2,389 | ) | |||
Total | $ | 294 | $ | (2,389 | ) |
March 31, 2017 | December 31, 2016 | |||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
(Unaudited) | ||||||||||||||||
Indebtedness | $ | 522,394 | $ | 522,438 | $ | 522,180 | $ | 527,414 | ||||||||
Interest rate swap liabilities | 568 | 568 | 829 | 829 | ||||||||||||
Interest rate cap assets | 479 | 479 | 259 | 259 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | adverse economic or real estate developments, either nationally or in the markets in which our properties are located; |
• | our failure to develop the properties in our development pipeline successfully, on the anticipated timeline or at the anticipated costs; |
• | our failure to generate sufficient cash flows to service our outstanding indebtedness; |
• | defaults on, early terminations of or non-renewal of leases by tenants, including significant tenants; |
• | bankruptcy or insolvency of a significant tenant or a substantial number of smaller tenants; |
• | difficulties in identifying or completing development, acquisition or disposition opportunities; |
• | our failure to successfully operate developed and acquired properties; |
• | our failure to generate income in our general contracting and real estate services segment in amounts that we anticipate; |
• | fluctuations in interest rates and increased operating costs; |
• | our failure to obtain necessary outside financing on favorable terms or at all; |
• | our inability to extend the maturity of or refinance existing debt or comply with the financial covenants in the agreements that govern our existing debt; |
• | financial market fluctuations; |
• | risks that affect the general retail environment or the market for office properties or multifamily units; |
• | the competitive environment in which we operate; |
• | decreased rental rates or increased vacancy rates; |
• | conflicts of interests with our officers and directors; |
• | lack or insufficient amounts of insurance; |
• | environmental uncertainties and risks related to adverse weather conditions and natural disasters; |
• | other factors affecting the real estate industry generally; |
• | our failure to maintain our qualification as a real estate investment trust (“REIT”) for U.S. federal income tax purposes; |
• | limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our qualification as a REIT for U.S. federal income tax purposes; and |
• | changes in governmental regulations or interpretations thereof, such as real estate and zoning laws and increases in real property tax rates and taxation of REITs. |
Property | Segment | Location | Ownership Interest | ||||
4525 Main Street | Office | Virginia Beach, Virginia* | 100 | % | |||
Armada Hoffler Tower | Office | Virginia Beach, Virginia* | 100 | % | |||
Commonwealth of Virginia - Chesapeake | Office | Chesapeake, Virginia | 100 | % | |||
Commonwealth of Virginia - Virginia Beach | Office | Virginia Beach, Virginia | 100 | % | |||
One Columbus | Office | Virginia Beach, Virginia* | 100 | % | |||
Two Columbus | Office | Virginia Beach, Virginia* | 100 | % | |||
249 Central Park Retail | Retail | Virginia Beach, Virginia* | 100 | % | |||
Alexander Pointe | Retail | Salisbury, North Carolina | 100 | % | |||
Bermuda Crossroads | Retail | Chester, Virginia | 100 | % | |||
Broad Creek Shopping Center | Retail | Norfolk, Virginia | 100 | % | |||
Broadmoor Plaza | Retail | South Bend, Indiana | 100 | % | |||
Brooks Crossing(1) | Retail | Newport News, Virginia | 65 | % | |||
Columbus Village | Retail | Virginia Beach, Virginia* | 100 | % | |||
Columbus Village II | Retail | Virginia Beach, Virginia* | 100 | % | |||
Commerce Street Retail | Retail | Virginia Beach, Virginia* | 100 | % | |||
Courthouse 7-Eleven | Retail | Virginia Beach, Virginia | 100 | % | |||
Dick's at Town Center | Retail | Virginia Beach, Virginia* | 100 | % | |||
Dimmock Square | Retail | Colonial Heights, Virginia | 100 | % | |||
Fountain Plaza Retail | Retail | Virginia Beach, Virginia* | 100 | % | |||
Gainsborough Square | Retail | Chesapeake, Virginia | 100 | % | |||
Greentree Shopping Center | Retail | Chesapeake, Virginia | 100 | % | |||
Hanbury Village | Retail | Chesapeake, Virginia | 100 | % | |||
Harper Hill Commons | Retail | Winston-Salem, North Carolina | 100 | % | |||
Harrisonburg Regal | Retail | Harrisonburg, Virginia | 100 | % |
Property | Segment | Location | Ownership Interest | ||||
Lightfoot Marketplace(2) | Retail | Williamsburg, Virginia | 70 | % | |||
North Hampton Market | Retail | Taylors, South Carolina | 100 | % | |||
North Point Center | Retail | Durham, North Carolina | 100 | % | |||
Oakland Marketplace | Retail | Oakland, Tennessee | 100 | % | |||
Parkway Marketplace | Retail | Virginia Beach, Virginia | 100 | % | |||
Patterson Place | Retail | Durham, North Carolina | 100 | % | |||
Perry Hall Marketplace | Retail | Perry Hall, Maryland | 100 | % | |||
Providence Plaza | Retail | Charlotte, North Carolina | 100 | % | |||
Renaissance Square | Retail | Davidson, North Carolina | 100 | % | |||
Sandbridge Commons | Retail | Virginia Beach, Virginia | 100 | % | |||
Socastee Commons | Retail | Myrtle Beach, South Carolina | 100 | % | |||
Southgate Square | Retail | Colonial Heights, Virginia | 100 | % | |||
Southshore Shops | Retail | Chesterfield, Virginia | 100 | % | |||
South Retail | Retail | Virginia Beach, Virginia* | 100 | % | |||
South Square | Retail | Durham, North Carolina | 100 | % | |||
Stone House Square | Retail | Hagerstown, Maryland | 100 | % | |||
Studio 56 Retail | Retail | Virginia Beach, Virginia* | 100 | % | |||
Tyre Neck Harris Teeter | Retail | Portsmouth, Virginia | 100 | % | |||
Waynesboro Commons | Retail | Waynesboro, Virginia | 100 | % | |||
Wendover Village | Retail | Greensboro, North Carolina | 100 | % | |||
Encore Apartments | Multifamily | Virginia Beach, Virginia* | 100 | % | |||
Johns Hopkins Village(3) | Multifamily | Baltimore, Maryland | 80 | % | |||
Liberty Apartments | Multifamily | Newport News, Virginia | 100 | % | |||
Smith's Landing | Multifamily | Blacksburg, Virginia | 100 | % | |||
The Cosmopolitan | Multifamily | Virginia Beach, Virginia* | 100 | % | |||
(1) | The Company is entitled to a preferred return of 8% on its investment in Brooks Crossing. As of March 31, 2017, the Company has not received the full amount of this return. |
(2) | The Company is entitled to a preferred return of 9% on its investment in Lightfoot Marketplace. As of March 31, 2017, the Company has not received the full amount of this return. |
(3) | See discussion of redeemable noncontrolling interest in Note 9 for additional information. The Company is entitled to a preferred return of 9% on its investment in Johns Hopkins Village. As of March 31, 2017, the Company has not received the full amount of this return. |
Property | Segment | Location | Ownership Interest | |||||
Town Center Phase VI | Multifamily | Virginia Beach, Virginia* | 100 | % | ||||
Harding Place | Multifamily | Charlotte, North Carolina | 80 | % | ||||
595 King Street | Multifamily | Charleston, South Carolina | 92.5 | % | ||||
• | Office NOI of $3.1 million compared to $3.5 million |
• | Retail NOI of $11.7 million compared to $9.4 million |
• | Multifamily NOI of $3.9 million compared to $2.7 million |
• | Office same store NOI of $2.5 million compared to $2.5 million |
• | Retail same store NOI of $6.8 million compared to $6.7 million |
• | Multifamily same store NOI of $2.7 million compared to $2.7 million |
Three Months Ended March 31, | ||||||||||||
2017 | 2016 | Change | ||||||||||
(unaudited, $ in thousands) | ||||||||||||
Rental revenues | $ | 4,906 | $ | 5,521 | $ | (615 | ) | |||||
Property expenses | 1,775 | 1,995 | (220 | ) | ||||||||
Segment NOI | $ | 3,131 | $ | 3,526 | $ | (395 | ) |
Three Months Ended March 31, | ||||||||||||
2017 | 2016 | Change | ||||||||||
(unaudited, $ in thousands) | ||||||||||||
Rental revenues | $ | 3,807 | $ | 3,921 | $ | (114 | ) | |||||
Property expenses | 1,336 | 1,390 | (54 | ) | ||||||||
Same Store NOI | $ | 2,471 | $ | 2,531 | $ | (60 | ) | |||||
Non-Same Store NOI | 660 | 995 | (335 | ) | ||||||||
Segment NOI | $ | 3,131 | $ | 3,526 | $ | (395 | ) |
Three Months Ended March 31, | ||||||||||||
2017 | 2016 | Change | ||||||||||
(unaudited, $ in thousands) | ||||||||||||
Rental revenues | $ | 15,631 | $ | 13,032 | $ | 2,599 | ||||||
Property expenses | 3,970 | 3,620 | 350 | |||||||||
Segment NOI | $ | 11,661 | $ | 9,412 | $ | 2,249 |
Three Months Ended March 31, | ||||||||||||
2017 | 2016 | Change | ||||||||||
(unaudited, $ in thousands) | ||||||||||||
Rental revenues | $ | 9,498 | $ | 9,370 | $ | 128 | ||||||
Property expenses | 2,668 | 2,703 | (35 | ) | ||||||||
Same Store NOI | $ | 6,830 | $ | 6,667 | $ | 163 | ||||||
Non-Same Store NOI | 4,831 | 2,745 | 2,086 | |||||||||
Segment NOI | $ | 11,661 | $ | 9,412 | $ | 2,249 |
Three Months Ended March 31, | ||||||||||||
2017 | 2016 | Change | ||||||||||
(unaudited, $ in thousands) | ||||||||||||
Rental revenues | $ | 6,695 | $ | 4,730 | $ | 1,965 | ||||||
Property expenses | 2,832 | 2,063 | 769 | |||||||||
Segment NOI | $ | 3,863 | $ | 2,667 | $ | 1,196 |
Three Months Ended March 31, | ||||||||||||
2017 | 2016 | Change | ||||||||||
