Armada Hoffler Properties, Inc.
Annual Report 2013

A Solid Foundation for Sustained Growth

2013 ANNUAL REPORT

 
 
ARMADA HOFFLER PROPERTIES...
A Different Kind of REIT.

N Y S E :  A H H

We are a full service real estate company with extensive experience 
developing, building, owning, and managing high-quality, institutional- 
grade office, retail, and multifamily properties in attractive markets 
throughout the Mid-Atlantic United States. 

We  primarily  target  markets  in  the  Mid-Atlantic  region  of  the 
United States that exhibit attractive long-term supply and demand 
characteristics as well as favorable competitive dynamics. Our 
portfolio consists of office, retail, and multifamily properties in 
various markets in Virginia and North Carolina. Future growth will 
take us to the broader Mid-Atlantic region.

Solid Dividend Yield Today, Powerful Growth Engine Tomorrow.

A R M A D A   H O F F L E R   P R O P E R T I E S   :   2 0 1 3   A N N U A L   R E P O R T

U N I Q U E  I N T EG R AT E D  B U S I N E S S  M O D E L

STABLE PORTFOLIO

DEVELOPMENT

CONSTRUCTION

High Occupancy

Growth Pipeline

Reduces Development Risk

Consistent Cash Flow

Wholesale Equity Creation

Fee Income

P A G E   1

TO OUR SHAREHOLDERS,

We are pleased with our operating and financial results for the 
year. We view 2013 as a year in which we laid a solid foundation 
for sustained future net operating income, stable funds from 
operations, and asset value growth. 

We  accomplished  what  we  set  out  to  do  this  year  including:  transitioning  to  a  publicly  traded  company,  executing  on  development 

opportunities, identifying attractive opportunities for the next generation pipeline, and positioning our in-place portfolio for further growth. In the 

May IPO, with the support of shareholders, we raised $218 million of gross proceeds which allowed us to reposition our balance sheet to 

support future growth.

THE STABLE PORTFOLIO

The stability of our portfolio is an important distinction. We have managed our assets for the past 34 years through recessionary times as well 

as boom times. We have successfully navigated four recessions and have come out of each one stronger and better positioned for the future. 

Our occupancy continues to remain stable at 94.4% as of December 31, 2013, up slightly from the 94.2% as of December 31, 2012. 

Since our IPO in May, we executed on 227,000 square feet of new and renewed leases as we renewed 100% of all expiring leases. 

We manage for long-term stable cash flow. This often means waiting for the right tenant and lease terms for each respective vacancy and 

not just filling space as quickly as possible to satisfy short-term comparisons. Similarly, it often means balancing space use, tenant credit, 

rental rates, additional terms, and tenant mix. 

This has proven to be a very successful long-term approach and it is why our occupancy varies little from the 95% benchmark we set for 

ourselves while cash flow from these assets remains stable over time. We don’t get overly excited when our occupancy exceeds this benchmark 

nor do we get overly concerned when it dips below—our focus is on the long term. 

THE DEVELOPMENT PIPELINE

We’ve proven over the last three decades that our development expertise, extensive corporate relationships, and long-standing track record in 

executing  large  public-private  partnerships  continue  to  drive  opportunities  in  our  direction. Along  with  targeted  and  strategic  acquisitions, 

development has and will continue to be a growth driver for the Company.

In January 2014 we closed on the previously announced acquisition of Liberty Apartments in Newport News, Virginia. Liberty Apartments 

is  part  of  a  $70  million  public-private,  mixed-use  development  project  with  the  Newport  News  Shipbuilding  division  of  Huntington  Ingalls 

Industries, the Commonwealth of Virginia, and the Industrial Development Authority of the City of Newport News, Virginia. 

The  remainder  of  the  $175  million  development  pipeline  that  we  announced  at  the  time  of  our  IPO  is  on  budget  and  progressing  as 

expected. During 2014, we expect to deliver five development projects which will cost approximately $150 million. These projects will begin 

delivering in the back-half of 2014 with the remainder in 2015. We continue to employ all of the tools at our disposal to maintain the wholesale 

to retail spread on our development projects. We believe these projects will ultimately generate net operating income of $13–14 million on an 

annual basis, which represents NOI growth in excess of 30%.

During this past year, we also began to enjoy the culmination of pre-development work on the next generation pipeline. We’re seeing a 

high  number  of  both  build-to-suit  opportunities  with  high  credit-quality  tenants,  which  are  fully  stabilized  upon  completion  and  grocery-

anchored shopping centers that have historically been the foundation of our stable cash flow. 

Such projects enable us to not only meet, but often exceed our target development spread of 150–200 basis points and create equity for 

our shareholders. We believe the NOI from the next generation pipeline will begin materializing in 2015—this is slightly faster than our original 

expectation of a new generation of development projects in the range of $150–175 million every 18–24 months. 

A R M A D A   H O F F L E R   P R O P E R T I E S   :   2 0 1 3   A N N U A L   R E P O R T

N E T  O P E R AT I N G  I N C O M E
(For the year ended December 31, 2013)

42%

36%

WELL BALANCED
PORTFOLIO

9%

13%

■ Office     ■ Retail     ■ Multifamily     ■ General Contracting     

A prime example of our next generation pipeline coming to fruition is our selection as the developer for a new office and manufacturing 

facility  for  Oceaneering  International. We  began  construction  on  this  155,000  square  foot  build-to-suit  project,  located  on  18  acres  in 

Chesapeake, Virginia,  during  the  fourth  quarter  of  2013  and  will  complete  this  100%  pre-leased  facility  in  early  2015. We  facilitated  this 

public-private transaction among the City of Chesapeake, the Commonwealth of Virginia, and Oceaneering International. 

THIRD PARTY CONSTRUCTION FEE BUSINESS

Our third party construction company continues to support our corporate goals in many ways, including: controlling costs and time frames on 

our  own  development  projects,  providing  a  reliable  source  of  annual  income,  and  projecting  our  brand  and  capabilities  throughout  the 

marketplace. It is a stable source of income, value, and opportunity for growth. 

MANAGEMENT TEAM

One of the hallmarks of our Company has been our ability to attract quality individuals who stay with us for the long term. Most of our 

management  team  has  been  with  us  for  at  least  15  years  with  many  individuals  having  over  20  years  of  service. The  longevity  of  our 

management  team  and  our  combined  commitment  to  the  Company  going  forward  is  evidenced  by  the  fact  that  we,  along  with  previous 

development partners, still own over 40% of this Company.

FINAL THOUGHTS

We believe we are well-positioned to grow net operating income and create value for our shareholders into the future, but we recognize that 

there is much work yet to be done. Execution will remain our focus in 2014 and 2015.

Sincerely,

Louis S. Haddad, President and Chief Executive Officer

P A G E   3

Louis S. Haddad

We build more than structures, We Build Trust. The successful 
relationships and credibility we have built since 1979 offers high 
returns today and a powerful growth engine for tomorrow.

O U R  COR E  M A R K E T

■  Previous Construction/Development Projects
■  Current Portfolio & Development Pipeline

A R M A D A   H O F F L E R   P R O P E R T I E S   :   2 0 1 3   A N N U A L   R E P O R T

PROPERTY KEY●  Office   ●  Retail ●  Multifamily●  Pipeline2013

10-K FINANCIAL REPORT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013
or

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from

to

Commission file number 001-35908

ARMADA HOFFLER PROPERTIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland
(State or Other Jurisdiction of
Incorporation or Organization)
222 Central Park Avenue, Suite 2100
Virginia Beach, Virginia
(Address of Principal Executive Offices)

23462
(Zip Code)
Registrant’s Telephone Number, Including Area Code (757) 366-4000
Securities registered pursuant to Section 12(b) of the Act:

46-1214914
(IRS Employer
Identification No.)

Title of Each Class

Name Of Each Exchange On Which Registered

Common Stock, $0.01 par value per share

New York Stock Exchange

Securities registered pursuant to Section 12(b) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ‘ No È
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ‘ No È
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes È No ‘
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files). Yes È No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. ‘
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer ‘
Non-accelerated filer È (Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No È
As of June 28, 2013, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of
the registrant’s common stock held by non-affiliates of the registrant was approximately $225.1 million, based on the closing sales price of
$11.78 per share as reported on the New York Stock Exchange. (For purposes of this calculation all of the registrant’s directors and
executive officers are deemed affiliates of the registrant.)
As of March 24, 2014, the registrant had 19,254,365 shares of common stock outstanding.
Documents Incorporated by Reference

‘
Accelerated filer
Smaller reporting company ‘

Portions of the registrant’s Definitive Proxy Statement relating to its 2014 Annual Meeting of Stockholders are incorporated by reference
into Part III of this report. The registrant expects to file its Definitive Proxy Statement with the Securities and Exchange Commission
within 120 days after December 31, 2013.

ARMADA HOFFLER PROPERTIES, INC.

FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2013

TABLE OF CONTENTS

PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.

Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.

Item 13.
Item 14.
PART IV
Item 15.
Signatures

Business.
Risk Factors.
Unresolved Staff Comments.
Properties.
Legal Proceedings.
Mine Safety Disclosures.

Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.
Selected Financial Data.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Quantitative and Qualitative Disclosures About Market Risk.
Financial Statements and Supplementary Data.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Controls and Procedures.
Other Information.

Directors, Executive Officers and Corporate Governance.
Executive Compensation.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
Certain Relationships and Related Transactions, and Director Independence.
Principal Accountant Fees and Services.

Exhibits and Financial Statement Schedules.

1
12
44
44
44
44

45
48
50
72
73
73
73
73

75
75

75
75
75

76
77

i

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

The following discussion should be read in conjunction with the financial statements and notes thereto

appearing elsewhere in this report. This report contains forward-looking statements within the meaning of the
federal securities laws. We caution investors that any forward-looking statements presented in this report, or
which management may make orally or in writing from time to time, are based on management’s beliefs and
assumptions made by, and information currently available to, management. When used, the words “anticipate,”
“believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,” “will,” “result” and
similar expressions, which do not relate solely to historical matters, are intended to identify forward-looking
statements. Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future
performance, which may be affected by known and unknown risks, trends, uncertainties and factors that are
beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected.
We caution you that while forward-looking statements reflect our good faith beliefs when we make them, they
are not guarantees of future performance and are impacted by actual events when they occur after we make such
statements. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of
new information, future events or otherwise, except as required by law. Accordingly, investors should use
caution in relying on past forward-looking statements, which are based on results and trends at the time they are
made, to anticipate future results or trends.

Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as

predictions of future events. Forward-looking statements depend on assumptions, data or methods which may be
incorrect or imprecise and we may not be able to realize them. We do not guarantee that the transactions and
events described will happen as described (or that they will happen at all). The following factors, among others,
could cause actual results and future events to differ materially from those set forth or contemplated in the
forward-looking statements:

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

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 identified 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 or acquisition opportunities;

our failure to successfully operate developed and acquired properties;

our failure to generate income in our general contracting and real estate sources 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;

ii

•

•

•

•

•

•

•

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 qualify and 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 qualify 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.

While forward-looking statements reflect our good faith beliefs, they are not guarantees of future

performance. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect
changes in underlying assumptions or factors, of new information, data or methods, future events or other
changes after the date of this Annual Report on Form 10-K, except as required by applicable law. You should not
place undue reliance on any forward-looking statements that are based on information currently available to us or
the third parties making the forward-looking statements. For a further discussion of these and other factors that
could impact our future results, performance or transactions, see the risk factors described in Item 1A herein and
in other documents that we file from time to time with the Securities and Exchange Commission (the “SEC”).

iii

Item 1.

Business.

Our Company

PART I

References to “we,” “our,” “us” and “our company” refer to Armada Hoffler Properties, Inc., a Maryland

corporation, together with our consolidated subsidiaries, including Armada Hoffler, L.P., a Virginia limited
partnership (the “Operating Partnership”), of which we are the sole general partner.

We are a full service real estate company with extensive experience developing, building, owning and

managing high-quality, institutional-grade office, retail and multifamily properties in attractive markets
throughout the Mid-Atlantic United States. As of December 31, 2013, our portfolio comprised seven office
properties, 15 retail properties and two multifamily properties located in Virginia and North Carolina. As of
December 31, 2013, our office and retail operating property portfolios aggregated over 2.0 million net rentable
square feet and our multifamily property portfolio comprised 626 apartment units. As of December 31, 2013, we
owned 100% of the interests in all of the properties in our portfolio. Substantially all of our assets are held by,
and all of our operations are conducted through our Operating Partnership and, as of December 31, 2013, we
owned 59.5% of the units of limited partnership interest (“OP Units”) in the Operating Partnership.

In addition to the ownership of our operating property portfolio, we develop and build properties for our

own account and through joint ventures between us and unaffiliated partners. We also provide general
contracting services to third parties. Our construction and development experience includes mid- and high-rise
office buildings, retail strip malls and retail power centers, multifamily apartment communities, hotels and
conference centers, single- and multi-tenant industrial, distribution and manufacturing facilities, educational,
medical and special purpose facilities, government projects, parking garages and mixed-use town centers. Our
third-party construction contracts have included signature properties across the Mid-Atlantic region, such as the
Inner Harbor East development in Baltimore, Maryland, including the Four Seasons Hotel and Legg Mason
office tower, the Mandarin Oriental Hotel in Washington, D.C., and a $50 million proton therapy institute for
Hampton University in Hampton, Virginia. Our construction company historically has been ranked among the
“Top 400 General Contractors” nationwide by Engineering News Record and has been ranked among the
“Top 50 Retail Contractors” by Shopping Center World.

We were formed on October 12, 2012 under the laws of the State of Maryland and are headquartered in

Virginia Beach, Virginia. In connection with our initial public offering, we engaged in certain formation
transactions to enable us to (1) consolidate ownership of our property portfolio under the Operating Partnership;
(ii) succeed to the property development and asset management businesses of Armada Hoffler Holding
Company, Inc. (“AH Holding”); (iii) succeed to the general commercial construction businesses of Armada
Hoffler Construction Company and Armada Hoffler Construction Company of Virginia (collectively, “AH
Construction”); (iv) facilitate our initial public offering; and (v) qualify as REIT for U.S. federal income tax
purposes commencing with the short taxable year ending December 31, 2013.

Our Competitive Strengths

We believe that we distinguish ourselves from other REITs through the following competitive strengths:

• High-Quality, Diversified Portfolio. Our portfolio consists of institutional-grade, premier office, retail
and multifamily properties located in Virginia and North Carolina. Our properties are generally in the
top tier of commercial properties in their markets and offer Class-A amenities and finishes. Our
properties have an average age of 10 years, and were, with one exception, built and developed by us.

•

Seasoned, Committed and Aligned Senior Management Team with a Proven Track Record. Our senior
management team has extensive experience developing, constructing, owning, operating, renovating
and financing institutional-grade office, retail, multifamily and hotel properties in the Mid-Atlantic

1

region. As of December 31, 2013, our executive officers, directors and their respective affiliates
collectively owned approximately 32% of our company on a fully diluted basis, which we believe
aligns their interests with those of our stockholders.

•

Strategic Focus on Attractive Mid-Atlantic Markets. We focus our activities in our target markets in the
Mid-Atlantic region of the United States that demonstrate attractive fundamentals driven by favorable
supply and demand characteristics and limited competition from other large, well-capitalized operators.
We believe that our longstanding presence in our target markets provides us with significant
advantages in sourcing and executing development opportunities, identifying and mitigating potential
risks and negotiating attractive pricing.

• Extensive Experience with Construction and Development. Our platform consists of development,
construction and asset management capabilities, which comprise an integrated delivery system for
every project that we build for our own account or for third-party clients. This integrated approach
provides a single source of accountability for design and construction, simplifies coordination and
communication among the relevant stakeholders in each project and provides us valuable insight from
an operational perspective. We believe that being regularly engaged in construction and development
projects provides us significant and distinct advantages, including enhanced market intelligence,
greater insight into best practices, enhanced operating leverage and “first look” access to development
and ownership opportunities in our target markets.

•

Longstanding Public and Private Relationships. We have extensive experience with public/private real
estate development projects dating back to 1984, having worked with the Commonwealth of Virginia,
the State of Georgia and the Kingdom of Sweden, as well as various municipalities. Through our
experience and longstanding relationships with governmental entities such as these, we have learned to
successfully navigate the often complex and time-consuming government approval process, which has
given us the ability to capture opportunities that we believe many of our competitors are unable to
pursue.

Our Business and Growth Strategies

Our primary business objectives are to (i) continue to develop, build and own institutional-grade office,
retail and multifamily properties in our target markets, (ii) finance and operate our portfolio in a manner that
increases cash flow and property values, (iii) execute new third-party construction work with consistent operating
margins and (iv) pursue selective acquisition opportunities, particularly when the acquisition involves a
significant redevelopment aspect. We will seek to achieve our objectives through the following strategies:

• Pursue a Disciplined, Opportunistic Development and Acquisition Strategy Focused on Office, Retail

and Multifamily Properties. We intend to grow our asset base through continued strategic development
of office, retail and multifamily properties, and the selective acquisition of high-quality properties that
are well-located in their submarkets. Furthermore, we believe our construction and development
expertise provides a high level of quality control while ensuring that the projects we construct and
develop are completed more quickly and at a lower cost than if we engaged a third-party general
contractor.

• Pursue New, and Expand Existing, Public/Private Relationships. We intend to leverage our extensive
experience in completing large, complex, mixed-use, public/private projects to establish relationships
with new public partners while expanding our relationships with existing public partners.

•

Leverage our Construction and Development Platform to Attract Additional Third-Party Clients. We
believe that we have a unique advantage over many of our competitors due to our integrated
construction and development business that provides expertise, oversight and a broad array of client-
focused services. We intend to continue to conduct and grow our construction business and other third-
party services by pursuing new clients and expanding our relationships with existing clients.

2

• Engage in Disciplined Capital Recycling. We intend to opportunistically divest properties when we
believe returns have been maximized and to redeploy the capital into new development, acquisition,
repositioning or redevelopment projects that are expected to generate higher potential risk-adjusted
returns.

Our Properties

As of December 31, 2013, our operating property portfolio comprised the following 24 office, retail and

multifamily properties aggregating approximately 2.0 million net rentable square feet and 626 apartment units.

Property

Location

Year Built

Net Rentable
Square Feet(1) % Leased(2)

Annualized
Base Rent(3)

Annualized
Base Rent per
Leased Sq. Ft.(3)

Average Net
Effective
Annual Base
Rent per
Leased Sq. Ft.(4)

Office Properties
Armada Hoffler Tower(5)
One Columbus
Two Columbus
Virginia Natural Gas(6)
Richmond Tower
Oyster Point
Sentara Williamsburg(6)

Subtotal / Weighted Average

Office Portfolio(7)

Retail Properties Not Subject

Virginia Beach, VA
Virginia Beach, VA
Virginia Beach, VA
Virginia Beach, VA
Richmond, VA
Newport News, VA
Williamsburg, VA

2002
1984
2009
2010
2010
1989
2008

326,581
129,424
109,215
31,000
206,969
100,214
49,200

98.9% $ 8,649,639
2,829,349
94.4%
2,474,646
90.7%
568,230
100.0%
7,274,896
98.0%
1,740,247
79.8%
1,006,140
100.0%

$26.79
23.17
24.98
18.33
35.87
21.76
20.45

$26.38
23.21
25.23
20.17
41.88
21.23
20.50

952,603

95.2% $24,543,148

$27.06

$28.31

to Ground Lease
Chester, VA
Bermuda Crossroads
Broad Creek Shopping Center Norfolk, VA
Courthouse 7-Eleven
Gainsborough Square
Hanbury Village
North Point Center
Parkway Marketplace
Harrisonburg Regal
Dick’s at Town Center
249 Central Park Retail
Studio 56 Retail
Commerce Street Retail(9)
Fountain Plaza Retail
South Retail(24)

Virginia Beach, VA
Chesapeake, VA
Chesapeake, VA
Durham, NC
Virginia Beach, VA
Harrisonburg, VA
Virginia Beach, VA
Virginia Beach, VA(8)
Virginia Beach, VA
Virginia Beach, VA
Virginia Beach, VA
Virginia Beach, VA

2001
1997-2001
2011
1999
2006-2009
1998-2009
1998
1999
2002
2004
2007
2008
2004
2002

111,566
227,731
3,177
88,862
61,049
215,690
37,804
49,000
100,804
91,171
11,600
20,123
35,961
38,763

94.0%
96.8%
100.0%
93.0%
86.4%
93.1%
100.0%
100.0%
83.3%
96.2%
84.8%
100.0%
100.0%
83.6%

1,409,089
2,922,782
125,000
1,295,935
1,321,633
2,365,193
735,668
683,550
798,000
2,536,604
371,200
792,313
996,181
621,240

13.44
13.26
39.35
15.69
25.07
11.77
19.46
13.95
9.50
28.93
37.75
39.37
27.70
19.17

13.93
12.90
43.81
15.36
24.66
11.71
19.68
13.95
7.79
27.30
36.92
39.24
25.71
18.66

Subtotal / Weighted Avg

Retail Portfolio not Subject
to Ground Leases(10)

Retail Properties Subject to

Ground Lease

Bermuda Crossroads(11)
Broad Creek Shopping

Center(12)

Hanbury Village(11)
North Point Center(11)
Tyre Neck Harris Teeter(12)

Subtotal / Weighted Avg

Retail Portfolio Subject to
Ground Leases

Total / Weighted Avg Retail

Portfolio

Total / Weighted Average

Retail and Office Portfolio

1,093,301

93.4% $16,974,385

$16.62

$16.18

Chester, VA

2001

Norfolk, VA
Chesapeake, VA
Durham, NC
Portsmouth, VA

1997-2001
2006-2009
1998-2009
2011

(13)

(14)

(15)

(16)

(17)

100.0%

163,350

100.0%
100.0%
100.0%
100.0%

579,188
1,067,598
1,055,125
508,134

100.0% $ 3,373,396

1,093,301(18)

93.4% $20,347,780

$16.62

$16.18

2,045,904

94.3% $44,890,928

$21.53

$21.88

3

Property

Multifamily
Smith’s Landing(22)

The Cosmopolitan

Total / Weighted Avg Multifamily Portfolio

Location

Year Built Units(19) % Leased(2)

Average
Monthly Base
Rent per
Leased Unit(21)

Annualized
Base Rent(20)

Blacksburg,
VA
Virginia
Beach, VA

2009

2006

284

342

626

99.3%

$ 3,382,380

$ 999.52

90.1%

6,639,606

1,547.93

94.2% $10,021,986

$1,285.81

(1) The net rentable square footage for each of our office properties is the sum of (a) the square footages of existing leases, plus (b) for
available space, management’s estimate of net rentable square footage based, in part, on past leases. The net rentable square footage
included in office leases is generally determined consistently with the Building Owners and Managers Association, or BOMA, 1996
measurement guidelines. The net rentable square footage for each of our retail properties is the sum of (a) the square footages of existing
leases, plus (b) for available space, the field verified square footage.

(2) Percentage leased for each of our office and retail properties is calculated as (a) square footage under executed leases as of December 31,
2013, divided by (b) net rentable square feet, expressed as a percentage. Percentage leased for our multifamily properties is calculated as
(a) total units occupied as of December 31, 2013, divided by (b) total units available, expressed as a percentage.

(3) For the properties in our office and retail portfolios, annualized base rent is calculated by multiplying (a) base rental payments for

executed leases as of December 31, 2013 (defined as cash base rents (before abatements) excluding tenant reimbursements for expenses
paid by the landlord), by (b) 12. Annualized base rent per leased square foot is calculated by dividing (a) annualized base rent, by
(b) square footage under commenced leases as of December 31, 2013. In the case of triple net or modified gross leases, annualized base
rent does not include tenant reimbursements for real estate taxes, insurance, common area or other operating expenses.
(4) Average net effective annual base rent per leased square foot represents (a) the contractual base rent for leases in place as of

December 31, 2013, calculated on a straight-line basis to amortize free rent periods and abatements, but without regard to tenant
improvement allowances and leasing commissions, divided by (b) square footage under commenced leases as of December 31, 2013.

(5) As of December 31, 2013, the Company occupied 16,151 square feet at this property at an annualized base rent of $449,007, or $27.80
per leased square foot, which amounts are reflected in the percentage leased, annualized base rent and annualized base rent per square
foot columns in the table above. The rent paid by us is eliminated from our revenues in consolidation. In addition, effective March 1,
2013, the Company subleases approximately 5,000 square feet of space from a tenant at this property.

Includes square footage and annualized base rent pursuant to leases for space occupied by us.

(6) This property is subject to a triple net lease pursuant to which the tenant pays operating expenses, insurance and real estate taxes.
(7)
(8) As of December 31, 2013, the Company occupied 8,995 square feet at this property at an annualized base rent of $278,965, or $31.01 per
leased square foot, which amounts are reflected in the percentage leased, annualized base rent and annualized base rent per square foot
columns in the table above. The rent paid by us is eliminated from our revenues in consolidation.
Includes $31,200 of annualized base rent pursuant to a rooftop lease.

(9)
(10) Reflects square footage and annualized base rent pursuant to leases for space occupied by us.
(11) For this ground lease, the Company owns the land and the tenant owns the improvements thereto. The Company will succeed to the

ownership of the improvements to the land upon the termination of the ground lease.

(12) The Company leases the land underlying this property from the owner of the land pursuant to a ground lease. The Company re-leases the

land to our tenant under a separate ground lease pursuant to which our tenant owns the improvements on the land.

(13) Tenants collectively lease approximately 139,356 square feet of land from us pursuant to ground leases.
(14) Tenants collectively lease approximately 299,170 square feet of land from us pursuant to ground leases.
(15) Tenants collectively lease approximately 105,988 square feet of land from us pursuant to ground leases.
(16) Tenants collectively lease approximately 1,443,985 square feet of land from us pursuant to ground leases.
(17) Tenant leases approximately 200,073 square feet of land from us pursuant to a ground lease.
(18) The total square footage of our retail portfolio excludes the square footage of land subject to ground leases.
(19) Units represent the total number of apartment units available for rent at December 31, 2013.
(20) For the properties in our multifamily portfolio, annualized base rent is calculated by multiplying (a) base rental payments for the month

ended December 31, 2013 by (b) 12.

(21) Average monthly base rent per leased unit represents the average monthly rent for all leased units for the month ended December 31,

2013.

(22) The Company leases the land underlying this property from the owner of the land pursuant to a ground lease.
(23) The annualized base rent for The Cosmopolitan includes $918,462 of annualized rent from 15 retail leases at the property.
(24) As of December 31, 2013, The Company occupied 2,908 square feet at this property at an annualized base rent of $12,000, or $4.13 per
leased square foot, which amounts are reflected in the percentage leased, annualized base rent and annualized base rent per square foot
columns in the table above. The rent paid by us and is eliminated from our revenues in consolidation.

4

Tenant Diversification

As of December 31, 2013, our operating property portfolio consisted of 220 office and retail leases and 590
multifamily residential leases. The following table lists the 10 tenants in our office and retail operating property
portfolios with the greatest annualized base rent as of December 31, 2013:

Office Portfolio

Tenant

Williams Mullen

Troutman Sanders
Sentara Medical Group
Cherry Bekaert

GSA
Pender & Coward
The Art Institute
Kimley-Horn
Hampton University
Hankins & Anderson

Top 10 Total

Retail Portfolio

Tenant

Home Depot

Harris Teeter

Food Lion

Dick’s Sporting Goods
Regal Cinemas
PetSmart

Kroger
Yard House
Rite Aid

Walgreens

Top 10 Total

Leasing Activity

Number
of Leases

Number
of Properties

3

1
1
3

1
2
1
1
2
1

2

1
1
3

1
1
1
1
1
1

Properties

Armada Hoffler Tower,
Richmond Tower
Armada Hoffler Tower
Sentara Williamsburg
Armada Hoffler Tower,
Richmond Tower,
Oyster Point
Oyster Point
Armada Hoffler Tower
Two Columbus
Two Columbus
Armada Hoffler Tower
Armada Hoffler Tower

Lease
Expiration

Annualized
Base Rent

% of Office
Portfolio
Annualized
Base Rent

% of Total
Portfolio
Annualized
Base Rent

3/19/2026 $ 7,779,349

31.7%

14.2%

1/31/2015
3/31/2023
9/21/2022

1,026,938
1,006,140
932,547

4/26/2017
1/31/2015
12/31/2019
12/31/2018
5/3/2023
4/30/2022

870,047
818,985
771,898
669,333
629,935
572,368

4.2%
4.1%
3.8%

3.5%
3.3%
3.1%
2.7%
2.6%
2.3%

1.9%
1.8%
1.7%

1.6%
1.5%
1.4%
1.2%
1.1%
1.0%

$15,077,541

61.4%

27.5%

Number
of
Leases

Number
of
Properties

Properties

Lease
Expiration

Annualized
Base Rent

% of Retail
Portfolio
Annualized
Base Rent

% of Total
Portfolio
Annualized
Base Rent

2

2

3

1
1
2

1
1
2

1

2

2

3

1
1
2

1
1
2

1

Broad Creek Shopping Center,
North Point Center
Tyre Neck Harris Teeter,
Hanbury Village
Broad Creek Shopping Center,
Bermuda Crossroads,
Gainsborough Square
Dick’s at Town Center
Harrisonburg Regal
Broad Creek Shopping Center,
North Point Center
North Point Center
Commerce Street Retail
Gainsborough Square,
Parkway Marketplace
Hanbury Village

12/27/2019 $2,032,600

10.0%

10/16/2028 1,430,001

7.0%

3/19/2020 1,282,568

6.3%

1/31/2020
4/23/2019
2/7/2016

8/31/2018
11/30/2023
5/29/2019

798,000
683,550
618,704

552,864
538,000
484,193

3.9%
3.4%
3.0%

2.7%
2.6%
2.4%

12/31/2083

447,564

2.2%

3.7%

2.6%

2.3%

1.5%
1.2%
1.1%

1.0%
1.0%
0.9%

0.8%

$8,868,044

43.6%

16.1%

During the year ended December 31, 2013, we executed new office and retail leases aggregating
approximately 63,000 square feet. The weighted average lease term for new office and retail leases executed
during the year ended December 31, 2013 was approximately 7.0 years and 5.4 years, respectively. The total
leasing costs associated with new office leases are estimated to be approximately $1.1 million, or $30.23 per
square foot. The total leasing costs associated with new retail leases are estimated to be approximately
$0.5 million, or $20.10 per square foot. These costs include tenant improvements, leasing commissions and
leasing incentives.

5

During the year ended December 31, 2013, we renewed expiring office and retail leases aggregating
approximately 179,000 square feet. The weighted average lease term for office and retail leases renewed during
the year ended December 31, 2013 was approximately 8.4 years and 4.8 years, respectively. The total leasing
costs associated with renewed office leases are estimated to be approximately $2.5 million, or $24.98 per square
foot. The total leasing costs associated with renewed retail leases are estimated to be approximately $0.3 million,
or $3.44 per square foot. These costs include tenant improvements, leasing commissions and leasing incentives.

Releasing spreads measure increases (decreases) in rental rates before and after a lease renewal. GAAP
basis releasing spreads consider future rental rate increases as well as any rent concessions provided during the
renewal period. Cash basis releasing spreads measure only the change in contractual rental rates immediately
before and after the commencement of the renewal period. Releasing spreads on office leases renewed during the
year ended December 31, 2013 were $1.22 per square foot on a GAAP basis and $(2.58) per square foot on a
cash basis. Releasing spreads on retail leases renewed during the year ended December 31, 2013 were $(0.17) per
square foot on a GAAP basis and $(1.94) per square foot on a cash basis. While we seek to obtain rents that are
higher than amounts within our expiring leases, there are many variables and uncertainties that can significantly
affect the leasing market at any given time. As such, we cannot guarantee that future leases will continue to be
signed for rents that are equal to or higher than current amounts.

Lease Expirations

The following tables summarize the scheduled expirations of our office and retail leases in place as of
December 31, 2013. We have excluded lease expirations for our multifamily operating property portfolio because
apartment unit leases generally have terms ranging from seven to 15 months, with a majority having 12-month
lease terms. The information in the following tables does not assume the exercise of any renewal options.

Office Lease Expirations

Year of Lease Expiration

Number of
Leases
Expiring

Square
Footage of
Leases
Expiring

% Portfolio
Net Rentable
Square Feet

Annualized
Base Rent

% of Portfolio
Annualized
Base Rent

Annualized Base
Rent per Leased
Square Foot

Available
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Thereafter

Total / Weighted Average

—
15
8
10
5
15
6
3
4
3
5
6

80

45,554
49,384
98,200
33,481
65,186
133,189
71,512
25,283
41,363
48,117
105,160
236,174

952,603

4.8% $
5.2%
10.3%
3.5%
6.8%
14.0%
7.5%
2.7%
4.3%
5.1%
11.0%
24.8%

—
1,375,424
2,483,520
784,963
1,566,263
3,517,059
1,619,344
772,781
946,930
1,268,882
2,310,230
7,897,751

—
5.6%
10.1%
3.2%
6.4%
14.3%
6.6%
3.1%
3.9%
5.2%
9.4%
32.2%

100.0% $24,543,148

100.0%

$ —
27.85
25.29
23.45
24.03
26.41
22.64
30.57
22.89
26.37
21.97
33.44

$27.06

6

Retail Lease Expirations

Year of Lease Expiration

Available
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Thereafter

Total / Weighted Average

Development Pipeline

Number of
Leases
Expiring

Square
Footage of
Leases
Expiring

% Portfolio
Net Rentable
Square Feet

Annualized
Base Rent

% of Portfolio
Annualized
Base Rent

Annualized Base
Rent per Leased
Square Foot

—
21
18
22
19
19
14
6
4
6
5
6

140

71,863
46,307
63,030
68,620
133,945
120,295
285,235
132,094
18,053
83,588
27,625
42,646

6.6% $
4.2%
5.8%
6.3%
12.3%
11.0%
26.1%
12.1%
1.7%
7.6%
2.5%
3.9%

—
783,659
1,314,420
1,667,203
1,877,223
1,736,312
4,023,649
1,647,180
503,648
1,215,718
869,930
1,335,442

—
4.6%
7.7%
9.8%
11.1%
10.2%
23.7%
9.7%
3.0%
7.2%
5.1%
7.9%

1,093,301

100.0% $16,974,385

100.0%

$ —
16.92
20.85
24.30
14.01
14.43
14.11
12.47
27.90
14.54
31.49
31.31

$16.62

As of December 31, 2013, we had seven properties under development and one pending property acquisition

with an estimated aggregate of 513,000 square feet of office and retail space and 686 multifamily apartment
units. As of December 31, 2013, our development pipeline also included Liberty Apartments, which we acquired
in January 2014.

Identified Development Pipeline

Schedule

Office/Retail

Location

Estimated
Square
Footage(1)

Estimated
Cost(1)

Cost Incurred
through
12/31/13

Start

Anchor
Tenant
Occupancy

Stabilized
Operation

AHH

Ownership %(1) Property Type

Principal
Tenants

4525 Main Street(2) Virginia Beach, VA 234,000(3) $50,000

$25,700

1Q13

3Q14

1Q16

100%

Office

Sandbridge Commons Virginia Beach, VA 70,000
Newport News, VA 36,000
Brooks Crossing(7)
18,000
Chesapeake, VA
Greentree Shopping

13,000
8,000
6,000

6,000
1,000
2,200

4Q13
3Q14
4Q13

1Q15
3Q15
4Q14

2Q16
3Q15
3Q16

85%
65%
100%

Center(5)

358,000

77,000

34,900

Multifamily

Location

Encore Apartments(2) Virginia Beach, VA
Whetstone

Apartments

Durham, NC

Liberty Apartments(6) Newport News, VA

Schedule

Estimated
Apartment
Units(1)

Estimated
Cost(1)

Cost Incurred
through
12/31/13

Initial

Start

Occupancy Complete(1)

Stabilized
Operation

AHH
Ownership %

286

$34,000

$11,500

1Q13

3Q14

4Q15

203
197

686

28,000
30,700

7,700
—

2Q13
—

3Q14
—

3Q15
1Q14

$92,700

$19,200

1Q16

1Q16
3Q15

100%

100%
100%

Next Generation Pipeline

Schedule

Office/Retail

Oceaneering

Location

Estimated
Square
Footage(1)

Estimated
Cost(1)

Cost Incurred
through
12/31/13

Start

Anchor
Tenant
Occupancy

Stabilized
Operation

AHH

Ownership %(1) Property Type

Principal
Tenants

Chesapeake, VA

155,000

26,000

3,500

4Q13

1Q15

1Q15

100%

Office

Oceaneering

% Leased

100%

Total

$195,700

$ 57,600

(1) Represents estimates that may change as the development process proceeds.
(2) This property will be located in the Town Center of Virginia Beach.
(3) Approximately 83,000 square feet is leased to Clark Nexsen, an architectural firm and approximately 23,000 square feet is leased to the City of Virginia

Beach Development Authority.

(4) The principal tenant lease has not been signed as of the date of this Annual Report on Form 10-K.
(5) The Company has a contract to sell Walmart a pad-ready site adjacent to Greentree Shopping Center.
(6) Reflects actual purchase price of the acquisition, which occurred in January 2014.
(7) Reflects the current development program as of the date of this Annual Report on Form 10-K.

7

Clark Nexsen,
Development
Authority of
Virginia Beach(3)
Harris Teeter
Huntington Ingalls(4)

Retail
Office
Retail Wawa

% Leased

46%

66%
0%(4)
40%

Segments

As of December 31, 2013, we operated in four business segments: office, retail, multifamily, and general

contracting and real estate services. Additional information regarding our four operating segments is set forth in
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 3 to our
consolidated and combined financial statements in Item 8 of this Annual Report on Form 10-K.

Tax Status

We intend to elect and qualify to be taxed as a REIT for U.S. federal income tax purposes commencing with

our short taxable year ending December 31, 2013. Our qualification as a REIT will depend upon our ability to
meet, on a continuing basis, through actual investment and operating results, various complex requirements
under the Code relating to, among other things, the sources of our gross income, the composition and values of
our assets, our distribution levels and the diversity of ownership of our capital stock. We believe that we are
organized in conformity with the requirements for qualification as a REIT under the Code and that our manner of
operation will enable us to meet the requirements for qualification and taxation as a REIT for U.S. federal
income tax purposes commencing with our short taxable year ending December 31, 2013. In addition, we intend
to elect to treat AHP Holding, Inc., which, through its wholly-owned subsidiaries, will operate our construction,
development and third-party asset management businesses, as a taxable REIT subsidiary (“TRS”).

As a REIT, we generally will not be subject to U.S. federal income tax on our net taxable income that we

distribute currently to our stockholders. Under the Code, REITs are subject to numerous organizational and
operational requirements, including a requirement that they distribute each year at least 90% of their REIT
taxable income, determined without regard to the deduction for dividends paid and excluding any net capital
gains. If we fail to qualify for taxation as a REIT in any taxable year and do not qualify for certain statutory relief
provisions, our income for that year will be taxed at regular corporate rates, and we would be disqualified from
taxation as a REIT for the four taxable years following the year during which we ceased to qualify as a REIT.
Even if we qualify as a REIT for U.S. federal income tax purposes, we may still be subject to state and local
taxes on our income and assets and to federal income and excise taxes on our undistributed income. Additionally,
any income earned by our services company, and any other TRS we form in the future, will be fully subject to
federal, state and local corporate income tax.

Insurance

We carry comprehensive liability, fire, extended coverage, business interruption and rental loss insurance

covering all of the properties in our portfolio under a blanket insurance policy, in addition to other coverage that
may be appropriate for certain of our properties. We believe the policy specifications and insured limits are
appropriate and adequate for our properties given the relative risk of loss, the cost of the coverage and industry
practice; however, our insurance coverage may not be sufficient to fully cover our losses. We do not carry
insurance for certain losses, including, but not limited to, losses caused by riots or war. Some of our policies, like
those covering losses due to terrorism and earthquakes, are insured subject to limitations involving large
deductibles or co-payments and policy limits that may not be sufficient to cover losses, for such events. In
addition, all of the properties in our portfolio are located in Virginia and North Carolina, which are areas subject
to an increased risk of hurricanes. While we will carry hurricane insurance on certain of our properties, the
amount of our hurricane insurance coverage may not be sufficient to fully cover losses from hurricanes. We may
reduce or discontinue hurricane, terrorism or other insurance on some or all of our properties in the future if the
cost of premiums for any of these policies exceeds, in our judgment, the value of the coverage discounted for the
risk of loss. Also, if destroyed, we may not be able to rebuild certain of our properties due to current zoning and
land use regulations. As a result, we may be required to incur significant costs in the event of adverse weather
conditions and natural disasters. In addition, our title insurance policies may not insure for the current aggregate
market value of our portfolio, and we do not intend to increase our title insurance coverage as the market value of
our portfolio increases. If we or one or more of our tenants experiences a loss that is uninsured or that exceeds

8

policy limits, we could lose the capital invested in the damaged properties as well as the anticipated future cash
flows from those properties. In addition, if the damaged properties are subject to recourse indebtedness, we
would continue to be liable for the indebtedness, even if these properties were irreparably damaged. Furthermore,
we may not be able to obtain adequate insurance coverage at reasonable costs in the future as the costs associated
with property and casualty renewals may be higher than anticipated.

