2024
ANNUAL REPORT
A MESSAGE
TO OUR
SHAREHOLDERS
We’ve turned the page to an exciting new chapter
at Armada Hoffler, and I am honored to lead the
company as we move forward in pursuit of our
long-term objectives. I’m pleased to share that we
achieved outstanding operational performance in
2024. Over the past year, we made significant
strides in leasing, finalized key developments,
completed asset dispositions and successfully
executed a $108 million common equity offering
that reduced leverage.
Our focus remains unwavering on our core goal:
enhancing income streams and strengthening our
balance sheet. In the short term, our strategy is
designed to position the company for sustainable
growth while preserving financial stability in an
ever-evolving market. With a continued focus on
maintaining a robust balance sheet, we’re excited
that our success across all areas of the business not
only strengthens the company’s stability but also
unlocks new growth opportunities. We will continue
to prioritize the continuous improvement of the
company’s quality, which serves as the cornerstone
of our value proposition.
2
STRATEGY
Armada Hoffler’s primary business objectives
are to: continue to acquire and manage high
quality multifamily, office, and retail properties
in our target markets, finance and operate our
portfolio in a manner that increases cash flow and
property values, pursue selective acquisition and
disposition opportunities, and deliver long-term
sustainable shareholder value. Armada Hoffler
seeks to achieve our objectives through the
following strategies:
•
Armada Hoffler intends to continue growing
our asset base and create value through the
selective acquisition of high-quality properties
that are well-located in submarkets, with
strong demand, which we believe will provide
solid returns.
•
Armada Hoffler intends to optimize
operational efficiency and maximize cash
flow by implementing strategies such
as reducing operating costs, optimizing
property performance, and focusing on
value-add enhancements such as strategic
redevelopment opportunities and tenant
retention strategies to enhance the long-term
value of each property.
•
Armada Hoffler seeks to provide financial
stability, liquidity, and the ability to invest in
growth opportunities by managing assets,
liabilities, and equity efficiently.
•
Armada Hoffler intends to opportunistically
divest properties when we believe returns have
been maximized and we believe redeploying
the capital into new acquisition, repositioning,
or redevelopment projects will generate higher
potential risk-adjusted returns.
•
Armada Hoffler intends to selectively deploy
capital with our real estate financing platform
in order to create opportunities to acquire
select properties.
OPERATIONAL
ACHIEVEMENTS
We are pleased to highlight the following
operational achievements for the year. Our
strong performance reflects the continued
success of our strategic leasing, effective asset
management, and disciplined capital allocation.
A major driver of our exceptional operational
metrics is the composition of our portfolio—58%
of which consists of mixed-use communities.
These amenity-rich environments, which integrate
office, residential, and retail components, continue
to outperform, as demand remains strong for
high-quality, well-located spaces. Notably, only
2% of our office assets are located outside of
mixed-use settings, mitigating us from many of
the occupancy challenges affecting the broader
office sector. Our office tenants value the energy
and convenience of these dynamic communities,
leading to healthy retention and leasing activity.
Our retail portfolio continues to demonstrate
resilience and stability, with the vast majority
of our shopping centers anchored by high-
credit grocers. These essential retail uses drive
consistent foot traffic and provide a dependable
foundation for tenant success.
As of December 31, 2024, we achieved a weighted
average stabilized portfolio occupancy of 96%.
During the year, we executed a total of 93 lease
renewals and 44 new leases, covering a combined
952,019 net rentable square feet. We achieved
Property Segment Net Operating Income (NOI)
of $171.0 million, reflecting a 6.8% increase
from $160.1 million in the previous year. This
strong Property Segment NOI growth is a direct
result of our strategic asset mix, high tenant
retention, proactive leasing, and disciplined cost
management. We remain committed to enhancing
operational performance, optimizing our portfolio,
and delivering long-term value for
our shareholders.