(unaudited, $ in thousands) | ||||||||||||
Rental revenues | $ | 4,796 | $ | 4,730 | $ | 66 | ||||||
Property expenses | 2,111 | 2,063 | 48 | |||||||||
Same Store NOI | $ | 2,685 | $ | 2,667 | $ | 18 | ||||||
Non-Same Store NOI | 1,178 | — | 1,178 | |||||||||
Segment NOI | $ | 3,863 | $ | 2,667 | $ | 1,196 |
Three Months Ended March 31, | ||||||||||||
2017 | 2016 | Change | ||||||||||
(unaudited, $ in thousands) | ||||||||||||
Segment revenues | $ | 63,519 | $ | 36,803 | $ | 26,716 | ||||||
Segment expenses | 61,196 | 35,037 | 26,159 | |||||||||
Segment gross profit | $ | 2,323 | $ | 1,766 | $ | 557 | ||||||
Operating margin | 3.7 | % | 4.8 | % | (1.1 | )% |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
(unaudited, $ in thousands) | ||||||||
Beginning backlog | $ | 217,718 | $ | 83,433 | ||||
New contracts/change orders | 3,441 | 129,501 | ||||||
Work performed | (63,437 | ) | (36,754 | ) | ||||
Ending backlog | $ | 157,722 | $ | 176,180 |
Three Months Ended March 31, | ||||||||||||
2017 | 2016 | Change | ||||||||||
(unaudited, $ in thousands) | ||||||||||||
Revenues | ||||||||||||
Rental revenues | $ | 27,232 | $ | 23,283 | $ | 3,949 | ||||||
General contracting and real estate services revenues | 63,519 | 36,803 | 26,716 | |||||||||
Total revenues | 90,751 | 60,086 | 30,665 | |||||||||
Expenses | ||||||||||||
Rental expenses | 6,068 | 5,329 | 739 | |||||||||
Real estate taxes | 2,509 | 2,349 | 160 | |||||||||
General contracting and real estate services expenses | 61,196 | 35,037 | 26,159 | |||||||||
Depreciation and amortization | 9,475 | 8,149 | 1,326 | |||||||||
General and administrative expenses | 2,986 | 2,484 | 502 | |||||||||
Acquisition, development and other pursuit costs | 47 | 704 | (657 | ) | ||||||||
Impairment charges | 4 | 35 | (31 | ) | ||||||||
Total expenses | 82,285 | 54,087 | 28,198 | |||||||||
Operating income | 8,466 | 5,999 | 2,467 | |||||||||
Interest income | 1,398 | 182 | 1,216 | |||||||||
Interest expense | (4,535 | ) | (3,791 | ) | (744 | ) | ||||||
Gain on real estate dispositions | 3,395 | 26,674 | (23,279 | ) | ||||||||
Change in fair value of interest rate derivatives | 294 | (2,389 | ) | 2,683 | ||||||||
Other (expense) income | 37 | 76 | (39 | ) | ||||||||
Income before taxes | 9,055 | 26,751 | (17,696 | ) | ||||||||
Income tax provision | (302 | ) | (218 | ) | (84 | ) | ||||||
Net income | $ | 8,753 | $ | 26,533 | $ | (17,780 | ) |
Three Months Ended March 31, | ||||||||||||
2017 | 2016 | Change | ||||||||||
(unaudited, $ in thousands) | ||||||||||||
Office | $ | 4,906 | $ | 5,521 | $ | (615 | ) | |||||
Retail | 15,631 | 13,032 | 2,599 | |||||||||
Multifamily | 6,695 | 4,730 | 1,965 | |||||||||
$ | 27,232 | $ | 23,283 | $ | 3,949 |
Three Months Ended March 31, | ||||||||||||
2017 | 2016 | Change | ||||||||||
Office | $ | 1,325 | $ | 1,456 | $ | (131 | ) | |||||
Retail | 2,520 | 2,336 | 184 | |||||||||
Multifamily | 2,223 | 1,537 | 686 | |||||||||
$ | 6,068 | $ | 5,329 | $ | 739 |
Three Months Ended March 31, | ||||||||||||
2017 | 2016 | Change | ||||||||||
(unaudited, $ in thousands) | ||||||||||||
Office | $ | 450 | $ | 539 | $ | (89 | ) | |||||
Retail | 1,450 | 1,284 | 166 | |||||||||
Multifamily | 609 | 526 | 83 | |||||||||
$ | 2,509 | $ | 2,349 | $ | 160 |
• | Total leverage ratio of the Company of not more than 60% (or 65% for the two consecutive quarters following any acquisition that is equal to or greater than 10% of our total asset value (as defined in the credit agreement), but only up to two times during the term of the credit facility); |
• | Ratio of adjusted EBITDA to fixed charges of the Company of not less than 1.50 to 1.0; |
• | Tangible net worth of not less than the sum of $220.0 million and 75% of the net equity proceeds received after December 31, 2014; |
• | Ratio of variable rate indebtedness to total asset value of not more than 30%; |
• | Ratio of secured indebtedness to total asset value of not more than 45%; and |
• | Ratio of secured recourse debt to total asset value of not more than 25%. |
Amount Outstanding | Interest Rate(a) | Effective Rate for Variable Debt | Maturity Date | Balance at Maturity | ||||||||||||
Secured Debt | ||||||||||||||||
249 Central Park Retail | $ | 17,021 | (b) | LIBOR+1.95% | 2.93 | % | August 8, 2021 | $ | 15,959 | |||||||
South Retail | 7,468 | (b) | LIBOR+1.95% | 2.93 | % | August 8, 2021 | 7,002 | |||||||||
Fountain Plaza Retail | 10,247 | (b) | LIBOR+1.95% | 2.93 | % | August 8, 2021 | 9,608 | |||||||||
4525 Main Street | 32,034 | (c) | 3.25 | % | September 10, 2021 | 30,774 | ||||||||||
Encore Apartments | 24,966 | (c) | 3.25 | % | September 10, 2021 | 24,006 | ||||||||||
Harrisonburg Regal | 3,202 | 6.06 | % | June 8, 2017 | 3,165 | |||||||||||
Commonwealth of Virginia – Chesapeake | 4,933 | LIBOR+1.90% | 2.88 | % | August 28, 2017 | 4,933 | ||||||||||
Hanbury Village | 20,635 | 6.67 | % | October 11, 2017 | 20,499 | |||||||||||
Lightfoot Marketplace | 12,894 | LIBOR+1.90% | 2.88 | % | November 14, 2017 | 12,194 | ||||||||||
Sandbridge Commons | 9,314 | LIBOR+1.85% | 2.83 | % | January 17, 2018 | 9,129 | ||||||||||
Southgate Square | 21,150 | LIBOR+2.00% | 2.98 | % | April 29, 2021 | 18,925 | ||||||||||
Columbus Village Note 1 | 6,215 | LIBOR+2.00% | 3.05 | % | (d) | April 5, 2018 | 6,033 | |||||||||
Columbus Village Note 2 | 2,254 | LIBOR+2.00% | 2.98 | % | April 5, 2018 | 2,207 | ||||||||||
Johns Hopkins Village | 45,093 | LIBOR+1.90% | 2.88 | % | July 30, 2018 | 43,841 | ||||||||||
North Point Note 1 | 9,726 | 6.45 | % | February 5, 2019 | 9,333 | |||||||||||
Socastee Commons | 4,842 | (e) | 4.57 | % | January 6, 2023 | 4,223 | ||||||||||
North Point Note 2 | 2,539 | 7.25 | % | September 15, 2025 | 1,344 | |||||||||||
Smith's Landing | 20,325 | 4.05 | % | June 1, 2035 | — | |||||||||||
Liberty Apartments | 19,925 | (e) | 5.66 | % | November 1, 2043 | — | ||||||||||
The Cosmopolitan | 45,721 | 3.75 | % | July 1, 2051 | — | |||||||||||
Total secured debt | $ | 320,504 | $ | 223,175 | ||||||||||||
Unsecured Debt | ||||||||||||||||
Revolving credit facility | 82,000 | LIBOR+1.40% to 2.00% | 2.53 | % | February 20, 2019 | 82,000 | ||||||||||
Term loan | 75,000 | LIBOR+1.35% to 1.95% | 2.48 | % | February 20, 2020 | 75,000 | ||||||||||
Term loan | 50,000 | LIBOR+1.35% to 1.95% | 3.50 | % | (b) | February 20, 2020 | 50,000 | |||||||||
Total unsecured debt | $ | 207,000 | $ | 207,000 | ||||||||||||
Unamortized GAAP adjustments | (5,110 | ) | — | |||||||||||||
Indebtedness, net | $ | 522,394 | $ | 430,175 | ||||||||||||
Year(1) | Amount Due | Percentage of Total | ||||||
2016 | $ | 44,380 | 8 | % | ||||
2017 | 65,780 | 12 | % | |||||
2018 | 94,818 | 18 | % | |||||
2019 | 129,482 | 25 | % | |||||
2020 | 109,862 | 21 | % | |||||
Thereafter | 83,182 | 16 | % | |||||
$ | 527,504 | 100 | % | |||||
Effective Date | Maturity Date | Strike Rate | Notional Amount | ||||||
October 26, 2015 | October 15, 2017 | 1.25 | % | 75,000 | |||||
February 25, 2016 | March 1, 2018 | 1.50 | % | 75,000 | |||||
June 17, 2016 | June 17, 2018 | 1.00 | % | 70,000 | |||||
February 7, 2017 | March 1, 2019 | 1.50 | % | 50,000 | |||||
Total | $ | 270,000 |
Three Months Ended March 31, | ||||||||||||
2017 | 2016 | Change | ||||||||||
($ in thousands) | ||||||||||||
Operating Activities | $ | 7,907 | $ | 11,308 | $ | (3,401 | ) | |||||
Investing Activities | (13,347 | ) | (111,103 | ) | 97,756 | |||||||
Financing Activities | (6,463 | ) | 91,616 | (98,079 | ) | |||||||
Net Increase (Decrease) | $ | (11,903 | ) | $ | (8,179 | ) | $ | (3,724 | ) | |||
Cash and Cash Equivalents, Beginning of Period | $ | 21,942 | $ | 26,989 | ||||||||
Cash and Cash Equivalents, End of Period | $ | 10,039 | $ | 18,810 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
(unaudited, $ in thousands) | ||||||||
Net income | $ | 8,753 | $ | 26,533 | ||||
Depreciation and amortization | 9,475 | 8,149 | ||||||
Gain on real estate dispositions | (3,395 | ) | (26,244 | ) | ||||
Funds from operations | $ | 14,833 | $ | 8,438 | ||||
Acquisition, development and other pursuit costs | 47 | 704 | ||||||
Impairment charges | 4 | 35 | ||||||
Change in fair value of interest rate derivatives | $ | (294 | ) | $ | 2,389 | |||
Normalized funds from operations | $ | 14,590 | $ | 11,566 | ||||
Net income per diluted share and unit | $ | 0.16 | $ | 0.57 | ||||
FFO per diluted share and unit | $ | 0.27 | $ | 0.18 | ||||
Normalized FFO per diluted share and unit | $ | 0.26 | $ | 0.25 | ||||
Weighted average common shares and units - diluted | 55,475 | 46,218 |
Total Number of | |||||||||||
Shares Purchased | Maximum Number of | ||||||||||
as Part of Publicly | Shares that May Yet be | ||||||||||
Total Number of | Average Price | Announced Plans | Purchased Under the | ||||||||
Period | Shares Purchased(1) | Paid for Shares(1) | or Programs | Plans or Programs | |||||||
January 1, 2017 through January 31, 2017 | — | $ | — | N/A | N/A | ||||||
February 1, 2017 through February 28, 2017 | — | — | N/A | N/A | |||||||
March 1, 2017 through March 31, 2017 | 20,691 | 13.99 | N/A | N/A | |||||||
Total | 20,691 | 13.99 |
(1) | The number of shares purchased represents shares of common stock surrendered by certain of our employees to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted shares of common stock issued under the 2013 Plan. With respect to these shares, the price paid per share is based on the fair value at the time of surrender. |