Regulation

General

Our properties are subject to various covenants, laws, ordinances and regulations, including regulations
relating to common areas and fire and safety requirements. We believe that each of the properties in our portfolio
has the necessary permits and approvals to operate its business.

Americans With Disabilities Act

Our properties must comply with Title III of the Americans with Disabilities Act (the “ADA”), to the extent

that such properties are “public accommodations” as defined by the ADA. Under the ADA, all public
accommodations must meet federal requirements related to access and use by disabled persons. The ADA may
require removal of structural barriers to access by persons with disabilities in certain public areas of our
properties where such removal is readily achievable. Although we believe that the properties in our portfolio in
the aggregate substantially comply with present requirements of the ADA, we have not conducted a
comprehensive audit or investigation of all of our properties to determine our compliance, and we are aware that
some particular properties may currently be in non-compliance with the ADA. Noncompliance with the ADA
could result in the incurrence of additional costs to attain compliance, the imposition of fines, an award of
damages to private litigants and a limitation on our ability to refinance outstanding indebtedness. The obligation
to make readily achievable accommodations is an ongoing one, and we will continue to assess our properties and
to make alterations as appropriate in this respect.

Environmental Matters

Under various federal, state and local laws and regulations relating to the environment, as a current or
former owner or operator of real property, we may be liable for costs and damages resulting from the presence or
discharge of hazardous or toxic substances, waste or petroleum products at, on, in, under, or migrating from such
property, including costs to investigate and clean up such contamination and liability for harm to natural
resources. Such laws often impose liability without regard to whether the owner or operator knew of, or was
responsible for, the presence of such contamination, and the liability may be joint and several. These liabilities
could be substantial and the cost of any required remediation, removal, fines, or other costs could exceed the
value of the property and our aggregate assets. In addition, the presence of contamination or the failure to
remediate contamination at our properties may expose us to third-party liability for costs of remediation and
personal or property damage or materially adversely affect our ability to sell, lease or develop our properties or to
borrow using the properties as collateral. In addition, environmental laws may create liens on contaminated sites
in favor of the government for damages and costs it incurs to address such contamination. Moreover, if
contamination is discovered on our properties, environmental laws may impose restrictions on the manner in
which property may be used or businesses may be operated, and these restrictions may require substantial
expenditures.

Some of our properties contain, have contained, or are adjacent to or near other properties that have

contained or currently contain storage tanks for the storage of petroleum products, propane or other hazardous or
toxic substances. Similarly, some of our properties were used in the past for commercial or industrial purposes,
or are currently used for commercial purposes, that involve or involved the use of petroleum products or other
hazardous or toxic substances, or are adjacent to or near properties that have been or are used for similar

9

commercial or industrial purposes. As a result, some of our properties have been or may be impacted by
contamination arising from the releases of such hazardous substances or petroleum products. Where we have
deemed appropriate, we have taken steps to address identified contamination or mitigate risks associated with
such contamination; however, we are unable to ensure that further actions will not be necessary. As a result of the
foregoing, we could potentially incur materially liability.

Environmental laws also govern the presence, maintenance and removal of asbestos-containing building
materials, or ACBM, and may impose fines and penalties for failure to comply with these requirements or expose
us to third-party liability. Such laws require that owners or operators of buildings containing ACBM (and
employers in such buildings) properly manage and maintain the asbestos, adequately notify or train those who
may come into contact with asbestos, and undertake special precautions, including removal or other abatement, if
asbestos would be disturbed during renovation or demolition of a building. In addition, the presence of ACBM in
our properties may expose us to third-party liability (e.g. liability for personal injury associated with exposure to
asbestos). We are not presently aware of any material adverse issues at our properties including ACBM.

Similarly, environmental laws govern the presence, maintenance and removal of lead-based paint in
residential buildings, and may impose fines and penalties for failure to comply with these requirements. Such
laws require, among other things, that owners or operators of residential facilities that contain or potentially
contain lead-based paint notify residents of the presence or potential presence of lead-based paint prior to
occupancy and prior to renovations and manage lead-based paint waste appropriately. In addition, the presence of
lead-based paint in our buildings may expose us to third-party liability (e.g., liability for personal injury
associated with exposure to lead-based paint). We are not presently aware of any material adverse issues at our
properties involving lead-based paint.

In addition, the properties in our portfolio also are subject to various federal, state, and local environmental
and health and safety requirements, such as state and local fire requirements. Moreover, some of our tenants may
handle and use hazardous or regulated substances and wastes as part of their operations at our properties, which
are subject to regulation. Such environmental and health and safety laws and regulations could subject us or our
tenants to liability resulting from these activities. Environmental liabilities could affect a tenant’s ability to make
rental payments to us. In addition, changes in laws could increase the potential liability for noncompliance. Our
leases sometimes require our tenants to comply with environmental and health and safety laws and regulations
and to indemnify us for any related liabilities. But in the event of the bankruptcy or inability of any of our tenants
to satisfy such obligations, we may be required to satisfy such obligations. In addition, we may be held directly
liable for any such damages or claims regardless of whether we knew of, or were responsible for, the presence or
disposal of hazardous or toxic substances or waste and irrespective of tenant lease provisions. The costs
associated with such liability could be substantial and could have a material adverse effect on us.

When excessive moisture accumulates in buildings or on building materials, mold growth may occur,
particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds
may produce airborne toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation,
chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen,
viruses and bacteria. Indoor exposure to airborne toxins or irritants above certain levels can be alleged to cause a
variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of
significant mold or other airborne contaminants at any of our properties could require us to undertake a costly
remediation program to contain or remove the mold or other airborne contaminants from the affected property or
increase indoor ventilation. In addition, the presence of significant mold or other airborne contaminants could
expose us to liability from our tenants, employees of our tenants or others if property damage or personal injury
occurs. We are not presently aware of any material adverse indoor air quality issues at our properties.

Competition

We compete with a number of developers, owners and operators of office, retail and multifamily real estate,

many of which own properties similar to ours in the same markets in which our properties are located and some

10

of which have greater financial resources than we do. In operating and managing our portfolio, we compete for
tenants based on a number of factors, including location, rental rates, security, flexibility and expertise to design
space to meet prospective tenants’ needs and the manner in which the property is operated, maintained and
marketed. As leases at our properties expire, we may encounter significant competition to renew or re-let space
in light of the large number of competing properties within the markets in which we operate. As a result, we may
be required to provide rent concessions or abatements, incur charges for tenant improvements and other
inducements, including early termination rights or below-market renewal options, or we may not be able to
timely lease vacant space.

We also face competition when pursuing development and acquisition opportunities. Our competitors may

be able to pay higher property acquisition prices, may have private access to opportunities not available to us and
otherwise be in a better position to acquire or develop a property. Competition may also have the effect of
reducing the number of suitable development and acquisition opportunities available to us, increase the price
required to consummate a development or acquisition opportunity.

In addition, we face competition in our construction business from other construction companies in the
markets in which we operate, including small local companies and large regional and national companies. In our
construction business, we compete for construction projects based on several factors, including cost, reputation
for quality and timeliness, access to machinery and equipment, access to and relationships with high-quality
subcontractors, financial strength, knowledge of local markets and project management abilities. We believe that
we compete favorably on the basis of the foregoing factors, and that our construction business is well-positioned
to compete effectively in the markets in which we operate. However, some of the construction companies with
which we compete have different cost structures and greater financial and other resources than we do, which may
put them at an advantage when competing with us for construction projects. Competition from other construction
companies may reduce the number of construction projects that we are hired to complete and increase pricing
pressure, either of which could reduce the profitability of our construction business.

Employees

At December 31, 2013, we had 120 employees. None of our employees are represented by a collective

bargaining unit. We believe that our relationship with our employees is good.

Corporate Information

Our principal executive office is located at 222 Central Park Avenue, Suite 2100, Virginia Beach,
Virginia 23462 in the Armada Hoffler Tower at the Virginia Beach Town Center. In addition, we have
construction offices located at 249 Central Park Avenue, Suite 300, Virginia Beach, Virginia 23462 and
720 Aliceanna Street, Suite 320-A, Baltimore, Maryland 21202. The telephone number for our principal
executive office is (757) 366-4000. We maintain a website located at www.armadahoffler.com. The information
on, or accessible through, our website is not incorporated into and does not constitute a part of this Annual
Report on Form 10-K or any other report or document we file with or furnish to the SEC.

Available Information

We file our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,
and all amendments to those reports with the SEC. You may obtain copies of these documents by visiting the SEC’s
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, by calling the SEC at 1-800-SEC-0330 or
by accessing the SEC’s website at www.sec.gov. In addition, as soon as reasonably practicable after such materials
are furnished to the SEC, we make copies of these documents available to the public free of charge through our
website or by contacting our Secretary at the address set forth above under “—Corporate Information.”

11

Our Corporate Governance Guidelines, Code of Business Conduct and Ethics, and the charters of our audit

committee, compensation committee and nominating and corporate governance committee are all available in the
Corporate Governance section of the Investor Relations section of our website.

Financial Information

For required financial information related to our operations, please refer to our consolidated and combined

financial statements, including the notes thereto, included with this Annual Report on Form 10-K.

Item 1A. Risk Factors

Set forth below are the risks that we believe are material to our stockholders. You should carefully consider

the following risks in evaluating our Company and our business. The occurrence of any of the following risks
could materially adversely impact our financial condition, results of operations, cash flow, the market price of
shares of our common stock and our ability to, among other things, satisfy our debt service obligations and to
make distributions to our stockholders, which in turn could cause our shareholders to lose all or a part of their
investment. Some statements in this report including statements in the following risk factors constitute forward-
looking statements. Please refer to the section entitled “Special Note Regarding Forward-Looking Statements” at
the beginning of this Annual Report on Form 10-K.

Risks Related to Our Real Estate Ownership, Acquisition and Development Business

The geographic concentration of our portfolio could cause us to be more susceptible to adverse economic or
regulatory developments in the markets in which our properties are located than if we owned a more
geographically diverse portfolio.

The properties in our portfolio are located in Virginia and North Carolina, which exposes us to greater

economic risks than if we owned a more geographically diverse portfolio. As of December 31, 2013, our
properties in the Virginia and North Carolina markets represented approximately 94% and 6%, respectively, of
the total annualized base rent of the properties in our portfolio. As a result, we are particularly susceptible to
adverse economic, regulatory or other conditions in these markets (such as periods of economic slowdown or
recession, business layoffs or downsizing, industry slowdowns, relocations of businesses, increases in real estate
and other taxes and the cost of complying with governmental regulations or increased regulation), as well as to
natural disasters that occur in these markets (such as hurricanes and other events). For example, the markets in
Virginia in which the properties in our portfolio are located contain high concentrations of military personnel and
operations. A reduction of the military presence or cuts in defense spending in these markets could have a
material adverse effect on us. If there is a further downturn in the economy in the Virginia or North Carolina
markets, our operations and our revenue and cash available for distribution, including cash available to pay
distributions to our stockholders, could be materially adversely affected. We cannot assure you that these markets
will grow or that underlying real estate fundamentals will be favorable to owners and operators of office, retail or
multifamily properties. Our operations may also be affected if competing properties are built in these markets.
Moreover, submarkets within any of our target markets may be dependent upon a limited number of industries.
Any adverse economic or real estate developments in our markets, or any decrease in demand for office, retail or
multifamily space resulting from the regulatory environment, business climate or energy or fiscal problems,
could materially adversely affect us, including our financial condition, results of operations, cash flow, cash
available for distribution and our ability to satisfy our debt service obligations.

We have a substantial amount of indebtedness outstanding, which may expose us to the risk of default under
our debt obligations and may include covenants that restrict our ability to pay distributions to our
stockholders.

At December 31, 2013, we had total debt outstanding of approximately $277.7 million, including amounts

drawn under our credit facility, a substantial portion of which is guaranteed by our operating partnership, and we

12

may incur significant additional debt to finance future acquisition and development activities. Payments of
principal and interest on borrowings may leave us with insufficient cash resources to operate our properties or to
pay the dividends currently contemplated or necessary to maintain our REIT qualification. Our level of debt and
the limitations imposed on us by our debt agreements could have significant adverse consequences, including the
following:

•

our cash flow may be insufficient to meet our required principal and interest payments;

• we may be unable to borrow additional funds as needed or on favorable terms, which could, among

other things, adversely affect our ability to meet operational needs;

• we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less

favorable than the terms of our original indebtedness;

• we may be forced to dispose of one or more of our properties, possibly on unfavorable terms or in

violation of certain covenants to which we may be subject;

• we may default on our obligations, in which case the lenders or mortgagees may have the right to

foreclose on any properties that secure the loans or collect rents and other income from our properties;

• we may violate restrictive covenants in our loan documents, which would entitle the lenders to

accelerate our debt obligations or reduce our ability to pay, or prohibit us from paying, distributions to
our stockholders; and

•

our default under any loan with cross default provisions could result in a default on other indebtedness.

If any one of these events were to occur, our financial condition, results of operations and cash flow could
be materially adversely affected. Furthermore, foreclosures could create taxable income without accompanying
cash proceeds, which could hinder our ability to meet the REIT distribution requirements imposed by the Code.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and
Capital Resources.”

We depend on significant tenants in certain of our office properties, and a bankruptcy, insolvency or inability
to pay rent by any of these tenants could result in a material decrease in our rental income, which would have
a material adverse effect on us, including our financial condition, results of operations, cash flow, cash
available for distribution and our ability to service our debt obligations.

As of December 31, 2013, the largest tenant at properties in our office portfolio—Williams Mullen—
represented approximately 32% of the total annualized base rent in our office portfolio. In addition, Sentara
Williamsburg and Virginia Natural Gas are 100% occupied by Sentara Medical Group and Virginia Natural Gas,
respectively. The inability of these or other significant tenants to pay rent or the bankruptcy or insolvency of a
significant tenant may adversely affect the income produced by our office properties. For example, Williams
Mullen, the largest tenant at properties in our portfolio by annualized base rent, accounted for an annualized base
rent of approximately $7.8 million for the year ended December 31, 2013, which represents 14% of the total
annualized base rent of our portfolio for the year ended December 31, 2013. As a result, Williams Mullen’s
inability to pay rent could materially adversely affect the income produced by our portfolio.

If a tenant becomes bankrupt or insolvent, federal law may prohibit us from evicting such tenant based
solely upon such bankruptcy or insolvency. In addition, a bankrupt or insolvent tenant may be authorized to
reject and terminate its lease with us. Any claim against such tenant for unpaid, future rent would be subject to a
statutory cap that might be substantially less than the remaining rent owed under the lease. If any of these tenants
were to experience a downturn in its business or a weakening of its financial condition resulting in its failure to
make timely rental payments or causing it to default under its lease, we may experience delays in enforcing our
rights as landlord and may incur substantial costs in protecting our investment. In many cases, we may have
made substantial initial investments in the applicable leases through tenant improvement allowances and other

13

concessions that we may not be able to recover. Any such event could have a material adverse effect on us,
including our financial condition, results of operations, cash flow, cash available for distribution and our ability
to service our debt obligations.

The loss of, or a store closure by, one of the anchor stores or major tenants in our retail shopping center
properties could result in a material decrease in our rental income, which would have a material adverse
effect on us, including our financial condition, results of operations, cash flow, cash available for distribution
and our ability to service our debt obligations.

Our retail shopping center properties typically are anchored by large, nationally recognized tenants. As of

December 31, 2013, Home Depot, Harris Teeter and Food Lion collectively represented approximately 23%, and
individually represented 10%, 7% and 6%, respectively, of the total annualized base rent in our retail portfolio. In
addition, several of our retail properties are single-tenant properties or are occupied primarily by a single tenant.
As of December 31, 2013, the Courthouse 7-Eleven, Tyre Neck Harris Teeter and Harrisonburg Regal retail
properties in our portfolio were 100% occupied by 7-Eleven, Harris Teeter and Regal Cinemas, respectively, and
the Dick’s at Town Center and Studio 56 retail properties were approximately 83% and 69% occupied by Dick’s
Sporting Goods and McCormick & Schmick’s, respectively. At any time, our tenants may experience a downturn
in their business that may weaken significantly their financial condition. As a result, our tenants, including our
anchor and other major tenants, may fail to comply with their contractual obligations to us, seek concessions in
order to continue operations or declare bankruptcy, any of which could result in the termination of such tenants’
leases and the loss of rental income attributable to the terminated leases. In addition, certain of our tenants may
cease operations while continuing to pay rent, which could decrease customer traffic, thereby decreasing sales for
our other tenants at the applicable retail property. In addition to these potential effects of a business downturn,
mergers or consolidations among retail establishments could result in the closure of existing stores or duplicate or
geographically overlapping store locations, which could include stores at our retail properties.

Loss of, or a store closure by, an anchor or major tenant could significantly reduce our occupancy level or

the rent we receive from our retail properties, and we may not have the right to re-lease vacated space or we may
be unable to re-lease vacated space at attractive rents or at all. Moreover, in the event of default by a major tenant
or anchor store, we may experience delays and costs in enforcing our rights as landlord to recover amounts due to
us under the terms of our agreements with those parties. The occurrence of any of the situations described above,
particularly if it involves an anchor tenant with leases in multiple locations, could seriously harm our
performance and could adversely affect the value of the affected retail property.

In the event that any of the anchor stores, major tenants or single-tenant property tenants in our retail
properties do not renew their leases with us when they expire, we may be unable to re-lease such premises at
market rents, or at all, which could have a material adverse effect on us, including our financial condition, results
of operations, cash flow and cash available for distribution and our ability to satisfy our debt service obligations.

We may be unable to renew leases, lease vacant space or re-let space on favorable terms or at all as leases
expire, which could materially adversely affect us, including our financial condition, results of operations,
cash flow, cash available for distribution and our ability to service our debt obligations.

As of December 31, 2013, 6% of the square footage of the properties in our office and retail portfolios was

available. We cannot assure you that leases will be renewed or that our properties will be re-let at net effective
rental rates equal to or above the current average net effective rental rates or that substantial rent abatements,
tenant improvements, early termination rights or below-market renewal options will not be offered to attract new
tenants or retain existing tenants. In addition, our ability to lease our multifamily properties at favorable rates, or
at all, may be adversely affected by the increase in supply of multifamily properties in our target markets. Our
ability to lease our properties depends upon the overall level of spending in the economy, which is adversely
affected by, among other things, job losses and unemployment levels, recession, personal debt levels, the housing
market, stock market volatility and uncertainty about the future. If rental rates for our properties decrease, our

14

existing tenants do not renew their leases or we do not re-let a significant portion of our available space and
space for which leases expire, our financial condition, results of operations, cash flow, cash available for
distributions and our ability to service our debt obligations could be materially adversely affected.

Competition for property acquisitions and development opportunities may reduce the number of opportunities
available to us and increase our costs, which could have a material adverse effect on our growth prospects.

The current market for property acquisitions and development opportunities continues to be extremely
competitive. This competition may increase the demand for the types of properties in which we typically invest
and, therefore, reduce the number of suitable investment opportunities available to us and increase the purchase
prices for such properties, in the event we are able to acquire or develop such properties. We face significant
competition for attractive investment opportunities from an indeterminate number of investors, including
publicly traded and privately held REITs, private equity investors and institutional investment funds, some of
which have greater financial resources than we do, a greater ability to borrow funds to make investments in
properties and the ability to accept more risk than we can prudently manage, including risks with respect to the
geographic proximity of investments and the payment of higher acquisition prices. This competition will increase
if investments in real estate become more attractive relative to other forms of investment. If the level of
competition for investment opportunities is significant in our target markets, it could have a material adverse
effect on our growth prospects.

The failure of properties that we develop or acquire in the future to meet our financial expectations could
have a material adverse effect on us, including our financial condition, results of operations, cash flow, the
per share trading price of our common stock and our growth prospects.

Our future acquisitions and development projects and our ability to successfully operate these properties

may be exposed to the following significant risks, among others:

• we may acquire or develop properties that are not accretive to our results upon acquisition, and we may

not successfully manage and lease those properties to meet our expectations;

•

our cash flow may be insufficient to enable us to pay the required principal and interest payments on
the debt secured by the property;

• we may spend more than budgeted amounts to make necessary improvements or renovations to

acquired properties or to develop new properties;

• we may be unable to quickly and efficiently integrate new acquisitions or developed properties into our

existing operations;

• market conditions may result in higher than expected vacancy rates and lower than expected rental rates; and

• we may acquire properties subject to liabilities and without any recourse, or with only limited recourse,

with respect to unknown liabilities such as liabilities for clean-up of undisclosed environmental
contamination, claims by tenants, vendors or other persons dealing with the former owners of the
properties, liabilities incurred in the ordinary course of business and claims for indemnification by
general partners, directors, officers and others indemnified by the former owners of the properties.

If we cannot operate acquired or developed properties to meet our financial expectations, our growth

prospects could be materially adversely affected.

Certain of the leases at our retail properties contain “co-tenancy” or “go-dark” provisions, which, if triggered,
may allow tenants to pay reduced rent, cease operations or terminate their leases, any of which could
materially adversely affect our performance or the value of the affected retail property.

Certain of the leases at our retail properties contain “co-tenancy” provisions that condition a tenant’s
obligation to remain open, the amount of rent payable by the tenant or the tenant’s obligation to continue

15

occupancy on certain conditions, including: (1) the presence of a certain anchor tenant or tenants; (2) the
continued operation of an anchor tenant’s store; and (3) minimum occupancy levels at the retail property. If a co-
tenancy provision is triggered by a failure of any of these or other applicable conditions, a tenant could have the
right to cease operations, to terminate its lease early or to reduce its rent. In periods of prolonged economic
decline, there is a higher than normal risk that co-tenancy provisions will be triggered as there is a higher risk of
tenants closing stores or terminating leases during these periods. In addition to these co-tenancy provisions,
certain of the leases at our retail properties contain “go-dark” provisions that allow the tenant to cease operations
while continuing to pay rent. This could result in decreased customer traffic at the affected retail property,
thereby decreasing sales for our other tenants at that property, which may result in our other tenants being unable
to pay their minimum rents or expense recovery charges. These provisions also may result in lower rental
revenue generated under the applicable leases. To the extent co-tenancy or go-dark provisions in our retail leases
result in lower revenue or tenant sales or tenants’ rights to terminate their leases early or to a reduction of their
rent, revenues and the value of the affected retail property could be materially adversely affected.

Our dependence on smaller businesses, particularly in our retail portfolio, to rent our space could have a
material adverse effect on our cash flow and results of operations.

Many of our tenants, particularly those that lease space in our retail properties are smaller businesses that
generally do not have the financial strength or resources of larger corporate tenants. In particular, 68 of our retail
tenants (representing approximately 12% of our annualized base rent from retail properties as of December 31,
2013) lease 2,500 or less square feet from us, and many of those tenants are smaller independent businesses,
which generally experience a higher rate of failure than large businesses. As a result of our dependence on these
smaller businesses, we could experience a higher rate of tenant defaults, turnover and bankruptcies, which could
have a material adverse effect on our cash flow and results of operations.

Many of our operating costs and expenses are fixed and will not decline if our revenues decline.

Our results of operations depend, in large part, on our level of revenues, operating costs and expenses. The

expense of owning and operating a property is not necessarily reduced when circumstances such as market
factors and competition cause a reduction in revenue from the property. As a result, if revenues decline, we may
not be able to reduce our expenses to keep pace with the corresponding reductions in revenues. Many of the costs
associated with real estate investments, such as real estate taxes, insurance, loan payments and maintenance,
generally will not be reduced if a property is not fully occupied or other circumstances cause our revenues to
decrease, which could have a material adverse effect on us, including our financial condition, results of
operations, cash flow, cash available for distribution and our ability to service our debt obligations.

Increases in mortgage rates or unavailability of mortgage debt may make it difficult for us to finance or
refinance our debt, which could have a material adverse effect on our financial condition, growth prospects
and our ability to make distributions to stockholders.

If mortgage debt is unavailable to us at reasonable rates or at all, we may not be able to finance the purchase or

development of additional properties or refinance existing debt when it becomes due. If interest rates are higher
when we refinance our properties, our income and cash flow could be reduced, which would reduce cash available
for distribution to our stockholders and may hinder our ability to raise more capital by issuing more stock or by
borrowing more money. In addition, to the extent we are unable to refinance our debt when it becomes due, we will
have fewer debt guarantee opportunities available to offer under our tax protection agreements, which could trigger
an obligation to indemnify certain parties under the applicable tax protection agreements.

Mortgage debt obligations expose us to the possibility of foreclosure, which could result in the loss of our
investment in a property or group of properties subject to mortgage debt.

Mortgage and other secured debt obligations increases our risk of property losses because defaults on
indebtedness secured by properties may result in foreclosure actions initiated by lenders and ultimately our loss of

16

the property securing any loans for which we are in default. Any foreclosure on a mortgaged property or group of
properties could adversely affect the overall value of our portfolio of properties. For tax purposes, a foreclosure on
any of our properties that is subject to a nonrecourse mortgage loan would be treated as a sale of the property for a
purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of
the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on
foreclosure, but would not receive any cash proceeds, which could hinder our ability to meet the REIT distribution
requirements imposed by the Code. Foreclosures could also trigger our tax indemnification obligations under the
terms of our tax protection agreements with respect to the sales of certain properties.

Most of our debt arrangements involve balloon payment obligations, which may materially adversely affect us,
including our cash flows, financial condition and ability to make distributions.

Most of our debt arrangements require us to make a lump-sum or “balloon” payment at maturity. Our ability

to make a balloon payment at maturity is uncertain and may depend upon our ability to obtain additional
financing or our ability to sell the property. At the time the balloon payment is due, we may or may not be able to
refinance the existing financing on terms as favorable as the original loan or sell the property at a price sufficient
to make the balloon payment. In addition, balloon payments and payments of principal and interest on our
indebtedness may leave us with insufficient cash to pay the distributions that we are required to pay to maintain
our qualification as a REIT.

Our credit facility restricts our ability to engage in certain business activities, including our ability to incur
additional indebtedness, make capital expenditures and make certain investments.

Our credit facility contains customary negative covenants and other financial and operating covenants that,

among other things:

•

•

•

•

•

•

•

restrict our ability to incur additional indebtedness;

restrict our ability to incur additional liens;

restrict our ability to make certain investments (including certain capital expenditures);

restrict our ability to merge with another company;

restrict our ability to sell or dispose of assets;

restrict our ability to make distributions to stockholders; and

require us to satisfy minimum financial coverage ratios, minimum tangible net worth requirements and
maximum leverage ratios.

These limitations restrict our ability to engage in certain business activities, which could materially
adversely affect our financial condition, results of operations, cash flow, cash available for distribution and our
ability to service our debt obligations. In addition, our credit facility may contain specific cross-default
provisions with respect to specified other indebtedness, giving the lenders the right, in certain circumstances, to
declare a default if we are in default under other loans.

Adverse economic and geopolitical conditions and dislocations in the credit markets could have a material
adverse effect on us, including our financial condition, results of operations, cash flow, cash available for
distribution and our ability to service our debt obligations.

Our business may be affected by market and economic challenges experienced by the U.S. economy or real
estate industry as a whole, such as the dislocations in the credit markets and general global economic downturn
during the recent recessionary period. These conditions, or similar conditions in the future, may materially
adversely affect us as a result of the following potential consequences, among others:

•

decreased demand for office, retail and multifamily space, which would cause market rental rates and
property values to be negatively impacted;

17

•

•

•

reduced values of our properties may limit our ability to dispose of assets at attractive prices or obtain
debt financing secured by our properties and may reduce the availability of unsecured loans;

our ability to obtain financing on terms and conditions that we find acceptable, or at all, may be
limited, which could reduce our ability to pursue acquisition and development opportunities and
refinance existing debt, reduce our returns from our acquisition and development activities and increase
our future debt service expense; and

one or more lenders under our credit facility could refuse to fund their financing commitment to us or
could fail and we may not be able to replace the financing commitment of any such lenders on
favorable terms, or at all.

In addition, the recent economic downturn has adversely affected, and may continue to adversely affect, the
businesses of many of our tenants. As a result, we may see increases in bankruptcies of our tenants and increased
defaults by tenants, and we may experience higher vacancy rates and delays in re-leasing vacant space, which
could negatively impact our business and results of operations, cash flow, cash available for distribution and our
ability to service our debt obligations.

Failure to hedge effectively against interest rate changes may adversely affect our financial condition, results
of operations, cash flow, cash available for distribution and our ability to service our debt obligations.

Subject to maintaining our qualification as a REIT, we expect to continue to enter into hedging transactions
to protect us from the effects of interest rate fluctuations on floating rate debt. Our existing hedging transactions
have, and future hedging transactions may, include entering into interest rate cap agreements or interest rate swap
agreements. These agreements involve risks, such as the risk that such arrangements would not be effective in
reducing our exposure to interest rate changes or that a court could rule that such an agreement is not legally
enforceable. In addition, interest rate hedging can be expensive, particularly during periods of rising and volatile
interest rates. Hedging could increase our costs and reduce the overall returns on our investments. In addition,
while hedging agreements would be intended to lessen the impact of rising interest rates on us, they could also
expose us to the risk that the other parties to the agreements would not perform, we could incur significant costs
associated with the settlement of the agreements or that the underlying transactions could fail to qualify as
highly-effective cash flow hedges under Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) Topic 815, Derivatives and Hedging.

Adverse conditions in the general retail environment could have a material adverse effect on us, including our
financial condition, results of operations, cash flow, cash available for distribution and our ability to satisfy
our debt service obligations and to make distributions to our stockholders.

Fifteen of our 24 properties, representing approximately 37% of our total annualized base rent as of
December 31, 2013, are retail properties. As a result, we are subject to factors that affect the retail sector
generally, as well as the market for retail space. The retail environment and the market for retail space have been,
and could continue to be, adversely affected by weakness in the national, regional and local economies, the level
of consumer spending and consumer confidence, the adverse financial condition of some large retailing
companies, the ongoing consolidation in the retail sector, the excess amount of retail space in a number of
markets and increasing competition from discount retailers, outlet malls, internet retailers and other online
businesses. Increases in consumer spending via the internet may significantly affect our retail tenants’ ability to
generate sales in their stores. New and enhanced technologies, including new digital technologies and new web
services technologies, may increase competition for certain of our retail tenants.

Any of the foregoing factors could adversely affect the financial condition of our retail tenants and the

willingness of retailers to lease space in our retail properties. In turn, these conditions could negatively affect
market rents for retail space and could materially and adversely affect us, including our financial condition,
results of operations, cash flow, cash available for distributions and our ability to service our debt obligations.

18

We have limited operating history as a REIT or a publicly traded company.

We have limited operating history as a REIT or a publicly traded company. We cannot assure you that the

past experience of our senior management team will be sufficient to successfully operate our company as a REIT
or a publicly traded company, including the requirements to timely meet disclosure requirements of the SEC. We
will be required to develop and implement control systems and procedures in order to qualify and maintain our
qualification as a REIT and satisfy our periodic and current reporting requirements under applicable SEC
regulations and comply with New York Stock Exchange (“NYSE”), listing standards, and this transition could
place a significant strain on our management systems, infrastructure and other resources. Failure to operate
successfully as a public company or maintain our qualification as a REIT could have a material adverse effect on
our financial condition, results of operations, cash flow and per share trading price of our common stock. See
“—Risks Related to Our Status as a REIT—Failure to qualify as a REIT would have significant adverse
consequences to us and the per share trading price of our common stock.”

We are an “emerging growth company,” and we cannot be certain if the reduced disclosure requirements
applicable to emerging growth companies will make shares of our common stock less attractive to investors.

In April 2012, President Obama signed into law the Jumpstart Our Business Startups Act (the “JOBS Act”).

The JOBS Act contains provisions that, among other things, relax certain reporting requirements for “emerging
growth companies,” including certain requirements relating to accounting standards and compensation
disclosure. We are classified as an emerging growth company. For as long as we are an emerging growth
company, which may be up to five full fiscal years, we may take advantage of exemptions from various reporting
and other requirements that are applicable to other public companies that are not emerging growth companies,
including the requirements to:

•

•

•

•

•

•

provide an auditor’s attestation report on management’s assessment of the effectiveness of our system
of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act;

comply with any new or revised financial accounting standards applicable to public companies until
such standards are also applicable to private companies;

comply with any new requirements adopted by the Public Company Accounting Oversight Board (the
“PCAOB”), requiring mandatory audit firm rotation or a supplement to the auditor’s report in which
the auditor would be required to provide additional information about the audit and the financial
statements of the issuer;

comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC
determines otherwise;

provide certain disclosure regarding executive compensation required of larger public companies; or

hold stockholder advisory votes on executive compensation.

We cannot predict if investors will find shares of our common stock less attractive because we will not be
subject to the same reporting and other requirements as other public companies. If some investors find shares of
our common stock less attractive as a result, there may be a less active trading market for our common stock, the
per share trading price of our common stock could decline and may be more volatile.

We will continue to incur costs as a result of becoming a public company, and such costs may increase if and
when we cease to be an “emerging growth company.”

As a public company, we expect to continue to incur significant legal, accounting, insurance and other
expenses that we did not incur as a private company, including costs associated with public company reporting
requirements. The expenses incurred by public companies generally for reporting and corporate governance
purposes have been increasing. We expect compliance with these public reporting requirements and associated
rules and regulations to increase expenses, particularly after we are no longer an emerging growth company,

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although we are currently unable to estimate theses costs with any degree of certainty. We could be an emerging
growth company for up to five years, although circumstances could cause us to lose that status earlier, which
could result in our incurring additional costs applicable to public companies that are not emerging growth
companies.

We will be subject to the requirements of the Sarbanes-Oxley Act of 2002.

As long as we remain an emerging growth company, as that term is defined in the JOBS Act, we will be

permitted to gradually comply with certain of the on-going reporting and disclosure obligations of public
companies pursuant to the Sarbanes-Oxley Act. However, after we are no longer an emerging growth company
under the JOBS Act, management will be required to deliver a report that assesses the effectiveness of our
internal controls over financial reporting, pursuant to Section 302 of the Sarbanes-Oxley Act. Section 404 of the
Sarbanes-Oxley Act may require our auditors to deliver an attestation report on the effectiveness of our internal
controls over financial reporting in conjunction with their opinion on our audited financial statements as of
December 31, 2014. Substantial work on our part is required to implement appropriate processes, document the
system of internal control over key processes, assess their design, remediate any deficiencies identified and test
their operation. This process is expected to be both costly and challenging. We cannot give any assurances that
material weaknesses will not be identified in the future in connection with our compliance with the provisions of
Section 302 and 404 of the Sarbanes-Oxley Act. The existence of any material weakness described above would
preclude a conclusion by management and our independent auditors that we maintained effective internal control
over financial reporting. Our management may be required to devote significant time and expense to remediate
any material weaknesses that may be discovered and may not be able to remediate any material weakness in a
timely manner. The existence of any material weakness in our internal control over financial reporting could also
result in errors in our financial statements that could require us to restate our financial statements, cause us to fail
to meet our reporting obligations and cause investors to lose confidence in our reported financial information, all
of which could lead to a decline in the per share trading price of our common stock.

We may be required to make rent or other concessions or significant capital expenditures to improve our
properties in order to retain and attract tenants, which may materially adversely affect us, including our
financial condition, results of operations, cash flow, cash available for distributions and our ability to service
our debt obligations.

Upon expiration of our leases to our tenants, to the extent that adverse economic conditions in the real estate

market reduce the demand for office, retail and multifamily space, we may be required to make rent or other
concessions, accommodate requests for renovations, build-to-suit remodeling and other improvements or provide
additional services to our tenants, any of which would increase our costs. As a result, we may have to make
significant capital or other expenditures in order to retain tenants whose leases expire and to attract new tenants
in sufficient numbers. Additionally, we may need to raise capital to make such expenditures. If we are unable to
do so or capital is otherwise unavailable, we may be unable to make the required expenditures. This could result
in non-renewals by tenants upon expiration of their leases. If any of the foregoing were to occur, it could have a
material adverse effect on us, including our financial condition, results of operations, cash flow, cash available
for distribution and our ability to service our debt obligations.

Our use of units in our operating partnership as currency to acquire properties could result in stockholder
dilution or limit our ability to sell such properties, which could have a material adverse effect on us.

In the future we may acquire properties or portfolios of properties through tax deferred contribution
transactions in exchange for units of limited partnership interest in our operating partnership (“OP Units”). This
acquisition structure may have the effect of, among other things, reducing the amount of tax depreciation we
could deduct over the tax life of the acquired properties, and may require that we agree to protect the
contributors’ ability to defer recognition of taxable gain through restrictions on our ability to dispose of the
acquired properties or the allocation of partnership debt to the contributors to maintain their tax bases. These

20

restrictions also could limit our ability to sell properties at a time, or on terms, that would be favorable absent
such restrictions. In addition, issuances of OP Units would reduce our ownership percentage in our operating
partnership and affect the amount of distributions made to us by our operating partnership and, therefore, the
amount of distributions we can make to our stockholders. To the extent that our stockholders do not directly own
OP Units, our stockholders will not have any voting rights with respect to any such issuances or other partnership
level activities of our operating partnership.

Significant competition in the leasing market could have a material adverse effect on us, including our
financial condition, results of operations, cash flow, cash available for distribution and our ability to service
our debt obligations.

We compete with numerous developers, owners and operators of real estate, many of which own properties

similar to ours in the same submarkets in which our properties are located. If our competitors offer space at rental
rates below current market rates, or below the rental rates we currently charge our tenants, we may lose existing
or potential tenants and we may be pressured to reduce our rental rates below those we currently charge or to
offer more substantial rent abatements, tenant improvements, early termination rights or below-market renewal
options in order to retain tenants when our tenants’ leases expire. As a result, our financial condition, results of
operations, cash flow cash available for distributions and our ability to service our debt obligations could be
materially and adversely affected.

Our success depends on key personnel whose continued service is not guaranteed, and the loss of one or more
of our key personnel could adversely affect our ability to manage our business and to implement our growth
strategies, or could create a negative perception of our company in the capital markets.

Our continued success and our ability to manage anticipated future growth depend, in large part, upon the

efforts of key personnel, particularly Messrs. Hoffler (our Executive Chairman), Kirk (our Vice Chairman),
Haddad (our President and Chief Executive Officer), Nero (our President of Development), Apperson (our
President of Construction), O’Hara (our Chief Financial Officer), and Smith (our Vice President of Operations)
and Ms. Hampton (our President of Asset Management), who have extensive market knowledge and
relationships and exercise substantial influence over our operational, financing, development and construction
activity. Among the reasons that these individuals are important to our success is that each has a national or
regional industry reputation that attracts business and investment opportunities and assists us in negotiations with
lenders, existing and potential tenants and industry personnel. If we lose their services, our relationships with
such personnel could diminish.

Many of our other senior executives also have extensive experience and strong reputations in the real estate

industry, which aid us in identifying opportunities, having opportunities brought to us and negotiating with
tenants and build-to-suit prospects. The loss of services of one or more members of our senior management team,
or our inability to attract and retain highly qualified personnel, could adversely affect our business, diminish our
investment opportunities and weaken our relationships with lenders, business partners, existing and prospective
tenants and industry participants, which could materially adversely affect our financial condition, results of
operations, cash flow and the per share trading price of our common stock.

We may be subject to on-going or future litigation, including existing claims relating to the entities that owned
the properties prior to our initial public offering and otherwise in the ordinary course of business, which could
have a material adverse effect on our financial condition, results of operations, cash flow and the per share
trading price of our common stock.