ARMADA HOFFLER | 2024 ANNUAL REPORT 3
CULTURE AND TEAM
Armada Hoffler was proud to receive several awards that underscore our continued
commitment to excellence across the commercial real estate industry. We were
named one of GlobeSt.com’s 2024 Influencers in Retail Real Estate, which celebrates
the impact of our innovative retail strategies and developments. Additionally, Virginia
Business once again recognized our leadership in the 2024 Virginia 500 Power List
as well as in Virginia Business’ 100 People to Meet in 2024. Armada Hoffler has also
earned high recognition of Virginia Business’ Best Places to Work and one of CRE’s
Best Places to Work of 2024 by GlobeSt.com. These awards reflect our dedication to
fostering a supportive, engaging, and dynamic workplace for our employees.
At the end of 2024, the Board of Directors announced Lou Haddad’s retirement from
CEO and his appointment as Executive Chairman of the Board of Directors.
We are deeply grateful for Lou’s decades of dedicated service, vision, and unwavering
commitment, which have been instrumental in shaping the company’s success and
culture. I am honored to build upon the strong foundation laid under Lou’s leadership
as Chief Executive Officer and President. Additionally, we named Blair Wimbush to our
Board of Directors in 2024, followed by Jennifer Boykin in 2025, further strengthening
our leadership team for the future.
4
ACQUISITIONS AND
DISPOSITIONS
We continue to focus on recycling stabilized
assets where we believe value has been fully
realized, with limited growth potential remaining.
These are assets where institutional interest is
strong and potential buyers are willing to pay
a premium. Having the flexibility to make this
strategic choice, and to redirect capital into more
promising long-term opportunities, is a significant
advantage of our diversified portfolio across
multiple sectors. In the fourth quarter of 2024,
we took advantage of the heightened demand for
retail assets in the Southeast U.S., selling two fully
stabilized, non-core retail properties at a blended
cap rate in the low 6% range. The $82 million
aggregate sales price reflects a more than 20%
profit spread over our initial cost, validating the
company’s original development thesis.
DEVELOPMENT AND
CONSTRUCTION PROJECTS
We successfully completed delivery of our largest
development pipeline. Southern Post opened
with a ribbon cutting and grand opening block
party held on October 24, 2024. Additionally,
we substantially completed two new assets
within the Harbor Point mixed-use community:
T. Rowe Price’s global headquarters and Allied
| Harbor Point, a new multifamily asset. These
developments further enhance the value and
appeal of our portfolio. In 2024, our general
contracting and real estate services gross profit
for the year was $13.9 million.
ARMADA HOFFLER | 2024 ANNUAL REPORT 5
LOOKING AHEAD
Our 2024 successes are represented by our strong underlying portfolio, high occupancy, sustained
renewal spreads, tenant diversification and credit quality. We expect this foundation will continue to
produce healthy NOI growth in each of our asset classes. It is for these reasons we will continue to create
shareholder value for years to come.
GRATITUDE
To all of our stakeholders – investors, tenants, partners, clients, board of directors, and our exceptional
team – thank you for your continued support. I am proud to be associated with each one of you. With our
talented workforce and depth of institutional knowledge, we look to 2025 as another prosperous year.
Sincerely,
Shawn J. Tibbetts
Chief Executive Officer & President
6
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
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
46-1214914
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
222 Central Park Avenue , Suite 1000
Virginia Beach , Virginia
23462
(Address of principal executive offices)
(Zip Code)
Registrant’s Telephone Number, Including Area Code: (757) 366-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
AHH
New York Stock Exchange
6.75% Series A Cumulative Redeemable
Perpetual Preferred Stock, $0.01 par value per
share
AHHPrA
New York Stock Exchange
Securities registered pursuant to Section 12(g) 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 x No ◻
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 x
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 x No ◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such
files). Yes x No ◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company"
in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report. x
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x
As of June 30, 2024, 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 $66,068,098 million, based on the closing sales price of $11.09 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 February 21, 2025, the registrant had 79,918,740 shares of common stock outstanding. In addition, as of February 21, 2025, Armada Hoffler, L.P., the
registrant's operating partnership subsidiary (the "Operating Partnership"), had 21,401,367 common units of limited partnership interest ("OP Units")
outstanding (other than OP Units held by the registrant). Based on the 79,918,740 shares of common stock and 21,401,367 OP Units held by limited partners
other than the registrant, the registrant had a total common equity market capitalization of $902,762,153 as of February 21, 2025 (based on the closing sales
price of $8.91 on the New York Stock Exchange on such date).