ARMADA HOFFLER PROPERTIES, INC. | |
Date: May 3, 2017 | /s/ LOUIS S. HADDAD |
Louis S. Haddad | |
President and Chief Executive Officer | |
(Principal Executive Officer) | |
Date: May 3, 2017 | /s/ MICHAEL P. O’HARA |
Michael P. O’Hara | |
Chief Financial Officer and Treasurer | |
(Principal Accounting and Financial Officer) |
Exhibit No. | Description | |
15.1 | Acknowledgment of Ernst & Young LLP, Independent Registered Public Accounting Firm | |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
101.DEF | XBRL Definition Linkbase |
• | 333-188545 on Form S-8, dated May 10, 2013 |
• | 333-204063 on Form S-3, dated May 11, 2015 and June 1, 2015 (Amendment No. 1) |
• | 333-214176 on Form S-3, dated October 19, 2016 |
• | 333-216795 on Form S-3, dated March 17, 2017 |
1. | I have reviewed this Quarterly Report on Form 10-Q of Armada Hoffler Properties, Inc. |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 3, 2017 | /s/ LOUIS S. HADDAD | |
Louis S. Haddad | ||
President and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Armada Hoffler Properties, Inc. |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 3, 2017 | /s/ MICHAEL P. O’HARA | |
Michael P. O’Hara | ||
Chief Financial Officer and Treasurer |
1. | the Quarterly Report for the period ended March 31, 2017 of the Company (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: May 3, 2017 | /s/ LOUIS S. HADDAD | |
Louis S. Haddad | ||
President and Chief Executive Officer |
1. | the Quarterly Report for the period ended March 31, 2017 of the Company (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: May 3, 2017 | /s/ MICHAEL P. O’HARA | |
Michael P. O’Hara | ||
Chief Financial Officer and Treasurer |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
May 01, 2017 |
|
Document And Entity Information [Abstract] | ||
Entity Registrant Name | Armada Hoffler Properties, Inc. | |
Entity Central Index Key | 0001569187 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q1 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 38,015,135 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, shares issued (in shares) | 37,813,127 | 37,490,361 |
Common stock, shares outstanding (in shares) | 37,813,127 | 37,490,361 |
Business of Organization |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business of Organization | Business of Organization Armada Hoffler Properties, Inc. (the “Company”) is a full service real estate company with extensive experience developing, building, owning and managing high-quality, institutional-grade office, retail and multifamily properties in attractive markets primarily throughout the Mid-Atlantic United States. The Company is the sole general partner of Armada Hoffler, L.P. (the “Operating Partnership”). The operations of the Company are carried on primarily through the Operating Partnership and the wholly owned subsidiaries of the Operating Partnership. Both the Company and the Operating Partnership were formed on October 12, 2012 and commenced operations upon completion of the underwritten initial public offering of shares of the Company’s common stock and certain related formation transactions on May 13, 2013. As of March 31, 2017, the Company's operating property portfolio consisted of the following properties:
*Located in the Town Center of Virginia Beach As of March 31, 2017, the following properties that the Company consolidates for financial statement purposes were under development or construction:
*Located in the Town Center of Virginia Beach Please see Note 5 for information related to the Company’s investment in Durham City Center II, LLC, which is an unconsolidated subsidiary that the Company accounts for using the equity method of accounting. |
Summary of Significant Accounting Policies |
3 Months Ended |
---|---|
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The condensed consolidated financial statements include the financial position and results of operations of the Company, the Operating Partnership and its consolidated subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for the fair presentation of the financial condition and results of operations for the interim periods presented. The accompanying condensed consolidated financial statements were prepared in accordance with the requirements for interim financial information. Accordingly, these interim financial statements have not been audited and exclude certain disclosures required for annual financial statements. Also, the operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These interim financial statements should be read in conjunction with the audited consolidated financial statements of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed. Such estimates are based on management’s historical experience and best judgment after considering past, current and expected events and economic conditions. Actual results could differ from management’s estimates. Significant Accounting Policies The accompanying condensed consolidated financial statements were prepared on the basis of the accounting principles described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. Recent Accounting Pronouncements On May 28, 2014, the FASB issued a new standard that provides a single, comprehensive model for recognizing revenue from contracts with customers. While the new standard does not supersede the guidance on accounting for leases, it could change the way the Company recognizes revenue from construction and development contracts with third party customers. The new standard will be effective for the Company on January 1, 2018. The Company plans to adopt the new standard using the full retrospective method. A substantial portion of our revenue consists of rental revenues from leasing arrangements, such as base rent, which is specifically excluded from the revenue guidance. Non-lease components, such as tenant reimbursements for common area maintenance will be subject to the revenue guidance. Management is currently evaluating the potential impact of the new revenue standard on the Company’s consolidated financial statements. The Company does not expect the new standard to have a material impact on the measure and recognition of gains and losses on the sale of properties. On February 25, 2016, the FASB issued a new lease standard that requires lessees to recognize most leases in their balance sheets as lease liabilities with corresponding right-of-use assets. The new standard also makes targeted changes to lessor accounting. The new standard will be effective for the Company on January 1, 2019 and requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application with an option to use certain transition relief. Management is currently evaluating the potential impact of the new lease standard on the Company’s consolidated financial statements. On March 30, 2016, the FASB issued new guidance that will change the accounting for certain aspects of share-based payments to employees. Entities will be required to recognize the income tax effects of awards in the income statement when the awards vest or are settled, and allows the Company to account for forfeitures as they occur. The new guidance is effective for the Company on January 1, 2017. The Company adopted the guidance on January 1, 2017 and it did not have a material impact on the Company’s consolidated financial statements. On August 26, 2016, the FASB issued new guidance that addresses eight classification issues related to the statement of cash flows. Early adoption is permitted, including adoption in an interim period. This guidance should be applied retrospectively to each period presented. This new guidance is effective for the Company on January 1, 2018. Management is currently evaluating the potential impact of the new guidance on the Company’s consolidated financial statements. On February 22, 2017, the FASB issued new guidance that clarifies the scope and application of guidance on sales or transfers of nonfinancial assets and in substance nonfinancial assets to customers, including partial sales. The new guidance applies to all nonfinancial assets, including real estate, and defines an in substance nonfinancial asset. The new guidance will be effective for the Company on January 1, 2018, with early adoption permitted. Management is currently evaluating the potential impact of the new revenue standard on the Company’s consolidated financial statements. |
Segments |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segments | Segments Net operating income (segment revenues minus segment expenses) is the measure used by the Company’s chief operating decision-maker to assess segment performance. Net operating income is not a measure of operating income or cash flows from operating activities as measured by GAAP and is not indicative of cash available to fund cash needs. As a result, net operating income should not be considered an alternative to cash flows as a measure of liquidity. Not all companies calculate net operating income in the same manner. The Company considers net operating income to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the core operations of the Company’s real estate and construction businesses. Net operating income of the Company’s reportable segments for the three months ended March 31, 2017 and 2016 was as follows (in thousands):