We may be subject to on-going litigation, including existing claims relating to the entities that owned the

properties and operated the businesses prior to our initial public offering and otherwise in the ordinary course of
business. Some of these claims may result in significant defense costs and potentially significant judgments
against us, some of which are not, or cannot be, insured against. We generally intend to vigorously defend

21

ourselves. However, we cannot be certain of the ultimate outcomes of currently asserted claims or of those that
may arise in the future. In addition, we may become subject to litigation in connection with the formation
transactions related to our initial public offering in the event that prior investors dispute the valuation of their
respective interests, the adequacy of the consideration received by them in the formation transactions or the
interpretation of the agreements implementing the formation transactions. Resolution of these types of matters
against us may result in our having to pay significant fines, judgments, or settlements, which, if uninsured, or if
the fines, judgments, and settlements exceed insured levels, could adversely impact our earnings and cash flows,
thereby having an adverse effect on our financial condition, results of operations, cash flow, cash available for
distribution and our ability to service our debt obligations. Certain litigation or the resolution of certain litigation
may affect the availability or cost of some of our insurance coverage, which could materially adversely affect our
results of operations and cash flows, expose us to increased risks that would be uninsured and adversely impact
our ability to attract officers and directors.

Potential losses from hurricanes in Virginia and North Carolina may not be covered by insurance.

All of the properties in our portfolio are located in Virginia and North Carolina, which are areas particularly

susceptible to hurricanes. While we carry insurance on certain of our properties in Virginia, the amount of our
insurance coverage may not be sufficient to fully cover losses from hurricanes and will be subject to limitations
involving large deductibles or co-payments. In addition, we may reduce or discontinue insurance on some or all
of our properties in the future if the cost of premiums for any such policies exceeds, in our judgment, the value of
the coverage discounted for the risk of loss. As a result, in the event of a hurricane, we may be required to incur
significant costs, and, to the extent that a loss exceeds policy limits, we could lose the capital invested in the
damaged properties as well as the anticipated future cash flows from those properties. In addition, if the damaged
properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these
properties were irreparably damaged.

We may not be able to rebuild our existing properties to their existing specifications if we experience a
substantial or comprehensive loss of such properties.

In the event that we experience a substantial or comprehensive loss of one of our properties, we may not be

able to rebuild such property to its existing specifications. Further, reconstruction or improvement of such a
property would likely require significant upgrades to meet zoning and building code requirements.
Environmental and legal restrictions could also restrict the rebuilding of our properties.

Joint venture investments could be adversely affected by our lack of sole decision-making authority, our
reliance on co-venturers’ financial condition and disputes between us and our co-venturers.

In the past, we have, and in the future, we expect to, co-invest with third parties through partnerships, joint

ventures or other entities, acquiring non-controlling interests in or sharing responsibility for developing
properties and managing the affairs of a property, partnership, joint venture or other entity. In particular, in
connection with the formation transactions related to our initial public offering, we provided certain of the prior
investors with the right to co-develop certain projects with us in the future and the right to acquire a minority
equity interest in certain properties that we may develop in the future, in each case under certain circumstances
and subject to certain conditions set forth in the applicable agreement. In the event that we co-develop a property
together with a third party, we would be required to share a portion of the development fee. With respect to any
such arrangement or any similar arrangement that we may enter into in the future, we may not be in a position to
exercise sole decision-making authority regarding the development, property, partnership, joint venture or other
entity. Investments in partnerships, joint ventures or other entities may, under certain circumstances, involve
risks not present where a third party is not involved, including the possibility that partners or co-venturers might
become bankrupt or fail to fund their share of required capital contributions. Partners or co-venturers may have
economic or other business interests or goals which are inconsistent with our business interests or goals and may
be in a position to take actions contrary to our policies or objectives, and they may have competing interests in

22

our markets that could create conflicts of interest. Such investments may also have the potential risk of impasses
on decisions, such as a sale or financing, because neither we nor the partner(s) or co-venturer(s) would have full
control over the partnership or joint venture. In addition, a sale or transfer by us to a third party of our interests in
the joint venture may be subject to consent rights or rights of first refusal, in favor of our joint venture partners,
which would in each case restrict our ability to dispose of our interest in the joint venture. Where we are a limited
partner or non-managing member in any partnership or limited liability company, if such entity takes or expects
to take actions that could jeopardize our status as a REIT or require us to pay tax, we may be forced to dispose of
our interest in such entity. Disputes between us and partners or co-venturers may result in litigation or arbitration
that would increase our expenses and prevent our officers and directors from focusing their time and effort on our
business. Consequently, actions by or disputes with partners or co-venturers might result in subjecting properties
owned by the partnership or joint venture to additional risk. In addition, we may in certain circumstances be
liable for the actions of our third-party partners or co-venturers. Our joint ventures may be subject to debt and,
during periods of volatile credit markets, the refinancing of such debt may require equity capital calls.

Increased competition and increased affordability of residential homes could limit our ability to retain our
residents, lease apartment units or increase or maintain rents at our multifamily apartment communities.

Our multifamily apartment communities compete with numerous housing alternatives in attracting residents,

including other multifamily apartment communities and single-family rental units, as well as owner-occupied
single- and multifamily units. Competitive housing in a particular area and an increase in the affordability of
owner-occupied single- and multifamily units due to, among other things, declining housing prices, oversupply,
mortgage interest rates and tax incentives and government programs to promote home ownership, could
adversely affect our ability to retain residents, lease apartment units and increase or maintain rents at our
multifamily properties.

Our growth depends on external sources of capital that are outside of our control and may not be available to
us on commercially reasonable terms or at all, which could limit our ability to, among other things, meet our
capital and operating needs or make the cash distributions to our stockholders necessary to maintain our
qualification as a REIT.

In order to maintain our qualification as a REIT, we are required under the Internal Revenue Code of 1986,

as amended (the “Code”) to, among other things, distribute annually at least 90% of our REIT taxable income,
determined without regard to the dividends paid deduction and excluding any net capital gain. In addition, we
will be subject to income tax at regular corporate rates to the extent that we distribute less than 100% of our
REIT taxable income, including any net capital gains. Because of these distribution requirements, we may not be
able to fund future capital needs, including any necessary capital expenditures, from operating cash flow.
Consequently, we intend to rely on third-party sources to fund our capital needs. We may not be able to obtain
such financing on favorable terms or at all and any additional debt we incur will increase our leverage and
likelihood of default. Our access to third-party sources of capital depends, in part, on:

•

•

•

•

•

•

general market conditions;

the market’s perception of our growth potential;

our current debt levels;

our current and expected future earnings;

our cash flow and cash distributions; and

the market price per share of our common stock.

Recently, the capital markets have been subject to significant disruptions. If we cannot obtain capital from
third-party sources, we may not be able to acquire or develop properties when strategic opportunities exist, meet
the capital and operating needs of our existing properties, satisfy our debt service obligations or make the cash
distributions to our stockholders necessary to maintain our qualification as a REIT.

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Risks Related to Our Third-Party Construction Business

Adverse economic and regulatory conditions, particularly in the Mid-Atlantic region, could adversely affect
our construction and development business, which could have a material adverse effect on our financial
condition, results of operations, cash flow, cash available for distribution and our ability to service our debt
obligations.

Our third-party construction activities have been, and are expected to continue to be, primarily focused in

the Mid-Atlantic region, although we have also undertaken construction projects in various states in the
Southeast, Northeast and Midwest regions of the United States. As a result of our concentration of construction
projects in the Mid-Atlantic region of the United States, we are particularly susceptible to adverse economic or
other conditions in this market (such as periods of economic slowdown or recession, business layoffs or
downsizing, industry slowdowns, relocations of businesses, labor disruptions and the costs of complying with
governmental regulations or increased regulation), as well as to natural disasters that occur in this region. We
cannot assure you that our target markets will support construction and development projects of the type in which
we typically engage. While our services company will provide a wide range of development and construction
services, any adverse economic or real estate developments in the Mid-Atlantic region could materially adversely
affect our financial condition, results of operations, cash flow and ability to satisfy our debt service obligations
and pay distributions to our stockholders.

There can be no assurance that all of the projects for which our construction business is engaged as general
contractor will be commenced or completed in their entirety in accordance with the anticipated cost, or that we
will achieve the financial results we expect from the construction of such properties, which could materially
adversely affect our cash flows, results of operations and growth prospects.

Our construction business earns profit for serving as the general contractor equal to the difference between

the total construction fees that we charge and the costs we incur to build the property. If the decision is made by a
third-party client to abandon a construction project for any reason, our anticipated fee revenue from such project
could be significantly lower than we expect. In addition, we defer pre-contract costs when such costs are directly
associated with specific anticipated construction contracts and their recovery is deemed probable. In the event
that we determine that the execution of a construction contract is no longer probable, we would be required to
expense those pre-contract costs in the period in which such determination is made, which could materially and
adversely affect our results of operations in such period. Our ability to complete the projects in our identified
construction pipeline on time and on budget could be materially adversely affected as a result of the following
factors, among others:

•

•

•

•

shortages of subcontractors, equipment, materials or skilled labor;

unscheduled delays in the delivery of ordered materials and equipment;

unanticipated increases in the cost of equipment, labor and raw materials;

unforeseen engineering, environmental or geological problems;

• weather interferences;

•

•

difficulties in obtaining necessary permits or in meeting permit conditions;

client acceptance delays; or

• work stoppages and other labor disputes.

If we do not complete construction projects on time and on budget, it could have a material adverse effect

on us, including our cash flows, results of operations and growth prospects.

24

Our dependence on third-party subcontractors and equipment and material providers could result in material
shortages and project delays and could reduce our profits or result in project losses, which could materially
adversely affect our financial condition, results of operations and cash flow.

Because our construction business provides general contracting services, we rely on third-party

subcontractors and equipment and material providers. For example, we procure equipment and construction
materials as needed when engaged in large construction projects. To the extent that we cannot engage
subcontractors or acquire equipment and materials at reasonable costs or if the amount we are required to pay for
subcontractors or equipment exceeds our estimates, our ability to complete a construction project in a timely
fashion or at a profit may be impaired. In addition, if a subcontractor or a manufacturer is unable to deliver its
services, equipment or materials according to the negotiated terms for any reason, including the deterioration of
its financial condition, we may be required to purchase the services, equipment or materials from another source
at a higher price. Additionally, while our construction contracts generally provide that our obligation to pay
subcontractors is expressly made subject to the condition precedent that we shall have first received payment, we
cannot assure you that these so called “pay-if-paid” or “pay-when-paid” provisions will be recognized in all
jurisdictions in which we do business, or that a subcontractor or payment bond surety may not otherwise be
entitled to payment or to record a lien on the affected property. In such event, we may be required to pay a
payment bond surety or the subcontractors we engage even though we have yet to receive our fees as general
contractor. This may reduce the profit to be realized or result in a loss on a project for which the services,
equipment or materials are needed, which may materially adversely affect us, including our financial condition,
results of operations and cash flow.

Our construction business recognizes certain revenue on a percentage-of-completion basis and upon the
achievement of contractual milestones, and any delay or cancellation of a construction project could
materially adversely affect our cash flows and results of operations.

Our construction business recognizes certain revenue on a percentage-of-completion basis and, as a result,

revenue from our construction business is driven by the performance of our contractual obligations. The
percentage-of-completion method of accounting is inherently subjective because it relies on estimates of total
project cost as a basis for recognizing revenue and profit. Accordingly, revenue and profit recognized under the
percentage-of-completion method is potentially subject to adjustments in subsequent periods based on
refinements in the estimated cost to complete a project, which could result in a reduction or reversal of
previously recorded revenues and profits. In addition, delays in, or the cancellation of, any particular construction
project could adversely impact our ability to recognize revenue in a particular period. Furthermore, changes in
job performance, job conditions and estimated profitability, including those arising from contract penalty
provisions and final contract settlements, may result in revisions to costs and income in the period in which they
are determined. If any of the foregoing were to occur, it could have a material adverse effect on our cash flows
and results of operations.

Construction project sites are inherently dangerous workplaces, and, as a result, our failure to maintain safe
construction project sites could result in deaths or injuries, reduced profitability, the loss of projects or clients
and possible exposure to litigation, any of which could materially adversely affect our financial condition,
results of operations, cash flow and reputation.

Construction and maintenance sites often put our employees, employees of subcontractors, our tenants and

members of the public in close proximity with mechanized equipment, moving vehicles, chemical and
manufacturing processes and highly regulated materials. On many sites, we are responsible for safety and,
accordingly, must implement safety procedures. If we fail to implement these procedures or if the procedures we
implement are ineffective, we may suffer the loss of or injury to our employees, fines or expose our tenants and
members of the public to potential injury, thereby creating exposure to litigation. As a result, our failure to
maintain adequate safety standards could result in reduced profitability or the loss of projects, clients and tenants,
which may materially adversely affect our financial condition, results of operations, cash flow and our reputation.

25

Supply shortages and other risks associated with demand for skilled labor could increase construction costs
and delay performance of our obligations under construction contracts, which could materially adversely
affect the profitability of our construction business, our cash flow and results of operations.

There is a high level of competition in the construction industry for skilled labor. Increased costs, labor

shortages or other disruptions in the supply of skilled labor, such as carpenters, roofers, electricians and
plumbers, could cause increases in construction costs and construction delays. We may not be able to pass on
increases in construction costs because of market conditions or negotiated contractual terms. Sustained increases
in construction costs due competition for skilled labor and delays in performance under construction contracts
may materially adversely affect the profitability of our construction business, our financial condition, results of
operations and cash flow.

Our failure to successfully and profitably bid on construction contracts could materially adversely affect our
results of operations and cash flow.

Many of the costs related to our construction business, such as personnel costs, are fixed and are incurred by

us irrespective of the level of activity of our construction business. The success of our construction business
depends, in part, on our ability to successfully and profitably bid on construction contracts for private and public
sector clients. Contract proposals and negotiations are complex and frequently involve a lengthy bidding and
selection process, which can be impacted by a number of factors, many of which are outside our control,
including market conditions, financing arrangements and required governmental approvals. If we are unable to
maintain a consistent flow of third-party construction contracts, our results of operations and cash flow could be
materially adversely affected.

If we fail to timely complete a construction project, miss a required performance standard or otherwise fail to
adequately perform on a construction project, we may incur losses or financial penalties, which could
materially adversely affect our financial condition, results of operations, cash flow and reputation.

We may contractually commit to a construction client that we will complete a construction project by a

scheduled date at a fixed cost. We may also commit that a construction project, when completed, will achieve
specified performance standards. If the construction project is not completed by the scheduled date or fails to
meet required performance standards, we may either incur significant additional costs or be held responsible for
the costs incurred by the client to rectify damages due to late completion or failure to achieve the required
performance standards. In addition, completion of projects can be adversely affected by a number of factors
beyond our control, including unavoidable delays from governmental inaction, public opposition, inability to
obtain financing, weather conditions, unavailability of vendor materials, availabilities of subcontractors, changes
in the project scope of services requested by our clients, industrial accidents, environmental hazards, labor
disruptions and other factors. In some cases, if we fail to meet required performance standards or milestone
requirements, we may also be subject to agreed-upon financial damages in the form of liquidated damages, which
are determined pursuant to the contract governing the construction project. To the extent that these events occur,
the total costs of the project could exceed our estimates and our contracted cost and we could experience reduced
profits or, in some cases, incur a loss on a project, which may materially adversely affect our financial condition,
results of operations and cash flow. Failure to meet performance standards or complete performance on a timely
basis could also adversely affect our reputation.

Unionization or work stoppages could have a materials adverse effect on us.

From time to time, our construction business and the subcontractors we engage may use unionized

construction workers, which requires us to pay the prevailing wage in a jurisdiction to such workers. Due to the
highly labor-intensive and price-competitive nature of the construction business, the cost of unionization or
prevailing wage requirements for new developments could be substantial, which could adversely affect our
profitability. In addition, the use of unionized construction workers could cause us to become subject to

26

organized work stoppages, which would materially adversely affect our ability to meet our construction
timetables and could significantly increase the cost of completing a construction project.

Risks Related to Our Development Business and Property Acquisitions

Our failure to establish new development relationships with public partners and expand our development
relationships with existing public partners could have a material adverse effect on us, including our cash
flows, results of operations and growth prospects.

Our growth strategy depends significantly on our ability to leverage our extensive experience in completing
large, complex, mixed-use public/private projects to establish new relationships with public partners and expand
our relationships with existing public partners. Future increases in our revenues may depend significantly on our
ability to expand the scope of the work we do with the state and local government agencies with which we
currently have partnered and attract new state and local government agencies to undertake public/private
development projects with us. Our ability to obtain new work with state and local governmental authorities on
new public/private development and financing partnerships could be adversely affected by several factors,
including decreases in state and local budgets, changes in administrations, the departure of government personnel
with whom we have worked and negative public perceptions about public/private partnerships. In addition, to the
extent that we engage in public/private partnerships in states or local communities in which we have not
previously worked, we could be subject to risks associated with entry into new markets, such as lack of market
knowledge or understanding of the local economy, lack of business relationships in the area and unfamiliarity
with local governmental and permitting procedures. If we fail to establish new relationships with public partners
and expand our relationships with existing public partners, it could have a material adverse effect on our growth
prospects.

We may be unable to identify and complete development opportunities and acquisitions of properties that

meet our investment criteria, which may materially adversely affect our financial condition, results of
operations, cash flow and growth prospects.

Our business and growth strategy involves the development and selective acquisition of office, retail and

multifamily properties. We may expend significant management time and other resources, including out-of-
pocket costs, in pursuing these investment opportunities. Our ability to complete development projects or acquire
properties on favorable terms, or at all, may be exposed to the following significant risks:

• we may incur significant costs and divert management attention in connection with evaluating and
negotiating potential development opportunities and acquisitions, including those that we are
subsequently unable to complete;

•

agreements for the development or acquisition of properties are subject to conditions, which we may be
unable to satisfy; and

• we may be unable to obtain financing on favorable terms or at all.

If we are unable to identify attractive investment opportunities, our financial condition, results of operations,

cash flow and growth prospects could be materially adversely affected.

The risks associated with land holdings and related activities could have a material adverse effect on us,
including our results of operations.

We hold options to acquire undeveloped parcels of land for future development and may in the future
acquire additional land holdings for development. The risks inherent in purchasing, owning, and developing land
increase as demand for office, retail or multifamily properties, or rental rates, decreases. Real estate markets are
highly uncertain and volatile and, as a result, the value of undeveloped land has fluctuated significantly and may
continue to fluctuate. In addition, carrying costs, including interest and other pre-development costs, can be

27

significant and can result in losses or reduced profitability. If there are subsequent changes in the fair value of our
undeveloped land holdings that cause us to determine that the fair value of our undeveloped land holdings is less
than their carrying basis reflected in our financial statements plus estimated costs to sell, we may be required to
take future impairment charges which would reduce our net income and could materially and adversely affect our
results of operations.

The success of our activities to design, construct and develop properties in which we will retain an ownership
interest is dependent, in part, on the availability of suitable undeveloped land at acceptable prices as well as
our having sufficient liquidity to fund investments in such undeveloped land and subsequent development.

Our success in designing, constructing and developing projects for our own account depends, in part, upon

the continued availability of suitable undeveloped land at acceptable prices. The availability of undeveloped land
for purchase at favorable prices depends on a number of factors outside of our control, including the risk of
competitive over-bidding on land and governmental regulations that restrict the potential uses of land. If the
availability of suitable land opportunities decreases, the number of development projects we may be able to
undertake could be reduced. In addition, our ability to make land purchases will depend upon us having sufficient
liquidity or access to external sources of capital to fund such purchases. Thus, the lack of availability of suitable
land opportunities and insufficient liquidity to fund the purchases of any such available land opportunities could
have a material adverse effect on our results of operations and growth prospects.

Our real estate development activities are subject to risks particular to development, such as unanticipated
expenses, delays and other contingencies, any of which could materially adversely affect us, including our
financial condition, results of operations and cash flow.

We engage in development and redevelopment activities and will be subject to the following risks

associated with such activities:

•

•

•

•

unsuccessful development or redevelopment opportunities could result in direct expenses to us and
cause us to incur losses;

construction or redevelopment costs of a project may exceed original estimates, possibly making the
project less profitable than originally estimated, or unprofitable;

occupancy rates and rents of a completed project may not be sufficient to make the project profitable;
and

the availability and pricing of financing to fund our development activities on favorable terms or at all.

These risks could result in substantial unanticipated delays or expenses and, under certain circumstances,
could prevent completion of development or redevelopment activities once undertaken, any of which could have
an adverse effect on our financial condition, results of operations and cash flow.

There can be no assurance that all of the properties in our development pipeline will be completed in their
entirety in accordance with the anticipated cost, or that we will achieve the results we expect from the
development of such properties, which could materially adversely affect our growth prospects, financial
condition and results of operations.

The development of the projects in our development pipeline are subject to numerous risks, many of which

are outside of our control. The cost necessary to complete the development of our identified development
pipeline could be materially higher than we anticipate. Because we generally intend to commence the
construction phase of an office or retail project for our own account only where a substantial percentage of the
commercial space is pre-leased, we could decide not to undertake construction on one or more of the projects in
our identified development pipeline if our pre-leasing efforts are unsuccessful. Furthermore, if we are delayed in
the completion of any development project, tenants may have the right to terminate pre-development leases,

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which could materially adversely affect the financial viability of the project. In addition, even if we decide to
commence construction on a project, we can provide no assurances that we will complete any of the projects in
our development pipeline on the anticipated schedule, or that, once completed, the properties in our development
pipeline will achieve the results that we expect. If the development of our development pipeline is not completed
in accordance with our anticipated timing or at the anticipated cost, or the properties fail to achieve the financial
results we expect, it could have a material adverse effect on our financial condition and results of operations.

Our option properties are subject to various risks, and we may not be able to acquire them.

We have options to acquire from certain of our officers and directors eight parcels of developable land.
These parcels are exposed to many of the same risks that may affect the other properties in our portfolio. The
terms of the option agreements relating to these parcels were not determined by arm’s-length negotiations, and
such terms may be less favorable to us than those that may have been obtained through negotiations with third
parties. In addition, it may become economically unattractive to exercise our options with respect to these
parcels, which could cause us to decide not to exercise our option to purchase these parcels in the future. In such
event, or in the event that the option agreements expire by their terms, the parcels could be sold to one of our
competitors without restriction. Because our officers and directors own economic interests in these parcels, our
decision to exercise or refrain from exercising such options will create conflicts of interest.

Risks Related to the Real Estate Industry

Our business is subject to risks associated with real estate assets and the real estate industry, which could
materially adversely affect our financial condition, results of operations, cash flow, cash available for
distribution and our ability to service our debt obligations.

Our ability to pay expected dividends to our stockholders depends on our ability to generate revenues in
excess of expenses, scheduled principal payments on debt and capital expenditure requirements. Events and
conditions generally applicable to owners and operators of real property that are beyond our control may
decrease cash available for distribution and the value of our properties. These events include many of the risks
set forth above under “—Risks Related to Our Business and Operations,” as well as the following:

•

•

•

•

•

•

•

•

•

•

oversupply or reduction in demand for office, retail or multifamily space in our markets;

adverse changes in financial conditions of buyers, sellers and tenants of properties;

vacancies or our inability to rent space on favorable terms, including possible market pressures to offer
tenants rent abatements, tenant improvements, early termination rights or below-market renewal
options, and the need to periodically repair, renovate and re-let space;

increased operating costs, including insurance premiums, utilities, real estate taxes and state and local
taxes;

a favorable interest rate environment that may result in a significant number of potential residents of
our multifamily apartment communities deciding to purchase homes instead of renting;

rent control or stabilization laws, or other laws regulating rental housing, which could prevent us from
raising rents to offset increases in operating costs;

civil unrest, acts of war, terrorist attacks and natural disasters, including hurricanes, which may result
in uninsured or underinsured losses;

decreases in the underlying value of our real estate;

changing submarket demographics; and

changing traffic patterns.

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In addition, periods of economic downturn or recession, rising interest rates or declining demand for real
estate, or the public perception that any of these events may occur, could result in a general decline in rents or an
increased incidence of defaults under existing leases, which could materially adversely affect our financial
condition, results of operations, cash flow, cash available for distribution and ability to service our debt
obligations.

Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the
performance of our properties and harm our financial condition.

The real estate investments made, and to be made, by us are difficult to sell quickly. As a result, our ability

to promptly sell one or more properties in our portfolio in response to changing economic, financial and
investment conditions is limited. Return of capital and realization of gains, if any, from an investment generally
will occur upon disposition or refinancing of the underlying property. We may be unable to realize our
investment objectives by sale, other disposition or refinancing at attractive prices within any given period of time
or may otherwise be unable to complete any exit strategy. In particular, our ability to dispose of one or more
properties within a specific time period is subject to certain limitations imposed by our tax protection
agreements, as well as weakness in or even the lack of an established market for a property, changes in the
financial condition or prospects of prospective purchasers, changes in national or international economic
conditions and changes in laws, regulations or fiscal policies of jurisdictions in which the property is located.

In addition, the Code imposes restrictions on a REIT’s ability to dispose of properties that are not applicable
to other types of real estate companies. In particular, the tax laws applicable to REITs effectively require that we
hold our properties for investment, rather than primarily for sale in the ordinary course of business, which may
cause us to forego or defer sales of properties that otherwise would be in our best interests. Therefore, we may
not be able to vary our portfolio in response to economic or other conditions promptly or on favorable terms.

Our property taxes could increase due to property tax rate changes or reassessment, which would adversely
impact our cash flows.

Even if we qualify as a REIT for federal income tax purposes, we will be required to pay some state and
local taxes on our properties. The real property taxes on our properties may increase as property tax rates change
or as our properties are assessed or reassessed by taxing authorities. Therefore, the amount of property taxes we
pay in the future may increase substantially from what we have paid in the past. If the property taxes we pay
increase, our cash flow would be adversely impacted, and our ability to pay dividends to our stockholders could
be adversely affected.

As an owner of real estate, we could incur significant costs and liabilities related to environmental matters.

Under various federal, state and local laws and regulations relating to the environment, as a current or
former owner or operator of real property, we may be liable for costs and damages resulting from the presence or
discharge of hazardous or toxic substances, waste or petroleum products at, on, in, under or migrating from such
property, including costs to investigate, clean up such contamination and liability for harm to natural resources.
Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for,
the presence of such contamination, and the liability may be joint and several. These liabilities could be
substantial and the cost of any required remediation, removal, fines or other costs could exceed the value of the
property and our aggregate assets. In addition, the presence of contamination or the failure to remediate
contamination at our properties may expose us to third-party liability for costs of remediation and personal or
property damage or materially adversely affect our ability to sell, lease or develop our properties or to borrow
using the properties as collateral. In addition, environmental laws may create liens on contaminated sites in favor
of the government for damages and costs it incurs to address such contamination. Moreover, if contamination is
discovered on our properties, environmental laws may impose restrictions on the manner in which property may
be used or businesses may be operated, and these restrictions may require substantial expenditures. See “Part I—
Business—Regulation.”

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Some of our properties have been or may be impacted by contamination arising from current or prior uses of

the property, or adjacent properties, for commercial or industrial purposes. Such contamination may arise from
spills of petroleum or hazardous substances or releases from tanks used to store such materials. For example,
some of the tenants of properties in our retail portfolio operate gas stations or other businesses that utilize storage
tanks to store petroleum products, propane or wastes typically associated with automobile service or other
operations conducted at the properties, and spills or leaks of hazardous materials from those storage tanks could
expose us to liability. See “Business and Properties—Regulation—Environmental Matters.” In addition to the
foregoing, while we obtained Phase I Environmental Site Assessments for each of the properties in our portfolio,
the assessments are limited in scope and may have failed to identify all environmental conditions or concerns.
For example, they do not generally include soil sampling, subsurface investigations or hazardous materials
survey. Furthermore, we do not have current Phase I Environmental Site Assessment reports for all of the
properties in our portfolio and, as such, may not be aware of all potential or existing environmental
contamination liabilities at the properties in our portfolio. As a result, we could potentially incur material liability
for these issues.

As the owner of the buildings on our properties, we could face liability for the presence of hazardous
materials, such as asbestos or lead, or other adverse conditions, such as poor indoor air quality, in our buildings.
Environmental laws govern the presence, maintenance, and removal of hazardous materials in buildings, and if
we do not comply with such laws, we could face fines for such noncompliance. Also, we could be liable to third
parties, such as occupants of the buildings, for damages related to exposure to hazardous materials or adverse
conditions in our buildings, and we could incur material expenses with respect to abatement or remediation of
hazardous materials or other adverse conditions in our buildings. In addition, some of our tenants routinely may
handle and use hazardous or regulated substances and wastes as part of their operations at our properties, which
are subject to regulation. Such environmental and health and safety laws and regulations could subject us or our
tenants to liability resulting from these activities. Environmental liabilities could affect a tenant’s ability to make
rental payments to us, and changes in laws could increase the potential liability for noncompliance. This may
result in significant unanticipated expenditures or may otherwise materially and adversely affect our operations,
or those of our tenants, which could in turn have an adverse effect on us. If we incur material environmental
liabilities in the future, we may face significant remediation costs, and we may find it difficult to sell any affected
properties.

Our properties may contain or develop harmful mold or suffer from other air quality issues, which could lead
to liability for adverse health effects and costs of remediation.

When excessive moisture accumulates in buildings or on building materials, mold growth may occur,
particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds
may produce airborne toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation,
chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen,
viruses and bacteria. Indoor exposure to airborne toxins or irritants above certain levels can be alleged to cause a
variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of
significant mold or other airborne contaminants at any of our properties could require us to undertake a costly
remediation program to contain or remove the mold or other airborne contaminants from the affected property or
increase indoor ventilation. In addition, the presence of significant mold or other airborne contaminants could
expose us to liability from our tenants, employees of our tenants or others if property damage or personal injury
is alleged to have occurred.

We may incur significant costs complying with various federal, state and local laws, regulations and covenants
that are applicable to our properties.

Properties are subject to various covenants and federal, state and local laws and regulatory requirements,

including permitting and licensing requirements. Local regulations, including municipal or local ordinances,
zoning restrictions and restrictive covenants imposed by community developers may restrict our use of our

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properties and may require us to obtain approval from local officials or restrict our use of our properties and may
require us to obtain approval from local officials of community standards organizations at any time with respect
to our properties, including prior to developing or acquiring a property or when undertaking renovations of any
of our existing properties. Among other things, these restrictions may relate to fire and safety, seismic or
hazardous material abatement requirements. There can be no assurance that existing laws and regulatory policies
will not adversely affect us or the timing or cost of any future development, acquisitions or renovations, or that
additional regulations will not be adopted that increase such delays or result in additional costs. Our growth
strategy may be affected by our ability to obtain permits, licenses and zoning relief.

In addition, federal and state laws and regulations, including laws such as the Americans with Disabilities
Act of 1990 (the “ADA”) and the Fair Housing Amendment Act of 1988 (“FHAA”), impose further restrictions
on our properties and operations. Under the ADA and the FHAA, all public accommodations must meet federal
requirements related to access and use by disabled persons. Some of our properties may currently be in non-
compliance with the ADA or the FHAA. If one or more of the properties in our portfolio is not in compliance
with the ADA, the FHAA or any other regulatory requirements, we may incur additional costs to bring the
property into compliance, incur governmental fines or the award of damages to private litigants or be unable to
refinance such properties. In addition, we do not know whether existing requirements will change or whether
future requirements will require us to make significant unanticipated expenditures that will adversely impact our
financial condition, results of operations and cash flow.

Risks Related to Our Organizational Structure

Daniel Hoffler and his affiliates own, directly or indirectly, a substantial beneficial interest in our company on
a fully diluted basis and has the ability to exercise significant influence on our company and our operating
partnership, including the approval of significant corporate transactions.

As of December 31, 2013, Daniel Hoffler, our Executive Chairman, and his affiliates owned approximately

17% and, collectively, Messrs. Hoffler, Haddad and Kirk and their affiliates collectively owned approximately
28% of the combined outstanding shares of our common stock and OP Units of our operating partnership (which
OP Units may be redeemable for shares of our common stock). Consequently, these individuals may be able to
significantly influence the outcome of matters submitted for stockholder action, including the approval of
significant corporate transactions, including business combinations, consolidations and mergers.

Conflicts of interest may exist or could arise in the future between the interests of our stockholders and the
interests of holders of units in our operating partnership, which may impede business decisions that could
benefit our stockholders.

Conflicts of interest may exist or could arise in the future as a result of the relationships between us and our

affiliates, on the one hand, and our operating partnership or any partner thereof, on the other. Our directors and
officers have duties to our company under Maryland law in connection with their management of our company.
At the same time, we, as the general partner of our operating partnership, have fiduciary duties and obligations to
our operating partnership and its limited partners under Virginia law and the partnership agreement of our
operating partnership in connection with the management of our operating partnership. Our fiduciary duties and
obligations as the general partner of our operating partnership may come into conflict with the duties of our
directors and officers to our company. Messrs. Hoffler, Haddad and Kirk own a significant interest in our
operating partnership as limited partners and may have conflicts of interest in making decisions that affect both
our stockholders and the limited partners of our operating partnership.

Under Virginia law, a general partner of a Virginia limited partnership has fiduciary duties of loyalty and

care to the partnership and its partners and must discharge its duties and exercise its rights as general partner
under the partnership agreement or Virginia law consistently with the obligation of good faith and fair dealing.
The partnership agreement provides that, in the event of a conflict between the interests of our operating

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partnership or any partner, on the one hand, and the separate interests of our company or our stockholders, on the
other hand, we, in our capacity as the general partner of our operating partnership, are under no obligation not to
give priority to the separate interests of our company or our stockholders, and that any action or failure to act on
our part or on the part of our directors that gives priority to the separate interests of our company or our
stockholders that does not result in a violation of the contract rights of the limited partners of the operating
partnership under its partnership agreement does not violate the duty of loyalty that we, in our capacity as the
general partner of our operating partnership, owe to the operating partnership and its partners.

Additionally, the partnership agreement provides that we will not be liable to the operating partnership or

any partner for monetary damages for losses sustained, liabilities incurred or benefits not derived by the
operating partnership or any limited partner, except for liability for our intentional harm or gross negligence. Our
operating partnership must indemnify us, our directors and officers and our designees from and against any and
all claims that relate to the operations of our operating partnership, unless (1) an act or omission of the person
was material to the matter giving rise to the action and either was committed in bad faith or was the result of
active and deliberate dishonesty, (2) the person actually received an improper personal benefit in violation or
breach of the partnership agreement or (3) in the case of a criminal proceeding, the indemnified person had
reasonable cause to believe that the act or omission was unlawful. Our operating partnership must also pay or
reimburse the reasonable expenses of any such person upon its receipt of a written affirmation of the person’s
good faith belief that the standard of conduct necessary for indemnification has been met and a written
undertaking to repay any amounts paid or advanced if it is ultimately determined that the person did not meet the
standard of conduct for indemnification. Our operating partnership will not indemnify or advance funds to any
person with respect to any action initiated by the person seeking indemnification without our approval (except for
any proceeding brought to enforce such person’s right to indemnification under the partnership agreement) or if
the person is found to be liable to our operating partnership on any portion of any claim in the action.

We may assume unknown liabilities in connection with our formation transactions, and any recourse against
third parties, including the prior investors in our assets, for certain of these liabilities will be limited.

As part of our formation transactions, we acquired entities and assets that are subject to existing liabilities,

some of which may be unknown or unquantifiable. These liabilities might include liabilities for cleanup or
remediation of undisclosed environmental conditions, claims by tenants, vendors or other persons dealing with
our predecessor entities (that had not been asserted or threatened prior to the completion of our initial public
offering), tax liabilities and accrued but unpaid liabilities incurred in the ordinary course of business. While in
some instances we may have the right to seek reimbursement against an insurer, any recourse against third
parties, including the prior investors in our assets, for certain of these liabilities will be limited. In connection
with our initial public offering and the related formation transactions, Mr. Hoffler entered into a Representation,
Warranty and Indemnity Agreement with us with respect to certain aspects of the formation transactions but his
liability to us is limited with respect to time and dollar amount. There can be no assurance that we will be entitled
to any such reimbursement or that ultimately we will be able to recover in respect of such rights for any of these
historical liabilities.

Our charter contains certain provisions restricting the ownership and transfer of our stock that may delay,
defer or prevent a change of control transaction that might involve a premium price for our common stock or
that our stockholders otherwise believe to be in their best interests.

Our charter contains certain ownership limits with respect to our stock. Our charter, among other
restrictions, prohibits the beneficial or constructive ownership by any person of more than 9.8% in value or
number of shares, whichever is more restrictive, of the outstanding shares of any class or series of our stock,
excluding any shares that are not treated as outstanding for federal income tax purposes. Our board of directors,
in its sole and absolute discretion, may exempt a person, prospectively or retroactively, from this ownership limit

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if certain conditions are satisfied. See “Description of Capital Stock—Restrictions on Ownership and Transfer.”
This ownership limit as well as other restrictions on ownership and transfer of our stock in our charter may:

•

•

discourage a tender offer or other transactions or a change in management or of control that might
involve a premium price for our common stock or that our stockholders otherwise believe to be in their
best interests; and

result in the transfer of shares acquired in excess of the restrictions to a trust for the benefit of a
charitable beneficiary and, as a result, the forfeiture by the acquirer of certain of the benefits of owning
the additional shares.

We could increase the number of authorized shares of stock, classify and reclassify unissued stock and issue
stock without stockholder approval.

Our board of directors, without stockholder approval, has the power under our charter to amend our charter
to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or
series that we are authorized to issue. In addition, under our charter, our board of directors, without stockholder
approval, has the power to authorize us to issue authorized but unissued shares of our common stock or preferred
stock and to classify or reclassify any unissued shares of our common stock or preferred stock into one or more
classes or series of stock and set the preference, conversion or other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications or terms or conditions of redemption for such
newly classified or reclassified shares. As a result, we may issue series or classes of common stock or preferred
stock with preferences, dividends, powers and rights, voting or otherwise, that are senior to, or otherwise conflict
with, the rights of holders of our common stock. Although our board of directors has no such intention at the
present time, it could establish a class or series of preferred stock that could, depending on the terms of such
series, delay, defer or prevent a transaction or a change of control that might involve a premium price for our
common stock or that our stockholders otherwise believe to be in their best interests.

Certain provisions of Maryland law could inhibit changes of control, which may discourage third parties from
conducting a tender offer or seeking other change of control transactions that could involve a premium price
for our common stock or that our stockholders otherwise believe to be in their best interests.

Certain provisions of the Maryland General Corporation Law (the “MGCL”), may have the effect of

inhibiting a third party from making a proposal to acquire us or of impeding a change of control under
circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to
realize a premium over the then-prevailing market price of such shares, including:

•

•

“business combination” provisions that, subject to limitations, prohibit certain business combinations
between us and an “interested stockholder” (defined generally as any person who beneficially owns
10% or more of the voting power of our outstanding voting shares or an affiliate or associate of ours
who was the beneficial owner, directly or indirectly, of 10% or more of the voting power of our then
outstanding stock at any time within the two-year period immediately prior to the date in question) or
an affiliate thereof for five years after the most recent date on which the stockholder becomes an
interested stockholder, and thereafter imposes certain fair price and supermajority stockholder voting
requirements on these combinations; and

“control share” provisions that provide that holders of “control shares” of our company (defined as
shares of stock that, when aggregated with other shares of stock controlled by the stockholder, entitle
the stockholder to exercise one of three increasing ranges of voting power in electing directors)
acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or
control of issued and outstanding “control shares”) have no voting rights with respect to their control
shares, except to the extent approved by our stockholders by the affirmative vote of at least two-thirds
of all the votes entitled to be cast on the matter, excluding all interested shares.

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By resolution of our board of directors, we have opted out of the business combination provisions of the
MGCL and provided that any business combination between us and any other person is exempt from the business
combination provisions of the MGCL, provided that the business combination is first approved by our board of
directors (including a majority of directors who are not affiliates or associates of such persons). In addition,
pursuant to a provision in our bylaws, we have opted out of the control share provisions of the MGCL. However,
our board of directors may by resolution elect to opt in to the business combination provisions of the MGCL and
we may, by amendment to our bylaws, opt in to the control share provisions of the MGCL in the future.

Certain provisions of the MGCL permit our board of directors, without stockholder approval and regardless

of what is currently provided in our charter or bylaws, to implement certain corporate governance provisions,
some of which (for example, a classified board) are not currently applicable to us. If implemented, these
provisions may have the effect of limiting or precluding a third party from making an unsolicited acquisition
proposal for us or of delaying, deferring or preventing a change in control of us under circumstances that
otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium
over the then current market price. Our charter contains a provision whereby we elect, at such time as we become
eligible to do so, to be subject to the provisions of Title 3, Subtitle 8 of the MGCL relating to the filling of
vacancies on our board of directors.