Documents Incorporated by Reference
Portions of the registrant’s Definitive Proxy Statement relating to its 2025 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, 2024.
Armada Hoffler Properties, Inc.
Form 10-K
For the Fiscal Year Ended December 31, 2024
Table of Contents
PART I
Item 1.
Business.
1
Item 1A.
Risk Factors.
15
Item 1B.
Unresolved Staff Comments.
41
Item 1C.
Cybersecurity.
42
Item 2.
Properties.
43
Item 3.
Legal Proceedings.
43
Item 4.
Mine Safety Disclosures.
44
PART II
Item 5.
Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
45
Item 6.
[Reserved].
47
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
47
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.
66
Item 8.
Financial Statements and Supplementary Data.
67
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
67
Item 9A.
Controls and Procedures.
67
Item 9B.
Other Information.
67
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
68
PART III
Item 10.
Directors, Executive Officers and Corporate Governance.
69
Item 11.
Executive Compensation.
69
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
69
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
69
Item 14.
Principal Accountant Fees and Services.
69
PART IV
Item 15.
Exhibits and Financial Statement Schedules.
70
Item 16.
Form 10-K Summary.
70
Index to Exhibits
71
Signatures
74
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 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 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;
•
the inability of one or more mezzanine loan borrowers to repay mezzanine loans or similar investments in
accordance with their contractual terms;
•
difficulties in identifying or completing development, acquisition, or disposition opportunities;
•
our ability to commence or continue construction and development projects on the timeframes and terms
currently anticipated;
•
our failure to successfully operate developed and acquired properties;
•
our failure to generate income in our general contracting and real estate services segment in amounts that we
anticipate;
•
fluctuations in interest rates;
•
the impact of inflation, including increases in 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;
ii
•
decreased rental rates or increased vacancy rates;
•
conflicts of interests with our officers and directors;
•
lack or insufficient amounts of insurance;
•
environmental uncertainties and risks related to adverse weather conditions and natural disasters;
•
other factors affecting the real estate industry generally;
•
our failure to maintain our qualification as a real estate investment trust ("REIT") for U.S. federal income tax
purposes;
•
limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our
qualification as a REIT for U.S. federal income tax purposes;
•
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; and
•
potential negative impacts from changes to the U.S. tax laws.
While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We
caution investors not to place undue reliance on these forward-looking statements. For a further discussion of these and other
factors that could impact our future results, performance, or transactions, see the factors discussed in Item 1A. Risk Factors and
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations herein and in other documents
that we file from time to time with the Securities and Exchange Commission (the "SEC").
Summary Risk Factors
Our business is subject to a number of risks, including risks that may prevent us from achieving our business
objectives or may adversely affect our business, financial condition, results of operations, cash flows and prospects. These
summary risks provide an overview of many of the risks we are exposed to in the normal course of our business and are
discussed more fully in Item 1A. Risk Factors herein. These risks include, but are not limited to, the following:
•
Adverse economic and geopolitical conditions and dislocations in the credit markets, could have a material
adverse effect on our financial condition, results of operations, cash flow, cash available for distribution, and
ability to service our debt obligations.
•
We may be unable to identify and complete acquisitions and development opportunities of properties that meet
our investment criteria, which may materially and adversely affect our results of operations, cash flow, and
growth prospects.