General contracting and real estate services revenues for the three months ended March 31, 2017 exclude revenue related to intercompany construction contracts of $5.9 million. General contracting and real estate services expenses for the three months ended March 31, 2017 exclude expenses related to intercompany construction contracts of $5.7 million. General contracting and real estate services expenses for the three months ended March 31, 2017 include noncash stock compensation expense of less than $0.3 million. General contracting and real estate services revenues for the three months ended March 31, 2016 exclude revenue from intercompany construction contracts of $15.0 million. General contracting and real estate services expenses for the three months ended March 31, 2016 exclude expenses for intercompany construction contracts of $14.8 million. General contracting and real estate services expenses for the three months ended March 31, 2016 include noncash stock compensation expense of less than $0.2 million. The following table reconciles net operating income to net income for the three months ended March 31, 2017 and 2016 (in thousands):
General and administrative expenses for the three months ended March 31, 2017 include noncash stock compensation expense of $0.4 million. General and administrative expenses for the three months ended March 31, 2016 include noncash stock compensation expense of $0.3 million. |
Real Estate Investments |
3 Months Ended |
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Mar. 31, 2017 | |
Real Estate [Abstract] | |
Real Estate Investments | Real Estate Investments Property Acquisitions On January 4, 2017, the Company acquired undeveloped land in Charleston, South Carolina for a contract price of $7.1 million plus capitalized acquisition costs of $0.2 million. The Company intends to use the land for future development. Property Dispositions On January 20, 2017, the Company completed the sale of the Wawa outparcel at Greentree Shopping Center. Net proceeds after transaction costs were $4.4 million. The gain on the disposition was $3.4 million. Subsequent to March 31, 2017 On April 20, 2017, the Company entered into an agreement to sell the Courthouse 7-Eleven property for $2.4 million. The Company expects the sale to close in the third quarter of 2017. |
Equity Method Investments |
3 Months Ended |
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Mar. 31, 2017 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Equity Method Investments | Equity Method Investments City Center On February 25, 2016, the Company acquired a 37% interest in Durham City Center II, LLC (“City Center”) for purposes of developing a 22-story mixed use tower in Durham, North Carolina. As of March 31, 2017 and December 31, 2016, the Company has invested $10.8 million and $10.3 million, respectively, in City Center. The Company has agreed to guarantee 37% of the construction loan for City Center; however, the loan is collateralized by 100% of the assets of City Center. As of March 31, 2017, $4.9 million has been drawn against the construction loan. As of March 31, 2017 and December 31, 2016, the difference between the carrying value of the Company’s initial investment in City Center and the amount of underlying equity was immaterial. For the three months ended March 31, 2017 and 2016, City Center did not have any operating activity, and therefore the Company did not receive any dividends or allocated income. Based on the terms of City Center’s operating agreement, the Company has concluded that City Center is a variable interest entity, and that the Company holds a variable interest. The Company does not have the power to direct the activities of the project that most significantly impact its performance. Accordingly, the Company is not the project’s primary beneficiary and, therefore, does not consolidate City Center in its consolidated financial statements. |
Notes Receivable |
3 Months Ended |
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Mar. 31, 2017 | |
Receivables [Abstract] | |
Notes Receivable | Notes Receivable Point Street Apartments On October 15, 2015, the Company agreed to invest up to $28.2 million in the Point Street Apartments project in the Harbor Point area of Baltimore, Maryland. Point Street Apartments is an estimated $93.0 million development project with plans for a 17-story building comprised of 289 residential units and 18,000 square feet of street-level retail space. Beatty Development Group (“BDG”) is the developer of the project and has engaged the Company to serve as construction general contractor. Point Street Apartments is scheduled to open in 2017; however, management can provide no assurances that Point Street Apartments will open on the anticipated timeline. BDG secured a senior construction loan of up to $70.0 million to fund the development and construction of Point Street Apartments on November 10, 2016. The Company has agreed to guarantee $25.0 million of the senior construction loan in exchange for the option to purchase up to an 88% controlling interest in Point Street Apartments upon completion of the project as follows: (i) an option to purchase a 79% indirect interest in Point Street Apartments for $27.3 million, exercisable within 1 year from the project’s completion (the “First Option”) and (ii) provided that the Company has exercised the First Option, an option to purchase an additional 9% indirect interest in Point Street Apartments for $3.1 million, exercisable within 27 months from the project’s completion (the “Second Option”). The Company currently has a $2.1 million letter of credit for the guarantee of the senior construction loan. The Company’s investment in the Point Street Apartments project is in the form of a loan under which BDG may borrow up to $28.2 million (the “BDG loan”). Interest on the BDG loan accrues at 8.0% per annum and matures on the earlier of: (i) November 1, 2018, which may be extended by BDG under two one-year extension options, (ii) the maturity date or earlier termination of the senior construction loan or (iii) the date the Company exercises the Second Option as described further below. In the event the Company exercises the First Option, BDG is required to pay down the outstanding BDG loan in full, with the difference between the BDG loan and $28.2 million applied to the senior construction loan. In the event the Company exercises the Second Option, BDG is required to simultaneously repay any remaining amounts outstanding under the BDG loan, with any excess proceeds received from the exercise of the Second Option applied against the senior construction loan. In the event the Company does not exercise either the First Option or the Second Option, the interest rate on the BDG loan will automatically be reduced to the interest rate on the senior construction loan for the remaining term of the BDG loan. As of March 31, 2017 and December 31, 2016, the Company had funded $21.1 million and $20.6 million, respectively, under the BDG loan. During the three months ended March 31, 2017 and 2016, the Company recognized $0.4 million and $0.2 million, respectively, of interest income on the BDG loan. No portion of the note receivable is past due and the Company has not recorded an impairment balance on the note. Management has concluded that this entity is a VIE. Because BDG is the developer of Point Street Apartments, the Company does not have the power to direct the activities of the project that most significantly impact its performance, nor is the Company the party most closely associated with the project. Therefore, the Company is not the project's primary beneficiary. Annapolis Junction On April 21, 2016, the Company entered into a note receivable with a maximum balance of $48.1 million in the Annapolis Junction residential component of the Annapolis Junction Town Center project in Maryland (“Annapolis Junction”). Annapolis Junction is an estimated $102.0 million mixed-use development project with plans for 416 residential units, 17,000 square feet of retail space and a 150-room hotel. Annapolis Junction Apartments Owner, LLC (“AJAO”) is the developer of the residential component and has engaged the Company to serve as construction general contractor for the residential component. Annapolis Junction is scheduled to open in 2017; however, management can provide no assurances that Annapolis Junction will open on the anticipated timeline or at the anticipated cost. AJAO secured a senior construction loan of up to $60.0 million to fund the development and construction of Annapolis Junction's residential component on September 30, 2016. The Company has agreed to guarantee up to $25.0 million of the senior construction loan in exchange for the option to purchase up to an 88% controlling interest in Annapolis Junction upon completion of the project as follows: (i) an option to purchase an 80% indirect interest in Annapolis Junction's residential component for the lesser of the