Certain provisions in the partnership agreement of our operating partnership may delay or prevent unsolicited
acquisitions of us.

Provisions in the partnership agreement of our operating partnership may delay, or make more difficult,
unsolicited acquisitions of us or changes of our control. These provisions could discourage third parties from
making proposals involving an unsolicited acquisition of us or change of our control, although some of our
stockholders might consider such proposals, if made, desirable. These provisions include, among others:

•

•

•

•

•

redemption rights;

a requirement that we may not be removed as the general partner of our operating partnership without
our consent;

transfer restrictions on OP Units;

our ability, as general partner, in some cases, to amend the partnership agreement and to cause the
operating partnership to issue units with terms that could delay, defer or prevent a merger or other
change of control of us or our operating partnership without the consent of the limited partners; and

the right of the limited partners to consent to direct or indirect transfers of the general partnership
interest, including as a result of a merger or a sale of all or substantially all of our assets, in the event
that such transfer requires approval by our common stockholders.

The limited partners in our operating partnership, including Mr. Hoffler and his affiliates and our other
executive officers and directors and their respective affiliates, owned approximately 40.5% of the outstanding OP
Units of our operating partnership as of December 31, 2013.

Our tax protection agreements could limit our ability to sell or otherwise dispose of certain properties.

In connection with the formation transactions related to our initial public offering, our operating partnership

entered into tax protection agreements that provide that if we dispose of any interest in the certain protected
properties in a taxable transaction prior to the seventh (or, in a limited number of cases, the tenth) anniversary of
the completion of the formation transactions, subject to certain exceptions, we will indemnify certain
contributors, including Messrs. Hoffler, Haddad, Kirk, Nero and Apperson and their respective affiliates and
certain of our other officers, for their tax liabilities attributable to the built-in gain that existed with respect to
such property interests as of the time of our initial public offering, and the tax liabilities incurred as a result of

35

such tax protection payment. Therefore, although it may be in our stockholders’ best interests that we sell one of
these properties, it may be economically prohibitive for us to do so because of these obligations. Moreover, as a
result of these potential tax liabilities, Messrs. Hoffler, Haddad, Kirk, Nero and Apperson and certain of our other
officers may have a conflict of interest with respect to our determination as to these properties.

Our tax protection agreements may require our operating partnership to maintain certain debt levels that
otherwise would not be required to operate our business.

Under our tax protection agreements, our operating partnership will provide certain of our contributors,
including Messrs. Hoffler, Haddad, Kirk, Nero and Apperson and their respective affiliates and certain of our other
officers, the opportunity to guarantee debt or enter into a deficit restoration obligations both at the completion of the
formation transactions and our initial public offering and upon a future repayment, retirement, refinancing or other
reduction (other than scheduled amortization) of currently outstanding debt prior to the tenth anniversary of the
completion of the formation transactions. If we fail to make such opportunities available, we will be required to
deliver to each such contributor a cash payment intended to approximate the contributor’s tax liability resulting
from our failure to make such opportunities available to that contributor and the tax liabilities incurred as a result of
such tax protection payment. We agreed to these provisions in order to assist our contributors in deferring the
recognition of taxable gain as a result of and after the formation transactions. These obligations may require us to
maintain more or different indebtedness than we would otherwise require for our business.

We may pursue less vigorous enforcement of terms of certain agreements with members of our senior
management and our affiliates because of our dependence on them and conflicts of interest.

Each of Messrs. Hoffler, Haddad and Kirk, our Executive Chairman of the Board, President and
Chief Executive Officer and Vice Chairman of the Board, respectively, were parties to or had interests in
contribution agreements with us pursuant to which we acquired interests in our properties and assets. In addition,
we have entered into option agreements with certain of our officers and directors, or entities they control, with
respect to certain parcels of developable land. Mr. Hoffler also entered into a Representation, Warranty and
Indemnity Agreement with us pursuant to which he made certain representations and warranties to us regarding
the entities and assets that we acquired in the formation transactions and agreed to indemnify us and our
operating partnership for breaches of such representations and warranties for one year after the completion of our
initial public offering and the formation transactions. We may choose not to enforce, or to enforce less
vigorously, our rights under these agreements because of our desire to maintain our ongoing relationships with
members of our board of directors and our management, with possible negative impact on stockholders.

Our board of directors may change our strategies, policies and procedures without stockholder approval and
we may become more highly leveraged, which may increase our risk of default under our debt obligations.

Our investment, financing, leverage and distribution policies, and our policies with respect to all other

activities, including growth, capitalization and operations, will be determined exclusively by our board of
directors, and may be amended or revised at any time by our board of directors without notice to or a vote of our
stockholders. This could result in us conducting operational matters, making investments or pursuing different
business or growth strategies than those contemplated in this Annual Report on Form 10-K. Further, our charter
and bylaws do not limit the amount or percentage of indebtedness, funded or otherwise, that we may incur. Our
board of directors may alter or eliminate our current policy on borrowing at any time without stockholder
approval. If this policy changed, we could become more highly leveraged which could result in an increase in our
debt service. Higher leverage also increases the risk of default on our obligations. In addition, a change in our
investment policies, including the manner in which we allocate our resources across our portfolio or the types of
assets in which we seek to invest, may increase our exposure to interest rate risk, real estate market fluctuations
and liquidity risk. Changes to our policies with regards to the foregoing could materially adversely affect our
financial condition, results of operations and cash flow.

36

Our rights and the rights of our stockholders to take action against our directors and officers are limited.

Under Maryland law, generally, a director will not be liable if he or she performs his or her duties in good

faith, in a manner he or she reasonably believes to be in our best interests and with the care that an ordinarily
prudent person in a like position would use under similar circumstances. In addition, our charter limits the
liability of our directors and officers to us and our stockholders for money damages, except for liability resulting
from:

•

•

actual receipt of an improper benefit or profit in money, property or services; or

active and deliberate dishonesty by the director or officer that was established by a final judgment as
being material to the cause of action adjudicated.

Our charter authorizes us to indemnify our directors and officers for actions taken by them in those

capacities to the maximum extent permitted by Maryland law. Our bylaws require us to indemnify each director
and officer, to the maximum extent permitted by Maryland law, in the defense of any proceeding to which he or
she is made, or threatened to be made, a party by reason of his or her service to us. In addition, we may be
obligated to advance the defense costs incurred by our directors and officers. We have entered into
indemnification agreements with each of our executive officers and directors whereby we agreed to indemnify
our directors and executive officers to the fullest extent permitted by Maryland law against all expenses and
liabilities incurred in their capacity as an officer or director, subject to limited exceptions. As a result, we and our
stockholders may have more limited rights against our directors and officers than might otherwise exist absent
the current provisions in our charter and bylaws or that might exist with other companies.

We are a holding company with no direct operations and, as such, we will rely on funds received from our
operating partnership to pay liabilities, and the interests of our stockholders will be structurally subordinated
to all liabilities and obligations of our operating partnership and its subsidiaries.

We are a holding company and conduct substantially all of our operations through our operating partnership.

We do not have, apart from an interest in our operating partnership, any independent operations. As a result, we
rely on cash distributions from our operating partnership to pay any dividends we might declare on shares of our
common stock. We also rely on distributions from our operating partnership to meet any of our obligations,
including any tax liability on taxable income allocated to us from our operating partnership. In addition, because
we are a holding company, your claims as a stockholder will be structurally subordinated to all existing and
future liabilities and obligations (whether or not for borrowed money) of our operating partnership and its
subsidiaries. Therefore, in the event of our bankruptcy, liquidation or reorganization, our assets and those of our
operating partnership and its subsidiaries will be available to satisfy the claims of our stockholders only after all
of our and our operating partnership’s and its subsidiaries’ liabilities and obligations have been paid in full.

Our operating partnership may issue additional OP Units to third parties without the consent of our
stockholders, which would reduce our ownership percentage in our operating partnership and could have a
dilutive effect on the amount of distributions made to us by our operating partnership and, therefore, the
amount of distributions we can make to our stockholders.

As of December 31, 2013, we owned 59.5% of the outstanding OP Units in our operating partnership. We

may, in connection with our acquisition of properties or otherwise, issue additional OP Units to third parties.
Such issuances would reduce our ownership percentage in our operating partnership and could affect the amount
of distributions made to us by our operating partnership and, therefore, the amount of distributions we can make
to our stockholders. Because stockholders do not directly own OP Units, you do not have any voting rights with
respect to any such issuances or other partnership level activities of our operating partnership.

37

Risks Related to Our Status as a REIT

Failure to qualify as a REIT, or failure to remain qualified as a REIT, would cause us to be taxed as a regular
corporation, which would substantially reduce funds available for distributions to our stockholders.

We intend to elect to be taxed and to operate in a manner that will allow us to qualify as a REIT for federal
income tax purposes commencing with our taxable year ending December 31, 2013. We have not requested and
do not plan to request a ruling from the Internal Revenue Service (the “IRS”) that we qualify as a REIT.
Therefore, we cannot be assured that we will qualify as a REIT, or that we will remain qualified as such in the
future. If we lose our REIT status, we will face serious tax consequences that would substantially reduce the
funds available for distribution to you for each of the years involved because: If we fail to qualify as a REIT in
any taxable year, we will face serious tax consequences that will substantially reduce the funds available for
distributions to our stockholders because:

• we would not be allowed a deduction for dividends paid to stockholders in computing our taxable

income and would be subject to U.S. federal income tax at regular corporate rates;

• we could be subject to the federal alternative minimum tax and possibly increased state and local taxes;

and

•

unless we are entitled to relief under certain U.S. federal income tax laws, we could not re-elect REIT
status until the fifth calendar year after the year in which we failed to qualify as a REIT.

In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions. As a result

of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise
capital, and it would adversely affect the value of our common stock.

Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flows.

Even if we qualify for taxation as a REIT, we may be subject to certain federal, state and local taxes on our

income and assets, including taxes on any undistributed income, tax on income from some activities conducted as
a result of a foreclosure, and state or local income, property and transfer taxes. In addition, our TRS will be
subject to regular corporate federal, state and local taxes. Any of these taxes would decrease cash available for
distributions to stockholders.

Failure to make required distributions would subject us to U.S. federal corporate income tax.

We intend to continue to operate in a manner so as to qualify as a REIT for U.S. federal income tax

purposes. In order to qualify as a REIT, we generally are required to distribute at least 90% of our REIT taxable
income, determined without regard to the dividends paid deduction and excluding any net capital gain, each year
to our stockholders. To the extent that we satisfy this distribution requirement, but distribute less than 100% of
our REIT taxable income, we will be subject to U.S. federal corporate income tax on our undistributed taxable
income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to
our stockholders in a calendar year is less than a minimum amount specified under the Code.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate
otherwise attractive investments.

To qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among
other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to
our stockholders and the ownership of our capital stock. In order to meet these tests, we may be required to
forego investments we might otherwise make. Thus, compliance with the REIT requirements may hinder our
performance.

38

In particular, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets

consists of cash, cash items, government securities and qualified real estate assets. The remainder of our
investment in securities (other than government securities, securities of TRSs and qualified real estate assets)
generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10%
of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the
value of our assets (other than government securities, securities of TRSs and qualified real estate assets) can
consist of the securities of any one issuer, and no more than 25% of the value of our total assets can be
represented by the securities of one or more TRSs. If we fail to comply with these requirements at the end of any
calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for
certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences.
As a result, we may be required to liquidate otherwise attractive investments. These actions could have the effect
of reducing our income and amounts available for distribution to our stockholders.

The prohibited transactions tax may limit our ability to dispose of our properties.

A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited

transactions are sales or other dispositions of property other than foreclosure property, held primarily for sale to
customers in the ordinary course of business. We may be subject to the prohibited transaction tax equal to 100%
of net gain upon a disposition of real property. Although a safe harbor to the characterization of the sale of real
property by a REIT as a prohibited transaction is available, we cannot assure you that we can comply with the
safe harbor or that we will avoid owning property that may be characterized as held primarily for sale to
customers in the ordinary course of business. Consequently, we may choose not to engage in certain sales of our
properties or may conduct such sales through our TRS, which would be subject to federal and state income
taxation.

We may pay taxable dividends in shares of our common stock and cash, in which case stockholders may sell
shares of our common stock to pay tax on such dividends, placing downward pressure on the market price of
our common stock.

We may distribute taxable dividends that are payable in cash and common stock at the election of each
stockholder. The IRS has issued private letter rulings to other REITs treating certain distributions that are paid
partly in cash and partly in stock as taxable dividends that would satisfy the REIT annual distribution
requirement and qualify for the dividends paid deduction for U.S. federal income tax purposes. Those rulings
may be relied upon only by taxpayers to whom they were issued, but we could request a similar ruling from the
IRS. In addition, the IRS previously issued a revenue procedure authorizing publicly traded REITs to make
elective cash/stock dividends, but that revenue procedure does not apply to our 2013 and future taxable years.
Accordingly, it is unclear whether and to what extent we will be able to make taxable dividends payable in cash
and common stock.

If we made a taxable dividend payable in cash and common stock, taxable stockholders receiving such
dividends will be required to include the full amount of the dividend as ordinary income to the extent of our
current and accumulated earnings and profits, as determined for U.S. federal income tax purposes. As a result,
stockholders may be required to pay income tax with respect to such dividends in excess of the cash dividends
received. If a U.S. stockholder sells the common stock that it receives as a dividend in order to pay this tax, the
sales proceeds may be less than the amount included in income with respect to the dividend, depending on the
market price of our common stock at the time of the sale. Furthermore, with respect to certain non-U.S.
stockholders, we may be required to withhold U.S. federal income tax with respect to such dividends, including
in respect of all or a portion of such dividend that is payable in common stock. If we made a taxable dividend
payable in cash and our common stock and a significant number of our stockholders determine to sell shares of
our common stock in order to pay taxes owed on dividends, it may put downward pressure on the trading price of
our common stock. We do not currently intend to pay taxable dividends of our common stock and cash, although
we may choose to do so in the future.

39

The ability of our board of directors to revoke our REIT qualification without stockholder approval may cause
adverse consequences to our stockholders.

Our charter provides that our board of directors may revoke or otherwise terminate our REIT election,
without the approval of our stockholders, if it determines that it is no longer in our best interests to continue to
qualify as a REIT. If we cease to qualify as a REIT, we would become subject to U.S. federal income tax on our
taxable income and would no longer be required to distribute most of our taxable income to our stockholders,
which may have adverse consequences on our total return to our stockholders.

Our ownership of our TRS will be subject to limitations and our transactions with our TRS will cause us to be
subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on
arm’s-length terms.

Overall, no more than 25% of the value of a REIT’s assets may consist of stock or securities of one or more

TRS. In addition, the Code limits the deductibility of interest paid or accrued by a TRS to its parent REIT to
assure that the TRS is subject to an appropriate level of corporate taxation. The Code also imposes a 100% excise
tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis.
Furthermore, we will monitor the value of our respective investments in our TRS for the purpose of ensuring
compliance with TRS ownership limitations and will structure our transactions with our TRS on terms that we
believe are arm’s length to avoid incurring the 100% excise tax described above. There can be no assurance,
however, that we will be able to comply with the 25% REIT subsidiaries limitation or to avoid application of the
100% excise tax.

You may be restricted from acquiring or transferring certain amounts of our common stock.

The restrictions on ownership and transfer in our charter may inhibit market activity in our capital stock and

restrict our business combination opportunities.

In order to qualify as a REIT for each taxable year after 2013, five or fewer individuals, as defined in the
Code, may not own, beneficially or constructively, more than 50% in value of our issued and outstanding stock at
any time during the last half of a taxable year. Attribution rules in the Code determine if any individual or entity
beneficially or constructively owns our capital stock under this requirement. Additionally, at least 100 persons
must beneficially own our capital stock during at least 335 days of a taxable year for each taxable year after
2013. To help insure that we meet these tests, our charter restricts the acquisition and ownership of shares of our
capital stock.

Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary to

preserve our qualification as a REIT. Unless exempted by our board of directors, our charter prohibits any person
from beneficially or constructively owning more than 9.8% in value or number of shares, whichever is more
restrictive, of the outstanding shares of any class or series of our capital stock. Our board of directors may not
grant an exemption from this restriction to any proposed transferee whose ownership in excess of 9.8% of the
value of our outstanding shares would result in our failing to qualify as a REIT. This as well as other restrictions
on transferability and ownership will not apply, however, if our board of directors determines that it is no longer
in our best interests to continue to qualify as a REIT.

Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.

The maximum tax rate applicable to “qualified dividend income” payable to U.S. stockholders that are taxed
at individual rates is 20%. Dividends payable by REITs, however, generally are not eligible for the reduced rates
on qualified dividend income. The more favorable rates applicable to regular corporate qualified dividends could
cause investors who taxed at individual rates to perceive investments in REITs to be relatively less attractive than
investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of
the shares of REITs, including our common stock.

40

We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our
common stock.

At any time, the U.S. federal income tax laws governing REITs or the administrative interpretations of those

laws may be amended. We cannot predict when or if any new U.S. federal income tax law, regulation or
administrative interpretation, or any amendment to any existing U.S. federal income tax law, regulation or
administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation, or
interpretation may take effect retroactively. We and our stockholders could be adversely affected by any such
change in the U.S. federal income tax laws, regulations or administrative interpretations.

If our operating partnership failed to qualify as a partnership for federal income tax purposes, we would cease
to qualify as a REIT and suffer other adverse consequences.

We believe that our operating partnership will be treated as a partnership for federal income tax purposes.

As a partnership, our operating partnership will not be subject to federal income tax on its income. Instead, each
of its partners, including us, will be allocated, and may be required to pay tax with respect to, its share of our
operating partnership’s income. We cannot assure you, however, that the IRS will not challenge the status of our
operating partnership or any other subsidiary partnership in which we own an interest as a partnership for federal
income tax purposes, or that a court would not sustain such a challenge. If the IRS were successful in treating our
operating partnership or any such other subsidiary partnership as an entity taxable as a corporation for federal
income tax purposes, we would fail to meet the gross income tests and certain of the asset tests applicable to
REITs and, accordingly, we would likely cease to qualify as a REIT. Also, the failure of our operating
partnership or any subsidiary partnerships to qualify as a partnership could cause it to become subject to federal
and state corporate income tax, which would reduce significantly the amount of cash available for debt service
and for distribution to its partners, including us.

To maintain our REIT status, we may be forced to borrow funds during unfavorable market conditions, and
the unavailability of such capital on favorable terms at the desired times, or at all, may cause us to curtail our
investment activities or dispose of assets at inopportune times or on unfavorable terms, which could materially
adversely affect our financial condition, results of operations and cash flow.

To qualify as a REIT, we generally must distribute to our stockholders at least 90% of our REIT taxable
income each year, excluding net capital gains, and we will be subject to regular corporate income taxes to the
extent that we distribute less than 100% of our REIT taxable income each year. In addition, we will be subject to
a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are
less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our
undistributed income from prior years. In order to maintain our REIT status and avoid the payment of income
and excise taxes, we may need to borrow funds to meet the REIT distribution requirements even if the then
prevailing market conditions are not favorable for these borrowings. These borrowing needs could result from,
among other things, differences in timing between the actual receipt of cash and inclusion of income for federal
income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required
principal or amortization payments. These sources, however, may not be available on favorable terms or at all.
Our access to third-party sources of capital depends on a number of factors, including the market’s perception of
our growth potential, our current debt levels, the market price of our common stock, and our current and potential
future earnings. We cannot assure you that we will have access to such capital on favorable terms at the desired
times, or at all, which may cause us to curtail our investment activities or dispose of assets at inopportune times
or on unfavorable terms, which could materially adversely affect our financial condition, results of operations
and cash flows.

41

Risks Related to Our Common Stock

We may be unable to make distributions at expected levels, which could result in a decrease in the market
price of our common stock.

We intend to continue to pay regular quarterly distributions to our stockholders. All distributions will be

made at the discretion of our board of directors and will be based upon, among other factors, our historical and
projected results of operations, financial condition, cash flows and liquidity, maintenance of our REIT
qualification and other tax considerations, capital expenditure and other expense obligations, debt covenants,
contractual prohibitions or other limitations and applicable law and such other matters as our board of directors
may deem relevant from time to time. If sufficient cash is not available for distribution from our operations, we
may have to fund distributions from working capital, borrow to provide funds for such distributions, or reduce
the amount of such distributions. To the extent we borrow to fund distributions, our future interest costs would
increase, thereby reducing our earnings and cash available for distribution from what they otherwise would have
been. If cash available for distribution generated by our assets is less than our current estimate, or if such cash
available for distribution decreases in future periods from expected levels, our inability to make the expected
distributions could result in a decrease in the market price of our common stock.

Our ability to make distributions may also be limited by our credit facility. Under the terms of the credit
facility, our ability to make distributions during any twelve-month period is limited to the greater of (1) 100% of
our funds from operations (“FFO”) through the first anniversary of the closing date of the credit facility plus a
portion of the net proceeds of our initial public offering and 95% of our FFO thereafter or (2) the amount
required for us to (x) qualify and maintain our REIT status and (y) avoid the payment of federal or state income
or excise tax. In addition, if a default or events of default exist or would result from a distribution, we are
precluded from making certain distributions other than those required to allow us to qualify and maintain our
status as a REIT.

As a result of the foregoing, we may not be able to make distributions in the future, and our inability to
make distributions, or to make distributions at expected levels, could result in a decrease in the market price of
our common stock.

The market price and trading volume of our common stock may be volatile and could decline substantially in
the future.

The market price of our common stock may be volatile in the future. In addition, the trading volume in our
common stock may fluctuate and cause significant price variations to occur. We cannot assure stockholders that
the market price of our common stock will not fluctuate or decline significantly in the future, including as a result
of factors unrelated to our operating performance or prospects. In particular, the market price of our common
stock could be subject to wide fluctuations in response to a number of factors, including, among others, the
following:

•

•

•

•

•

•

•

•

actual or anticipated variations in our quarterly operating results or dividends;

changes in our funds from operations or earnings estimates;

publication of research reports about us or the real estate industry;

increases in market interest rates that lead purchasers of our shares to demand a higher yield;

changes in market valuations of similar companies;

adverse market reaction to any additional debt we incur in the future;

additions or departures of key management personnel;

actions by institutional stockholders;

42

•

•

•

•

•

•

•

•

•

•

•

•

speculation in the press or investment community;

the realization of any of the other risk factors presented in this Annual Report on Form 10-K;

the extent of investor interest in our securities;

the general reputation of REITs and the attractiveness of our equity securities in comparison to other
equity securities, including securities issued by other real estate-based companies;

our underlying asset value;

investor confidence in the stock and bond markets generally;

changes in tax laws;

future equity issuances;

failure to meet earnings estimates;

failure to meet and maintain REIT qualifications;

changes in our credit ratings; and

general market and economic conditions.

In the past, securities Class-Action litigation has often been instituted against companies following periods
of volatility in the price of their common stock. This type of litigation could result in substantial costs and divert
our management’s attention and resources, which could have a material adverse effect on us, including our
financial condition, results of operations, cash flow and the per share trading price of our common stock.

Increases in market interest rates may have an adverse effect on the trading prices of our common stock as
prospective purchasers of our common stock may expect a higher dividend yield and as an increased cost of
borrowing may decrease our funds available for distribution.

One of the factors that will influence the trading prices of our common stock will be the dividend yield on

the common stock (as a percentage of the price of our common stock) relative to market interest rates. An
increase in market interest rates, which are currently at low levels relative to historical rates, may lead
prospective purchasers of our common stock to expect a higher dividend yield (with a resulting decline in the
trading prices of our common stock) and higher interest rates would likely increase our borrowing costs and
potentially decrease funds available for distribution. Thus, higher market interest rates could cause the market
price of our common stock to decrease.

The number of shares of our common stock available for future issuance or sale could materially adversely
affect the per share trading price of our common stock.

As of March 24, 2014, approximately 19.3 million shares of our common stock were outstanding. In

addition, as of March 24, 2014, approximately 13.8 million OP Units in our operating partnership were
outstanding, which are redeemable at the option of the holders beginning in May 2014, for cash, or at our option,
for shares of our common stock, on a one-for-one basis. We have agreed to register the shares issuable upon
redemption of the OP Units so that such shares will be freely tradable under the securities laws.

We cannot predict whether future issuances or sales of shares of our common stock or the availability of
shares for resale in the open market will decrease the per share trading price per share of our common stock. The
per share trading price of our common stock may decline significantly when we register the shares of our
common stock issuable upon redemption of outstanding OP Units.

43

The issuance of substantial numbers of shares of equity securities, including OP Units, or the perception that
such issuances might occur could materially adversely affect us, including the per share trading price of
shares of our common stock.

The redemption of OP Units for common stock, the vesting of any restricted stock granted to certain

directors, executive officers and other employees under our 2013 Equity Incentive Plan, the issuance of our
common stock or OP Units in connection with future property, portfolio or business acquisitions and other
issuances of our common stock could have an adverse effect on the per share trading price of our common stock,
and the existence of units, options or shares of our common stock issuable under our 2013 Equity Incentive Plan
or upon redemption of OP Units may adversely affect the terms upon which we may be able to obtain additional
capital through the sale of equity securities. In addition, future issuances of shares of our common stock or OP
Units may be dilutive to existing stockholders.

Future offerings of debt, which would be senior to our common stock upon liquidation, and preferred equity
securities, which may be senior to our common stock for purposes of dividend distributions or upon
liquidation, may materially adversely affect us, including the per share trading price of our common stock.

In the future, we may attempt to increase our capital resources by making additional offerings of debt or
equity securities (or causing our operating partnership to issue debt securities), including medium-term notes,
senior or subordinated notes and classes or series of preferred stock. Upon liquidation, holders of our debt
securities and shares of preferred stock and lenders with respect to other borrowings will be entitled to receive
our available assets prior to distribution to the holders of our common stock. Additionally, any convertible or
exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable
than those of our common stock and may result in dilution to owners of our common stock. Holders of our
common stock are not entitled to preemptive rights or other protections against dilution. Our preferred stock, if
issued, could have a preference on liquidating distributions or a preference on dividend payments that could limit
our ability pay dividends to the holders of our common stock. Because our decision to issue securities in any
future offering will depend on market conditions and other factors beyond our control, we cannot predict or
estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk that our future
offerings could reduce the per share trading price of our common stock and dilute their interest in us.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

The information set forth under the caption “Our Properties” in Item 1 of this Annual Report on Form 10-K

is incorporated by reference herein.

Item 3. Legal Proceedings.

The nature of our business exposes our properties, us and the Operating Partnership to the risk of claims and

litigation in the normal course of business. Other than routine litigation arising out of the ordinary course of
business, we are not presently subject to any material litigation nor, to our knowledge, is any material litigation
threatened against us.

Item 4. Mine Safety Disclosures.

Not Applicable.

44

Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

PART II

Equity Securities.

Market Information

Our common stock trades on the New York Stock Exchange (the “NYSE”), under the symbol “AHH.”
Below is a summary of the high and low prices of our common stock for each quarterly period since May 8,
2013, the date our common stock began trading on the NYSE, and the cash distributions per share declared by us
with respect to each period.

May 8, 2013—June 30, 2013(1)
July 1, 2013—September 30, 2013
October 1, 2013—December 31, 2013

High

Low

$11.85
$11.84
$10.70

$10.70
$ 8.89
$ 9.01

Distributions
Declared

$0.08
$0.16
$0.16

(1) We completed an initial public offering of shares of our common stock on May 13, 2013.

On December 31, 2013 and March 24, 2014, the closing price of our common stock as reported on the

NYSE was $9.28 and $10.01, respectively.

Stock Performance Graph

The following graph sets forth the cumulative total stockholder return (assuming reinvestment of dividends)

to our stockholders during the period May 8, 2013, the date our common stock began trading on the NYSE,
through December 31, 2013, as well as the corresponding returns on an overall stock market index (Russell 2000
Index) and a peer group index (MSCI US REIT Index). The stock performance graph assumes that $100 was
invested on May 8, 2013. Historical total stockholder return is not necessarily indicative of future results. The
information in this paragraph and the following graph shall not be deemed to be “soliciting material” or to be
“filed” with the SEC or subject to Regulation 14A or 14C, other than as provided in Item 201 of Regulation S-K,
or to the liabilities of Section 18 of the Exchange Act, except to the extent we specifically request that such
information be treated as soliciting material or specifically incorporate it by reference into a filing under the
Securities Act or the Exchange Act.

45

Distribution Information

Since our initial quarter as a publicly-traded REIT, we have made regular quarterly distributions to our

stockholders. We intend to continue to declare quarterly distributions. However, we cannot provide any
assurance as to the amount or timing of future distributions. For a description of restrictions on our ability to
make distributions, see “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Liquidity and Capital Resources—Credit Facility,” and Note 9, “Indebtedness” to our
accompanying consolidated and combined financial statements.

Any future distributions will be at the sole discretion of our board of directors, and their form, timing and

amount, if any, will depend upon a number of factors, including our actual and projected financial condition,
liquidity, EBITDA, FFO and results of operations, the revenue we actually receive from our properties, our
operating expenses, our debt service requirements, our capital expenditures, prohibitions and other limitations
under our financing arrangements, as described above, our REIT taxable income, the annual REIT distribution
requirements, applicable law and such other factors as our board of directors deems relevant. To the extent that
our cash available for distribution is less than 90% of our REIT taxable income, we may consider various means
to cover any such shortfall, including borrowing under our revolving credit facility or other loans, selling certain
of our assets or using a portion of the net proceeds we receive from offerings of equity, equity-related or debt
securities or declaring taxable share dividends.

To the extent that we make distributions in excess of our earnings and profits, as computed for federal
income tax purposes, these distributions will represent a return of capital, rather than a dividend, for federal
income tax purposes. Distributions that are treated as a return of capital for federal income tax purposes will
reduce the stockholder’s basis in its shares (but not below zero) and therefore can result in the stockholder having
a higher gain upon a subsequent sale of such shares. Return of capital distributions in excess of a stockholder’s
basis generally will be treated as gain from the sale of such shares for federal income tax purposes.

Stockholder Information

As of March 24, 2014, there were approximately 96 holders of record of our common stock. However,
because many shares of our common stock are held by brokers and other institutions on behalf of stockholders,
we believe there are substantially more beneficial holders of our common stock than record holders. As of
March 24, 2014, there were 48 holders (other than our company) of our OP units. Our OP units are redeemable
for cash or, at our election, for shares of our common stock.

Unregistered Sales of Equity Securities

In connection with the formation transactions related to our initial public offering, we issued 13,059,365 OP

Units to the predecessor’s prior investors as partial consideration for the contribution of their interests in the
predecessor to the Operating Partnership. In addition, in January 2014, we issued 695,652 OP Units in
connection with our acquisition of the Liberty Apartments (also referred to as the Apprentice School
Apartments).

46

Issuer Purchases of Equity Securities

During the period from May 13, 2013 (the date of our IPO) through December 31, 2013, certain of our
directors and employees surrendered shares of common stock owned by them to satisfy their statutory minimum
federal and state tax obligations associated with the vesting of restricted shares of common stock issued under
our 2013 Equity Incentive Plan (the “2013 Plan”). The following table summarizes all of these repurchases
during the period May 13, 2013 through December 31, 2013.

Period

May 13, 2013 through

May 31, 2013

June 1, 2013 through
June 30, 2013

July 1, 2013 through
July 31, 2013

August 1, 2013 through
August 31, 2013

September 1, 2013 through
September 30, 2013

October 1, 2013 through
October 31, 2013

November 1, 2013 through
November 30, 2013

December 1, 2013 through
December 31, 2013

Total Number of
Shares Purchased(1)

Average Price
Paid for Shares

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs

Maximum Number of
Shares that May Yet be
Purchased Under the
Plans or Programs

8,687

$11.50

—

—

—

—

—

—

—

—

—

—

—

—

—

—

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Total

8,687

(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 grant date fair value of the restricted stock awards.

47

Item 6. Selected Financial Data.

The following selected historical combined financial information should be read in conjunction with
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical
consolidated and combined financial statements as of December 31, 2013 and 2012 and for the three years ended
December 31, 2013, 2012 and 2011, and the related notes included elsewhere in this Annual Report on Form 10-K.

We completed our initial public offering on May 13, 2013. Due to the timing of the initial public offering,

we present herein certain combined consolidated historical financial data for us and our predecessor. Our
predecessor was not a legal entity, but rather a combination of certain real estate and construction entities. The
historical combined financial data for our predecessor is not necessarily indicative of our results of operations,
cash flows or financial position following the completion of the initial public offering.

The selected historical combined financial information as of and for the years ended December 31, 2013,

2012, 2011 and 2010 has been derived from our audited historical financial statements. Due to the timing of the
initial public offering, the results of operations for the years ended December 31, 2012, 2011 and 2010 reflect
only the financial condition and results of operations of our predecessor. The results of operations for the year
ended December 31, 2013 reflect the financial condition and results of operations of our predecessor together
with our company.

Operating Data:
Rental revenues
General contracting and real estate services revenues
Rental expenses
Real estate taxes
General contracting and real estate services expenses
Depreciation and amortization
Interest expense
Loss on extinguishment of debt
Gain on acquisitions
Income from continuing operations
Results from discontinued operations
Net income
Net income attributable to stockholders
Net income per share—basic and diluted
Cash dividends declared per share

Balance Sheet Data:
Real estate investments, at cost
Accumulated depreciation
Net real estate investments
Real estate assets held-for-sale
Cash and cash equivalents
Construction assets
Total assets
Indebtedness
Debt related to real estate assets held-for-sale
Construction liabilities
Total liabilities
Total equity

Other Data:
Funds from operations(1)
Cash provided by operating activities
Cash used for investing activities
Cash provided by (used for) financing activities

48

Years Ended December 31,

2013

2012

2011

2010

($ in thousands, except per share data)

$ 57,520
82,516
14,025
5,124
78,813
14,898
(12,303)
(2,387)
9,460
14,453
—
$ 14,453
7,336
$
0.39
$
0.40
$

$ 462,976
(105,228)
357,748
—
18,882
13,811
435,282
277,745
—
29,680
329,761
105,521

$ 54,436
54,046
12,682
4,865
50,103
12,909
(16,561)
—
—
8,907
(10)
8,897

$

$ 52,578
77,602
12,568
4,781
72,138
12,994
(18,134)
(3,448)
—
2,647
(381)
2,266

$

$ 47,847
87,279
11,734
4,463
82,127
12,158
(18,208)
—
—
4,081
(337)
3,744

$

$354,740
(92,454)
262,286
—
9,400
11,696
331,813
335,081
—
21,605
373,154
(41,341)

$349,933
(80,923)
269,010
473
13,449
13,866
340,134
339,562
—
23,825
377,533
(37,399)

$343,627
(69,532)
274,095
3,162
8,435
21,560
359,448
334,211
1,225
31,400
382,993
(23,545)

$ 19,806
22,175
(47,947)
35,254

$ 21,886
22,326
(4,702)
(21,673)

$ 15,861
23,183
(5,998)
(12,171)

$ 16,150
6,090
(14,715)
5,566

(1) We calculate FFO in accordance with the standards established by the National Association of Real Estate

Investment Trusts, or NAREIT. FFO represents net income (loss) (computed in accordance with U.S. generally
accepted accounting principles, or GAAP), excluding gains (or losses) from sales of depreciable operating
property, real estate related depreciation and amortization (excluding amortization of deferred financing costs) and
after adjustments for unconsolidated partnerships and joint ventures. FFO is a supplemental non-GAAP financial
measure. Management uses FFO as a supplemental performance measure because it believes that FFO is
beneficial to investors as a starting point in measuring our operational performance. Specifically, in excluding real
estate related depreciation and amortization and gains and losses from property dispositions, which do not relate to
or are not indicative of operating performance, FFO provides a performance measure that, when compared year
over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely
recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our
operating performance with that of other REITs. However, because FFO excludes real estate related depreciation
and amortization and captures neither the changes in the value of our properties that result from use or market
conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating
performance of our properties, all of which have real economic effects and could materially impact our results
from operations, the utility of FFO as a measure of our performance is limited. In addition, other equity REITs
may not calculate FFO in accordance with the NAREIT definition as we do, and, accordingly, our FFO may not
be comparable to such other REITs’ FFO. Accordingly, FFO should be considered only as a supplement to net
income as a measure of our performance. FFO should not be used as a measure of our liquidity, nor is it indicative
of funds available to fund our cash needs, including our ability to pay dividends or service indebtedness. FFO also
should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance
with GAAP. The following table sets forth a reconciliation of our pro forma FFO to net income, the most directly
comparable GAAP equivalent, for the periods presented:

Net income
Depreciation and amortization
Gain on acquisitions
Loss on disposal of real estate assets
Real estate joint ventures, net

Funds from operations

Years Ended December 31,

2013

2012

2011

2010

($ in thousands)

$14,453
14,898
(9,460)
—
(85)

$ 8,897
12,909
—
—
80

$ 2,266
12,994
—
569
32

$ 3,744
12,158
—
—
248

$19,806

$21,886

$15,861

$16,150

Net income for the year ended December 31, 2013 includes debt extinguishment losses of $2.4 million, of which
$0.6 million was noncash. Net income for the year ended December 31, 2013 also includes noncash stock
compensation of $1.2 million and noncash impairment charges of $0.6 million.

Net income for the year ended December 31, 2011 includes debt extinguishment losses of $3.4 million, of which
$1.1 million was noncash.

Real estate joint ventures for each of the three years ended December 31, 2013 represents activity from Bermuda
Crossroads and Smith’s Landing, both of which were unconsolidated properties for periods prior to the completion
of our IPO and Formation Transactions on May 13, 2013.

49

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

References to “we,” “our,” “us,” and “our company” refer to Armada Hoffler Properties, Inc., a Maryland

corporation, together with our consolidated subsidiaries, including Armada Hoffler, L.P., a Virginia limited
partnership, of which we are the sole general partner and which we refer to in this Annual Report on Form 10-K
as our Operating Partnership.

Business Description

We are a full service real estate company with extensive experience developing, building, owning and

managing high-quality, institutional-grade office, retail and multifamily properties in attractive markets
throughout the Mid-Atlantic United States. As of December 31, 2013, our portfolio comprised seven office
properties, 15 retail properties and two multifamily properties located in Virginia and North Carolina. As of
December 31, 2013, our office and retail operating property portfolios aggregated over 2.0 million net rentable
square feet and our multifamily property portfolio included 626 apartment units.

We are a Maryland corporation formed on October 12, 2012 to acquire the entities in which Daniel A.
Hoffler and his affiliates, certain of our other officers, directors and their affiliates and other third parties owned a
direct or indirect interest (our “Predecessor”) through the a series of related formation transactions (the
“Formation Transactions”). We did not have any operating activity until the consummation of our initial public
offering of our shares of common stock (the “IPO”) and the Formation Transactions on May 13, 2013. Upon
completing our IPO and the Formation Transactions, we carry on our operations through Armada Hoffler, L.P.
(our “Operating Partnership”), whose assets, liabilities and results of operations we consolidate.

Our “Predecessor” was not a single legal entity, but rather a combination of real estate and construction
entities that were under common control by our Executive Chairman, Daniel A. Hoffler. These entities included:
(i) controlling interests in entities that owned seven office properties, 14 retail properties and one multifamily
property, (ii) non-controlling interests in entities that owned one retail and one multifamily property (Bermuda
Crossroads and Smith’s Landing, respectively), (iii) the property development and asset management businesses
of Armada Hoffler Holding Company, Inc. and (iv) the general commercial construction businesses of Armada
Hoffler Construction Company and Armada Hoffler Construction Company of Virginia.

Because of the timing of the IPO and the Formation Transactions, the financial condition as of

December 31, 2012 and results of operations for the years ended December 31, 2012 and 2011 reflect those of
our Predecessor. The results of operations for the year ended December 31, 2013 reflect our results together with
those of our Predecessor, while the financial condition as of December 31, 2013 reflects solely ours.

Executive Overview

Our strategy is to be the premier real estate developer, owner and operator in the Mid-Atlantic

United States. We seek to grow earnings, funds from operations (“FFO”) and FFO per share by: (i) maintaining
and increasing occupancy in our stabilized property portfolio, (ii) delivering the projects in our development
pipeline on time, (iii) executing on strategic and opportunistic acquisitions, (iv) managing our balance sheet and
overall leverage to provide us with the necessary flexibility to invest selectively and (v) executing new third-
party construction work with consistent operating margins.