•
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.
•
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.
•
Failure to maintain our current credit rating could adversely affect our cost of funds, related margins, liquidity,
and access to the debt capital markets.
•
Increases in interest rates, or failure to hedge effectively against interest rate changes, will increase our interest
expense and may adversely affect our financial condition, results of operations, cash flow, cash available for
distribution, and ability to service our debt obligations.
•
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.
iii
•
We may be unable to renew leases, lease vacant space, or re-lease space on favorable terms or at all as leases
expire, which could materially and adversely affect our financial condition, results of operations, cash flow,
cash available for distribution, and ability to service our debt obligations.
•
The short-term leases in our multifamily portfolio expose us to the effects of declining market rents, which
could adversely affect our results of operations, cash flow, and cash available for distribution.
•
Mezzanine loans and similar investments are subject to significant risks, and losses related to these investments
could have a material adverse effect on our financial condition and results of operations.
•
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 and adversely affect our financial
condition, results of operations, and cash flow.
•
Most of our costs, such as operating and general and administrative expenses, interest expense, and real estate
acquisition and construction costs, are subject to inflation.
•
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 ability to service our debt obligations.
•
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.
•
There can be no assurance that we will be able to realize the business objectives of our real estate investments
through disposition or refinancing of such at attractive prices or within certain time periods, and any related
illiquidity of our real estate investments could significantly impede our ability to respond to adverse changes in
the performance of our properties and harm our financial condition.
•
Daniel Hoffler and his affiliates own, directly or indirectly, a substantial beneficial interest in our company on a
fully diluted basis and have the ability to exercise significant influence on our company and our Operating
Partnership, including the approval of significant corporate transactions.
•
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.
•
Failure to maintain our qualification as a REIT would cause us to be taxed as a regular corporation, which
would substantially reduce funds available for distribution to our stockholders.
•
We may be unable to make distributions at expected levels, which could result in a decrease in the market price
of our common stock and our 6.75% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.01 par
value per share (“Series A Preferred Stock”).
iv
PART I
Item 1.
Business.
Our Company
References to "we," "our," "us," "our company," and "Armada Hoffler" 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 vertically-integrated, self-managed REIT with over four decades of experience managing high-quality
properties located primarily in the Mid-Atlantic and Southeastern United States. Our focus is to deliver long-term, sustainable
shareholder value by consistently investing in and operating the highest-quality assets, maintaining a robust and resilient
balance sheet, and fostering a dynamic, highly skilled team. In addition to the ownership of our operating property portfolio, we
historically have developed and built properties for our own account and through joint ventures between us and unaffiliated
partners and invested in development projects through real estate financing arrangements.
We were formed on October 12, 2012 under the laws of the State of Maryland and are headquartered in Virginia
Beach, Virginia. We elected to be taxed as a REIT for U.S. federal income tax purposes commencing with the taxable year
ended December 31, 2013. Substantially all of our assets are held by, and all of our operations are conducted through, our
Operating Partnership. As of December 31, 2024, we owned, through a combination of direct and indirect interests, 78.6% of
the common units of limited partnership interest in our Operating Partnership ("OP Units").
2024 and Recent Highlights
The following highlights our results of operations and significant transactions for the year ended December 31, 2024:
•
Net income attributable to common stockholders and holders of OP Units ("OP Unitholders") of $30.9 million,
or $0.33 per diluted share, for the year ended December 31, 2024.
•
Funds from operations attributable to common stockholders and OP Unitholders ("FFO") of $99.8 million, or
$1.08 per diluted share, for the year ended December 31, 2024. See "Non-GAAP Financial Measures."
•
Normalized funds from operations attributable to common stockholders and OP Unitholders ("Normalized
FFO") of $118.9 million, or $1.29 per diluted share, for the year ended December 31, 2024. See "Non-GAAP
Financial Measures."