seller’s budgeted or actual cost, exercisable within one year from the project’s completion (the “First Option”) and (ii) provided that the Company has exercised the First Option, an option to purchase an additional 8% indirect interest in Annapolis Junction for the lesser of the seller’s actual or budgeted cost, exercisable within 27 months from the project’s completion (the “Second Option”). The Company’s investment in the Annapolis Junction project is in the form of a loan under which AJAO may borrow up to $48.1 million, including a $6.0 million interest reserve (the “AJAO loan”). Interest on the AJAO loan accrues at 10.0% per annum and matures on the earlier of: (i) December 21, 2020, which may be extended by AJAO under two one-year extension options, (ii) the maturity date or earlier termination of the senior construction loan or (iii) the date the Company exercises the Second Option as described further below. In the event that the Company exercises the First Option, AJAO is required to simultaneously pay down both the senior construction loan and the AJAO loan by 80%, at which time the interest rate on the AJAO loan will automatically be reduced to the interest rate on the senior construction loan. In the event the Company exercises the Second Option, AJAO is required to simultaneously repay any remaining amounts outstanding under the AJAO loan, with any excess proceeds received from the exercise of the Second Option applied against the remaining balance of the senior construction loan. In the event that the Company does not exercise either the First Option or the Second Option, the interest rate on the AJAO loan will automatically be reduced to the interest rate on the senior construction loan for the remaining term of the AJAO loan. As of March 31, 2017 and December 31, 2016, the Company had funded $39.9 million and $38.9 million, respectively, on the AJAO loan. During the three months ended March 31, 2017, the Company recognized $1.0 million of interest income on the AJAO loan. No portion of the note receivable balance is past due and the Company has not recorded an impairment balance on the note. Management has concluded that this entity is a VIE. Because AJAO is the developer of Point Street Apartments, the Company does not have the power to direct the activities of the project that most significantly impact its performance, nor is the Company the party most closely associated with the project. Therefore, the Company is not the project's primary beneficiary. |
Indebtedness |
3 Months Ended |
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Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Indebtedness | Indebtedness Credit Facility On February 20, 2015, the Operating Partnership, as borrower, and the Company, as parent guarantor, entered into a new $200.0 million senior unsecured credit facility that includes a $150.0 million senior unsecured revolving credit facility and a $50.0 million senior unsecured term loan facility. During 2016, the Company increased the borrowings under the senior unsecured term loan facility to $100.0 million. During the first quarter of 2017, the Company increased the borrowings under the senior unsecured term loan facility to $125.0 million, increasing the total capacity of the credit facility to $275.0 million pursuant to the accordion feature. Depending on the Operating Partnership’s total leverage, the revolving credit facility bears interest at LIBOR plus 1.40% to 2.00% and the term loan facility bears interest at LIBOR plus 1.35% to 1.95%. As of March 31, 2017, the effective interest rates on the revolving credit facility and the term loan facility were 2.53% and 2.48%, respectively. The revolving credit facility has a scheduled maturity date of February 20, 2019, with a one-year extension option, subject to certain conditions, and the term loan facility has a scheduled maturity date of February 20, 2020. The Operating Partnership may, at any time, voluntarily prepay any loan under the credit facility in whole or in part without premium or penalty. On February 25, 2016, the Company amended the credit facility to, among other things, allow the maximum leverage ratio of the Company to be increased to 65% for the two consecutive quarters following any acquisition that is equal to or greater than 10% of the Company’s total asset value (as defined in the credit agreement), but only up to two times during the term of the credit facility. As of March 31, 2017, the outstanding balances on the revolving credit facility and the term loan facility were $82.0 million and $125.0 million, respectively. Other Financing Activity On February 1, 2017, the Company paid off the North Point Center Note 5 in full for $0.6 million. On February 24, 2017, the Company secured a $29.8 million construction loan for the Harding Place project in Charlotte, North Carolina. During the three months ended March 31, 2017, the Company borrowed $1.9 million under its construction loans to fund new development and construction. Subsequent to March 31, 2017 On April 4, 2017, the Company increased its borrowings under the revolving credit facility by $18.0 million. On April 7, 2017, the Company paid off the Harrisonburg Regal note in full for $3.2 million. On April 19, 2017, the Company entered into a second amendment to the credit agreement for the Lightfoot Marketplace loan, which amended certain definitions and covenant requirements. |
Derivative Financial Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | Derivative Financial Instruments The Company may enter into interest rate derivative contracts to manage exposure to interest rate risks. The Company does not use derivative financial instruments for trading or speculative purposes. Derivative financial instruments are recognized at fair value and presented within other assets and liabilities in the condensed consolidated balance sheets. Gains and losses resulting from changes in the fair value of derivatives that are neither designated nor qualify as hedging instruments are recognized within the change in fair value of interest rate derivatives in the condensed consolidated statements of income. For derivatives that qualify as cash flow hedges, the effective portion of the gain or loss is reported as a component of other comprehensive loss and reclassified into earnings in the periods during which the hedged forecasted transaction affects earnings. On February 1, 2017, the North Point Center Note 5 was paid in full, which terminated the interest rate swap agreement associated with the note. The loss on the interest rate swap agreement was not significant. On February 7, 2017, the Operating Partnership entered into a LIBOR interest rate cap agreement on a notional amount of $50.0 million at a strike rate of 1.50% for a premium of less than $0.2 million. The interest rate cap agreement expires on March 1, 2019. The Company’s derivatives were comprised of the following as of March 31, 2017 and December 31, 2016 (in thousands):
The changes in the fair value of the Company’s derivatives during the three months ended March 31, 2017 and 2016 were comprised of the following (in thousands):
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Equity |
3 Months Ended |
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Mar. 31, 2017 | |
Equity [Abstract] | |
Equity | Equity Stockholders’ Equity On May 4, 2016, the Company commenced an at-the-market continuous equity offering program (the “ATM Program”) through which the Company may, from time to time, issue and sell shares of its common stock having an aggregate offering price of up to $75.0 million. During the three months ended March 31, 2017, the Company issued and sold an aggregate of 248,559 shares of common stock at a weighted average price of $14.17 per share under the ATM Program, receiving net proceeds after offering costs and commissions of $3.4 million. As of March 31, 2017 and December 31, 2016, the Company’s authorized capital was 500 million shares of common stock and 100 million shares of preferred stock. The Company had 37,813,127 and 37,490,361 shares of common stock issued and outstanding as of March 31, 2017 and December 31, 2016, respectively. No shares of preferred stock were issued and outstanding as of March 31, 2017 or December 31, 2016. Redeemable Noncontrolling Interests The noncontrolling interest holder of Johns Hopkins Village has the option to redeem the 20% noncontrolling interest in that entity (the "Put Option"). Currently, the Put Option may be redeemed for $2.0 million in cash or the equivalent amount in Class A units of limited partnership interest in the Operating Partnership ("Class A Units"), which is at the holder's control. Upon the first anniversary of the certificate of occupancy, which occurs in August 2017, the Put Option may be settled for the fair value of the 20% noncontrolling interest in Johns Hopkins Village, as determined by appraised value. Because the timing of the Put Option's redemption is outside of the Company's control, it has been included in temporary equity. Upon the exercise of the Put Option, it will be reclassed into permanent equity. Noncontrolling Interests As of March 31, 2017 and December 31, 2016, the Company held a 