The following highlights our significant transactions, events and results during the year ended December 31,

2013:

Development Pipeline

• Began construction on six new properties aggregating approximately 477,000 square feet and 489

apartment units.

50

•

Invested $41.3 million on new development and construction.

• Executed new construction loans aggregating $91.5 million to fund our development pipeline.

Capital Activity

• Completed our IPO in May 2013 raising net proceeds of $192.0 million after deducting the

underwriting discount and offering expenses.

• Entered into a credit facility with an aggregate capacity of $155.0 million of which $70.0 million was

borrowed as of December 31, 2013.

• Retired $182.5 million of debt.

• Refinanced $28.5 million of secured debt to remove the recourse components, lower the interest rates

and extend the maturity dates to 2018.

• Amended $24.8 million of secured debt to extend the maturity date to 2017.

• Declared cash dividends of $0.40 per share covering the period May 13, 2013 to December 31, 2013.

Operating Results

• Net income of $14.5 million compared to $8.9 million for the year ended December 31, 2012.

•

•

FFO of $19.8 million compared to $21.9 million for the year ended December 31, 2012.

FFO for 2013 includes losses on debt extinguishments of $2.4 million and noncash stock compensation
expense of $1.2 million. See “—Non-GAAP Financial Measures”.

• Net income attributable to stockholders of $7.3 million, or $0.39 per share.

• Net operating income of $42.1 million compared to $40.8 million for the year ended December 31,

2012.

• Cash from operations of $22.2 million compared to $22.3 million during the year ended December 31,

2012.

• Weighted average occupancy of 94.4% as of December 31, 2013 compared to 94.2% as of

December 31, 2012.

• Approximately 242,000 square feet of new and renewal leases executed in our office and retail

property portfolios.

• New construction contracts of $64.7 million.

• Third-party construction backlog of $46.4 million as of December 31, 2013.

We view 2013 as a year in which we laid a solid foundation for sustained future net operating income and
asset value growth. We accomplished what we set out to do in 2013 including: transitioning to a publicly traded
company, executing on development opportunities, identifying attractive opportunities for the next generation
pipeline, and positioning our income portfolio for further growth.

Development Pipeline

In addition to the projects in our development pipeline, in November 2012, we were selected by Johns

Hopkins University, after an extensive competitive selection process, to join with the university in the
redevelopment of a 1.12 acre property adjacent to the university’s Homewood campus in Baltimore, Maryland.
This mixed-use development will include student housing, retail space, restaurants and parking. The goal of the
completed project will be to complement the Homewood campus and nearby Charles Village neighborhood and

51

provide a catalyst for future development in the area. The Johns Hopkins project continues to progress, with the
program now defined and strong interest from retailers for the ground floor commercial space.

Our development pipeline consists of the following office, retail and multifamily properties ($ in

thousands):

Identified Development Pipeline

Schedule

Office/Retail

Location

Estimated
Square
Footage(1)

Estimated
Cost(1)

Cost Incurred
through
12/31/13

Start

Anchor
Tenant
Occupancy

Stabilized
Operation

AHH

Ownership %(1) Property Type

Principal
Tenants

4525 Main Street(2) Virginia Beach, VA 234,000(3) $50,000

$25,700

1Q13

3Q14

1Q16

100%

Office

Sandbridge Commons Virginia Beach, VA 70,000
Brooks Crossing(7)

13,000

6,000

4Q13

1Q15

2Q16

85%

Retail

Greentree Shopping

Center(5)

Newport News, VA 36,000
18,000
Chesapeake, VA

8,000
6,000

1,000
2,200

3Q14
4Q13

3Q15
4Q14

3Q15
3Q16

65%
100%

Office
Retail Wawa

Clark Nexsen,
Development
Authority of
Virginia Beach(3)
Harris Teeter
Huntington
Ingalls(4)

% Leased

46%

66%

0%(4)
40%

Multifamily

Location

Encore Apartments(2) Virginia Beach, VA
Whetstone

Apartments

Durham, NC

Liberty Apartments(6) Newport News, VA

358,000

77,000

34,900

Schedule

Estimated
Apartment
Units(1)

Estimated
Cost(1)

Cost Incurred
through
12/31/13

Initial

Start

Occupancy Complete(1)

Stabilized
Operation

AHH
Ownership %

286

$34,000

$11,500

1Q13

3Q14

4Q15

203
197

686

28,000
30,700

7,700
—

2Q13
—

3Q14
—

3Q15
1Q14

$92,700

$19,200

1Q16

1Q16
3Q15

100%

100%
100%

Next Generation Pipeline

Schedule

Office/Retail

Oceaneering

Location

Estimated
Square
Footage(1)

Estimated
Cost(1)

Cost Incurred
through
12/31/13

Start

Anchor
Tenant
Occupancy

Stabilized
Operation

AHH

Ownership %(1) Property Type

Principal
Tenants

Chesapeake, VA 155,000

26,000

3,500

4Q13

1Q15

1Q15

100%

Office

Oceaneering

% Leased

100%

Total

$195,700

$57,600

(1) Represents estimates that may change as the development process proceeds.
(2) This property will be located in the Town Center of Virginia Beach.
(3) Approximately 83,000 square feet is leased to Clark Nexsen, an architectural firm and approximately 23,000 square feet is leased to the City of Virginia

Beach Development Authority.

(4) The principal tenant lease has not been signed as of the date of this Annual Report on Form 10-K.
(5) The Company has a contract to sell Walmart a pad-ready site adjacent to Greentree Shopping Center.
(6) Reflects actual purchase price of the acquisition, which occurred in January 2014.
(7) Reflects the current development program as of the date of this Annual Report on Form 10-K.

Our execution on all of the projects identified in the preceding table and the Johns Hopkins project are
subject to, among other factors, regulatory approvals, financing availability and suitable market conditions.
Excluding the total consideration paid for Liberty Apartments, the total estimated costs of the projects identified
in the preceding table are approximately $165.0 million, of which approximately $137.9 million represent hard
costs for land and construction and $27.1 million represent soft costs for architecture, engineering, real estate
taxes, insurance, interest and compensation and overhead related to our development team. During the year
ended December 31, 2013, we capitalized approximately $1.6 million of development-related compensation and
overhead.

4525 Main Street is our most recent addition to the Town Center of Virginia Beach and is located across
from The Cosmopolitan, One Columbus and Armada Hoffler Tower. This 15-story office tower is the future
home of Clark Nexsen, an international architecture and engineering firm, which has agreed to lease
approximately 83,000 square feet. Additionally, the City of Virginia Beach Development Authority has agreed to
lease approximately 23,000 square feet of office space. 4525 Main Street will also feature approximately
21,000 square feet of ground floor retail space. On July 30, 2013, we closed on a $63.0 million loan of which
$37.8 million is available to fund our construction of 4525 Main Street.

52

Sandbridge Commons continues our long-standing relationship with Harris Teeter, which has agreed to anchor

the shopping center. In addition to a 53,000 square foot Harris Teeter grocery store, Sandbridge Commons will
include approximately 22,000 square feet of small shop retail space. On August 27, 2013, we purchased the
underlying land for $5.2 million. The site includes two outparcels that we plan to either lease or sell. On
December 19, 2013, we closed on a $10.0 million loan to fund our construction of Sandbridge Commons.

Brooks Crossing is a new multi-phased commercial center designed to revitalize the east end of Newport
News, Virginia. We are currently negotiating leases with Huntington Ingalls Industries to be our principal tenant
in the first phase of this project.

Greentree Shopping Center is a retail power center that will feature a Wawa convenience store and gas
station adjacent to a new Walmart Neighborhood Market. We have a long-term ground lease with Wawa and are
under contract to deliver to Walmart their pad-ready site. On November 26, 2013, we purchased the underlying
land for $1.5 million.

Encore Apartments are also located in the Town Center of Virginia Beach and sit adjacent to 4525 Main

Street. Encore Apartments will feature free covered parking, a private pool, concierge service, a business center
and meeting space. On July 30, 2013, we closed on a $63.0 million loan of which $25.2 million is available to
fund our construction of Encore Apartments.

Whetstone Apartments are conveniently located near Duke University and are scheduled to open in time for

the fall 2014 semester. On June 4, 2013, we purchased the underlying land for $2.6 million and commenced
construction in the third quarter of 2013. On October 8, 2013, we closed on an $18.5 million loan to fund our
construction of Whetstone Apartments.

Liberty Apartments in Newport News, Virginia feature 197 apartment units and approximately 28,000
square feet of retail space. Liberty Apartments are located next to the Newport News Apprentice School of
Shipbuilding, another one of our public/private partnership projects. As contemplated in our Formation
Transactions, we completed our acquisition of Liberty Apartments on January 17, 2014 for total consideration of
$30.7 million. The total consideration for Liberty Apartments was comprised of 695,652 common units of our
Operating Partnership, repayment of a $3.0 million mezzanine loan that affiliates of our Predecessor borrowed to
fund the equity portion of the project and the assumption of $20.9 million of debt that bears interest at 5.66% and
has a 30-year term.

The Oceaneering International facility will be a 155,000 square foot office and manufacturing building
located in Chesapeake, Virginia. We were selected as the developer of this new build-to-suit facility that will
serve as Oceaneering International’s operational base in Virginia. Oceaneering International has agreed to a 15-
year lease with us. We facilitated this public/private transaction among the City of Chesapeake, the
Commonwealth of Virginia and Oceaneering International. On December 16, 2013, we purchased the underlying
land for $1.9 million. On February 28, 2014, we closed on a $19.5 million loan to fund our construction of the
Oceaneering International facility.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our
consolidated and combined financial statements that have been prepared in accordance with GAAP. The
preparation of these financial statements requires us to exercise our best judgment in making estimates that affect
the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience
and other assumptions that we believe to be reasonable under the circumstances. We evaluate our estimates on an
ongoing basis, based upon current available information. Actual results could differ from these estimates.

We believe the following accounting policies and estimates are the most critical to understanding our

reported financial results as their effect on our financial condition and results of operations is material.

53

Revenue Recognition

Rental Revenues

We lease our properties under operating leases and recognize base rents on a straight-line basis over the
lease term. We also recognize revenue from tenant recoveries, through which tenants reimburse us for expenses
paid by us such as utilities, janitorial, repairs and maintenance, security and alarm, parking lot and grounds,
general and administrative, management fees, insurance and real estate taxes, on an accrual basis. Our rental
revenues are reduced by the amount of any lease incentives on a straight-line basis over the term of the
applicable lease. We include a renewal period in the lease term only if it appears at lease inception that the
renewal is reasonably assured. We begin recognizing rental revenue when the tenant has the right to take
possession of or controls the physical use of the property under lease. We maintain control of the physical use of
the property under lease if we serve as the general contractor for the tenant. Rental revenue is recognized subject
to management’s evaluation of tenant credit risk.

General Contracting and Real Estate Services Revenues

We recognize revenue on construction contracts using the percentage-of-completion method. Using this
method, we recognize revenue and an estimated profit as construction contract costs are incurred based on the
proportion of incurred costs to total estimated costs under the contract. Provisions for estimated losses on
uncompleted contracts are recognized immediately in the period in which such losses are determined. Changes in
job performance, job conditions, and estimated profitability, including those arising from contract penalty
provisions and final contract settlements, may result in revisions to costs and income and are recognized in the
period in which they are determined. We include profit incentives in revenues when their realization is probable
and the amount can be reasonably estimated. General contracting and real estate services revenue is recognized
subject to management’s evaluation of customer credit risk.

Allowance for Doubtful Accounts

We are subject to tenant defaults and bankruptcies that could affect our collection of accounts receivable.

We recognize a provision for losses on accounts receivable representing our best estimate of uncollectible
amounts. Our evaluation of the collectability of accounts receivable and the adequacy of the allowance is based
primarily upon evaluations of individual receivables, current economic conditions, historical experience and
other relevant factors. As a matter of policy, we reserve all accounts receivable over 90 days outstanding. For any
tenants with rents receivable over 90 days outstanding, we also reserve any related accrued straight-line rental
revenue. We recognize additional reserves for more current amounts, as applicable, where we have determined
that collectability is doubtful. The extended collection period for accrued straight-line rental revenue along with
our evaluation of tenant credit risk may result in the non-recognition of all or a portion of straight-line rental
revenue until the collection of such revenue is reasonably assured.

Real Estate Project Costs

We capitalize direct and certain indirect costs clearly associated with the development, redevelopment,
construction, leasing or expansion of our real estate assets. Capitalized project costs include direct material,
labor, subcontract costs, real estate taxes, insurance, utilities, ground rent, interest on borrowing obligations and
salaries and related personnel costs.

We capitalize direct and indirect project costs associated with the initial construction or redevelopment of a

property up to the time the property is substantially complete and ready for its intended use. We believe the
completion of the building shell is the proper basis for determining substantial completion of initial construction.

We also capitalize direct and indirect costs, including interest costs, on vacant space during extended lease-

up periods after construction of the building shell has been completed if costs are being incurred to prepare the
vacant space for its intended use. If costs and activities incurred to prepare the vacant space for its intended use

54

cease, then cost capitalization is also discontinued until such activities are resumed. Once necessary work has
been completed on a vacant space, project costs are no longer capitalized. In addition, all leasing commissions
paid to third parties for new leases or lease renewals are capitalized.

We depreciate buildings on a straight-line basis over 39 years and tenant improvements over the shorter of

their estimated useful lives or the term of the related lease.

Real Estate Impairment

We evaluate our real estate assets for impairment whenever events or changes in circumstances indicate that

their carrying amounts may not be recoverable. If such an evaluation is necessary, we compare the carrying
amount of any such real estate asset with the undiscounted expected future cash flows that are directly associated
with, and that are expected to arise as a direct result of, its use and eventual disposition. Our estimate of the
expected future cash flows attributable to a real estate asset is based upon, among other things, our estimates
regarding future market conditions, rental rates, occupancy levels, tenant improvements, leasing commissions,
tenant concessions and assumptions regarding the residual value of our properties. If the carrying amount of a
real estate asset exceeds its associated undiscounted expected future cash flows, we recognize an impairment loss
to reduce the carrying amount of the real estate asset to its fair value based on marketplace participant
assumptions.

Adoption of New or Revised Accounting Standards

As an emerging growth company under the Jumpstart Our Business Startups Act, we can elect to adopt new
or revised accounting standards as they are effective for private companies. However, we have elected to opt out
of such extended transition period. Therefore, we will adopt new or revised accounting standards as they are
effective for public companies. This election is irrevocable.

Segment Results of Operations

As of December 31, 2013, we operated our business in four segments: (i) office real estate, (ii) retail real

estate, (iii) multifamily residential real estate and (iv) general contracting and real estate services that are
conducted through our taxable REIT subsidiaries (“TRSs”). Net operating income (segment revenues minus
segment expenses) or “NOI” is the measure used by management to assess segment performance and allocate our
resources among our segments. See Note 3 to our consolidated and combined financial statements in Item 8 of
this Annual Report on Form 10-K.

We define same store properties as those that we owned and operated and that were stabilized for the
entirety of both periods presented. Same store properties exclude those that were in lease-up during the periods
presented. We generally consider a property to be in lease-up until the earlier of: (i) the quarter after the property
reaches 80% occupancy or (ii) the thirteenth quarter after the property receives its certificate of occupancy.

Office Segment Data

Rental revenues
NOI
Properties(1)
Square feet(1)
Occupancy(1)

(1) As of the end of the periods presented.

55

Years Ended December 31,

2013

2012

2011

$ 25,794
$ 17,902
7
952,603

($ in thousands)
$ 25,815
$ 18,147
7
953,442

$ 24,680
$ 16,679
7
953,309

95.2%

94.1%

92.4%

Rental revenues for the year ended December 31, 2013 were relatively unchanged compared to the year

ended December 31, 2012. NOI decreased $0.2 million during the year ended December 31, 2013 compared to
the year ended December 31, 2012 due to increased operating costs at our office properties in the Town Center of
Virginia Beach.

During the year ended December 31, 2013, we executed new office leases aggregating approximately
36,000 square feet. The weighted average lease term for new office leases executed during the year ended
December 31, 2013 was approximately 7.0 years. The total leasing costs associated with new office leases are
estimated to be approximately $1.1 million, or $30.23 per square foot. These costs include tenant improvements,
leasing commissions and leasing incentives.

During the year ended December 31, 2013 we renewed expiring office leases aggregating approximately

101,000 square feet. The weighted average lease term for office leases renewed during the year ended
December 31, 2013 was approximately 8.4 years. The total leasing costs associated with renewed office leases
are estimated to be approximately $2.5 million, or $24.98 per square foot. These costs include tenant
improvements, leasing commissions and leasing incentives.

Releasing spreads measure increases (decreases) in rental rates before and after a lease renewal. GAAP
basis releasing spreads consider future rental rate increases as well as any rent concessions provided during the
renewal period. Cash basis releasing spreads measure only the change in contractual rental rates immediately
before and after the commencement of the renewal period. Releasing spreads on office leases renewed during the
year ended December 31, 2013 were $1.22 per square foot on a GAAP basis and $(2.58) per square foot on a
cash basis. While we seek to obtain rents that are higher than amounts within our expiring leases, there are many
variables and uncertainties that can significantly affect the leasing market at any given time. As such, we cannot
guarantee that future leases will continue to be signed for rents that are equal to or higher than current amounts.

Rental revenues for the year ended December 31, 2012 increased $1.1 million compared to the year ended
December 31, 2011 due to increased occupancy at Armada Hoffler Tower, One Columbus and Two Columbus.
Occupancy increases at these three properties combined with decreased utility expenses in our office portfolio
resulted in $1.5 million of increased NOI for the year ended December 31, 2012 compared to the year ended
December 31, 2011.

During the year ended December 31, 2012, we executed new office leases aggregating approximately
72,000 square feet. The total leasing costs associated with new office leases were approximately $0.9 million, or
$13.11 per square foot. During the year ended December 31, 2012 we renewed expiring office leases aggregating
approximately 125,000 square feet. The total leasing costs associated with renewed office leases were
approximately $0.6 million, or $4.82 per square foot.

Office Same Store Results

Office same store rental revenues, property expenses and NOI for the comparative years ended

December 31, 2013 and 2012 and December 31, 2012 and 2011 were as follows:

Rental revenues
Property expenses

Same Store NOI
Non-Same Store NOI

Segment NOI

Years ended
December 31,

Years ended
December 31,

2013

2012

Change

2012(1)

2011(1)

Change

$25,794
7,892

$17,902
—

$25,815
7,668

$18,147
—

($ in thousands)
$ (21) $23,274
6,938

224

$22,422 $ 852
(332)

7,270

$(245) $16,336
1,811

—

$15,152 $1,184
284

1,527

$17,902

$18,147

$(245) $18,147

$16,679 $1,468

(1) Same store results exclude Two Columbus, which was in lease-up during the comparative period.

56

Same store rental revenues for the year ended December 31, 2013 were relatively unchanged compared to

the year ended December 31, 2012. Same store NOI decreased $0.2 million during the year ended December 31,
2013 compared to the year ended December 31, 2012 due to increased operating costs at our office properties in
the Town Center of Virginia Beach.

Same store rental revenues for the year ended December 31, 2012 increased $0.8 million compared to the

year ended December 31, 2011 due to increased occupancy at Armada Hoffler Tower and One Columbus.
Occupancy increases at these two properties combined with decreased utility expenses in our office portfolio
resulted in $1.2 million of increased same store NOI for the year ended December 31, 2012 compared to the year
ended December 31, 2011.

Retail Segment Data

Rental revenues
NOI
Properties(2)
Square feet(2)
Occupancy(2)

Years Ended December 31,

2013(1)

2012

2011

$
$

21,755
14,976
15
1,093,301

($ in thousands)
$ 21,164
$ 14,535
14
983,107

$ 20,105
$ 14,326
14
981,930

93.4%

93.9%

93.8%

Includes Bermuda Crossroads beginning May 13, 2013.

(1)
(2) As of the end of the periods presented.

Rental revenues increased $0.6 million and NOI increased $0.4 million during the year ended December 31,

2013 compared to the year ended December 31, 2012. The increases in rental revenues and NOI resulted from
our consolidation of Bermuda Crossroads upon completion of our IPO and the Formation Transactions on
May 13, 2013 and our completion and concurrent stabilization of Tyre Neck Harris Teeter in the second quarter
of 2012. The increased rental revenues and NOI from Bermuda Crossroads and Tyre Neck Harris Teeter were
partially offset by declines in occupancy at South Retail in the Town Center of Virginia Beach and Dick’s at
Town Center.

During the year ended December 31, 2013, we executed new retail leases aggregating approximately 27,000
square feet. The weighted average lease term for new retail leases executed during the year ended December 31,
2013 was approximately 5.4 years. The total leasing costs associated with new retail leases are estimated to be
approximately $0.5 million, or $20.10 per square foot. These costs include tenant improvements, leasing
commissions and leasing incentives.

During the year ended December 31, 2013, we renewed expiring retail leases aggregating approximately

78,000 square feet. The weighted average lease term for retail leases renewed during the year ended
December 31, 2013 was approximately 4.8 years. The total leasing costs associated with renewed retail leases are
estimated to be approximately $0.3 million, or $3.44 per square foot. These costs include tenant improvements,
leasing commissions and leasing incentives.

Releasing spreads measure increases (decreases) in rental rates before and after a lease renewal. GAAP
basis releasing spreads consider future rental rate increases as well as any rent concessions provided during the
renewal period. Cash basis releasing spreads measure only the change in contractual rental rates immediately
before and after the commencement of the renewal period. Releasing spreads on retail leases renewed during the
year ended December 31, 2013 were $(0.17) per square foot on a GAAP basis and $(1.94) per square foot on a
cash basis. While we seek to obtain rents that are higher than amounts within our expiring leases, there are many
variables and uncertainties that can significantly affect the leasing market at any given time. As such, we cannot
guarantee that future leases will continue to be signed for rents that are equal to or higher than current amounts.

57

Rental revenues increased $1.1 million and NOI increased $0.2 million during the year ended December 31,

2012 compared to the year ended December 31, 2011. The increases in rental revenues and NOI resulted from
our completion and concurrent stabilization of Courthouse 7-Eleven in the first quarter of 2012 and Tyre Neck
Harris Teeter in the second quarter of 2012. Also contributing to the increases in rental revenues and NOI was
Commerce Street Retail, which reached 100% occupancy at the end of the second quarter of 2011.

During the year ended December 31, 2012, we executed new retail leases aggregating approximately 9,000
square feet. The total leasing costs associated with new retail leases were approximately $0.2 million, or $17.89
per square foot. During the year ended December 31, 2012 we renewed expiring retail leases aggregating
approximately 55,000 square feet. The total leasing costs associated with renewed office leases were
approximately $0.1 million, or $2.39 per square foot.

Retail Same Store Results

Retail same store rental revenues, property expenses and NOI for the comparative years ended

December 31, 2013 and 2012 and December 31, 2012 and 2011 were as follows:

Rental revenues
Property expenses

Same Store NOI
Non-Same Store NOI

Segment NOI

Years ended
December 31,

Years ended
December 31,

2013(1)(2)

2012(2)

Change

2012(2)(3)

2011(2)(3)

Change

$19,898
6,254

$13,644
1,332

$20,786
6,458

$14,328
207

($ in thousands)
$ (888) $20,625
6,443

(204)

$20,105
5,776

$ 520
667

$ (684) $14,182
353
1,125

$14,329
(3)

$(147)
356

$14,976

$14,535

$ 441

$14,535

$14,326

$ 209

(1) Same store results exclude Bermuda Crossroads, which was an unconsolidated property prior to May 13,

2013.

(2) Same store results exclude Tyre Neck Harris Teeter, which was in lease-up during the comparative period.
(3) Same store results exclude Courthouse 7-Eleven, which was in lease-up during the comparative period.

Same store rental revenues decreased $0.9 million and same store NOI decreased $0.7 million during the
year ended December 31, 2013 compared to the year ended December 31, 2012. The decreases in same store
rental revenues and same store NOI resulted from declines in occupancy at South Retail in the Town Center of
Virginia Beach and Dick’s at Town Center.

Same store rental revenues increased $0.5 million while same store NOI decreased $0.1 million during the

year ended December 31, 2012 compared to the year ended December 31, 2011. Commerce Street Retail reached
100% occupancy at the end of the second quarter of 2011 and generated the increase in same store rental
revenues, which was offset by increased operating expenses across our same store retail portfolio.

Multifamily Segment Data

Rental revenues
NOI
Properties(2)
Apartment units(2)
Occupancy(2)

Includes Smith’s Landing beginning May 13, 2013.

(1)
(2) As of the end of the periods presented.

58

Years Ended December 31,

2013(1)

2012

2011

$9,971
$5,493
2
626
94.2%

($ in thousands)
$7,457
$4,281
1
342
91.9%

$7,793
$4,295
1
342
91.5%

Rental revenues increased $2.5 million and NOI increased $1.2 million during the year ended December 31,

2013 compared to the year ended December 31, 2012 due to our consolidation of Smith’s Landing upon
completion of our IPO and the Formation Transactions on May 13, 2013.

Rental revenues decreased $0.3 million and NOI decreased slightly during the year ended December 31,

2012 compared to the year ended December 31, 2011. Higher vacancy and rent concessions during the year
ended December 31, 2012 at The Cosmopolitan caused the decreases in rental revenues and NOI.

Multifamily Same Store Results

Multifamily same store rental revenues, property expenses and NOI for the comparative years ended

December 31, 2013 and 2012 and December 31, 2012 and 2011 were as follows:

Rental revenues
Property expenses

Same Store NOI
Non-Same Store NOI

Segment NOI

Years ended
December 31,

Years ended
December 30,

2013(1)

2012

Change

2012

2011

Change

$7,494
3,441

$4,053
1,440

$7,457
3,176

$4,281
—

($ in thousands)

$

37
265

$7,457
3,176

$ (228) $4,281
—
1,440

$7,793
3,498

$4,295
—

$(336)
(322)

$ (14)
—

$5,493

$4,281

$1,212

$4,281

$4,295

$ (14)

(1) Same store results exclude Smith’s Landing, which was an unconsolidated property prior to May 13, 2013.

Same store rental revenues increased slightly while same store NOI decreased $0.2 million during the year

ended December 31, 2013 compared to the year ended December 31, 2012. The increase in same store rental
revenues resulted from increased ground floor retail occupancy at The Cosmopolitan, which helped to offset
residential occupancy declines. Increased operating expenses at The Cosmopolitan caused the decrease in same
store NOI during the year ended December 31, 2013.

Same store rental revenues decreased $0.3 million while same store NOI decreased slightly during the year
ended December 31, 2012 compared to the year ended December 31, 2011. Higher vacancy and rent concessions
during the year ended December 31, 2012 at The Cosmopolitan caused the decreases in same store rental
revenues and same store NOI.

General Contracting and Real Estate Services Segment Data

Segment revenues
NOI
Operating margin

Years Ended December 31,

2013

2012

2011

$82,516
3,703

($ in thousands)
$54,046
3,943

$77,602
5,464

4.5%

7.3%

7.0%

Segment revenues for the year ended December 31, 2013 increased $28.5 million compared to the year

ended December 31, 2012. The increase in segment revenues was driven primarily by our progress and
completion of the Newport News Apprentice School of Shipbuilding, Liberty Apartments and the Biomedical
Research Laboratory at Hampton University. NOI decreased $0.2 million during the year ended December 31,
2013 compared to the year ended December 31, 2012 as we experienced tighter operating margins during 2013.

59

Segment revenues for the year ended December 31, 2012 decreased $23.6 million compared to the year

ended December 31, 2011 as because we had lower construction volume during 2012 as a result of our
substantial completion of a number of construction projects during the year ended December 31, 2011. NOI
decreased $1.5 million during the year ended December 31, 2012 compared to the year ended December 31,
2011 due to the lower construction volume during year, while operating margins increased slightly.

The changes in backlog for the year ended December 31, 2013 were as follows:

Beginning backlog
New contracts/change orders
Work performed

Ending backlog

Year ended
December 31, 2013

($ in thousands)
$ 64,577
64,742
(82,934)

$ 46,385

During the year ended December 31, 2013, we executed a $24.4 million contract to serve as the general
contractor for the Hyatt Place Baltimore/Inner Harbor Hotel. We broke ground on the project on August 19, 2013
and expect to complete construction in the fall of 2014. As of December 31, 2013, we had $23.2 million of
backlog on the Hyatt Place Baltimore/Inner Harbor Hotel project. Also during the year ended December 31,
2013, we executed a $4.2 million contract to build a new Harris Teeter grocery store in the Wards Corner area of
Norfolk, Virginia. We began construction during the second quarter of 2013 and expect to complete construction
in the first quarter of 2014.

As of December 31, 2013, we had $11.9 million of backlog on the City of Suffolk Municipal Center project,

which we expect to complete in the second quarter of 2015. We also had $4.6 million of backlog on the Main
Street parking garage underlying both 4525 Main Street and Encore Apartments in the Town Center of Virginia
Beach. We expect to complete construction of the Main Street parking garage in the third quarter of 2014. During
the year ended December 31, 2013, we completed construction of the Newport News Apprentice School of
Shipbuilding, Liberty Apartments and the Biomedical Research Laboratory at Hampton University.

Consolidated and Combined Results of Operations

Because of the timing of our IPO, the results of operations for the years ended December 31, 2012 and 2011

reflect those of our Predecessor. The results of operations for the year ended December 31, 2013 reflect our
results together with those of our Predecessor.

60

The following table summarizes our results of operations for each of the three years ended December 31, 2013:

Revenues
Rental revenues
General contracting and real estate services

Years ended
December 31,

Years ended
December 31,

2013

2012

Change

2012

2011

Change

($ in thousands)

$ 57,520

$ 54,436

$ 3,084

$ 54,436

$ 52,578 $ 1,858

revenues

82,516

54,046

28,470

54,046

77,602

(23,556)

Total revenues
Expenses
Rental expenses
Real estate taxes
General contracting and real estate services

expenses

Depreciation and amortization
General and administrative expenses
Impairment charges

Total expenses

Operating income

Interest expense
Loss on extinguishment of debt
Gain on acquisitions
Other income (expense)

Income before taxes
Income tax (provision) benefit

Income from continuing operations

140,036

108,482

31,554

108,482

130,180

(21,698)

14,025
5,124

78,813
14,898
6,937
580

12,682
4,865

50,103
12,909
3,232
—

1,343
259

28,710
1,989
3,705
580

12,682
4,865

50,103
12,909
3,232
—

12,568
4,781

72,138
12,994
3,728
—

114
84

(22,035)
(85)
(496)
—

120,377

83,791

36,586

83,791

106,209

(22,418)

19,659

24,691

(5,032)

24,691

23,971

(12,303)
(2,387)
9,460
297

14,726
(273)

14,453

(16,561)
—
—
777

8,907
—

8,907

4,258
(2,387)
9,460
(480)

5,819
(273)

5,546

(16,561)
—
—
777

(18,134)
(3,448)
—
258

8,907
—

8,907

2,647
—

2,647

720

1,573
3,448
—
519

6,260
—

6,260

371

Results from discontinued operations

—

(10)

10

(10)

(381)

Net income

$ 14,453

$

8,897

$ 5,556

$

8,897

$

2,266 $ 6,631

Rental Revenues. Rental revenues by segment for each of the three years ended December 31, 2013 were as

follows:

Office
Retail
Multifamily

Years ended
December 31,

Years ended
December 31,

2013

2012

Change

2012

2011

Change

$25,794
21,755
9,971

$25,815
21,164
7,457

($ in thousands)

$ (21)
591
2,514

$25,815
21,164
7,457

$24,680
20,105
7,793

$1,135
1,059
(336)

$57,520

$54,436

$3,084

$54,436

$52,578

$1,858

Rental revenues increased $3.1 million during the year ended December 31, 2013 compared to the year

ended December 31, 2012. Office rental revenues for the year ended December 31, 2013 were relatively
unchanged compared to the year ended December 31, 2012. Retail rental revenues increased due to our
consolidation of Bermuda Crossroads beginning May 13, 2013 and our completion and concurrent stabilization
of Tyre Neck Harris Teeter in the second quarter of 2012. Multifamily rental revenues increased due to our
consolidation of Smith’s Landing beginning on May 13, 2013.

61

Rental revenues increased $1.9 million during the year ended December 31, 2012 compared to the year
ended December 31, 2011. Office rental revenues increased because of occupancy increases at Armada Hoffler
Tower, One Columbus and Two Columbus. Retail rental revenues increased because of our completion and
concurrent stabilization of Courthouse 7-Eleven in the first quarter of 2012 and Tyre Neck Harris Teeter in the
second quarter of 2012. Commerce Street Retail reached 100% occupancy at the end of the second quarter of
2011, which also contributed to the increase in retail rental revenues. Multifamily rental revenues decreased due
to higher vacancy and rent concessions at The Cosmopolitan.

General Contracting and Real Estate Services Revenues. General contracting and real estate services

revenues for the year ended December 31, 2013 increased $28.5 million compared to the year ended
December 31, 2012. The increase was driven primarily by our progress and completion of the Newport News
Apprentice School of Shipbuilding, Liberty Apartments and the Biomedical Research Laboratory at Hampton
University.

General contracting and real estate services revenues for the year ended December 31, 2012 decreased $22.0
million compared to the year ended December 31, 2011 as because we had lower construction volume during the
year ended December 31, 2012 as a result of our substantial completion of a number of construction projects
during the year ended December 31, 2011.

Rental Expenses. Rental expenses by segment for each of the three years ended December 31, 2013 were as

follows:

Office
Retail
Multifamily
Other

Years ended
December 31,

Years ended
December 31,

2013

2012

Change

2012

2011

Change

$ 5,721
4,808
3,496
—

$ 5,499
4,791
2,383
9

($ in thousands)

$ 222
17
1,113
(9)

$ 5,499
4,791
2,383
9

$ 5,849
3,940
2,771
8

$(350)
851
(388)
1

$14,025

$12,682

$1,343

$12,682

$12,568

$ 114

Rental expenses increased $1.3 million during the year ended December 31, 2013 compared to the year
ended December 31, 2012, primarily driven by our multifamily segment. Multifamily rental expenses increased
due to our consolidation of Smith’s Landing beginning on May 13, 2013. Office rental expenses increased
$0.2 million because of repairs and maintenance. Retail rental expenses were relatively unchanged during the
year ended December 31, 2013 compared to the year ended December 31, 2012.

Rental expenses increased slightly during the year ended December 31, 2012 compared to the year ended
December 31, 2011. Decreases in rental expenses in our office and multifamily segments more than offset an
increase in our retail segment. The decrease in office rental expenses resulted primarily from lower utility
expenses due to a successful challenge to our rate schedules and an unusually mild winter. The increase in retail
rental expenses was primarily due to the completed development and concurrent stabilization of both Tyre Neck
Harris Teeter and Courthouse 7-Eleven in May 2012 and January 2012, respectively, and the expenses associated
with these properties. Multifamily rental expenses decreased because of the slight decrease in occupancy at The
Cosmopolitan.

62

Real Estate Taxes. Real estate taxes by segment for each of the three years ended December 31, 2013 were

as follows:

Office
Retail
Multifamily
Other

Years ended
December 31,
2012
2013

Change

Years ended
December 31,
2011
2012

$2,171
1,971
982
—

$2,169
1,838
793
65

($ in thousands)
$

2
133
189
(65)

$2,169
1,838
793
65

$2,152
1,839
727
63

$5,124

$4,865

$259

$4,865

$4,781

Change

$17
(1)
66
2

$84

Real estate taxes increased $0.3 million during the year ended December 31, 2013 compared to the year

ended December 31, 2012. Office real estate taxes for the year ended December 31, 2013 were relatively
unchanged compared to the year ended December 31, 2012. Retail real estate taxes increased due to our
consolidation of Bermuda Crossroads beginning May 13, 2013 and our completion and concurrent stabilization
of Tyre Neck Harris Teeter in the second quarter of 2012. Multifamily real estate taxes increased due to our
consolidation of Smith’s Landing beginning on May 13, 2013. Real estate taxes for the year ended December 31,
2012 were relatively unchanged compared to the year ended December 31, 2011.

General Contracting and Real Estate Services Expenses. General contracting and real estate services

expenses for the year ended December 31, 2013 increased $28.7 million compared to the year ended
December 31, 2012. The increase was driven primarily by our progress and completion of the Newport News
Apprentice School of Shipbuilding, Liberty Apartments and the Biomedical Research Laboratory at Hampton
University.

General contracting and real estate services expenses for the year ended December 31, 2012 decreased
$23.6 million compared to the year ended December 31, 2011 as because we had lower construction volume
during the year ended December 31, 2012 as a result of our substantial completion of a number of construction
projects during the year ended December 31, 2011.

Depreciation and Amortization. Depreciation and amortization for the year ended December 31, 2013

increased $2.0 million compared to the year ended December 31, 2012. The increase was attributable to
depreciation and amortization associated with our consolidation of Bermuda Crossroads and Smith’s Landing
beginning on May 13, 2013. Depreciation and amortization for the years ended December 31, 2012 and 2011 was
relatively unchanged.

General and Administrative Expenses. General and administrative expenses for the year ended

December 31, 2013 increased $3.7 million compared to the year ended December 31, 2012. The increase resulted
from noncash stock compensation of $1.2 million and increased corporate, regulatory and compliance costs of
operating as a public company. General and administrative expenses decreased $0.5 million during the year
ended December 31, 2012 compared to the year ended December 31, 2011. The decrease was primarily due to
lower health care expenses and state taxes.

Impairment Charges. We recognized impairment charges of approximately $0.6 million during the year
ended December 31, 2013 resulting from three retail tenants that vacated prior to their lease expiration. The
impairment charge consisted of unamortized deferred leasing costs, lease incentives and acquired lease
intangibles related to these three tenants.

Interest Expense. Interest expense for the year ended December 31, 2013 decreased $4.3 million compared

to the year ended December 31, 2012. The decrease resulted from our overall reduction in our debt using a

63

portion of the net proceeds from our IPO, as well as our refinancing to lower interest rates during 2013. Our
consolidated indebtedness as of December 31, 2013 was $277.7 million compared to $335.1 million as of
December 31, 2012. Our weighted average interest rate as of December 31, 2013 and 2012 was 3.6% and 4.3%,
respectively.

Interest expense decreased $1.6 million during the year ended December 31, 2012 compared to the year
ended December 31, 2011. This decrease was primarily the result of refinancing four loans, which resulted in
lower interest rates and a full year of interest savings from the lower interest rate on the 2011 Cosmopolitan debt
refinancing. These interest expense savings were partially offset by interest on the loans secured by Tyre Neck
Harris Teeter and Courthouse 7-Eleven, both of which we completed and stabilized during the year ended
December 31, 2012.

Loss on Extinguishment of Debt. During the year ended December 31, 2013, we used a portion of the net

proceeds from our IPO and borrowings under our credit facility to repay $150.0 million of debt. As a result, we
recognized a loss on extinguishment of $1.1 million consisting of $0.5 million of unamortized deferred financing
costs and $0.6 million of defeasance expenses. On July 17, 2013, we defeased the loan on One Columbus and
recognized a loss on extinguishment of $1.0 million representing defeasance expenses. On October 11, 2013, we
repaid the Bermuda Crossroads loan for $10.8 million and recognized a $0.1 million gain on extinguishment of
debt representing the unamortized fair value premium adjustment. On October 25, 2013, we amended Broad
Creek Shopping Center Notes 1, 2 and 3 to remove the recourse component, lower the interest rates to LIBOR
plus 2.25% and extend the maturity dates to October 31, 2018. We recognized a $0.2 million loss on
extinguishment of debt representing unamortized debt issuance costs on Broad Creek Shopping Center Notes 2
and 3. We did not extinguish any debt during the year ended December 31, 2012. We recognized an approximate
$3.4 million loss on the extinguishment of debt on The Cosmopolitan during the year ended December 31, 2011.

Gain on Acquisitions. We accounted for our acquisition of controlling interests in Bermuda Crossroads and

Smith’s Landing as purchases at fair value under the acquisition method of accounting in accordance with
GAAP. As a result, we recognized a gain upon acquisition of approximately $9.5 million representing the
difference between the fair value and carrying value of our Predecessor’s prior noncontrolling equity interests in
Bermuda Crossroads and Smith’s Landing.