•
As of December 31, 2024, weighted average stabilized portfolio occupancy was 96.0%. Retail occupancy was
95.3%, office occupancy was 97.2%, and multifamily occupancy was 95.3%.
•
Positive spreads on renewals across all segments:
▪
Retail 11.1% (GAAP) and 2.9% (Cash)
▪
Office 18.7% (GAAP) and 3.5% (Cash)
▪
Multifamily 4.7% (GAAP and Cash)
•
Executed 93 lease renewals and 44 new leases during the year ended December 31, 2024 for an aggregate of
952,019 of net rentable square feet.
•
Same Store net operating income ("NOI") for the year ended December 31, 2024 increased 1.9% on a GAAP
basis compared to the year ended December 31, 2023.
•
Property segment NOI of $171.0 million for the year ended December 31, 2024, which represents a 6.8%
increase compared to $160.1 million for the year ended December 31, 2023.
•
Third-party construction backlog as of December 31, 2024 was $123.8 million and general contracting and real
estate services gross profit for the year ended December 31, 2024 was $13.9 million.
•
Dividends declared during the year ended December 31, 2024 of $0.82 per share, representing a 5.8% year-
over-year increase.
1
•
During the fourth quarter of 2024, unrealized gains on non-designated interest rate derivatives that positively
affected FFO were $2.5 million. As of December 31, 2024, the asset value of our entire interest rate derivative
portfolio, net of unrealized gains, was $15.9 million. These unrealized gains are excluded from normalized
FFO.
•
In July, we realized $25.8 million in cash upon full redemption of the Solis City Park II preferred equity
investment.
•
In September, we raised $108.7 million of gross proceeds in an underwritten public offering of 10.35 million
shares of our common stock at a public offering price of $10.50 per share. Net proceeds, after deducting the
underwriting discount and offering expenses, totaled $103.5 million.
•
On September 27, 2024, we paid off the $35.0 million, $23.7 million, and $10.9 million balances of the loans
secured by the Chronicle Mill mixed-use multifamily, retail, and office property, the Premier mixed-use
multifamily and retail property, and the Market at Mill Creek retail property, respectively.
•
We delivered Southern Post Retail, Southern Post Office, and Chandler Residences, a mixed-use development
comprised of 42,000 square feet of retail space, 95,000 square feet of office space, and 137 multifamily units.
•
Consistent with our previously announced succession plan, on November 14, 2024, Louis S. Haddad informed
our board of directors of his decision to retire from his position as Chief Executive Officer of the Company
(“Chief Executive Officer”), effective December 31, 2024. Mr. Haddad remains a director and the Executive
Chairman of our board through the Company’s 2025 annual meeting of stockholders, at which Mr. Haddad is
expected to be nominated for reelection to the board.
•
Pursuant to the previously announced succession plan, the board appointed Shawn J. Tibbetts, the Company’s
President and Chief Operating Officer, to the position of Chief Executive Officer and President effective
January 1, 2025. The board appointed Mr. Tibbetts to the board in connection with his promotion to Chief
Executive Officer.
•
On November 27, 2024, we closed on a loan secured by the Premier Retail and Premier Apartments properties,
using the $29.4 million in proceeds to pay off the $24.5 million balance of the loan secured by the Southgate
Square retail property and pay down $4.9 million on our revolving credit facility.
•
On December 18, 2024, we completed the disposition of the Market at Mill Creek and Nexton Square retail
properties for gross proceeds of $82.0 million, resulting in a combined net gain on real estate dispositions of
$21.3 million. The proceeds were used to pay off the $21.1 million loan secured by the Nexton Square property
and pay down our revolving credit facility.
For definitions and discussion of FFO, Normalized FFO, NOI, and Same Store NOI, see the section below entitled
"Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations."