67.9% and 68.1% interest, respectively, in the Operating Partnership. The Company is the primary beneficiary of the Operating Partnership as it has the power to direct the activities of the Operating Partnership and the rights to absorb 67.9% of the net income of the Operating Partnership. As the primary beneficiary, the Company consolidates the financial position and results of operations of the Operating Partnership. Noncontrolling interests in the Company represent units of limited partnership interest in the Operating Partnership not held by the Company. The noncontrolling interest for the consolidated entities under development or construction (see Note 1) was zero as of March 31, 2017 and December 31, 2016. As of March 31, 2017, there were 16,583,610 Class A Units not held by the Company. As partial consideration for Columbus Village, the Operating Partnership issued 1,000,000 Class B Units on July 10, 2015 and issued 275,000 Class C Units on January 10, 2017. Subject to the occurrence of certain events, the Class B Units and Class C Units will not earn or accrue distributions until July 10, 2017 and January 10, 2018, respectively, at which time each automatically will convert to Class A Units. On January 10, 2017, the Operating Partnership issued 68,691 Class A Units to acquire the remaining 20% interest in the Town Center Phase VI project. Common Stock Dividends and Class A Unit Distributions On January 5, 2017, the Company paid cash dividends of $6.7 million to common stockholders and the Operating Partnership paid cash distributions of $3.0 million to holders of Class A Units. On February 2, 2017, the Board of Directors declared a cash dividend of $0.19 per share payable on April 6, 2017 to stockholders of record on March 29, 2017. Subsequent to March 31, 2017 On April 6, 2017, the Company paid cash dividends of $7.2 million to common stockholders and the Operating Partnership paid cash distributions of $3.2 million to holders of Class A Units. From April 1, 2017 to April 13, 2017, the Company issued and sold an aggregate of 202,131 shares of common stock under the ATM Program at a weighted average price of $13.97 per share. Net proceeds to the Company after offering costs and commissions were $2.8 million. |
Stock-Based Compensation |
3 Months Ended |
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Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation During the three months ended March 31, 2017, the Company granted an aggregate of 94,991 shares of restricted stock to employees and non-employee directors with a weighted average grant date fair value of $13.99 per share. Employee restricted stock awards generally vest over a period of two years: one-third immediately on the grant date and the remaining two-thirds in equal amounts on the first two anniversaries following the grant date, subject to continued service to the Company. Non-employee director restricted stock awards vest either immediately upon grant or over a period of one year, subject to continued service to the Company. During the three months ended March 31, 2017, the Company issued performance-based awards in the form of restricted stock units to certain employees. The performance period for these awards is three years, with a required two-year service period immediately following the expiration of the performance period. The compensation expense and the effect on the Company’s weighted average diluted shares calculation were immaterial. During the three months ended March 31, 2017 and 2016, the Company recognized $0.7 million and $0.6 million, respectively, of stock-based compensation expense. As of March 31, 2017, there were 111,382 nonvested restricted shares outstanding; the total unrecognized compensation expense related to nonvested restricted shares was $1.0 million, which the Company expects to recognize over the next 23 months. |
Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments Fair value measurements are based on assumptions that market participants would use in pricing an asset or a liability. The hierarchy for inputs used in measuring fair value is as follows: Level 1—quoted prices in active markets for identical assets or liabilities Level 2—observable inputs other than quoted prices in active markets for identical assets and liabilities Level 3—unobservable inputs Except as disclosed below, the carrying amounts of the Company’s financial instruments approximate their fair value. Financial assets and liabilities whose fair values are measured on a recurring basis using Level 2 inputs consist of interest rate swaps and caps. The Company measures the fair values of these assets and liabilities based on prices provided by independent market participants that are based on observable inputs using market-based valuation techniques. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. For disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. The fair value of the Company’s long term debt is sensitive to fluctuations in interest rates. Discounted cash flow analysis based on Level 2 inputs is generally used to estimate the fair value of the Company’s long term debt. Considerable judgment is used to estimate the fair value of financial instruments. The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. The carrying amounts and fair values of the Company’s financial instruments, all of which are based on Level 2 inputs, as of March 31, 2017 and December 31, 2016, were as follows (in thousands):
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Related Party Transactions |
3 Months Ended |
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Mar. 31, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions The Company provides general contracting and real estate services to certain related party entities that are not included in these condensed consolidated financial statements. Revenue from construction contracts with related party entities of the Company were $6.6 million for the three months ended March 31, 2017. Gross profit from such contracts was $0.2 million for the three months ended March 31, 2017. Revenue from construction contracts with related party entities of the Company was $6.5 million for the three months ended March 31, 2016. Gross profit from such contracts was less than $0.3 million for the three months ended March 31, 2016. Real estate services fees from affiliated entities of the Company were not significant for either the three months ended March 31, 2017 or 2016. In addition, affiliated entities also reimburse the Company for monthly maintenance and facilities management services provided to the properties. Cost reimbursements earned by the Company from affiliated entities were not significant for either the three months ended March 31, 2017 or 2016. The Operating Partnership entered into tax protection agreements that indemnify certain directors and executive officers of the Company from their tax liabilities resulting from the potential future sale of certain of the Company’s properties within seven (or, in a limited number of cases, ten) years of the completion of the Company’s initial public offering and formation transactions completed on May 13, 2013. In addition, the tax protection agreements provide that the Operating Partnership will offer certain of the original contributors, including certain of the Company’s directors and executive officers, the opportunity to guarantee debt, or, alternatively, to enter into a deficit restoration obligation, for ten years from the closing of the Company’s initial public offering in a manner intended to provide an allocation of Operating Partnership liabilities to the partner for federal income tax purposes. Pursuant to these tax protection agreements, certain of the Company’s executive officers have guaranteed approximately $0.3 million of the Operating Partnership’s outstanding debt as of March 31, 2017. The loan for the City Center joint venture is underwritten by a syndicate which includes Park Sterling Bank. The Chief Executive Officer of Park Sterling Bank is the Chairman of the Company’s Audit Committee. |
Commitments and Contingencies |
3 Months Ended |