Other Income. Other income for the year ended December 31, 2013 decreased $0.5 million compared to the
year ended December 31, 2012 due to the changes in fair value of our interest rate derivatives for which we have
not elected hedge accounting. Other income for the year ended December 31, 2012 increased $0.5 million due to
a loss on disposal of real estate assets that we recognized during the year ended December 31, 2011.

Income Taxes. Prior to the completion of our IPO on May 13, 2013, we made no provision for U.S. federal,

state or local income taxes because the profits and losses of our Predecessor flowed through to its respective
partners, members and shareholders who were individually responsible for reporting such amounts. Subsequent
to the completion of our IPO, our TRSs, through which we conduct our development and construction business,
are subject to federal, state and local corporate income taxes. The income tax provision recognized during the
year ended December 31, 2013 is attributable to the profits of our TRSs.

Liquidity and Capital Resources

Overview

We believe our primary short-term liquidity requirements consist of general contractor expenses, operating

expenses and other expenditures associated with our properties, including tenant improvements, leasing
commissions and leasing incentives, dividend payments to our stockholders required to maintain our REIT
qualification, debt service, capital expenditures, new real estate development projects and strategic acquisitions.
We expect to meet our short-term liquidity requirements through net cash provided by operations, reserves

64

established from existing cash borrowings under construction loans to fund new real estate development and
construction and borrowings available under our credit facility.

Our long-term liquidity needs consist primarily of funds necessary for the repayment of debt at or prior to

maturity, general contracting expenses, property development and acquisitions, tenant improvements and capital
improvements. We expect to meet our long-term liquidity requirements with net cash from operations, long-term
secured and unsecured indebtedness and the issuance of equity and debt securities. We also may fund property
development and acquisitions and capital improvements using our credit facility pending long-term financing.

As of December 31, 2013, we had unrestricted cash and cash equivalents of $18.9 million and restricted
cash in escrow of $2.2 million available for both current liquidity needs as well as development activities. As of
December 31, 2013 and March 31, 2014, we had $82.0 million and $65.1 million, respectively, available under
our credit facility to meet our short-term liquidity requirements.

Credit Facility

On May 13, 2013, we closed on a $100.0 million senior secured credit facility that includes an accordion
feature that allows us to increase the borrowing capacity under the facility up to $250.0 million, subject to certain
conditions. On October 10, 2013, we increased the borrowing capacity under the credit facility to $155.0 million
pursuant to the accordion feature by adding six properties to the borrowing base collateral. As of December 31,
2013, the following ten properties collectively serve as the borrowing base collateral for the credit facility:
(i) Armada Hoffler Tower, (ii) Richmond Tower, (iii) One Columbus, (iv) Two Columbus, (v) Virginia Natural
Gas, (vi) Sentara Williamsburg, (vii) a portion of North Point Center, (viii) Gainsborough Square, (ix) Parkway
Marketplace and (x) Courthouse 7-Eleven.

The credit facility matures on May 13, 2016 and includes an optional one-year extension (assuming our
compliance with applicable covenants and conditions) for a fee equal to 0.25% of the then applicable maximum
amount of the credit facility.

The credit facility bears interest at LIBOR plus 1.60% to 2.20%, depending on our total leverage ratio. As of

December 31, 2013, the interest rate on the credit facility was LIBOR plus 1.75%. In addition to interest owed
under the credit facility, we are obligated to pay an annual fee based on the average unused portion of the credit
facility. This fee is payable quarterly in arrears and is 0.25% of the amount of the unused portion of the credit
facility if amounts borrowed are greater than 50% of the credit facility and 0.30% of the unused portion of the
credit facility if amounts borrowed are less than 50% of the credit facility.

As of December 31, 2013, we had $70.0 million borrowed under the credit facility and had standby letters of

credit issued under the credit facility totaling $3.0 million. As of December 31, 2013, we had $82.0 million of
aggregate capacity available under the credit facility. As of March 31, 2014, we had $80.0 million borrowed
under the credit facility and had standby letters of credit issued under the credit facility totaling $9.9 million. As
of March 31, 2014, we had $65.1 million of aggregate capacity available under the credit facility.

The credit facility requires us to comply with various financial covenants, including:

• Maximum leverage ratio of 65% as of the last day of each fiscal quarter through December 31, 2014

and 60% as of the last day of each fiscal quarter thereafter;

• Minimum fixed charge coverage ratio of 1.75x;

• Minimum tangible net worth equal to at least the sum of 80% of tangible net worth on the closing date

of the credit facility plus 75% of the net proceeds of any additional equity issuances;

• Maximum amount of variable rate indebtedness not exceeding 30% of our total asset value; and

• Maximum amount of secured recourse indebtedness of 35% of our total asset value.

65

The credit facility permits investments in the following types of assets: (i) unimproved land holdings in an
aggregate amount not exceeding 5% of our total asset value, (ii) construction in progress in an aggregate amount
not exceeding 25% of our total asset value and (iii) unconsolidated affiliates in aggregate amount not exceeding
5% of our total asset value. Investments in these types of assets cannot exceed 30% of our total asset value. In
addition to these financial covenants, the credit facility requires us to comply with various customary affirmative
and negative covenants that restrict our ability to, among other things, incur debt and liens, make investments,
dispose of properties and make distributions.

We are currently in compliance with all covenants under the credit facility.

IPO and Formation Transactions

In May 2013, we completed our IPO raising net proceeds of $192.0 million after deducting the underwriting
discount and offering expenses. Using proceeds from our IPO and borrowings under our credit facility, we repaid
$150.0 million of debt and as a result, unencumbered nine properties, all of which now serve as borrowing base
collateral for the credit facility:

Properties Unencumbered

Parkway Marketplace
Two Columbus
Gainsborough Square
North Point—Note 3
Courthouse 7-Eleven
Sentara Williamsburg
Virginia Natural Gas
Richmond Tower
Armada Hoffler Tower

Other Debt Reduction

Broad Creek—Note 2
Oyster Point Participation Loan

Total

Debt Repaid

($ in thousands)

$

5,669
18,785
9,732
9,242
1,485
10,915
5,457
46,523
38,813

146,621

2,697
643

3,340
$149,961

Consolidated Indebtedness

During the year ended December 31, 2013, we:

• Repaid the outstanding $2.2 million balance of the loan secured by Main Street Land.

• Defeased the loan secured by One Columbus for $14.9 million, including costs of $1.0 million.

• Closed on a $63.0 million loan to fund our construction of 4525 Main Street and Encore Apartments.

We purchased two LIBOR interest rate caps both with strike prices of 3.50% for the full amount of the
construction loan. The interest rate cap agreements expire on March 1, 2016.

• Closed on an $18.5 million loan to fund our construction of Whetstone Apartments. The loan bears
interest at LIBOR plus 1.90% and matures on October 8, 2016. We purchased a LIBOR interest rate
cap with a strike price of 1.50% and a term ending on April 1, 2016 for the full amount of the
construction loan.

• Repaid the loan secured by Bermuda Crossroads for $10.8 million. As of December 31, 2013, Bermuda

Crossroads is available to the borrowing base collateral for our credit facility.

66

• Amended Broad Creek Shopping Center Notes 1, 2 and 3 to remove the recourse component, lower the

interest rates to LIBOR plus 2.25% and extend the maturity dates to October 31, 2018.

• Refinanced the Commerce Street Retail loan, Hanbury Village Note 2 and the Tyre Neck Harris Teeter
loan to remove the recourse components, lower the interest rates to LIBOR plus 2.25% and extend the
maturity dates to October 31, 2018. We prepaid an aggregate of $1.4 million of principal on these three
loans.

• Closed on a $10.0 million loan to fund the development and construction of Sandbridge Commons. The

construction loan bears interest at LIBOR plus 1.85% and matures on January 17, 2018.

• Amended the Smith’s Landing loan to extend the maturity date to January 31, 2017.

67

The following table sets forth our consolidated indebtedness as of December 31, 2013 ($ in thousands):

Amount
Outstanding

$

6,466

Interest
Rate(1)

Effective Rate for
Variable-Rate
Debt
as of
December 31,
2013

Maturity Date

Balance at
Maturity

5.41%

December 1, 2015

$

6,089

LIBOR+2.25
LIBOR+2.25
LIBOR+2.25

6.67
LIBOR+2.25
6.06

6.45
7.25
5.59
LIBOR+2.00
LIBOR+2.25
5.99
5.99
3.75
LIBOR+2.25
5.99
LIBOR+2.75
3.75
LIBOR+2.15

LIBOR+1.60-2.20
LIBOR+1.95
LIBOR+1.95
LIBOR+1.90
LIBOR+1.85

4,503
8,267
3,461

21,449
4,159
3,842

10,319
2,830
1,030
705
2,482
15,834
6,985
2,690
5,613
7,917
8,318
47,723
24,795(3)

$189,388
70,000
11,313
3,585
284
3,172

$277,742

3
$277,745

2.42%
2.42%
2.42%

2.42%

3.57%(2)
2.42%

2.42%

2.92%

2.32%

1.93%
2.13%
2.13%
2.07%
2.02%

October 31, 2018
October 31, 2018
October 31, 2018

October 11, 2017
October 31, 2018
June 8, 2017

February 5, 2019
September 15, 2025
December 1, 2014
February 1, 2017
October 31, 2018
September 8, 2016
September 8, 2016
May 7, 2015
October 31, 2018
September 8, 2016
October 31, 2017
July 1, 2051
January 31, 2017

May 13, 2016
January 30, 2017
January 30, 2017
October 8, 2016
January 17, 2018

4,223
7,752
3,246

20,499
3,777
3,165

9,333
1,344
1,007
641
2,235
15,084
6,655
2,592
5,264
7,542
7,889
—
23,793

$132,130
70,000
11,313
3,585
284
3,172

$220,484

Oyster Point
Broad Creek Shopping

Center

Note 1
Note 2
Note 3
Hanbury Village
Note 1
Note 2

Harrisonburg Regal
North Point Center
Note 1
Note 2
Note 4
Note 5

Tyre Neck Harris Teeter
249 Central Park Retail
South Retail
Studio 56 Retail
Commerce Street Retail
Fountain Plaza Retail
Dick’s at Town Center
The Cosmopolitan
Smith’s Landing

Stabilized Portfolio
Credit Facility
4525 Main Street
Encore Apartments
Whetstone Apartments
Sandbridge Commons

Total

Unamortized fair value

adjustments
Indebtedness

(1) LIBOR rate is determined by individual lenders.
(2) Subject to an interest rate swap lock.
(3) Principal balance excluding fair value adjustments.

We currently are in compliance with all debt covenants on our outstanding indebtedness.

68

As of December 31, 2013 our outstanding indebtedness matures during the following years:

Year

2014
2015
2016
2017
2018 and thereafter

Amount Due

($ in thousands)

$

1,007
8,681
99,565
70,885
40,346

Percentage of
Total

<1%
4
45
32
18

$220,484

100%

On January 17, 2014, we assumed $20.9 million of debt in connection with the acquisition of Liberty

Apartments. The loan bears interest at 5.66% and has a 30-year term.

On February 28, 2014, we closed on a $19.5 million loan to fund the development and construction of the

Oceaneering International facility. The construction loan bears interest at LIBOR plus 1.75% and matures on
February 28, 2018.

Interest Rate Derivatives

We may use interest rate derivatives from time to time to manage our exposure to interest rate risks. Using

an interest rate swap lock, we fixed our interest payments under North Point Center Note 5 at 3.57% through
maturity on February 1, 2017.

As of March 31, 2014, we were party to the following LIBOR interest rate cap agreements ($ in thousands):

Effective Date

May 31, 2012
September 1, 2013
September 1, 2013
September 1, 2013
October 4, 2013
March 14, 2014

Total

Maturity Date

Strike Rate

Notional Amount

May 29, 2015
March 1, 2016
March 1, 2016
March 1, 2016
April 1, 2016
March 1, 2017

1.09%
3.50%
3.50%
1.50%
1.50%
1.25%

$

9,127
25,198
37,848
40,000
18,500
50,000

$180,673

Contractual Obligations

The following table summarizes the future payments for known contractual obligations as of December 31,

2013 (in thousands):

Contractual Obligations

Principal payments of long-term indebtedness
Long-term debt—fixed interest
Long-term debt—variable interest
Ground and other operating leases
Tenant-related and other commitments

Total

Total

$277,742
58,663
11,125
69,379
9,511

Less than
1 year

$ 3,877
6,685
3,511
1,535
6,528

Payments due by period

1 – 3
years

3 – 5
years

More than
5 years

$113,829
12,027
5,962
2,940
514

$103,801 $ 56,235
33,702
—
62,021
2,406

6,249
1,652
2,883
63

$426,420

$22,136

$135,272

$114,648

$154,364

For long-term debt that bears interest at variable rates, we estimated future interest payments using the

indexed rates as of December 31, 2013. One-month LIBOR as of December 31, 2013 was 17 basis points.

69

Off-Balance Sheet Arrangements

We have entered into standby letters of credit relating to the guarantee of future performance on certain of

our construction contracts. Letters of credit generally are available for draw down in the event we do not
perform. As of December 31, 2013 and March 31, 2014, we had aggregate outstanding letters of credit totaling
$3.0 million and $9.9 million, respectively, all of which expire during 2014. However, all of our standby letters
of credit are expected to renew for additional periods until completion of the underlying contractual obligation.

Cash Flows

Comparison of the years ended December 31, 2013 and 2012.

Operating Activities
Investing Activities
Financing Activities

Net Increase (Decrease)

Years Ended
December 31,

2013

2012

Change

$ 22,175
(47,947)
35,254

($ in thousands)
$ 22,326
(4,702)
(21,673)

$

(151)
(43,245)
56,927

$ 9,482

$ (4,049)

$ 13,531

Cash and Cash Equivalents, Beginning of Period
Cash and Cash Equivalents, End of Period

$ 9,400
$ 18,882

$ 13,449
$ 9,400

Net cash provided by operating activities decreased slightly for the year ended December 31, 2013

compared to the year ended December 31, 2012. The less than 1.0% change resulted from increased net income
adjusted for noncash items offset by cash used for operating assets and liabilities. Net income adjusted for
noncash items increased $2.0 million during the year ended December 31, 2013 while cash used for operating
assets and liabilities increased at a slightly higher rate.

We made significant progress on executing on the opportunities in our development pipeline during the year

ended December 31, 2013 and, as a result, net cash used for investing activities increased $43.2 million during
the year. During the year ended December 31, 2013, we invested $41.3 million of cash on new real estate
development compared to $2.7 million during the year ended December 31, 2012. During the year ended
December 31, 2013, we began construction of the following properties in our development pipeline:
(i) 4525 Main Street, (ii) Encore Apartments, (iii) Whetstone Apartments, (iv) Sandbridge Commons,
(v) Greentree Shopping Center and (vi) the Oceaneering International facility. During the year ended
December 31, 2013, we invested $3.9 million in tenant and building improvements compared to $2.3 million
during the year ended December 31, 2012. In connection with our Formation Transactions, we paid $2.1 million
of cash to acquire controlling interests in Bermuda Crossroads and Smith’s Landing. Leasing costs and leasing
incentives paid during the year ended December 31, 2013 were $1.4 million compared to $1.2 million during the
year ended December 31, 2012.

Net proceeds from our IPO in May 2013 and borrowings under our credit facility offset by debt repayments

resulted in the overall $56.9 million increase in cash provided by financing activities during the year ended
December 31, 2013.

70

Comparison of the years ended December 31, 2012 and 2011.

Operating Activities
Investing Activities
Financing Activities

Net Increase (Decrease)

Years Ended
December 31,

2012

2011

Change

$ 22,326
(4,702)
(21,673)

($ in thousands)
$ 23,183
(5,998)
(12,171)

$ (857)
1,296
(9,502)

$ (4,049)

$ 5,014

$(9,063)

Cash and Cash Equivalents, Beginning of Period
Cash and Cash Equivalents, End of Period

$ 13,449
$ 9,400

$ 8,435
$ 13,449

The $0.9 million decrease in net cash provided by operating activities during the year ended December 31,
2012 was due to cash outflows from property and construction assets offset by cash inflows from property and
construction liabilities. Net income adjusted for non-cash items increased $4.8 million, which also offset the cash
outflows from property and construction assets.

The $1.3 million change in net cash used for investing activities resulted principally from lower real estate
investments and payments for leasing commissions and leasing incentives during the year ended December 31,
2012. During 2012, we invested $2.7 million of cash on new real estate development, primarily 4525 Main Street
and Encore Apartments, compared to $3.6 million during the year ended December 31, 2011 for the development
and construction of Tyre Neck Harris Teeter and Courthouse 7-Eleven. During the year ended December 31,
2012, we invested $2.3 million in tenant and building improvements compared to $3.8 million during the year
ended December 31, 2011. Leasing costs and leasing incentives paid during the year ended December 31, 2012
were $1.2 million compared to $3.9 million during the year ended December 31, 2011.

The $9.5 million change in net cash used in financing activities resulted from net debt repayments of

secured notes payable of $4.5 million during the year ended December 31, 2012 compared with net debt
issuances of $5.4 million during the year ended December 31, 2011. Cash used for financing activities for the
year ended December 31, 2012 also includes $3.1 million of offering costs related to our IPO.

Non-GAAP Financial Measures

We calculate FFO in accordance with the standards established by NAREIT. NAREIT defines FFO as net

income (loss) (calculated in accordance with GAAP), excluding gains (or losses) from sales of depreciable
operating property, real estate related depreciation and amortization (excluding amortization of deferred
financing costs) and after adjustments for unconsolidated partnerships and joint ventures.

FFO is a supplemental non-GAAP financial measure. Management uses FFO as a supplemental

performance measure because it believes that FFO is beneficial to investors as a starting point in measuring our
operational performance. Specifically, in excluding real estate related depreciation and amortization and gains
and losses from property dispositions, which do not relate to or are not indicative of operating performance, FFO
provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental
rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs,
FFO will be used by investors as a basis to compare our operating performance with that of other REITs.

However, because FFO excludes depreciation and amortization and captures neither the changes in the value

of our properties that result from use or market conditions nor the level of capital expenditures and leasing
commissions necessary to maintain the operating performance of our properties, all of which have real economic
effects and could materially impact our results from operations, the utility of FFO as a measure of our
performance is limited. In addition, other equity REITs may not calculate FFO in accordance with the NAREIT

71

definition as we do, and, accordingly, our FFO may not be comparable to such other REITs’ FFO. Accordingly,
FFO should be considered only as a supplement to net income as a measure of our performance. FFO should not
be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our
ability to pay dividends or service indebtedness. FFO also should not be used as a supplement to or substitute for
cash flow from operating activities computed in accordance with GAAP.

The following table sets forth a reconciliation of FFO for each of the three years ended December 31, 2013

to net income, the most directly comparable GAAP equivalent:

Net income
Depreciation and amortization
Gain on acquisitions
Loss on disposal of real estate assets
Real estate joint ventures, net

Funds from operations

Years Ended December 31,

2013

2012

2011

$14,453
14,898
(9,460)
—
(85)

($ in thousands)
$ 8,897
12,909
—
—
80

$ 2,266
12,994
—
569
32

$19,806

$21,886

$15,861

Net income for the year ended December 31, 2013 includes debt extinguishment losses of $2.4 million, of

which $0.6 million was noncash. Net income for the year ended December 31, 2013 also includes noncash stock
compensation expense of $1.2 million and noncash impairment charges of $0.6 million.

Net income for the year ended December 31, 2011 includes debt extinguishment losses of $3.4 million, of

which $1.1 million was noncash.

Real estate joint ventures for each of the three years ended December 31, 2013 represents activity from
Bermuda Crossroads and Smith’s Landing, both of which were unconsolidated properties for periods prior to the
completion of our IPO and Formation Transactions on May 13, 2013.

Inflation

Substantially all of our office and retail leases provide for the recovery of increases in real estate taxes and
operating expenses. In addition, substantially all of the leases provide for annual rent increases. We believe that
inflationary increases may be offset in part by the contractual rent increases and expense escalations previously
described. In addition, our multifamily leases generally have lease terms ranging from 7 to 15 months with a
majority having 12-month lease terms allowing negotiation of rental rates at term end, which we believe reduces
our exposure to the effects of inflation.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The primary market risk to which we are exposed is interest rate risk. Our primary interest rate exposure is

daily LIBOR. We primarily use fixed interest rate financing to manage our exposure to fluctuations in interest
rates. On a limited basis, we also use derivative financial instruments to manage interest rate risk. We do not use
these derivatives for trading or other speculative purposes. We have not designated any of our derivatives as
hedges for accounting purposes.

At December 31, 2013, approximately $127.1 million, or 46%, of our debt had fixed interest rates and
approximately $150.7 million, or 54%, had variable interest rates. Assuming no increase in the level of our
variable rate debt, if interest rates increased by 1.0%, our cash flow would decrease by approximately
$1.5 million per year. At December 31, 2013, LIBOR was approximately 17 basis points. Assuming no increase
in the level of our variable rate debt, if LIBOR was reduced to 0 basis points, our cash flow would increase by
approximately $0.3 million per year.

72

Item 8.

Financial Statements and Supplementary Data

Our consolidated and combined financial statements and supplementary data are included as a separate
section of this Annual Report on Form 10-K commencing on page F-1 and are incorporated herein by reference.

Item 9.

Changes and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Disclosure Controls and Procedures

The Company’s management has evaluated, under the supervision and with the participation of the

Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)), as required by paragraph (b) of Rules 13a-15 and 15d-15 of the Exchange Act. Based on
this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that as of
December 31, 2013, the Company’s disclosure controls and procedures were effective to ensure that information
we are required to disclose in reports filed or submitted with the Securities and Exchange Commission (i) is
recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms and (ii) is accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding
disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

This Annual Report on Form 10-K does not include a report of management’s assessment regarding internal
control over financial reporting or an attestation report of the Company’s registered public accounting firm due to
a transition period established by rules of the SEC for newly public companies.

Attestation Report of Independent Registered Public Accounting Firm

Not applicable.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended December 31, 2013 that have
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial
reporting.

Item 9B. Other Information.

2013 Bonus Awards

On January 31, 2014, the compensation committee (the “Compensation Committee”) of our board of
directors approved the following annual cash and stock bonus awards for 2013 (the “2013 Bonus Awards”) for
our named executive officers and chief financial officer (the “Officers”):

Name and Principal Position

2013 Cash Bonus

2013 Stock Bonus

Louis S. Haddad—President and Chief Executive Officer
Anthony P. Nero—President of Development
Eric E. Apperson—President of Construction
Michael P. O’Hara—Chief Financial Officer

$120,000
75,000
75,000
60,000

$120,000
75,000
75,000
60,000

73

The 2013 Bonus Awards, which were in the sole discretion of the Compensation Committee, were based on
the Compensation Committee’s assessment of the performance of the Officers in 2013, including, but not limited
to, successfully managing our portfolio, the continued execution of our development pipeline and the successful
transition from a private company to a public company as a result of our initial public offering. The bonus
amounts approved by the Compensation Committee are consistent with the expected bonus payments set forth in
the prospectus related to the Company’s initial public offering. The stock portion of the 2013 Bonus Awards
were in the form of restricted shares of common stock and were made on March 3, 2014. One-third of the grant
vested on the grant date, while the remaining two-thirds will vest in equal amounts on the first two anniversaries
of the grant date.

Each of the stock awards was granted under our 2013 Equity Incentive Plan and are evidenced by an

executive stock award agreement, substantially in the form previously approved by the Compensation Committee
and filed as Exhibit 10.3 to this Annual Report on Form 10-K.

2014 Short-Term Incentive Program

On March 19, 2014, the board of directors, upon the recommendation of the Compensation Committee,

adopted a short-term incentive program for 2014 (the “2014 STIP”) and set the specific performance goals and
business criteria for the awards under the 2014 STIP. The intent of the performance goals and business criteria of
the 2014 STIP is to align the interests of our executive management team with the interests of our stockholders.
To be eligible to receive an award under the 2014 STIP, the officer must be employed by the Company on the
last day of the performance period, which ends on December 31, 2014. Awards under the 2014 STIP will be paid
50% in cash and 50% in shares of common stock.

Award determinations under the 2014 STIP are based on both pre-defined quantitative factors as well as
qualitative factors, the achievement of which will be determined by the Compensation Committee in its sole
discretion. With respect to Louis Haddad, our President and Chief Executive Officer, Michael O’Hara, our Chief
Financial Officer, and Anthony Nero, our President of Development, 40% of the quantitative goal is based on the
Company achieving certain threshold, target and maximum levels of FFO and the remaining 60% of the
quantitative goal is based on the Company achieving certain threshold, target and maximum levels of FFO per
common stock equivalent. For Eric Apperson, our President of Construction, 50% of the quantitative goal is
based the Company achieving certain threshold, target and maximum levels of gross profit relating to our third-
party construction business, 20% is based on the Company achieving certain threshold, target and maximum
levels of FFO and the remaining 30% of the quantitative goal is based on the Company achieving certain
threshold, target and maximum levels of FFO per common stock equivalent.

For purposes of the 2014 STIP:

•

•

FFO is defined as Funds From Operations as defined by NAREIT with further adjustments to exclude
one-time and extraordinary non-recurring items such as refinance costs, defeasance costs and
acquisition costs, as well as the impact of restricted stock grants;

FFO per common stock equivalent includes both common stock and OP Units in the Operating
Partnership; and

• Gross profit relating to our third-party construction business is determined by the contribution of our

third-party construction projects to GAAP net income.

74

Under the 2014 STIP, the performance payout thresholds for Messrs. Haddad, O’Hara, Nero and Apperson

were set as follows:

Name

Louis Haddad
Michael O’Hara
Anthony Nero
Eric Apperson

Threshold

Target

Maximum

$180,000
78,000
104,000
104,000

$240,000
120,000
160,000
160,000

$300,000
150,000
200,000
200,000

Item 10. Directors, Executive Officers and Corporate Governance.

PART III

This information is incorporated by reference from the Company’s Proxy Statement with respect to the 2014

Annual Meeting of Stockholders to be filed with the SEC no later than April 30, 2014.

Item 11. Executive Compensation.

This information is incorporated by reference from the Company’s Proxy Statement with respect to the 2014

Annual Meeting of Stockholders to be filed with the SEC no later than April 30, 2014.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters.

This information is incorporated by reference from the Company’s Proxy Statement with respect to the 2014

Annual Meeting of Stockholders to be filed with the SEC no later than April 30, 2014.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

This information is incorporated by reference from the Company’s Proxy Statement with respect to the 2014

Annual Meeting of Stockholders to be filed with the SEC no later than April 30, 2014.

Item 14. Principal Accountant Fees and Services.

This information is incorporated by reference from the Company’s Proxy Statement with respect to the 2014

Annual Meeting of Stockholders to be filed with the SEC no later than April 30, 2014.

75

Item 15. Exhibits and Financial Statement Schedules.

The following is a list of documents filed as a part of this report:

PART IV

(1)

Financial Statements

Included herein at pages F-1 through F-31.

(2)

Financial Statement Schedules

The following financial statement schedule is included herein at pages F-32 through F-33:

Schedule III—Consolidated Real Estate Investments and Accumulated Depreciation

All other schedules for which provision is made in Regulation S-X are either not required to be included
herein under the related instructions, are inapplicable or the related information is included in the footnotes to the
applicable financial statement and, therefore, have been omitted.

(3)

Exhibits

The exhibits required to be filed by Item 601 of Regulation S-K are listed in the Exhibit Index.

76

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 31, 2014

ARMADA HOFFLER PROPERTIES, INC.

By: /s/ Louis S. Haddad

Louis S. Haddad
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Daniel A. Hoffler

Daniel A. Hoffler

/s/ A. Russell Kirk

A. Russell Kirk

/s/ Louis S. Haddad

Louis S. Haddad

/s/ Michael P. O’Hara

Michael P. O’Hara

/s/ George F. Allen

George F. Allen

/s/ James A. Carroll

James A. Carroll

/s/ James C. Cherry

James C. Cherry

/s/ Joseph W. Prueher

Adm. Joseph W. Prueher (Ret.)

/s/ John W. Snow

John W. Snow

Executive Chairman and Director

March 31, 2014

Vice Chairman and Director

March 31, 2014

President, Chief Executive Officer
and Director
(principal executive officer)

March 31, 2014

Chief Financial Officer
(principal financial officer and
principal accounting officer)

March 31, 2014

Director

March 31, 2014

Director

March 31, 2014

Director

March 31, 2014

Director

March 31, 2014

Director

March 31, 2014

77

ARMADA HOFFLER PROPERTIES, INC.

FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2013

ITEM 8, ITEM 15(A)(1) AND (2)

INDEX TO FINANCIAL STATEMENTS AND SCHEDULE

Report of Independent Registered Public Accounting Firm
Consolidated and Combined Balance Sheets as of December 31, 2013 and 2012
Consolidated and Combined Statements of Income for the Years Ended December 31, 2013, 2012

and 2011

Consolidated and Combined Statements of Equity for the Years Ended December 31, 2013, 2012

and 2011

Consolidated and Combined Statements of Cash Flows for the Years Ended December 31, 2013, 2012

and 2011

Notes to Consolidated and Combined Financial Statements
Schedule III—Consolidated Real Estate Investments and Accumulated Depreciation

F-2
F-3

F-4

F-5

F-6
F-8
F-35

F-1

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders of
Armada Hoffler Properties, Inc.

We have audited the accompanying consolidated and combined balance sheets of Armada Hoffler Properties,
Inc., as described in Note 1 (the “Company”), as of December 31, 2013 and 2012, and the related consolidated
and combined statements of income, equity, and cash flows for each of the three years in the period ended
December 31, 2013. Our audits also included the financial statement schedule listed in the Index at Item 15(2).
These financial statements and schedule are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. We were not engaged to perform an audit of
the Company’s internal control over financial reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
and combined financial position of Armada Hoffler Properties, Inc., as described in Note 1, at December 31,
2013 and 2012, and the consolidated and combined results of its operations and its cash flows for each of the
three years in the period ended December 31, 2013, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

Richmond, Virginia
March 31, 2014

F-2

ARMADA HOFFLER PROPERTIES, INC. AND PREDECESSOR
Consolidated and Combined Balance Sheets

(In Thousands, except par value and share data)

ASSETS

Real estate investments:

Income producing property
Held for development
Construction in progress

Accumulated depreciation

Net real estate investments

Cash and cash equivalents
Restricted cash
Accounts receivable, net
Construction receivables, including retentions
Construction contract costs and estimated earnings in excess of billings
Due from affiliates
Other assets

Total Assets

LIABILITIES AND EQUITY

Indebtedness:

Secured debt
Participating note

Accounts payable and accrued liabilities
Construction payables, including retentions
Billings in excess of construction contract costs and estimated earnings
Due to affiliates
Other liabilities

Total Liabilities

Stockholders’ equity:
Common stock, $0.01 par value, 500,000,000 shares authorized, 19,163,413 shares

issued and outstanding as of December 31, 2013

Additional paid-in capital
Distributions in excess of earnings
Predecessor deficit

Total stockholders’ and predecessor deficit
Noncontrolling interests

Total Equity

Total Liabilities and Equity

DECEMBER 31,

2013

2012

$ 406,239
—
56,737

$350,814
3,926
—

462,976
(105,228)

354,740
(92,454)

357,748
18,882
2,160
18,272
12,633
1,178
—
24,409

262,286
9,400
3,725
17,423
10,490
1,206
5,719
21,564

$ 435,282 $331,813

$ 277,745
—
6,463
28,139
1,541
—
15,873

$334,438
643
2,478
17,369
4,236
3,597
10,393

$ 329,761 $373,154

192
1,247
(47,934)
—

(46,495)
152,016

—
—
—
(41,341)

(41,341)
—

105,521

(41,341)

$ 435,282 $331,813

See Notes to Consolidated and Combined Financial Statements.

F-3

ARMADA HOFFLER PROPERTIES, INC. AND PREDECESSOR
Consolidated and Combined Statements of Income

(In Thousands, except per share data)

Revenues

Rental revenues
General contracting and real estate services revenues

Total revenues

Expenses

Rental expenses
Real estate taxes
General contracting and real estate services expenses
Depreciation and amortization
General and administrative expenses
Impairment charges

Total expenses

Operating income
Interest expense
Loss on extinguishment of debt
Gain on acquisitions
Other income

Income before taxes
Income tax provision

Income from continuing operations
Discontinued operations:

Loss from discontinued operations
Gain (loss) on sale of real estate

Results from discontinued operations

Net income

Net income attributable to predecessor
Net income attributable to noncontrolling interests

Net income attributable to stockholders

Net income per share and unit:

Basic and diluted

Weighted-average outstanding:

Common shares
Common units

Basic and diluted

YEARS ENDED DECEMBER 31,

2013

2012

2011

$ 57,520
82,516

$ 54,436
54,046

$ 52,578
77,602

140,036

108,482

130,180

14,025
5,124
78,813
14,898
6,937
580

12,682
4,865
50,103
12,909
3,232
—

12,568
4,781
72,138
12,994
3,728
—

120,377

83,791

106,209

19,659
(12,303)
(2,387)
9,460
297

14,726
(273)

14,453

—
—

—

24,691
(16,561)
—
—
777

8,907
—

8,907

(35)
25

(10)

23,971
(18,134)
(3,448)
—
258

2,647
—

2,647

(318)
(63)

(381)

14,453

$

8,897

$

2,266

$

$

(2,020)
(5,097)

7,336

0.39

19,046
13,059

32,105

See Notes to Consolidated and Combined Financial Statements.

F-4

ARMADA HOFFLER PROPERTIES, INC. AND PREDECESSOR
Consolidated and Combined Statements of Equity

(In Thousands, except share data)

Shares of
common
stock

Common
stock

Additional
paid-
in capital

Distributions
in excess of
earnings

Predecessor
deficit

Total
stockholders’
and
predecessor
deficit

Noncontrolling
interests

Total
Equity

Predecessor
Balance, January 1, 2011
Net income
Contributions
Distributions

Balance, December 31, 2011
Net income
Contributions
Distributions

Balance, December 31, 2012
Net income
Contributions
Distributions

Balance, May 12, 2013
Armada Hoffler

Properties, Inc.

Net proceeds from sale of

common stock

Formation transactions
Restricted stock award grants
Restricted stock award

forfeitures

Vesting of restricted stock

awards
Net income
Dividends declared

— $ — $
—
—
—

—
—
—

— $ — $
—
—
—

—
—
—

— $ — $
—
—
—

—
—
—

— $ — $(23,545) $ (23,545)
2,266
—
11,117
—
(27,237)
—

2,266
11,117
(27,237)

—
—
—

— $ — $(37,399) $ (37,399)
8,897
—
1,655
—
(14,494)
—

8,897
1,655
(14,494)

—
—
—

— $ — $(41,341) $ (41,341)
2,020
—
2,218
—
(12,399)
—

2,020
2,218
(12,399)

—
—
—

$ — $ (23,545)
2,266
11,117
(27,237)

—
—
—

$ — $ (37,399)
8,897
1,655
(14,494)

—
—
—

$ — $ (41,341)
2,020
2,218
(12,399)

—
—
—

— $ — $

— $ — $(49,502) $ (49,502)

$ — $ (49,502)

19,003,750
—
160,540

190
—
2

191,993
(191,993)
(2)

—
(47,605)
—

—
49,502
—

(877) —

—

—

—
—
—

—
—
—

1,249
—
—

—
7,336
(7,665)

—

—
—
—

192,183
(190,096)

—

152,142

—

—

—

—

192,183
(37,954)
—

—

1,249
7,336
(7,665)

—
5,097
(5,223)

1,249
12,433
(12,888)

Balance, December 31, 2013

19,163,413

$ 192

$

1,247

$(47,934) $ — $ (46,495)

$152,016

$105,521

See Notes to Consolidated and Combined Financial Statements.

F-5

ARMADA HOFFLER PROPERTIES, INC. AND PREDECESSOR
Consolidated and Combined Statements of Cash Flows

(In Thousands)

OPERATING ACTIVITIES
Net income
Results from discontinued operations

Income from continuing operations
Adjustments to reconcile net income to net cash provided by operating

activities:

Depreciation of buildings and tenant improvements
Amortization of deferred leasing costs and in-place lease intangibles
Accrued straight-line rental revenue
Amortization of lease incentives and above or below-market rents
Accrued straight-line ground rent expense
Bad debt expense
Noncash stock compensation
Impairment charges
Noncash interest expense
Noncash loss on extinguishment of debt
Gain on acquisitions
Change in the fair value of derivatives
Income from real estate joint ventures
Loss on disposal of real estate assets

Changes in operating assets and liabilities, net of acquisitions:

Property assets
Property liabilities
Construction assets
Construction liabilities

Net cash provided by continuing operations
Net cash used for discontinued operations

Net cash provided by operating activities

INVESTING ACTIVITIES
Development of real estate investments
Tenant and building improvements
Acquisitions of real estate investments, net of cash acquired
Government development grants
Decrease in restricted cash
Contributions to real estate joint ventures
Return of capital from real estate joint ventures
Deferred leasing costs
Leasing incentives

Net cash used for continuing operations
Net cash provided by discontinued operations

Net cash used for investing activities

F-6

YEARS ENDED DECEMBER 31,

2013

2012

2011

$ 14,453
—

$ 8,897 $ 2,266
381

10

14,453

8,907

2,647

12,806
2,092
(1,055)
683
364
162
1,249
580
636
644
(9,460)
12
(210)
—

7,761
(2,836)
(2,115)
(3,591)

22,175
—

22,175

(41,298)
(3,920)
(2,106)
300
93
(81)
511
(1,180)
(266)

(47,947)
—

11,601
1,308
(2,158)
755
333
305
—
—
615
—
—
(408)
(261)
—

(991)
2,404
2,170
(2,220)

22,360
(34)

11,708
1,286
(2,370)
663
312
140
—
—
896
1,083
—
(436)
(309)
569

8,196
(1,168)
7,694
(7,575)

23,336
(153)

22,326

23,183

(2,665)
(2,307)
—
400
184
—
405
(741)
(475)

(5,199)
497

(3,576)
(3,801)
—
750
1,517
—
580
(1,973)
(1,956)

(8,459)
2,461

(47,947)

(4,702)

(5,998)

FINANCING ACTIVITIES
Proceeds from sale of common stock
Offering costs
Formation transactions
Debt issuances and credit facility borrowings
Debt and credit facility payments, including principal amortization
Debt issuance costs
Predecessor contributions
Predecessor distributions
Common stock dividends and common unit distributions

Net cash provided by (used for) continuing operations
Net cash used for discontinued operations

Net cash provided by (used for) financing activities

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Supplemental cash flow information:
Cash paid for interest
Noncash contributions
(Decrease) increase in distributions payable

203,245
(7,937)
(47,450)
106,054
(197,478)
(2,738)
2,218
(12,927)
(7,733)

35,254
—

—
(3,125)
—
30,612
(35,093)
(931)
1,655
(14,791)
—

(21,673)
—

—
—
—
69,049
(63,698)
(943)
11,058
(26,412)
—

(10,946)
(1,225)

35,254

(21,673)

(12,171)

9,482
9,400

(4,049)
13,449

5,014
8,435

$ 18,882

$ 9,400

$ 13,449

$ 12,617
$
$

$ 16,161 $ 17,366
59
825

— $ — $
(297) $
(528) $

See Notes to Consolidated and Combined Financial Statements.

F-7

ARMADA HOFFLER PROPERTIES, INC. AND PREDECESSOR
Notes to Consolidated and Combined Financial Statements

1. Business and 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 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 (the “IPO”) and certain related formation transactions
(the “Formation Transactions”) on May 13, 2013.

Armada Hoffler Properties, Inc. Predecessor (the “Predecessor”) was not a single legal entity, but rather a
combination of real estate and construction entities. The entities comprising the Predecessor included: (i) the
property development and asset management businesses of Armada Hoffler Holding Company, Inc. (“AH
Holding”), (ii) the general commercial construction businesses of Armada Hoffler Construction Company
and Armada Hoffler Construction Company of Virginia (collectively, “AH Construction”), (iii) controlling
interests in entities that owned 22 properties (seven office, 14 retail and one multifamily), (iv) controlling
interests in entities that undertook the development of six properties (two office, two retail and two
multifamily, collectively, the “Development Pipeline”) and (v) noncontrolling interests in entities that
owned one retail property and one multifamily property (collectively, the “Noncontrolled Entities”). AH
Holding, AH Construction, the controlling interests in the 22 real estate properties and the controlling
interests in the Development Pipeline are referred to as the Controlled Entities. The Controlled Entities were
under common ownership by their individual partners, members and stockholders and under common
control of Daniel A. Hoffler prior to the IPO and the Formation Transactions. Mr. Hoffler had the ability to
control each of the Controlled Entities as the primary beneficiary, the majority vote holder or through his
interest as a general partner or managing member. The financial position and results of operations of the
Controlled Entities have been combined in the Predecessor financial statements for the periods prior to the
completion of the IPO and the Formation Transactions. The Predecessor accounted for its investments in the
Noncontrolled Entities under the equity method of accounting.