Our Competitive Strengths
We believe that we distinguish ourselves from other REITs through the following competitive strengths:
•
Armada Hoffler's diversified portfolio consists of high-quality retail, office, and multifamily assets, located
primarily in the Mid-Atlantic and Southeastern regions. Our portfolio is distinguished by its high quality,
featuring exceptional amenities, and is strategically located in high barrier-to-entry markets that we believe
will provide long-term value.
•
Armada Hoffler has an experienced, dedicated, and resilient senior management team that serves as the
catalyst for the organization's success, inspiring employees, driving innovation, and creating value for all
stakeholders. Our senior management team brings substantial experience in strategic business operations, as
well as ownership, management, and development of high-quality real estate properties. As of December 31,
2024, our executive officers and directors collectively held a stake of approximately 10.8% in our company
on a fully diluted basis, which we believe aligns their interests with those of our stockholders.
•
Armada Hoffler strategically focuses on target markets in the Mid-Atlantic and Southeastern regions of the
United States. These markets demonstrate attractive fundamentals driven by favorable supply and demand
characteristics, high barriers, and limited competition. We believe that our longstanding presence in our target
2
markets provides us with significant advantages in sourcing and executing development opportunities,
identifying and mitigating potential risks, and negotiating attractive pricing.
•
Armada Hoffler leverages mezzanine lending and preferred equity arrangements, which provide opportunities
to acquire completed development projects at prices that are below market or at cost and may enable us to
realize profit on projects we do not intend to own.
•
Our platform consists of asset management, development, and construction expertise, which comprise an
integrated delivery system for every project that we build for our portfolio or for third-party clients.
Our Business and Growth Strategies
Armada Hoffler's primary business objectives are to: (i) continue to acquire and manage high quality multifamily,
office, and retail properties in our target markets, (ii) finance and operate our portfolio in a manner that increases cash flow and
property values, (iii) pursue selective acquisition and disposition opportunities, and (iv) deliver long-term sustainable
shareholder value. We seek to achieve our objectives through the following strategies:
•
Armada Hoffler intends to continue to grow our asset base and create value through the selective acquisition of high-
quality properties that are well-located in submarkets, with strong demand, which we believe will provide solid
returns.
•
Armada Hoffler intends to optimize operational efficiency and maximize cash flow by implementing strategies such as
reducing operating costs, optimizing property performance, and focusing on value-add enhancements such as strategic
redevelopment opportunities and tenant retention strategies to enhance the long-term value of each property.
•
Armada Hoffler seeks to provide financial stability, liquidity, and the ability to invest in growth opportunities by
managing assets, liabilities, and equity efficiently.
•
Armada Hoffler opportunistically divests properties when we believe returns have been maximized and we believe
redeploying the capital into new acquisition, repositioning, or redevelopment projects will generate higher potential
risk-adjusted returns.
•
Armada Hoffler will selectively deploy capital with our real estate financing platform in order to create opportunities
to acquire select properties.
Our Properties
The table below sets forth certain information regarding our stabilized portfolio as of December 31, 2024. We
generally consider a property to be stabilized upon the earlier of: (i) the quarter after the property reaches 80% occupancy or
(ii) the thirteenth quarter after the property receives its certificate of occupancy. Additionally, any property that is fully or
partially taken out of service for the purpose of redevelopment is no longer considered stabilized until the redevelopment
activities are complete, the asset is placed back into service, and the stabilization criteria above are again met.