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Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Legal Proceedings The Company is from time to time involved in various disputes, lawsuits, warranty claims, environmental and other matters arising in the ordinary course of business. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters. The Company currently is a party to various legal proceedings, none of which management expects will have a material adverse effect on the Company’s financial position, results of operations or liquidity. Management accrues a liability for litigation if an unfavorable outcome is determined to be probable and the amount of loss can be reasonably estimated. If an unfavorable outcome is determined to be probable and a range of loss can be reasonably estimated, management accrues the best estimate within the range; however, if no amount within the range is a better estimate than any other, the minimum amount within the range is accrued. Legal fees related to litigation are expensed as incurred. Management does not believe that the ultimate outcome of these matters, either individually or in the aggregate, could have a material adverse effect on the Company’s financial position or results of operations; however, litigation is subject to inherent uncertainties. Under the Company’s leases, tenants are typically obligated to indemnify the Company from and against all liabilities, costs and expenses imposed upon or asserted against it as owner of the properties due to certain matters relating to the operation of the properties by the tenant. Commitments The Company has a bonding line of credit for its general contracting construction business and is contingently liable under performance and payment bonds, bonds for cancellation of mechanics liens and defect bonds. Such bonds collectively totaled $40.1 million and $40.5 million as of March 31, 2017 and December 31, 2016, respectively. The Operating Partnership has entered into standby letters of credit using the available capacity under the credit facility. The letters of credit relate to the guarantee of future performance on certain of the Company’s construction contracts. Letters of credit generally are available for draw down in the event the Company does not perform. As of March 31, 2017 and December 31, 2016, the Operating Partnership had total outstanding letters of credit of $4.1 million and $4.1 million, respectively. The amounts outstanding at March 31, 2017 and December 31, 2016 include a $2.1 million letter of credit related to the guarantee on the Point Street Apartments senior construction loan. |
Summary of Significant Accounting Policies (Policies) |
3 Months Ended |
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Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The condensed consolidated financial statements include the financial position and results of operations of the Company, the Operating Partnership and its consolidated subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for the fair presentation of the financial condition and results of operations for the interim periods presented. The accompanying condensed consolidated financial statements were prepared in accordance with the requirements for interim financial information. Accordingly, these interim financial statements have not been audited and exclude certain disclosures required for annual financial statements. Also, the operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These interim financial statements should be read in conjunction with the audited consolidated financial statements of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed. Such estimates are based on management’s historical experience and best judgment after considering past, current and expected events and economic conditions. Actual results could differ from management’s estimates. |
Significant Accounting Policies | Significant Accounting Policies The accompanying condensed consolidated financial statements were prepared on the basis of the accounting principles described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements On May 28, 2014, the FASB issued a new standard that provides a single, comprehensive model for recognizing revenue from contracts with customers. While the new standard does not supersede the guidance on accounting for leases, it could change the way the Company recognizes revenue from construction and development contracts with third party customers. The new standard will be effective for the Company on January 1, 2018. The Company plans to adopt the new standard using the full retrospective method. A substantial portion of our revenue consists of rental revenues from leasing arrangements, such as base rent, which is specifically excluded from the revenue guidance. Non-lease components, such as tenant reimbursements for common area maintenance will be subject to the revenue guidance. Management is currently evaluating the potential impact of the new revenue standard on the Company’s consolidated financial statements. The Company does not expect the new standard to have a material impact on the measure and recognition of gains and losses on the sale of properties. On February 25, 2016, the FASB issued a new lease standard that requires lessees to recognize most leases in their balance sheets as lease liabilities with corresponding right-of-use assets. The new standard also makes targeted changes to lessor accounting. The new standard will be effective for the Company on January 1, 2019 and requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application with an option to use certain transition relief. Management is currently evaluating the potential impact of the new lease standard on the Company’s consolidated financial statements. On March 30, 2016, the FASB issued new guidance that will change the accounting for certain aspects of share-based payments to employees. Entities will be required to recognize the income tax effects of awards in the income statement when the awards vest or are settled, and allows the Company to account for forfeitures as they occur. The new guidance is effective for the Company on January 1, 2017. The Company adopted the guidance on January 1, 2017 and it did not have a material impact on the Company’s consolidated financial statements. On August 26, 2016, the FASB issued new guidance that addresses eight classification issues related to the statement of cash flows. Early adoption is permitted, including adoption in an interim period. This guidance should be applied retrospectively to each period presented. This new guidance is effective for the Company on January 1, 2018. Management is currently evaluating the potential impact of the new guidance on the Company’s consolidated financial statements. On February 22, 2017, the FASB issued new guidance that clarifies the scope and application of guidance on sales or transfers of nonfinancial assets and in substance nonfinancial assets to customers, including partial sales. The new guidance applies to all nonfinancial assets, including real estate, and defines an in substance nonfinancial asset. The new guidance will be effective for the Company on January 1, 2018, with early adoption permitted. Management is currently evaluating the potential impact of the new revenue standard on the Company’s consolidated financial statements. |
Derivative Financial Instruments | Derivative Financial Instruments The Company may enter into interest rate derivative contracts to manage exposure to interest rate risks. The Company does not use derivative financial instruments for trading or speculative purposes. Derivative financial instruments are recognized at fair value and presented within other assets and liabilities in the condensed consolidated balance sheets. Gains and losses resulting from changes in the fair value of derivatives that are neither designated nor qualify as hedging instruments are recognized within the change in fair value of interest rate derivatives in the condensed consolidated statements of income. For derivatives that qualify as cash flow hedges, the effective portion of the gain or loss is reported as a component of other comprehensive loss and reclassified into earnings in the periods during which the hedged forecasted transaction affects earnings. |
Fair Value of Financial Instruments | Fair value measurements are based on assumptions that market participants would use in pricing an asset or a liability. The hierarchy for inputs used in measuring fair value is as follows: Level 1—quoted prices in active markets for identical assets or liabilities Level 2—observable inputs other than quoted prices in active markets for identical assets and liabilities Level 3—unobservable inputs Except as disclosed below, the carrying amounts of the Company’s financial instruments approximate their fair value. Financial assets and liabilities whose fair values are measured on a recurring basis using Level 2 inputs consist of interest rate swaps and caps. The Company measures the fair values of these assets and liabilities based on prices provided by independent market participants that are based on observable inputs using market-based valuation techniques. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. For disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. The fair value of the Company’s long term debt is sensitive to fluctuations in interest rates. Discounted cash flow analysis based on Level 2 inputs is generally used to estimate the fair value of the Company’s long term debt. Considerable judgment is used to estimate the fair value of financial instruments. The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. |