Controlled Entities (Combined by the Predecessor)

Office Properties

Armada Hoffler Tower
Richmond Tower
One Columbus
Two Columbus
Oyster Point
Virginia Natural Gas
Sentara Williamsburg

Retail Properties

249 Central Park Retail
South Retail
Studio 56 Retail
Commerce Street Retail
Fountain Plaza Retail
Dick’s at Town Center

F-8

Location

Virginia Beach, VA
Richmond, VA
Virginia Beach, VA
Virginia Beach, VA
Newport News, VA
Virginia Beach, VA
Williamsburg, VA

Location

Virginia Beach, VA
Virginia Beach, VA
Virginia Beach, VA
Virginia Beach, VA
Virginia Beach, VA
Virginia Beach, VA

Broad Creek Shopping Center
North Point Center
Hanbury Village
Gainsborough Square
Parkway Marketplace
Harrisonburg Regal
Courthouse 7-Eleven
Tyre Neck Harris Teeter

Multifamily Property

The Cosmopolitan

Development Pipeline

4525 Main Street(1)
Encore Apartments(2)
Whetstone Apartments(3)
Sandbridge Commons
Brooks Crossing
Greentree Shopping Center

Norfolk, VA
Durham, NC
Chesapeake, VA
Chesapeake, VA
Virginia Beach, VA
Harrisonburg, VA
Virginia Beach, VA
Portsmouth, VA

Location

Virginia Beach, VA

Location

Virginia Beach, VA
Virginia Beach, VA
Durham, NC
Virginia Beach, VA
Newport News, VA
Chesapeake, VA

(1) Previously referred to as Main Street Office.
(2) Previously referred to as Main Street Apartments.
(3) Previously referred to as Jackson Street Apartments.

General Contracting and Real Estate Services

AH Holding

AH Construction

Noncontrolled Entities (Equity method accounting by the Predecessor)

Retail Property

Bermuda Crossroads

Multifamily Property

Smith’s Landing

Location

Chester, VA

Location

Blacksburg, VA

Initial Public Offering and Formation Transactions

On May 13, 2013, the Company completed the IPO of 16,525,000 shares of common stock priced at $11.50
per share. On May 22, 2013, the underwriters of the IPO exercised their overallotment option in full to
purchase an additional 2,478,750 shares at the IPO price of $11.50 per share. Proceeds from the IPO to the
Company after deducting the underwriting discount and related offering costs were $192.0 million. The
common stock is listed on the New York Stock Exchange under the symbol “AHH” and began trading on
May 8, 2013. The Company contributed the net proceeds from the IPO to the Operating Partnership in
exchange for common units in the Operating Partnership. The Operating Partnership repaid $150.0 million
of outstanding indebtedness with net proceeds from the IPO and paid $47.6 million as partial consideration
to prior investors in connection with the Formation Transactions.

On May 13, 2013, the Operating Partnership, as borrower, and the Company, as parent guarantor, entered
into a $100.0 million senior secured revolving credit facility. Upon completion of the IPO, the Operating
Partnership borrowed $40.0 million under the revolving credit facility to fund a portion of the consideration
payable in connection with the completion of the Formation Transactions, repay existing lines of credit and

F-9

certain debt relating to the projects in the Development Pipeline and repay existing indebtedness relating to
certain properties acquired in connection with the Formation Transactions.

Pursuant to the Formation Transactions, the Operating Partnership: (i) acquired 100% of the interests in the
Controlled Entities and the Noncontrolled Entities, (ii) succeeded to the ongoing construction and
development businesses of AH Holding and AH Construction, (iii) assumed asset management of certain of
the properties acquired from the Predecessor, (iv) succeeded to the third party asset management business of
AH Holding, (v) succeeded to the projects in the Development Pipeline, (vi) received options to acquire
nine parcels of developable land from the Predecessor and (vii) entered into a contribution agreement to
acquire Liberty Apartments, a 197-unit multifamily property located in Newport News, Virginia, upon
satisfaction of certain conditions and transferability restrictions including completion of the project’s
construction by AH Construction. The Operating Partnership completed the acquisition of Liberty
Apartments on January 17, 2014.

The Company accounted for the contribution or acquisition of interests in the Controlled Entities as
transactions among entities under common control because Mr. Hoffler had the ability to control each of the
Controlled Entities as previously described. As a result, the contribution or acquisition of interests in each of
the Controlled Entities was accounted for at the Predecessor’s historical cost. The acquisitions of interests in
the Noncontrolled Entities were accounted for as purchases at fair value under the acquisition method of
accounting.

Because of the timing of the IPO and the Formation Transactions, the financial condition as of
December 31, 2012 and results of operations for the years ended December 31, 2012 and 2011 reflect those
of the Predecessor. The results of operations for the year ended December 31, 2013 reflect those of the
Predecessor together with the Company, while the financial condition as of December 31, 2013 reflects
solely that of the Company. References to “Armada Hoffler” in these notes to consolidated and combined
financial statements signify the Company for the period after the completion of the IPO and the Formation
Transactions on May 13, 2013 and the Predecessor for all prior periods.

2.

Significant Accounting Policies

Basis of Presentation

The accompanying consolidated and combined financial statements were prepared in accordance with
accounting principles generally accepted in the United States (“GAAP”).

The consolidated financial statements include the financial position and results of operations of the
Company, the Operating Partnership and its wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.

The financial position and results of operations of the entities comprising the Predecessor have been
combined because they were under common ownership by their individual partners, members and
stockholders and under common control of Mr. Hoffler. All significant intercompany transactions and
balances have been eliminated in combination.

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.

Segments

Segment information is prepared on the same basis that management reviews information for operational
decision-making purposes. Management evaluates the performance of each of Armada Hoffler’s properties

F-10

individually and aggregates such properties into segments based on their economic characteristics and
classes of tenants. Armada Hoffler operates in four business segments: (i) office real estate, (ii) retail real
estate, (iii) multifamily residential real estate and (iv) general contracting and real estate services. Armada
Hoffler’s general contracting and real estate services business develops and builds properties for its own
account and also provides construction and development services to both related and third parties.

Revenue Recognition

Rental Revenues

Armada Hoffler leases its properties under operating leases and recognizes base rents when earned on a
straight-line basis over the lease term. Armada Hoffler begins recognizing rental revenue when the tenant
has the right to take possession of or controls the physical use of the property under lease. Armada Hoffler
recognizes contingent rental revenue (e.g., percentage rents based on tenant sales) when changes in the
factors on which the contingent lease payments are based actually occur. Armada Hoffler recognizes lease
incentives as reductions to rental revenue on a straight-line basis over the lease term. Armada Hoffler
recognizes cost reimbursement revenue for real estate taxes, operating expenses and common area
maintenance costs on an accrual basis during the periods in which the expenses are incurred. Armada
Hoffler recognizes lease termination fees either upon termination or evenly over any remaining lease term.

General Contracting and Real Estate Services Revenues

Armada Hoffler recognizes general contracting revenue on construction contracts using the percentage-of-
completion method. Under this method, Armada Hoffler recognizes revenue and an estimated profit as
construction contract costs are incurred based on the proportion of incurred costs to total estimated
construction contract costs at completion. Construction contract costs include all direct material, labor and
subcontract costs as well as any indirect costs related to contract performance. Provisions for estimated
losses on uncompleted contracts are recognized immediately in the period in which such losses are
determined. Changes in job performance, job conditions and estimated profitability, including those arising
from contract penalty provisions and final contract settlements, may result in revisions to costs and income
and are recognized in the period in which they are determined. Profit incentives are included in revenues
when their realization is probable and when they can be reasonably estimated.

Armada Hoffler recognizes real estate services revenues from property development and management when
realized and earned, generally as such services are provided.

Real Estate Investments

Income producing property primarily includes land, buildings and tenant improvements and is stated at cost.
Real estate investments held for development include land and capitalized development costs. Armada
Hoffler reclassifies real estate investments held for development to construction in progress upon
commencement of construction. Construction in progress is stated at cost. Direct and certain indirect costs
clearly associated with the development, redevelopment, construction, leasing or expansion of real estate
assets are capitalized as a cost of the property. Repairs and maintenance costs are expensed as incurred.

Armada Hoffler capitalizes direct and indirect project costs associated with the initial construction of a
property until the property is substantially complete and ready for its intended use. Capitalized project costs
include preacquisition development and preconstruction costs including salaries and related costs of
personnel directly involved, real estate taxes, insurance, utilities, ground rent and interest. Interest
capitalized during the year ended December 31, 2013 was $0.6 million. Interest capitalized during the years
ended December 31, 2012 and 2011 was not significant. Preacquisition development and preconstruction
costs, including salaries and related personnel costs, capitalized during each of the three years ended
December 31, 2013 were $1.6 million, $0.4 million and $1.3 million, respectively.

F-11

Armada Hoffler capitalizes preacquisition development costs directly identifiable with specific properties
when the acquisition of such properties is probable. Capitalized preacquisition development costs are
presented within other assets in the consolidated and combined balance sheets. Costs attributable to
unsuccessful projects are expensed.

Armada Hoffler recognizes real estate development grants from state and local governments as reductions to
the carrying amounts of the related real estate investments when any attached conditions are satisfied and
when there is reasonable assurance that the grant will be received.

Income producing property is depreciated on a straight-line basis over the following estimated useful lives:

Buildings
Capital improvements
Equipment
Tenant improvements

39 years
15—20 years
5—15 years
Term of the related lease
(or estimated useful life, if shorter)

Impairment of Long Lived Assets

Armada Hoffler evaluates its real estate assets for impairment on a property by property basis whenever
events or changes in circumstances indicate that their carrying amounts may not be recoverable. If such an
evaluation is necessary, Armada Hoffler compares the carrying amount of any such real estate asset with the
undiscounted expected future cash flows that are directly associated with, and that are expected to arise as a
direct result of, its use and eventual disposition. If the carrying amount of a real estate asset exceeds the
associated estimate of undiscounted expected future cash flows, an impairment loss is recognized to reduce
the real estate asset’s carrying value to its fair value.

Real estate assets classified as held for sale are reported at the lower of their carrying value or their fair
value, less estimated costs to sell. Once a property is designated as held for sale, it is no longer depreciated.
A property is classified as held for sale when: (i) senior management commits to a plan to sell the property,
(ii) the sale is expected to be completed within one year under terms usual and customary for such sales and
(iii) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will
be made or that the plan will be withdrawn.

Cash and Cash Equivalents

Cash and cash equivalents include demand deposits, investments in money market funds and investments
with an original maturity of three months or less.

Restricted Cash

Restricted cash represents amounts held by lenders for real estate taxes, insurance and reserves for capital
improvements. Armada Hoffler presents changes in cash restricted for real estate taxes and insurance as
operating activities in the consolidated and combined statements of cash flows. Armada Hoffler presents
changes in cash restricted for capital improvements as investing activities in the consolidated and combined
statements of cash flows.

Accounts Receivable, net

Accounts receivable include amounts from tenants for base rents, contingent rents and cost reimbursements
as well as accrued straight-line rental revenue.

F-12

Armada Hoffler’s evaluation of the collectability of accounts receivable and the adequacy of the allowance
for doubtful accounts is based primarily upon evaluations of individual receivables, current economic
conditions, historical experience and other relevant factors. Armada Hoffler establishes reserves for tenant
receivables outstanding over 90 days. For all such tenants, Armada Hoffler also reserves any related accrued
straight-line rental revenue. Additional reserves are recorded for more current amounts, as applicable, when
Armada Hoffler has determined collectability to be doubtful. Armada Hoffler presents bad debt expense
within rental expenses in the consolidated and combined statements of income. The extended collection
period for accrued straight-line rental revenue along with Armada Hoffler’s evaluation of tenant credit risk
may result in the nonrecognition of all or a portion of straight-line rental revenue until the collection of such
revenue is reasonably assured.

Deferred Leasing Costs

Commissions paid by Armada Hoffler to third parties to originate a lease are deferred and amortized as
depreciation and amortization expense on a straight-line basis over the term of the related lease. Deferred
leasing costs are presented within other assets in the consolidated and combined balance sheets.

Lease Incentives

Incentives paid by Armada Hoffler to tenants are deferred and amortized as reductions to rental revenues on
a straight-line basis over the term of the related lease. Lease incentives are presented within other assets in
the consolidated and combined balance sheets.

Acquired Lease Intangibles

Acquired lease intangibles are presented within other assets and other liabilities in the consolidated balance
sheet. The Company amortizes in-place lease assets as depreciation and amortization expense on a straight-
line basis over the remaining term of the underlying leases. The Company amortizes above-market lease
assets as reductions to rental revenues on a straight-line basis over the remaining term of the underlying
leases. The Company amortizes below-market lease liabilities as increases to rental revenues on a straight-
line basis over the remaining term of the underlying leases. The Company amortizes below-market ground
lease assets as increases to rental expenses on a straight-line basis over the remaining term of the underlying
leases.

Debt Issuance Costs

Financing costs are deferred and amortized as interest expense using the effective interest method over the
term of the related debt. Debt issuance costs are presented within other assets in the consolidated and
combined balance sheets.

Derivative Financial Instruments

Armada Hoffler may enter into interest rate derivatives to manage exposure to interest rate risks. Armada
Hoffler does not use derivative financial instruments for trading or speculative purposes. Armada Hoffler
recognizes derivative financial instruments at fair value and presents them within other assets and liabilities
in the consolidated and combined balance sheets. Presentation of gains (losses) resulting from changes in
the fair value of derivatives depend on their designation and qualification for hedge accounting. Armada
Hoffler has not designated any of its derivative instruments as hedges for accounting purposes. As a result,
changes in the fair value of derivatives are recognized currently within other income (expense) in the
consolidated and combined statements of income.

F-13

Stock Based Compensation

The Company measures the compensation cost of restricted stock awards based on the grant date fair value.
The Company recognizes compensation cost for the vesting of restricted stock awards using the accelerated
attribution method and presents stock-based compensation within general and administrative expenses in the
consolidated and combined statement of income.

Income Taxes

The Company will elect to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax
purposes commencing with the taxable year ended December 31, 2013. To qualify as a REIT for federal
income tax purposes, the Company must meet certain organizational and operational requirements,
including a requirement to pay distributions to our stockholders of at least 90% of our annual taxable
income, excluding net capital gains. As a REIT, the Company generally is not subject to income tax on net
income distributed as dividends to stockholders. The Company is subject to state and local income taxes in
some jurisdictions and, in certain circumstances, may also be subject to federal excise taxes on undistributed
income. In addition, certain of the Company’s activities must be conducted by subsidiaries which elect to be
treated as a taxable REIT subsidiary (“TRS”), which is subject to both federal and state income taxes. The
Operating Partnership conducts its development and construction businesses through the TRS. The related
income tax provision or benefit attributable to the profits or losses of the TRS and any taxable income of the
Company is reflected in the consolidated and combined financial statements.

The Predecessor was comprised primarily of limited partnerships and limited liability companies. AH
Holding and the entities comprising AH Construction were organized as S-corporations. Under applicable
federal and state income tax rules, the allocated share of net income or loss from the limited partnerships,
limited liability companies and S-corporations flows through to the respective partners, members and
shareholders. For periods prior to the completion of the IPO and the Formation Transactions on May 13,
2013, no provision was made for U.S. federal, state or local income taxes because profits and losses of the
Predecessor flowed through to its respective partners, members and shareholders who were individually
responsible for reporting such amounts.

The Company uses the liability method of accounting for deferred income tax in accordance with GAAP.
Under this method, deferred tax assets and liabilities are recognized for the future tax consequences
attributable to temporary differences between the carrying value of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using the statutory rates expected to be
applied in the periods in which those temporary differences are settled. The effect of a change in tax rates on
deferred tax assets and liabilities is recognized in the period of the change. A valuation allowance is
recorded on the Company’s deferred tax assets when it is more likely than not that such assets will not be
realized. When evaluating the realizability of the Company’s deferred tax assets, all evidence, both positive
and negative is evaluated. Items considered in this analysis include the ability to carryback losses, the
reversal of temporary differences, tax planning strategies and expectations of future earnings.

Under GAAP, the amount of tax benefit to be recognized is the amount of benefit that is more likely than
not to be sustained upon examination. Management analyzes its tax filing positions in the U.S. federal, state
and local jurisdictions where it is required to file income tax returns for all open tax years. If, based on this
analysis, management determines that uncertainties in tax positions exist, a liability is established. The
Company recognizes accrued interest and penalties related to unrecognized tax positions in the provision for
income taxes. If recognized, the entire amount of unrecognized tax positions would be recorded as a
reduction to the provision for income taxes.

Discontinued Operations

Armada Hoffler presents properties held for sale as discontinued operations only when Armada Hoffler will
not have any significant continuing involvement in the properties’ operations after their disposition and

F-14

when the properties’ operations and cash flows: (i) can be clearly distinguished and (ii) will be eliminated
from Armada Hoffler’s ongoing operations upon disposition.

Net Income Per Share and Unit

The Company calculates net income per share and unit based upon the weighted average shares and units
outstanding during the period beginning May 13, 2013. Diluted net income per share and unit is calculated
after giving effect to all significant potential dilutive shares outstanding during the period. There were no
significant potential dilutive shares or units outstanding during the period May 13, 2013 through
December 31, 2013. As a result, basic and diluted outstanding shares and units were the same.

Other Comprehensive Income

Armada Hoffler had no items of other comprehensive income in any of the three years ended December 31,
2013.

Emerging Growth Company Status

The Company qualifies as an emerging growth company (“EGC”) pursuant to the Jumpstart Our Business
Startups Act. An EGC may choose to take advantage of the extended private company transition period
provided for complying with new or revised accounting standards that may be issued by the Financial
Accounting Standards Board or the U.S. Securities and Exchange Commission (the “SEC”). The Company
has elected to opt out of such extended transition period. This election is irrevocable.

3.

Segments

Net operating income (segment revenues minus segment expenses) is the measure used by Armada
Hoffler’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. Armada Hoffler 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 Armada Hoffler’s real estate and construction businesses.

F-15

Net operating income of Armada Hoffler’s reportable segments for each of the three years ended
December 31, 2013 was as follows (in thousands):

Office real estate
Rental revenues
Property expenses

Segment net operating income

Retail real estate
Rental revenues
Property expenses

Segment net operating income

Multifamily residential real estate
Rental revenues
Property expenses

Segment net operating income

General contracting and real estate services
Segment revenues
Segment expenses

Segment net operating income

Other

Net operating income

Years Ended December 31,

2013

2012

2011

$25,794
7,892

$25,815
7,668

$24,680
8,001

17,902

18,147

16,679

21,755
6,779

14,976

9,971
4,478

5,493

82,516
78,813

3,703

—

21,164
6,629

14,535

7,457
3,176

4,281

54,046
50,103

3,943

20,105
5,779

14,326

7,793
3,498

4,295

77,602
72,138

5,464

(74)

(71)

$42,074

$40,832

$40,693

General contracting and real estate services segment revenues for each of the three years ended
December 31, 2013 exclude revenue related to intercompany construction contracts of $35.7 million,
$1.4 million and $5.6 million, respectively. General contracting and real estate services segment expenses
for each of the three years ended December 31, 2013 exclude expenses related to intercompany construction
contracts of $35.4 million, $1.3 million and $5.5 million, respectively.

The following table reconciles net operating income to net income for each of the three years ended
December 31, 2013 (in thousands):

Net operating income
Depreciation and amortization
General and administrative expenses
Impairment charges
Interest expense
Loss on extinguishment of debt
Gain on acquisitions
Other income
Results from discontinued operations
Income tax provision

Net income

Years Ended December 31,

2013

2012

2011

$ 42,074
(14,898)
(6,937)
(580)
(12,303)
(2,387)
9,460
297
—
(273)

$ 40,832
(12,909)
(3,232)
—
(16,561)
—
—
777
(10)
—

$ 40,693
(12,994)
(3,728)
—
(18,134)
(3,448)
—
258
(381)
—

$ 14,453

$ 8,897

$ 2,266

General and administrative expenses represent costs not directly associated with the operation and
management of Armada Hoffler’s real estate properties and general contracting business. General and

F-16

administrative expenses include office personnel salaries and benefits, bank fees, accounting fees, legal fees
and other corporate office expenses. General and administrative expenses for the year ended December 31,
2013 include noncash stock compensation of $1.2 million.

During the year ended December 31, 2013, Armada Hoffler recognized $0.6 million of impairment charges
representing unamortized leasing assets related to three vacated retail tenants.

Rental revenues of Armada Hoffler’s reportable segments for each of the three years ended December 31,
2013 comprised the following (in thousands):

Minimum rents
Office
Retail
Multifamily

Percentage rents(1)
Office
Retail
Multifamily

Other(2)

Office
Retail
Multifamily

Rental revenues

Years Ended December 31,

2013

2012

2011

$24,415
18,473
8,364

$24,101
17,753
6,259

$23,324
16,930
6,662

104
121
105

1,275
3,161
1,502

109
121
103

1,605
3,290
1,095

107
129
161

1,249
3,046
970

$57,520

$54,436

$52,578

(1) Percentage rents are based on tenants’ sales.
(2) Other rental revenue includes cost reimbursements for real estate taxes, property insurance and

common area maintenance as well as termination fees.

Property expenses of Armada Hoffler’s reportable segments for each of the three years ended December 31,
2013 comprised the following (in thousands):

Rental expenses
Office
Retail
Multifamily
Other

Total

Real estate taxes
Office
Retail
Multifamily
Other

Total

Property expenses

Years Ended December 31,

2013

2012

2011

$ 5,721
4,808
3,496
—

$ 5,499
4,791
2,383
9

$ 5,849
3,940
2,771
8

14,025

12,682

12,568

2,171
1,971
982
—

5,124

2,169
1,838
793
65

4,865

2,152
1,839
727
63

4,781

$19,149

$17,547

$17,349

Rental expenses represent costs directly associated with the operation and management of Armada Hoffler’s
real estate properties. Rental expenses include asset management fees, property management fees, repairs
and maintenance, insurance and utilities.

F-17

4. Rental Revenues

Armada Hoffler’s rental revenues for each of the three years ended December 31, 2013 comprised the
following (in thousands):

Base rents
Percentage rents
Other

Rental revenues

Years ended December 31,

2013

2012

2011

$51,252
330
5,938

$48,113
333
5,990

$46,916
397
5,265

$57,520

$54,436

$52,578

Base rents include $1.1 million, $2.2 million and $2.4 million of straight-line revenue recognition for the
years ended December 31, 2013, 2012 and 2011, respectively. Minimum rents also include $(0.8) million,
$(0.8) million and $(0.7) million of lease incentive amortization for the years ended December 31, 2013,
2012 and 2011, respectively.

Percentage rents are based on tenants’ sales.

Other rental revenue includes cost reimbursements for real estate taxes, property insurance and common
area maintenance as well as termination fees.

5. Operating Leases

Armada Hoffler’s commercial tenant leases generally range from five to 20 years, but certain leases with
anchor tenants may be longer. Armada Hoffler’s commercial tenant leases provide for minimum rental
income during each of the next five years and thereafter as follows (in thousands):

2014
2015
2016
2017
2018
Thereafter

Total

$ 44,295
46,297
45,035
42,865
39,486
243,969

$461,947

Lease terms on multifamily apartment units generally range from seven to 15 months, with a majority
having 12-month lease terms. Apartment leases are not included in the preceding table as the remaining
terms as of December 31, 2013 are generally less than one year.

F-18

6. Real Estate Investments

Armada Hoffler’s real estate investments comprised the following as of December 31, 2013 and 2012 (in
thousands):

Land
Land improvements
Buildings and improvements
Development costs
Construction in progress

Accumulated depreciation

Net real estate investments

December 31,

2013

2012

$ 41,313
12,562
365,941
—
43,160

$ 24,511
11,543
316,596
2,090
—

462,976

354,740

(105,228)

(92,454)

$ 357,748

$262,286

In January 2013, Armada Hoffler began construction of 4525 Main Street and Encore Apartments in the
Virginia Beach Town Center. As of December 31, 2012, real estate investments held for development
included $1.8 million of land for 4525 Main Street and Encore Apartments.

As discussed in Notes 1 and 19, the Operating Partnership acquired a controlling interest in Bermuda
Crossroads and Smith’s Landing on May 13, 2013.

On June 4, 2013, Armada Hoffler purchased $2.6 million of land in Durham, North Carolina for the
development and construction of Whetstone Apartments.

On August 27, 2013, Armada Hoffler purchased $5.2 million of land in Virginia Beach, Virginia for the
development and construction of Sandbridge Commons.

On November 26, 2013, Armada Hoffler purchased $1.5 million of land in Chesapeake, Virginia for the
development and construction of Greentree Shopping Center.

On December 16, 2013, Armada Hoffler purchased $1.9 million of land in Chesapeake, Virginia for the
development and construction of a new office and manufacturing building for Oceaneering International.

Subsequent to December 31, 2013

As discussed in Note 1, the Company completed the acquisition of Liberty Apartments on January 17, 2014.
Total consideration transferred to acquire Liberty Apartments was $30.7 million, consisting of 695,652
common units of the Operating Partnership, the repayment of a $3.0 million mezzanine loan and the
assumption of $20.9 million of debt. The Company is currently evaluating the accounting for the Liberty
Apartments acquisition and anticipates that the consideration transferred will primarily be allocated to the
building, land and acquired lease intangibles.

7. Accounts Receivable

Accounts receivable comprised the following as of December 31, 2013 and 2012 (in thousands):

Accrued straight-line rental revenue
Tenant accounts receivable
Allowance for doubtful accounts

Accounts receivable

F-19

December 31,

2013

2012

$17,494
778
—

$16,579
997
(153)

$18,272

$17,423

8. Construction Contracts

Construction contract costs and estimated earnings in excess of billings represent reimbursable costs and
amounts earned under contracts in progress as of the balance sheet date. Such amounts become billable
according to contract terms, which usually consider the passage of time, achievement of certain milestones
or completion of the project. Billings of $16.2 million and $78.3 million are netted against construction
contract costs and estimated earnings as of December 31, 2013 and 2012, respectively. The Company
expects to bill and collect substantially all construction contract costs incurred as of December 31, 2013
during the year ending December 31, 2014.

Armada Hoffler defers precontract costs when such costs are directly associated with specific anticipated
contracts and their recovery is probable. Precontract costs of $0.8 million and $0.6 million were deferred as
of December 31, 2013 and 2012, respectively.

Billings in excess of construction contract costs and estimated earnings represent billings or collections on
contracts made in advance of revenue recognized.

Construction receivables and payables include retentions—amounts that are generally withheld until the
completion of the contract or the satisfaction of certain restrictive conditions such as fulfillment guarantees.
As of December 31, 2013 and 2012, construction receivables included retentions of $3.2 million and
$3.0 million, respectively. The Company expects to collect substantially all construction receivables as of
December 31, 2013 during the year ending December 31, 2014. As of December 31, 2013 and 2012,
construction payables included retentions of $2.1 million and $2.5 million, respectively. The Company
expects to pay substantially all construction payables as of December 31, 2013 during the year ending
December 31, 2014.

Armada Hoffler’s net position on uncompleted construction contracts comprised the following as of
December 31, 2013 and 2012 (in thousands):

Costs incurred on uncompleted construction contracts
Estimated earnings
Billings

Net position

Construction contract costs and estimated earnings in

excess of billings

Billings in excess of construction contract costs and

estimated earnings

Net position

December 31,

2013

2012

$ 97,372
4,584
(102,319)

$ 542,994
22,526
(568,550)

$

(363)

$

(3,030)

December 31,

2013

2012

$

1,178

$

1,206

(1,541)

(4,236)

$

(363)

$

(3,030)

The Company expects to complete all uncompleted contracts as of December 31, 2013 during the years
ending December 31, 2014 and 2015.

F-20

9.

Indebtedness

Armada Hoffler’s indebtedness comprised the following as of December 31, 2013 and 2012 (dollars in
thousands):

Secured Debt

Credit facility

Armada Hoffler Tower
Richmond Tower
One Columbus
Two Columbus
Oyster Point
Virginia Natural Gas
Sentara Williamsburg
249 Central Park Retail(1)
South Retail
Studio 56 Retail
Commerce Street Retail
Fountain Plaza Retail(1)
Dick’s at Town Center
Broad Creek Shopping Center

Note 1(2)
Note 2(2)
Note 3(2)
North Point Center
Note 1
Note 2
Note 3
Note 4
Note 5(3)
Hanbury Village
Note 1
Note 2

Gainsborough Square
Parkway Marketplace
Harrisonburg Regal
Courthouse 7-Eleven

Note 1
Note 2

Tyre Neck Harris Teeter
The Cosmopolitan
Smith’s Landing(4)
Main Street Land
4525 Main Street
Encore Apartments
Whetstone Apartments
Sandbridge Commons

Principal Balance

December 31,

2013

2012

$ 70,000

$ —

Stated Interest
Rate

Stated Maturity
Date

December 31,

2013

2013

May 13, 2016

LIBOR +
1.60% - 2.20%
—
—
—
—
5.41%
—
—
5.99%
5.99%
3.75%

39,240
47,023
14,095
18,854
6,648
5,524
10,997
16,086
7,097
2,760
6,800 LIBOR + 2.25% October 31, 2018
8,043
September 8, 2016
8,413 LIBOR + 2.75% October 31, 2017

—
—
—
—
December 1, 2015
—
—
September 8, 2016
September 8, 2016
May 7, 2015

5.99%

4,553 LIBOR + 2.25% October 31, 2018
8,360 LIBOR + 2.25% October 31, 2018
3,500 LIBOR + 2.25% October 31, 2018

10,478
2,910
9,356
1,053

February 5, 2019
September 15, 2025
—
December 1, 2014
724 LIBOR + 2.00% February 1, 2017

6.45%
7.25%
—
5.59%

6.67%

21,666
October 11, 2017
4,332 LIBOR + 2.25% October 31, 2018
9,771
5,747
4,015

—
—
June 8, 2017

—
—
6.06%

1,505
1,739
2,650 LIBOR + 2.25% October 31, 2018

—
—

—
—

48,291

3.75%

July 1, 2051

— LIBOR + 2.15% January 31, 2017

2,208

—

—

— LIBOR + 1.95% January 30, 2017
— LIBOR + 1.95% January 30, 2017
— LIBOR + 1.90%
October 8, 2016
— LIBOR + 1.85% January 17, 2018

—
—
—
—
6,466
—
—
15,834
6,985
2,690
5,613
7,917
8,318

4,503
8,267
3,461

10,319
2,830
—
1,030
705

21,449
4,159
—
—
3,842

—
—
2,482
47,723
24,795
—
11,313
3,585
284
3,172

Oyster Point Participation Loan
Unamortized fair value adjustments

Total Indebtedness

—

—

$277,742

$334,438

— $
3

643
—

$277,745

$335,081

F-21

(1) Cross collateralized.
(2) Cross collateralized.
(3) Subject to an interest rate swap lock at a rate of 3.57%.
(4) Principal balance excluding fair value adjustments.

Armada Hoffler’s indebtedness comprised the following fixed-rate, variable-rate and participating notes as
of December 31, 2013 and 2012 (in thousands):

Fixed-rate secured debt
Variable-rate secured debt
Participating note

Total Indebtedness

December 31,

2013

2012

$127,085
150,660
—

$188,129
146,309
643

$277,745

$335,081

Certain loans require the Company to comply with various financial and other covenants, including the
maintenance of minimum debt coverage ratios. As of December 31, 2013, the Company was in compliance
with all loan covenants.

Scheduled principal repayments and term-loan maturities during each of the next five years and thereafter
are as follows (in thousands):

Year

2014
2015
2016
2017
2018
Thereafter

Total

Scheduled
Principal
Payments

Term-
Loan
Maturities

$ 2,870
2,930
2,653
1,843
1,404
45,558

$

1,007
8,681
99,565
70,885
29,669
10,677

Total
Payments

$

3,877
11,611
102,218
72,728
31,073
56,235

$57,258

$220,484

$277,742

2012 Financing Activity

On February 13, 2012, Armada Hoffler modified the North Point Center Note 5 to lower the interest rate to
LIBOR plus 2.00% and extend the maturity date to February 1, 2017. In conjunction with this note, Armada
Hoffler entered into an interest rate swap lock at a rate of 3.57%.

On May 7, 2012, Armada Hoffler refinanced the existing Studio 56 Retail loan with a new $2.9 million loan
that bears interest at 3.75% and matures on May 7, 2015.

On October 31, 2012, Armada Hoffler modified the Dick’s at Town Center loan to extend the maturity date
to October 31, 2017.

On December 7, 2012, Armada Hoffler refinanced the existing Broad Creek Note 2 with a new loan for up
to $11.1 million that bears interest at LIBOR plus 2.75% and matures on December 7, 2016. On April 15,
2013, Armada Hoffler borrowed an additional $2.7 million on Broad Creek Shopping Center Note 2.

On December 7, 2012, Armada Hoffler refinanced the existing Broad Creek Note 3 with a new $3.5 million
loan that bears interest at LIBOR plus 2.75% and matures on December 7, 2016.

F-22

Credit Facility

On May 13, 2013, the Operating Partnership, as borrower, and the Company, as parent guarantor, entered
into a $100.0 million senior secured revolving credit facility. On October 10, 2013, the Operating
Partnership increased the aggregate capacity under the credit facility to $155.0 million.

As of December 31, 2013, the following properties served as the borrowing base collateral for the credit
facility: (i) Armada Hoffler Tower, (ii) Richmond Tower, (iii) One Columbus, (iv) Two Columbus,
(v) Virginia Natural Gas, (vi) Sentara Williamsburg, (vii) a portion of North Point Center,
(viii) Gainsborough Square, (ix) Parkway Marketplace and (x) Courthouse 7-Eleven.

The credit facility requires the Operating Partnership to comply with various financial covenants, including:

• Maximum leverage ratio of 65% as of the last day of each fiscal quarter through December 31, 2014

and 60% as of the last day of each fiscal quarter thereafter;

• Minimum fixed charge coverage ratio of 1.75x;

• Minimum tangible net worth equal to at least the sum of 80% of tangible net worth on the closing date

of the credit facility plus 75% of the net proceeds of any additional equity issuances;

• Maximum amount of variable rate indebtedness not exceeding 30% of our total asset value; and

• Maximum amount of secured recourse indebtedness of 35% of our total asset value.

The credit facility permits investments in the following types of assets: (i) unimproved land holdings in an
aggregate amount not exceeding 5% of total asset value, (ii) construction in progress in an aggregate amount
not exceeding 25% of total asset value and (iii) unconsolidated affiliates in aggregate amount not exceeding
5% of total asset value. Investments in these types of assets cannot exceed 30% of total asset value. In
addition to these financial covenants, the credit facility requires the Operating Partnership to comply with
various customary affirmative and negative covenants that restrict the ability to, among other things, incur
debt and liens, make investments, dispose of properties and make distributions. As of December 31, 2013,
the Operating Partnership was in compliance with all covenants under the credit facility.

As of December 31, 2013, the Operating Partnership had $70.0 million outstanding on the credit facility.
The credit facility matures on May 13, 2016 and bears interest between LIBOR plus 1.60% and LIBOR plus
2.20%. The interest rate on the credit facility as of December 31, 2013 was 1.93%. On September 1, 2013,
the Operating Partnership executed a LIBOR interest rate cap agreement on a notional amount of
$40.0 million and a strike price of 1.50%. The interest rate cap agreement expires on March 1, 2016.

F-23

2013 Financing Activity

In connection with the IPO and Formation Transactions, the Company used proceeds from the IPO and the
credit facility to repay the following debt (in thousands):

Properties unencumbered:

Armada Hoffler Tower
Richmond Tower
Two Columbus
Virginia Natural Gas
Sentara Williamsburg
North Point Center Note 3
Gainsborough Square
Parkway Marketplace
Courthouse 7-Eleven Note 1

Subtotal

Other debt repayments:
Broad Creek Shopping Center Note 2
Oyster Point Participation Loan

Subtotal

Total

Amount repaid

$ 38,813
46,523
18,785
5,457
10,915
9,242
9,732
5,669
1,485

146,621

2,697
643

3,340

$149,961

The Company recognized a $1.1 million loss on extinguishment of debt representing $0.6 million of fees
and $0.5 million of unamortized debt issuance costs associated with the debt repaid in connection with the
IPO and Formation Transactions.

On July 3, 2013, the Company repaid the outstanding $2.2 million balance of the Main Street Land loan in
full.

On July 17, 2013, the Operating Partnership defeased the One Columbus loan for $14.9 million, including
costs of $1.0 million. The Company recognized a $1.0 million loss on extinguishment of debt representing
defeasance costs.

On July 30, 2013, the Company closed on a $63.0 million construction loan to fund the 4525 Main Street
and Encore Apartments development projects. The construction loan bears interest at LIBOR plus 1.95%
and matures on January 30, 2017. On September 1, 2013, the Company executed two LIBOR interest rate
cap agreements on an aggregate notional amount of $63.0 million both with strike prices at 3.50%. The
interest rate cap agreements expire on March 1, 2016.

On October 8, 2013, the Company closed on an $18.5 million loan to fund the development and
construction of Whetstone Apartments. The construction loan bears interest at LIBOR plus 1.90% and
matures on October 8, 2016. In conjunction with this loan, the Company executed a LIBOR interest rate cap
agreement on a notional amount of $18.5 million and a strike price of 1.50%. The interest rate cap
agreement expires on April 1, 2016.

On October 11, 2013, the Operating Partnership repaid the Bermuda Crossroads loan for $10.8 million. The
Company recognized a $0.1 million gain on extinguishment of debt representing the unamortized fair value
premium adjustment.

On October 25, 2013, the Operating Partnership amended Broad Creek Shopping Center Notes 1, 2 and 3 to
remove the recourse component, lower the interest rates to LIBOR plus 2.25% and extend the maturity dates
to October 31, 2018. The Company recognized a $0.2 million loss on extinguishment of debt representing
unamortized debt issuance costs on Broad Creek Shopping Center Notes 2 and 3.

F-24

On October 31, 2013, the Operating Partnership amended the Commerce Street Retail loan, Hanbury
Village Note 2 and the Tyre Neck Harris Teeter loan to remove the recourse components, lower the interest
rates to LIBOR plus 2.25% and extend the maturity dates to October 31, 2018. The Operating Partnership
prepaid an aggregate of $1.4 million of principal on these three loans.

On December 19, 2013, the Company closed on a $10.0 million loan to fund the development and
construction of Sandbridge Commons. The construction loan bears interest at LIBOR plus 1.85% and
matures on January 17, 2018.

On December 19, 2013, the Company amended the Smith’s Landing loan to extend the maturity date to
January 31, 2017.

Subsequent to December 31, 2013

On January 17, 2014, the Company assumed $20.9 million of debt in connection with the acquisition of
Liberty Apartments. The loan bears interest at 5.66% and has a 30-year term.

On February 28, 2014, the Company closed on a $19.5 million loan to fund the development and
construction of the Oceaneering International facility. The construction loan bears interest at LIBOR plus
1.75% and matures on February 28, 2018.

10. Derivative Financial Instruments

During the year ended December 31, 2013, Armada Hoffler entered into four LIBOR interest rate cap
agreements on an aggregate notional amount of $121.5 million with strike prices ranging between 1.50%
and 3.50% for collective premiums totaling $0.3 million. All four interest rate cap agreements expire in
2016.