Legal Proceedings | Legal Proceedings The Company is from time to time involved in various disputes, lawsuits, warranty claims, environmental and other matters arising in the ordinary course of business. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters. The Company currently is a party to various legal proceedings, none of which management expects will have a material adverse effect on the Company’s financial position, results of operations or liquidity. Management accrues a liability for litigation if an unfavorable outcome is determined to be probable and the amount of loss can be reasonably estimated. If an unfavorable outcome is determined to be probable and a range of loss can be reasonably estimated, management accrues the best estimate within the range; however, if no amount within the range is a better estimate than any other, the minimum amount within the range is accrued. Legal fees related to litigation are expensed as incurred. Management does not believe that the ultimate outcome of these matters, either individually or in the aggregate, could have a material adverse effect on the Company’s financial position or results of operations; however, litigation is subject to inherent uncertainties. Under the Company’s leases, tenants are typically obligated to indemnify the Company from and against all liabilities, costs and expenses imposed upon or asserted against it as owner of the properties due to certain matters relating to the operation of the properties by the tenant. |
Business of Organization (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of owned properties | As of March 31, 2017, the Company's operating property portfolio consisted of the following properties:
*Located in the Town Center of Virginia Beach |
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Schedule of properties under development or construction | As of March 31, 2017, the following properties that the Company consolidates for financial statement purposes were under development or construction:
*Located in the Town Center of Virginia Beach |
Segments (Tables) |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net operating income of reportable segments | Net operating income of the Company’s reportable segments for the three months ended March 31, 2017 and 2016 was as follows (in thousands):
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Reconciliation of net operating income to net income | The following table reconciles net operating income to net income for the three months ended March 31, 2017 and 2016 (in thousands):
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Derivative Financial Instruments (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of derivatives | The Company’s derivatives were comprised of the following as of March 31, 2017 and December 31, 2016 (in thousands):
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Schedule of changes in fair value of derivatives | The changes in the fair value of the Company’s derivatives during the three months ended March 31, 2017 and 2016 were comprised of the following (in thousands):
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Fair Value of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying amounts and fair values of financial instruments measured based on level two inputs | The carrying amounts and fair values of the Company’s financial instruments, all of which are based on Level 2 inputs, as of March 31, 2017 and December 31, 2016, were as follows (in thousands):
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Business of Organization - Schedule of Properties Under Development or Construction (Details) - Multifamily |
Mar. 31, 2017 |
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Town Center Phase VI | |
Business And Organization [Line Items] | |
Ownership interest percentage in properties | 100.00% |
Harding Place | |
Business And Organization [Line Items] | |
Ownership interest percentage in properties | 80.00% |
595 King Street | |
Business And Organization [Line Items] | |
Ownership interest percentage in properties | 92.50% |
Segments - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2017 |
Mar. 31, 2016 |
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Segment Reporting Information | ||
General contracting and real estate services revenues | $ 63,519 | $ 36,803 |
General contracting and real estate services expenses | 61,196 | 35,037 |
Non-cash stock compensation | 411 | 437 |
General and Administrative Expense | ||
Segment Reporting Information | ||
Non-cash stock compensation | 400 | 300 |
General contracting and real estate services | Maximum | ||
Segment Reporting Information | ||
Non-cash stock compensation | 300 | 200 |
General contracting and real estate services | Intersegment Eliminations | ||
Segment Reporting Information | ||
General contracting and real estate services revenues | 5,900 | 15,000 |
General contracting and real estate services expenses | $ 5,700 | $ 14,800 |
Real Estate Investments - Acquisitions (Details) - Charleston, South Carolina $ in Millions |
Jan. 04, 2017
USD ($)
|
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Real Estate Properties | |
Payments to acquire land | $ 7.1 |
Capitalized acquisition costs | $ 0.2 |
Real Estate Investments - Dispositions (Details) - USD ($) $ in Millions |
3 Months Ended | |
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Jan. 20, 2017 |
Sep. 30, 2017 |
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Wawa | Disposal Group, Disposed of by Sale, Not Discontinued Operations | ||
Real Estate Dispositions | ||
Net proceeds after transaction costs | $ 4.4 | |
Gain (Loss) on disposition of property | $ 3.4 | |
Courthouse 7-Eleven | Scenario, Forecast | ||
Real Estate Dispositions | ||
Proceeds from sale of real estate | $ 2.4 |
Equity Method Investments (Details) |
3 Months Ended | ||
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Mar. 31, 2017
USD ($)
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Dec. 31, 2016
USD ($)
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Feb. 25, 2016
story
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Schedule of Equity Method Investments [Line Items] | |||
Equity method investments | $ 10,794,000 | $ 10,235,000 | |
22-Story Mixed Use Tower | City Center | |||
Schedule of Equity Method Investments [Line Items] | |||
Interests in equity method investments | 37.00% | ||
Number stories in the mixed use tower (story) | story | 22 | ||
Equity method investments | 10,800,000 | $ 10,300,000 | |
Guarantee of construction loan | 37.00% | ||
Assets being used as collateral for the construction loan | 100.00% | ||
Borrowings under construction loans | 4,900,000.0 | ||
Dividends from equity investment | 0 | ||
Income from equity method investment | $ 0 |
Derivative Financial Instruments - Additional Information (Details) - USD ($) |
Feb. 01, 2017 |
Mar. 31, 2017 |
Feb. 07, 2017 |
Dec. 31, 2016 |
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Derivatives | ||||
Interest rate agreement, notional amount | $ 326,214,000 | $ 326,901,000 | ||
Interest Rate Swaps | ||||
Derivatives | ||||
Loss on termination of North Point Center Note interest rate swap | $ 0 | |||
Interest rate agreement, notional amount | 56,214,000 | 56,901,000 | ||
Interest Rate Caps | ||||
Derivatives | ||||
Interest rate agreement, notional amount | $ 270,000,000 | $ 50,000,000.0 | $ 270,000,000 | |
Interest rate cap agreement, strike price | 1.50% | |||
Interest rate cap agreement, premium (less than) | $ 200,000 |
Derivative Financial Instruments - Schedule of Derivatives (Details) - USD ($) |
3 Months Ended | |||
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Mar. 31, 2017 |
Mar. 31, 2016 |
Feb. 07, 2017 |
Dec. 31, 2016 |
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Derivatives | ||||
Notional Amount | $ 326,214,000 | $ 326,901,000 | ||
Asset, Fair Value | 479,000 | 259,000 | ||
Liability, Fair Value | (568,000) | (829,000) | ||
Changes in fair value of derivatives | ||||
Change in fair value of interest rate derivatives | 294,000 | $ (2,389,000) | ||
Total change in fair value | 294,000 | (2,389,000) | ||
Interest rate swaps | ||||
Derivatives | ||||
Notional Amount | 56,214,000 | 56,901,000 | ||
Asset, Fair Value | 0 | 0 | ||
Liability, Fair Value | (568,000) | (829,000) | ||
Changes in fair value of derivatives | ||||
Total change in fair value | 261,000 | (2,244,000) | ||
Interest rate caps | ||||
Derivatives | ||||
Notional Amount | 270,000,000 | $ 50,000,000.0 | 270,000,000 | |
Asset, Fair Value | 479,000 | 259,000 | ||
Liability, Fair Value | 0 | $ 0 | ||
Changes in fair value of derivatives | ||||
Total change in fair value | $ 33,000 | $ (145,000) |
Fair Value of Financial Instruments - Carrying Amounts and Fair Values of Financial Instruments Measured based on Level Two Inputs (Detail) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Carrying Value | ||
Fair Value of Financial Instruments | ||
Indebtedness | $ 522,394 | $ 522,180 |
Interest rate swap liabilities | 568 | 829 |
Interest rate cap assets | 479 | 259 |
Fair Value | Level 2 | ||
Fair Value of Financial Instruments | ||
Indebtedness | 522,438 | 527,414 |
Interest rate swap liabilities | 568 | 829 |
Interest rate cap assets | $ 479 | $ 259 |
Commitments and Contingencies - Additional Information (Details) - USD ($) $ in Millions |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Commitments and Contingencies | ||
Line of credit, performance and payment bonds | $ 40.1 | $ 40.5 |
Operating Partnership | ||
Commitments and Contingencies | ||
Outstanding letters of credit | 4.1 | 4.1 |
Financial Guarantee | Point Street Apartments | Letter of Credit | ||
Commitments and Contingencies | ||
Credit facility, amount outstanding | $ 2.1 | $ 2.1 |
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