Armada Hoffler’s derivatives comprised the following as of December 31, 2013 and 2012 (in thousands):

Pay fixed interest rate swaps
Interest rate caps

Total

December 31,

2013

2012

Notional
Amount

Fair Value

Asset

Liability

Notional
Amount

Fair Value

Asset

Liability

$

705
130,672

$— $ (16)
102 —

$11,721
9,356

$— $(239)

9

—

$131,377

$102

$ (16)

$21,077

$ 9

$(239)

The changes in the fair value of Armada Hoffler’s derivatives during each of the three years ended
December 31, 2013 was as follows (in thousands):

Pay fixed interest rate swaps
Interest rate caps

Other (expense) income

Subsequent to December 31, 2013

Years Ended December 31,

2013

2012

2011

$ 152
(164)

$445

$436

(37) —

$ (12)

$408

$436

On March 14, 2014, the Company executed a LIBOR interest rate cap agreement on a notional amount of
$50.0 million and a strike price of 1.25% for a premium of $0.4 million. The interest rate cap agreement
expires on March 1, 2017.

F-25

11. Equity

Stockholders’ Equity

As of December 31, 2013, the Company’s authorized capital was 500 million shares of common stock and
100 million shares of preferred stock. The Company had 19.2 million shares of common stock issued and
outstanding as of December 31, 2013. No shares of preferred stock were issued and outstanding as of
December 31, 2013.

Noncontrolling Interests

Upon completion of the IPO and the Formation Transactions, the Operating Partnership issued 13,059,365
common units of limited partnership interest to the Predecessor’s prior investors as partial consideration for
the contribution of their interests in the Predecessor to the Operating Partnership, which the Company
recognized at fair value. Noncontrolling interests in the Company represent common units of the Operating
Partnership held by the Predecessor’s prior investors. As of December 31, 2013, the Company held a 59.5%
interest in the Operating Partnership. As the sole general partner and the majority interest holder, the
Company consolidates the financial position and results of operations of the Operating Partnership.

Holders of common units may not transfer their units without the Company’s prior consent as general
partner of the Operating Partnership. Beginning on the first anniversary of the completion of the IPO and the
Formation Transactions, common unitholders may tender their units for redemption by the Operating
Partnership in exchange for cash equal to the market price of shares of the Company’s common stock at the
time of redemption or, at the Company’s option and sole discretion, for shares of common stock on a one-
for-one basis. Accordingly, the Company presents the common units of the Operating Partnership held by
the Predecessor’s prior investors as noncontrolling interests within equity in the consolidated balance sheet.

Common Stock Dividends and Common Unit Distributions

During the year ended December 31, 2013, the Company declared aggregate cash dividends and
distributions to common stockholders and common unitholders of $12.9 million. During the year ended
December 31, 2013, the Company paid aggregate cash dividends and distributions to common stockholders
and common unitholders of $7.7 million. The $5.2 million of aggregate dividends and distributions payable
as of December 31, 2013 is presented within other liabilities in the consolidated balance sheet.

During the year ended December 31, 2013, the Company declared the following dividends per share and
distributions per unit:

Period

May 13, 2013 to June 30, 2013
July 1, 2013 to September 30, 2013
October 1, 2013 to December 31, 2013

Total

Dividend Per
Share/ Distribution
Per Unit

$0.08
0.16
0.16

$0.40

Declaration Date

Record Date

Paid Date

June 19, 2013
August 9, 2013

October 1, 2013 October 10, 2013
November 11, 2013 December 30, 2013 January 9, 2014

July 1, 2013

July 11, 2013

The tax status of dividends per share and distributions per unit paid during the year ended December 31,
2013 was as follows:

Ordinary income
Return of capital

Total

F-26

Per Share/Unit

%

$0.04
0.20

$0.24

17.0%
83.0%

100.0%

Subsequent to December 31, 2013

On January 9, 2014, the Company paid cash dividends of $3.1 million to common stockholders and
$2.1 million to common unitholders.

On February 18, 2014, the Company’s Board of Directors declared a cash dividend/distribution of $0.16 per
share/unit payable on April 10, 2014 to common stockholders and common unitholders of record on April 1,
2014.

12. Stock-Based Compensation

The Company’s 2013 Equity Incentive Plan permits the grant of restricted stock awards, stock options, stock
appreciation rights, performance units and other equity based awards up to an aggregate of 700,000 shares
of common stock over the ten-year term of the plan. As of December 31, 2013, the Company had 540,337
shares of common stock reserved for issuance under the 2013 Equity Incentive Plan.

During the year ended December 31, 2013, the Company granted an aggregate of 169,227 shares of
restricted stock to employees and nonemployee directors. Restricted stock awards 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.

During the year ended December 31, 2013, the Company recognized $1.2 million of stock-based
compensation expense. As of December 31, 2013, the total unrecognized compensation cost related to
nonvested restricted shares was $0.7 million, substantially all of which the Company expects to recognize
over the next 17 months.

The following table summarizes the changes in the Company’s nonvested restricted stock awards during the
year ended December 31, 2013:

Nonvested as of January 1, 2013
Granted
Vested
Forfeited

Nonvested as of December 31, 2013

Restricted Stock
Awards

Weighted Average
Grant Date Fair
Value Per Share

—
169,227
(56,410)
(877)

111,940

$ —
11.50
11.50
11.50

$11.50

Restricted stock awards granted and vested during the year ended December 31, 2013 include 8,687 shares
tendered by employees to satisfy minimum statutory tax withholding obligations.

Subsequent to December 31, 2013

On March 3, 2014, the Company granted 99,289 shares of restricted stock to employees with a grant date
fair value of $9.94 per share.

13. Employee Benefit Plans

The Predecessor had a deferred compensation plan for certain key employees pursuant to which Armada
Hoffler purchased whole life insurance policies. Armada Hoffler discontinued its deferred compensation
plan in May 2013 and, as result, the Company has no further obligation under this plan. As of December 31,
2012, the Predecessor’s deferred compensation liability and cash surrender value of life insurance policies
were both $1.2 million.

F-27

Armada Hoffler has a defined contribution 401(k) plan. Under the 401(k) plan, participants may make
voluntary contributions up to the maximum allowed by law. Armada Hoffler may make discretionary
matching contributions based on a percentage of the employees’ contributions. Discretionary matching
contributions were not significant for any of the three years ended December 31, 2013.

14. 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 Inputs—quoted prices in active markets for identical assets or liabilities

Level 2 Inputs—observable inputs other than quoted prices in active markets for identical assets and
liabilities

Level 3 Inputs—unobservable inputs

Except as disclosed below, the carrying amounts of Armada Hoffler’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, interest rate caps, the cash surrender value of life insurance and
deferred compensation. Armada Hoffler 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 Armada Hoffler’s secured 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 Armada Hoffler’s
secured 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 our financial instruments, all of which are based on Level 2 inputs,
as of December 31, 2013 and 2012 were as follows (in thousands):

Secured debt
Participating note
Interest rate swap liabilities
Interest rate cap assets
Cash surrender value of life insurance
Deferred compensation liability

December 31,

2013

2012

Carrying
Value

$277,745
—
16
102
—
—

Fair
Value

$273,310
—
16
102
—
—

Carrying
Value

$334,438
643
239
9
1,196
1,249

Fair
Value

$339,623
643
239
9
1,196
1,249

F-28

15. Income Taxes

The income tax provision for the year ended December 31, 2013 comprised the following (in thousands):

Federal income taxes:
Current
Deferred
State income taxes:
Current
Deferred

Income tax provision

Year Ended
December 31, 2013

$ 356
(113)

43
(13)

$ 273

As of December 31, 2013, the Company had $0.5 million of net deferred tax assets representing basis
differences in the assets of the TRS and stock based compensation attributable to the TRS.

Management has evaluated the Company’s income tax positions and concluded that the Company has no
uncertain income tax positions as of December 31, 2013.

The Company had no income tax expense or benefit for the years ended December 31, 2012 and 2011 as the
Predecessor consisted of flow-through entities that were not subject to tax.

16. Other Assets

Other assets comprised the following as of December 31, 2013 and 2012 (in thousands):

Deferred leasing costs, net
Lease incentives, net
Acquired lease intangibles, net
Preacquisition development costs
Debt issuance costs, net
Offering costs
Cash surrender value of life insurance
Prepaid assets and other

Other assets

December 31,

2013

2012

$ 7,858
4,851
4,369
2,036
3,072
—
—
2,223

$ 8,004
5,763
—
—
1,951
3,294
1,196
1,356

$24,409

$21,564

17. Other Liabilities

Other liabilities comprised the following as of December 31, 2013 and 2012 (in thousands):

Deferred ground rent payable
Dividends/distributions payable
Acquired lease intangibles, net
Deferred compensation
Interest rate swap liability
Other installment notes
Security deposits
Prepaid rent and other

Other liabilities

F-29

December 31,

2013

2012

$ 6,475
5,155
1,638
—
16
279
748
1,562

$ 6,111
—
—
1,249
239
496
469
1,829

$15,873

$10,393

18. Noncontrolled Entities

As of December 31, 2012, Armada Hoffler held indirect noncontrolling investments in real estate joint
ventures that owned the following properties:

Property

Bermuda Crossroads
Smith’s Landing

Type

Retail
Multifamily

Location

Ownership %

Chester, VA
Blacksburg, VA

50.0%
40.0%

Armada Hoffler’s indirect ownership interests in both Bermuda Crossroads and Smith’s Landing did not
provide control over these entities; however, they did provide significant influence. As a result, Armada
Hoffler accounted for these investments under the equity method of accounting.

As of December 31, 2012, the carrying amount of Armada Hoffler’s investment in Bermuda Crossroads was
not significant. Income from Bermuda Crossroads represents distributions received in excess of the carrying
amount of Armada Hoffler’s investment. Income from Bermuda Crossroads for the year ended
December 31, 2012 was not significant. Income from Bermuda Crossroads for the year ended December 31,
2011 was $0.2 million.

Liabilities for cumulative distributions in excess of cumulative investments in and earnings from equity
method investees are only recognized to the extent that Armada Hoffler has guaranteed obligations of the
investee. Armada Hoffler has guaranteed certain obligations of Smith’s Landing and, as a result, the
carrying amount of Armada Hoffler’s investment in Smith’s Landing was $(0.7) million as of December 31,
2012. This amount is presented within other liabilities in the combined balance sheet. Equity in the earnings
of Smith’s Landing for the years ended December 31, 2012 and 2011 were appoximately $0.2 million and
$0.1 million, respectively.

19. Acquisition of Noncontrolled Entities

As discussed in Note 1, the Company completed the IPO of shares of its common stock on May 13, 2013.
Substantially concurrent with the completion of the IPO and in connection with the Formation Transactions,
the Operating Partnership acquired 100% of the interests in the Noncontrolled Entities of the Predecessor
(Bermuda Crossroads and Smith’s Landing).

The acquisitions of the interests in Bermuda Crossroads and Smith’s Landing on May 13, 2013 were accounted
for as purchases at fair value under the acquisition method of accounting. Total consideration in the form of
cash and common units paid for the 50% interest in Bermuda Crossroads was $3.2 million. Total consideration
in the form of cash and common units paid for the 60% interest in Smith’s Landing was $7.5 million.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at
the acquisition date (in thousands):

Income producing property
Intangible assets
Net working capital
Secured debt
Below-market leases

Net assets acquired

Bermuda
Crossroads

Smith’s
Landing

$ 16,091
2,860
237
(11,053)
(1,750)

$ 35,105
2,420
14
(24,995)
—

$ 6,385

$ 12,544

The identified intangible assets for Bermuda Crossroads are primarily in-place leases. The identified
intangible assets for Smith’s Landing include $1.9 million assigned to a below-market ground lease and
$0.5 million assigned to in-place leases. The fair value adjustment to the assumed secured debt of Bermuda
Crossroads was a $0.2 million premium. The fair value adjustment to the assumed secured debt of Smith’s
Landing was not significant.

F-30

Prior to the acquisition date, the Predecessor accounted for its 50% interest in Bermuda Crossroads and 40%
interest in Smith’s Landing as equity method investments. The acquisition-date fair values of the previous
equity interests in Bermuda Crossroads and Smith’s Landing were $3.2 million and $5.0 million,
respectively. The Company recognized a gain of $9.5 million as a result of remeasuring the Predecessor’s
prior equity interests in Bermuda Crossroads and Smith’s Landing held before the acquisitions.

The following table summarizes the consolidated and combined results of operations of Armada Hoffler,
Bermuda Crossroads and Smith’s Landing on a pro forma basis, as if both Bermuda Crossroads and Smith’s
Landing had been acquired as of January 1, 2012 (in thousands):

Rental revenues
Net income

Years Ended
December 31,

2013

2012

$59,517
5,581

$60,075
18,520

The pro forma financial information is presented for informational purposes only and is not indicative of the
results of operations that would have been achieved if these acquisitions had taken place on January 1, 2012. The
pro forma financial information includes adjustments to depreciation and amortization expense for acquired
property and intangible assets and liabilities, adjustments to rental revenue and rental expenses for above and
below-market leases and adjustments to interest expense for fair value adjustments to assumed indebtedness.

Pro forma net income for the year ended December 31, 2012 includes the nonrecurring $9.5 million gain as
a result of remeasuring the Predecessor’s prior equity interests in Bermuda Crossroads and Smith’s Landing
held before the acquisitions.

Rental revenues and net income of both Bermuda Crossroads and Smith’s Landing for the period from the
acquisition date to December 31, 2013 included in the consolidated and combined statements of income
were $3.8 million and $0.2 million, respectively.

20. Acquired Lease Intangibles

The following table summarizes the Company’s acquired lease intangibles as of December 31, 2013 (in thousands):

In-place lease assets
Above-market lease assets
Below-market lease liabilities
Below-market ground lease assets

December 31, 2013

Gross Carrying
Amount

Accumulated
Amortization

Net Carrying
Amount

$3,279
27
1,750
1,920

$817
7
112
33

$2,462
20
1,638
1,887

Armada Hoffler did not have any acquired lease intangibles as of December 31, 2012.

Amortization of in-place lease assets, net below-market lease liabilities and below-market lease assets for
the year ended December 31, 2013 was $0.8 million, $0.1 million and less than $0.1 million, respectively.

Estimated amortization of acquired lease intangibles for each of the five succeeding years is as follows (in
thousands):

Year ending December 31,
2014
2015
2016
2017
2018

Rental Revenues

Rental Expenses

Depreciation and
Amortization

$158
149
111
112
104

F-31

$53
53
53
53
53

$458
409
355
332
189

21. Discontinued Operations

Armada Hoffler presented the held for sale Studio 56 residential condominium units as discontinued
operations during the years ended December 31, 2012 and 2011. Net sale proceeds during the years ended
December 31, 2012 and 2011 were $0.5 million and $2.5 million, respectively. Armada Hoffler sold the last
Studio 56 residential condominium unit during the year ended December 31, 2012. Armada Hoffler
currently has no plans to develop residential condominium units for sale.

22. Related Party Transactions

Armada Hoffler provides general contracting and real estate services to certain related party entities that are
not included in these consolidated and combined financial statements. Revenue from construction contracts
with related party entities of Armada Hoffler was $45.0 million, $17.4 million and $0 million for the years
ended December 31, 2013, 2012 and 2011, respectively. Operating margin from such contracts was
$1.5 million, $1.2 million and $0 million for the years ended December 31, 2013, 2012 and 2011,
respectively. Real estate services fees from affiliated entities of Armada Hoffler were not significant for any
of the three years ended December 31, 2013. In addition, affiliated entities also reimburse Armada Hoffler
for monthly maintenance and facilities management services provided to the properties. Cost
reimbursements earned by Armada Hoffler from affiliated entities were not significant for any of the three
years ended December 31, 2013.

In connection with the Formation Transactions, 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 Formation Transactions on May 13, 2013.

Certain owners of Armada Hoffler, including Mr. Hoffler, guaranteed $154.8 million of Armada Hoffler’s
indebtedness as of December 31, 2012.

Capital contributions from the owners of Armada Hoffler, including Mr. Hoffler, are presented as
contributions in the combined statements of equity. Distributions to the owners of Armada Hoffler are
presented as distributions in the combined statements of equity. Distributions payable to the owners of
Armada Hoffler of $0.5 million are presented within due to affiliates in the combined balance sheets as of
December 31, 2012, all of which were paid during 2013.

23. Commitments and Contingencies

Legal Proceedings

Armada Hoffler is from time to time involved in various disputes, lawsuits, warranty claims, environmental
and other matters arising in the ordinary course of its business. Management makes assumptions and
estimates concerning the likelihood and amount of any potential loss relating to these matters.

Armada Hoffler currently is a party to various legal proceedings, none of which management expects will
have a material adverse effect on Armada Hoffler’s financial position, results of operations or liquidity.
Armada Hoffler accrues a liability for litigation if an unfavorable outcome is determined by management to
be probable and the amount of loss can be reasonably estimated. If an unfavorable outcome is determined by
management to be probable and a range of loss can be reasonably estimated, Armada Hoffler 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.
Armada Hoffler does not believe that the ultimate outcome of these matters, either individually or in the
aggregate, could have a material adverse effect on its financial position or results of operations; however,
litigation is subject to inherent uncertainties.

F-32

Under Armada Hoffler’s leases, tenants are typically obligated to indemnify Armada Hoffler 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

Armada Hoffler 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 $35.8 million and $34.0 million as of December 31, 2013 and
2012, 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 December 31, 2013, the Operating Partnership had total outstanding letters of credit
of $3.0 million.

Armada Hoffler has four ground leases on three properties with initial terms that range from twenty to fifty
years and options to extend up to an additional 40 years in certain cases. Armada Hoffler also leases
automobiles and equipment.

Future minimum rental payments during each of the next five years and thereafter are as follows (in
thousands):

2014
2015
2016
2017
2018
Thereafter

Total

$ 1,535
1,495
1,445
1,430
1,453
62,021

$69,379

Ground rent expense for the years ended December 31, 2013, 2012 and 2011 was $1.5 million, $1.5 million
and $1.3 million, respectively.

Concentrations of Credit Risk

The majority of Armada Hoffler’s income producing properties are located in Hampton Roads, Virginia.
During each of the three years ended December 31, 2013, rental revenues from Hampton Roads properties
represented 70%, 75% and 76%, respectively, of Armada Hoffler’s rental revenues. Ten of Armada
Hoffler’s income producing properties are located in the Town Center of Virginia Beach. During each of the
three years ended December 31, 2013, rental revenues from Town Center properties represented 48%, 51%
and 52%, respectively, of Armada Hoffler’s rental revenues.

Revenues from Richmond Tower individually represented 15%, 16% and 16% of Armada Hoffler’s rental
revenues during each of the three years ended December 31, 2013, respectively. A single tenant—Williams
Mullen, a prominent Mid-Atlantic law firm—occupies over 80% of Richmond Tower. Williams Mullen also
leases office space at Armada Hoffler Tower. Base rents from Williams Mullen represented 16%, 17% and
17% of Armada Hoffler’s rental revenues during each of the three years ended December 31, 2013,
respectively.

As of December 31, 2013 and 2012, Armada Hoffler Tower, Richmond Tower and The Cosmopolitan each
individually represented more than 10% of Armada Hoffler’s total assets.

F-33

Construction contracts with three customers collectively represented 50% of Armada Hoffler’s general
contracting and real estate services revenues for the year ended December 31, 2013. These same three
customers also collectively accounted for 69% of construction receivables as of December 31, 2013.
Construction contracts with two customers collectively represented 37% and 83% of Armada Hoffler’s
general contracting and real estate services revenues for the years ended December 31, 2012 and 2011,
respectively. These same two customers also collectively accounted for 18% of construction receivables as
of December 31, 2012.

24. Selected Quarterly Financial Data (Unaudited)

The following tables summarize certain selected quarterly financial data for 2013 and 2012 (in thousands,
except per share data):

Rental revenues
General contracting and real estate services revenues
Net operating income
Net income
Net income attributable to stockholders
Net income per share: basic and diluted

Rental revenues
General contracting and real estate services revenues
Net operating income
Net income

25. Subsequent Events

2013 Quarters

First

Second

Third

Fourth

$13,398
17,956
9,455
1,931
—
$ —

$14,231
23,291
10,372
8,404
4,886
0.26

$

$14,899
21,896
10,731
1,252
745
0.04

$

$14,992
19,373
11,516
2,866
1,705
$ 0.09

2012 Quarters

First

Second

Third

Fourth

$13,387
14,641
9,989
$ 1,883

$13,609
12,383
10,338
$ 2,110

$13,318
13,631
9,405
$ 1,755

$14,122
13,391
11,100
$ 3,149

As discussed in Note 11, the Company paid an aggregate of $5.2 million of cash dividends and distributions
to common stockholders and common unitholders on January 9, 2014.

As discussed in Notes 1, 6 and 9, the Company completed the acquisition of Liberty Apartments on
January 17, 2014 for total consideration of $30.7 million, including the issuance of 695,652 common units
of the Operating Partnership, the repayment of a $3.0 million mezzanine loan and the assumption of
$20.9 million of debt.

As discussed in Note 11, the Company’s Board of Directors declared a cash dividend/distribution of
$0.16 per share/unit on February 18, 2014.

As discussed in Note 9, the Company closed on a $19.5 million loan on February 28, 2014 to fund the
development and construction of the Oceaneering International facility.

As discussed in Note 12, the Company granted 99,289 shares of restricted stock to employees with a grant
date fair value of $9.94 per share on March 3, 2014.

As discussed in Note 10, the Company executed a LIBOR interest rate cap agreement on a notional amount
of $50.0 million and a strike price of 1.25% on March 14, 2014. The interest rate cap agreement expires on
March 1, 2017.

F-34

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Exhibit

Number

3.1

3.2

4.1

10.1

10.2

10.3

10.4

10.5

10.6

10.7

10.8

10.9

10.10

10.11

10.12

10.13

INDEX TO EXHIBITS

Description

Articles of Amendment and Restatement of Armada Hoffler Properties, Inc. (Incorporated by
reference to the Company’s Registration Statement on Form S-11/A, filed on April 26, 2013)

Amended and Restated Bylaws of Armada Hoffler Properties, Inc. (Incorporated by reference to
the Company’s Registration Statement on Form S-11/A, filed on April 26, 2013)

Form of Certificate of Common Stock of Armada Hoffler Properties, Inc. (Incorporated by
reference to the Company’s Registration Statement on Form S-11/A, filed on May 2, 2013)

Amended and Restated Agreement of Limited Partnership of Armada Hoffler, L.P. (Incorporated
by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed on
November 12, 2013)

Armada Hoffler Properties, Inc. 2013 Equity Incentive Plan (Incorporated by reference to
Exhibit 10.2 to the Company’s Registration Statement on Form S-11/A, filed on April 26, 2013)

Form of Restricted Stock Award Agreement (Time Vesting) (Incorporated by reference to
Exhibit 10.3 to the Company’s Registration Statement on Form S-11/A, filed on May 2, 2013)

Indemnification Agreement between Armada Hoffler Properties, Inc. and each of the Directors
and Officers listed on Schedule A thereto (Incorporated by reference to Exhibit 10.3 to the
Company’s Quarterly Report on Form 10-Q, filed on November 12, 2013)

Tax Protection Agreement by and among Armada Hoffler Properties, Inc. and the persons listed
on the signature page thereto (Incorporated by reference to Exhibit 10.4 to the Company’s
Quarterly Report on Form 10-Q, filed on November 12, 2013)

Representation, Warranty and Indemnity Agreement among Armada Hoffler Properties, Inc.
Armada Hoffler, L.P. and Daniel A. Hoffler (Incorporated by reference to Exhibit 10.5 to the
Company’s Quarterly Report on Form 10-Q, filed on November 12, 2013)

Armada Hoffler, L.P. Executive Severance Benefit Plan with the participants listed on Schedule
A thereto (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on
Form 10-Q, filed on April November 12, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.
and Daniel A. Hoffler, dated as of February 11, 2013 (Incorporated by reference to Exhibit 10.8
to the Company’s Registration Statement on Form S-11, filed on April 26, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.
and A. Russell Kirk, dated February 12, 2013 (Incorporated by reference to Exhibit 10.9 to the
Company’s Registration Statement on Form S-11/A, filed on April 26, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.
and Louis S. Haddad, dated as of February 11, 2013 (Incorporated by reference a to Exhibit 10.10
to the Company’s Registration Statement on Form S-11/A, filed on April 26, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.
and Anthony P. Nero, dated as of February 12, 2013 (Incorporated by reference to Exhibit 10.11
to the Company’s Registration Statement on Form S-11/A, filed on April 26, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.,
and Eric E. Apperson, dated as of February 11, 2013 (Incorporated by reference to Exhibit 10.12
to the Company’s Registration Statement on Form S-11/A, filed on April 26, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.,
and Michael P. O’Hara, dated as of February 11, 2013 (Incorporated by reference to
Exhibit 10.13 to the Company’s Registration Statement on Form S-11/A, filed on April 26, 2013)

Exhibit

Number

10.14

10.15

10.16

10.17

10.18

10.19

10.20

10.21

10.22

10.23

10.24

10.25

10.26

10.27

Description

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.,
and John C. Davis, dated as of February 11, 2013 (Incorporated by reference to Exhibit 10.14 to
the Company’s Registration Statement on Form S-11/A, filed on April 26, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.,
and Alan R. Hunt, dated as of February 11, 2013 (Incorporated by reference to Exhibit 10.15 to
the Company’s Registration Statement on Form S-11/A, filed on April 26, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.,
and Shelly R. Hampton, dated as of February 11, 2013 (Incorporated by reference to
Exhibit 10.16 to the Company’s Registration Statement on Form S-11/A, filed on April 26, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc., and
William Christopher Harvey, dated as of February 11, 2013 (Incorporated by reference to
Exhibit 10.17 to the Company’s Registration Statement on Form S-11/A, filed on April 26, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.,
and Eric L. Smith, dated as of February 12, 2013 (Incorporated by reference to Exhibit 10.18 to
the Company’s Registration Statement on Form S-11/A, filed on April 12, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.,
and John E. Babb, dated as of January 31, 2013 (Incorporated by reference to Exhibit 10.19 to the
Company’s Registration Statement on Form S-11/A, filed on April 12, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.,
and Rickard E. Burnell, dated as of February 12, 2013 (Incorporated by reference to
Exhibit 10.20 to the Company’s Registration Statement on Form S-11/A, filed on April 26, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc., and
A/H TWA Associates, L.L.C., dated as of February 11, 2013 (Incorporated by reference to
Exhibit 10.21 to the Company’s Registration Statement on Form S-11/A, filed on April 12, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc., and
RMJ Kirk Fortune Bay, L.L.C., dated as of February 11, 2013 (Incorporated by reference to
Exhibit 10.22 to the Company’s Registration Statement on Form S-11/A, filed on April 12, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc., and
Kirk Gainsborough, L.L.C., dated as of February 11, 2013 (Incorporated by reference to
Exhibit 10.23 to the Company’s Registration Statement on Form S-11/A, filed on April 12, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.,
and Chris A. Sanders, dated as of January 25, 2013 (Incorporated by reference to Exhibit 10.24 to
the Company’s Registration Statement on Form S-11/A, filed on April 26, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.,
and Allen O. Keene, dated as of January 21, 2013 (Incorporated by reference to Exhibit 10.25 to
the Company’s Registration Statement on Form S-11/A, filed on April 12, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.,
and Bruce G. Ford, dated as of January 31, 2013 (Incorporated by reference to Exhibit 10.26 to
the Company’s Registration Statement on Form S-11/A, filed on April 12, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.,
and DIAN, LLC, dated as of January 28, 2013 (Incorporated by reference to Exhibit 10.27 to the
Company’s Registration Statement on Form S-11/A, filed on April 26, 2013)

Exhibit

Number

10.28

10.29

10.30

10.31

10.32

10.33

10.34

10.35

10.36

10.37

10.38

10.39

10.40

Description

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.,
and Compson of Richmond, L.C., Thomas Comparato and Lindsey Smith Comparato, dated as of
January 31, 2013 (Incorporated by reference to Exhibit 10.28 to the Company’s Registration
Statement on Form S-11/A, filed on April 26, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.,
and Bruce Smith Enterprises, LLC and Bruce B. Smith, dated as of January 31, 2013
(Incorporated by reference to Exhibit 10.29 to the Company’s Registration Statement on
Form S-11/A, filed on April 12, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.,
and Steyn, LLC, dated as of January 31, 2013 (Incorporated by reference to Exhibit 10.30 to the
Company’s Registration Statement on Form S-11/A, filed on April 12, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.,
and D&F Beach, L.L.C., dated as of February 1, 2013 (Incorporated by reference to Exhibit 10.31
to the Company’s Registration Statement on Form S-11/A, filed on April 12, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc., and
DF Smith’s Landing, LLC, dated as of January 31, 2013 (Incorporated by reference to Exhibit
10.32 to the Company’s Registration Statement on Form S-11/A, filed on April 12, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc., and
Spratley Family Holdings, L.L.C., dated as of January 22, 2013 (Incorporated by reference to
Exhibit 10.33 to the Company’s Registration Statement on Form S-11/A, filed on April 12, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc.,
and Columbus One, LLC, DP Columbus Two, LLC, City Center Associates, LLC, TC Block 7
Partners LLC, TC Block 12 Partners LLC, TC Block 3 Partners LLC, TC Block 6 Partners LLC,
TC Block 8 Partners LLC, TC Block 11 Partners LLC and TC Apartment Partners, LLC, dated as
of February 1, 2013 (Incorporated by reference to Exhibit 10.34 to the Company’s Registration
Statement on Form S-11/A, filed on April 26, 2013)

Asset Purchase Agreement by and among AHP Construction, LLC and Armada/Hoffler
Construction Company and Armada/Hoffler Construction Company of Virginia, dated as of
March , 2013 (Incorporated by reference to Exhibit 10.35 to the Company’s Registration
Statement on Form S-11/A, filed on May 2, 2013)

Asset Purchase Agreement by and among AHP Asset Services, LLC and Armada Hoffler
Holding Company, Inc., dated as of , 2013 (Incorporated by reference to Exhibit 10.36 to the
Company’s Registration Statement on Form S-11/A, filed on May 2, 2013)

Contribution Agreement for the Apprentice School Apartment property by and among Armada
Hoffler, L.P., Washington Avenue Associates, L.L.C. and Washington Avenue Apartments,
L.L.C., and dated as of , 2013 (Incorporated by reference to the Company’s Registration
Statement on Form S-11/A, filed on May 2, 2013)

Land Option Agreement by and between and Armada Hoffler, L.P. and Courthouse Marketplace
Parcel 7, L.L.C., dated as of May 1, 2013 (Incorporated by reference to Exhibit 10.38 to the
Company’s Registration Statement on Form S-11/A, filed on May 2, 2013)

Land Option Agreement by and between and Armada Hoffler, L.P. and Courthouse Marketplace
Outparcels, L.L.C., dated as of May, 1 2013 (Incorporated by reference to Exhibit 10.39 to the
Company’s Registration Statement on Form S-11/A, filed on May 2, 2013)

Land Option Agreement by and between and Armada Hoffler, L.P. and Hanbury Village, LLC,
dated as of May 1, 2013 (Incorporated by reference to Exhibit 10.40 to the Company’s
Registration Statement on Form S-11/A, filed on May 2, 2013)

Exhibit

Number

10.41

10.42

10.43

10.44

10.45

10.46

10.47

10.48

21.1*

23.1*

31.1*

31.2*

32.1**

32.2**

Description

Land Option Agreement by and between and Armada Hoffler, L.P. and Lake View AH-VNG,
LLC, dated as of May 1, 2013 (Incorporated by to Exhibit 10.41 reference to the Company’s
Registration Statement on Form S-11/A, filed on May 2, 2013)
Land Option Agreement by and between and Armada Hoffler, L.P. and Oyster Point Hotel
Associates, L.L.C., dated as of May 1, 2013 (Incorporated by reference to Exhibit 10.42 to the
Company’s Registration Statement on Form S-11/A, filed on May 2, 2013)

Contribution Agreement by and among Armada Hoffler, L.P., Armada Hoffler Properties, Inc. and
Oyster Point Investors, L.P., dated as of February 11, 2013 (Incorporated by reference to
Exhibit 10.43 to the Company’s Registration Statement on Form S-11/A, filed on April 26, 2013)

Form of Restricted Stock Award Agreement for Directors (Incorporated by reference to
Exhibit 10.44 to the Company’s Registration Statement on Form S-11/A, filed on May 2, 2013)

Option Agreement dated May 1, 2013 by and between Armada/Hoffler Properties, L.L.C. and
Armada Hoffler, L.P. (Incorporated by reference to Exhibit 10.45 to the Company’s Registration
Statement on Form S-11/A, filed on May 2, 2013)

Credit Agreement among Armada Hoffler, L.P., Armada Hoffler Properties, Inc., Bank of
America, Regions Bank and Merrill Lynch, Pierce, Fenner & Smith Incorporated, dated as of
May 13, 2013 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K, filed May 17, 2013)

Option Transfer Agreement by and among Town Center Associates, L.L.C. Armada/Hoffler
Properties, L.L.C., City Center Associates, L.L.C. and Armada Hoffler, L.P., dated as of May 10,
2013 (Incorporated by reference to Exhibit 10.14 to the Company’s Quarterly Report on
Form 10-Q, filed August 14, 2013)

Construction Loan Agreement among TCA Block 11 Apartments, LLC and TCA Block 11
Office, LLC as Borrower and Bank of America, N.A., as Administrative Agent, dated as of
July 30, 2013 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K, filed August 13, 2013)

List of Subsidiaries of Armada Hoffler Properties, Inc.

Consent of Ernst & Young LLP, Independent Public Accounting Firm

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Certification of the Chief Executive 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

Exhibit

Number

Description

101.LAB*** XBRL Taxonomy Extension Label Linkbase Document

101.PRE*** XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF*** XBRL Taxonomy Extension Presentation Linkbase Document

*
Filed herewith
** Furnished herewith
*** Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101

hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12
of the Securities Act of 1933, as amended, and are deemed not filed for the purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

List of Subsidiaries of Armada Hoffler Properties, Inc.

EXHIBIT 21.1

Name
Armada Hoffler, L.P.
AHP Holding, Inc.
AHP Asset Services, LLC
AHP Construction, LLC
AHP Development, LLC
AHP Tenant Services, LLC
AHP Acquisitions, LLC
New Armada Hoffler Properties I, LLC
New Armada Hoffler Properties II, LLC
Bermuda Shopping Center, L.L.C.
BSE/AH Blacksburg Apartments, LLC
Broad Creek PH. I, L.L.C.
Broad Creek PH. II, L.L.C.
Broad Creek PH. III, L.L.C.
Columbus Tower, L.L.C.
Columbus Tower Block 5-A2 Associates, L.L.C.
AH Columbus II, L.L.C.
HT Tyre Neck, L.L.C.
Hanbury Village II, L.L.C.
Hoffler and Associates EAT, LLC
Armada/Hoffler Charleston Associates, L.P.
North Pointe PH. 1 Limited Partnership
North Pointe-CGL, L.L.C.
North Point Development Associates, L.P.
North Pointe Outparcels, L.L.C.
North Pointe VW4, L.L.C.
Ferrell Parkway Associates, L.L.C.
TCA Block 4 Retail, L.L.C.
Armada/Hoffler Tower 4, L.L.C.
Town Center Associates 7, L.L.C.
Town Center Associates 12, L.L.C.
Lake View AH-VNG, LLC
Williamsburg Medical Building, LLC
AH Sandbridge, L.L.C.
Courthouse Marketplace Outparcels, L.L.C.
Greenbrier Technology Center II Associates, L.L.C.
TCA Block 6, L.L.C.
Armada/Hoffler Block 8 Associates, L.L.C.
AH Richmond Tower I, L.L.C.
Town Center Associates 11, L.L.C.
AH Durham Apartments, L.L.C.
AH Southeast Commerce Center, L.L.C.
AH Greentree, L.L.C.
Bermuda Marketplace, Inc.
FBJ Investors, Inc.
Gateway Centre, L.L.C.
A/H North Pointe, Inc.
North Point Development Associates, L.L.C.
TCA Block 3, Inc.
TCA Block 8, Inc.
A/H Harrisonburg Regal L.L.C.

Place of Organization
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia

Town Center Block 10 Apartments, L.P.
TCA 10 GP, LLC
Armada Hoffler Manager, LLC
Oyster Point Office Building, LLC
Tower Manager, LLC
Hanbury GP, LLC
FBJ GP, LLC
TCA Block 11 Office, LLC
TCA Block 11 Apartments, LLC
Greenbrier Ocean Partners, LLC
Greenbrier Ocean Partners II, LLC
Hopkins Village, L.L.C.
Washington Avenue Apartments, L.L.C.

Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia
Virginia

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-188545)
pertaining to the Armada Hoffler Properties, Inc. 2013 Equity Incentive Plan of Armada Hoffler Properties, Inc.
of our report dated March 31, 2014, with respect to the consolidated and combined financial statements and
schedule of Armada Hoffler Properties, Inc. included in this Annual Report (Form 10-K) for the year ended
December 31, 2013.

/s/ Ernst & Young LLP

Richmond, Virginia
March 31, 2014

SARBANES-OXLEY SECTION 302(a) CERTIFICATION

EXHIBIT 31.1

I, Louis S. Haddad, certify that:

1.

I have reviewed this Annual Report on Form 10-K 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(s) 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))
[intentionally omitted] (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)

[Intentionally omitted];

(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; and

5.

The registrant’s other certifying officer(s) 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: March 31, 2014

/s/ Louis S. Haddad

Louis S. Haddad
Chief Executive Officer

SARBANES-OXLEY SECTION 302(a) CERTIFICATION

EXHIBIT 31.2

I, Michael P. O’Hara, certify that:

1.

I have reviewed this Annual Report on Form 10-K 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(s) 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))
[intentionally omitted] (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)

[Intentionally omitted];

(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; and

5.

The registrant’s other certifying officer(s) 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: March 31, 2014

/s/ Michael P. O’Hara

Michael P. O’Hara
Chief Financial Officer

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EXHIBIT 32.1

In connection with the Annual Report of Armada Hoffler Properties Inc. (the “Company”) on Form 10-K for the
period ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), I, Louis S. Haddad, Chief Executive Officer, certify, pursuant to 18 U.S.C. § 1350, as adopted
pursuant to § 906 of the Sarbanes-Oxley Act of 2002, in my capacity as an officer of the Company that, to my
knowledge:

1.

2.

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.

Date: March 31, 2014

/s/ Louis S. Haddad

Louis S. Haddad
Chief Executive Officer

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EXHIBIT 32.2

In connection with the Annual Report of Armada Hoffler Properties, Inc. (the “Company”) on Form 10-K for the
period ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), I, Michael P. O’Hara, Chief Financial Officer, certify, pursuant to 18 U.S.C. § 1350, as adopted
pursuant to § 906 of the Sarbanes-Oxley Act of 2002, in my capacity as an officer of the Company that, to my
knowledge:

1.

2.

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.

Date: March 31, 2014

/s/ Michael P. O’Hara
Michael P. O’Hara
Chief Financial Officer

CORPORATE INFORMATION

BOARD OF DIRECTORS

Daniel A. Hoffler
Executive Chairman of the Board

A. Russell Kirk
Vice Chairman of the Board 

Louis S. Haddad
President and Chief Executive Officer

SENIOR MANAGEMENT

Louis S. Haddad
President and Chief Executive Officer

Eric E. Apperson
President of Construction

SHAREHOLDER INFORMATION

Corporate Office
Armada Hoffler Properties
222 Central Park Avenue, Suite 2100
Virginia Beach, VA 23462
757.366.4000
www.ArmadaHoffler.com 

Independent Accountants & Auditors
Ernst & Young LLP
The Edgeworth Building
Suite 201
2100 East Cary Street
Richmond, VA 23223
804.344.6000

John W. Snow
Lead Independent Director

George F. Allen
Independent Director

James A. Carroll
Independent Director

James C. Cherry
Independent Director

Joseph W. Prueher
Independent Director

Shelly R. Hampton
President of Asset Management

Anthony P. Nero
President of Development

Michael P. O’Hara
Chief Financial Officer and Treasurer

Eric L. Smith
Vice President of Operations and Secretary

Transfer Agent
Broadridge
2 Journal Square, 7th Floor
Jersey City, NJ 07306
201.714.3800  

Investor Services
If you have questions regarding security ownership  
or would like to request printed information, please  
contact the Company’s Investor Relations Department. 
Email Julie Trudell at jtrudell@ArmadaHoffler.com or  
call 757.366.6692.

Annual Report Design by Curran & Connors, Inc. / www.curran-connors.com

ARMADA HOFFLER PROPERTIES
222 Central Park Avenue, Suite 2100 : Virginia Beach, VA 23462
757.366.4000 : www.ArmadaHoffler.com

A Solid Foundation for Sustained Growth