3
Property
Location
Year Built /
Renovated /
Redeveloped
Ownership
Interest
Net Rentable
Square Feet(1)
Occupancy (2)
ABR (3)
ABR per
Leased SF(3)
Retail
Town Center of Virginia Beach
249 Central Park Retail*
Virginia Beach, VA
2004
100 %
35,161
100.0 % $ 1,177,891 $
33.50
4525 Main Street Retail*
Virginia Beach, VA
2014
100 %
26,328
100.0 % 485,188
18.43
4621 Columbus Retail*(4)
Virginia Beach, VA
2020
100 %
84,000
100.0 % 1,176,000
14.00
Columbus Village*
Virginia Beach, VA
2020
100 %
62,207
100.0 % 2,022,540
32.51
Commerce Street Retail*
Virginia Beach, VA
2008
100 %
19,173
100.0 % 890,078
46.42
Fountain Plaza Retail*
Virginia Beach, VA
2004
100 %
35,961
94.4 % 1,119,318
32.98
Pembroke Square*
Virginia Beach, VA
2015
100 %
124,181
100.0 % 2,096,262
16.88
Premier Retail*
Virginia Beach, VA
2018
100 %
39,015
94.9 % 1,254,924
33.88
South Retail*
Virginia Beach, VA
2002
100 %
38,515
100.0 % 1,065,261
27.66
Studio 56 Retail*
Virginia Beach, VA
2007
100 %
11,594
100.0 % 413,118
35.63
The Cosmopolitan Retail*
Virginia Beach, VA
2020
100 %
41,872
88.6 % 1,220,239
32.90
Two Columbus Retail*
Virginia Beach, VA
2009
100 %
13,752
100.0 % 526,978
38.32
West Retail*
Virginia Beach, VA
2002
100 %
17,558
83.4 % 494,102
33.74
Harbor Point - Baltimore Waterfront
Constellation Retail*
Baltimore, MD
2016
90 %
38,464
76.7 % 783,891
26.58
Point Street Retail*
Baltimore, MD
2018
100 %
18,632
60.8 % 439,665
38.82
Grocery Anchored
Broad Creek Shopping Center (5)
Norfolk, VA
2001
100 %
121,504
97.2 % 2,330,199
19.74
Broadmoor Plaza
South Bend, IN
1980
100 %
115,059
98.2 % 1,359,075
12.03
Brooks Crossing Retail*
Newport News, VA
2016
65 % (6)
18,349
84.8 % 229,537
14.75
Delray Beach Plaza* (5)
Delray Beach, FL
2021
100 %
87,207
98.0 % 2,959,879
34.62
Greenbrier Square
Chesapeake, VA
2017
100 %
260,625
100.0 % 2,624,984
10.07
Greentree Shopping Center
Chesapeake, VA
2014
100 %
15,719
91.1 % 335,615
23.44
Hanbury Village
Chesapeake, VA
2009
100 %
98,638
100.0 % 2,045,579
20.74
Lexington Square
Lexington, SC
2017
100 %
85,440
97.2 % 1,892,535
22.79
North Pointe Center
Durham, NC
2009
100 %
226,083
100.0 % 2,996,368
13.25
Parkway Centre
Moultrie, GA
2017
100 %
61,200
100.0 % 861,149
14.07
Parkway Marketplace
Virginia Beach, VA
1998
100 %
37,804
94.2 % 712,610
20.01
Perry Hall Marketplace
Perry Hall, MD
2001
100 %
74,251
100.0 % 1,299,008
17.49
Sandbridge Commons
Virginia Beach, VA
2015
100 %
69,417
100.0 % 951,730
13.71
Tyre Neck Harris Teeter (5)
Portsmouth, VA
2011
100 %
48,859
100.0 % 559,948
11.46
Southeast Sunbelt
Chronicle Mill Retail*
Belmont, NC
2022
85 % (6)
11,530
22.4 % 112,500
43.50
North Hampton Market
Taylors, SC
2004
100 %
114,954
98.8 % 1,605,665
14.14
One City Center Retail*
Durham, NC
2019
100 %
22,679
55.7 % 421,442
33.38
Overlook Village
Asheville, NC
1990
100 %
151,365
100.0 % 2,289,281
15.12
Patterson Place
Durham, NC
2004
100 %
159,842
99.1 % 2,682,119
16.93
Providence Plaza Retail*
Charlotte, NC
2008
100 %
49,447
100.0 % 1,565,800
31.67
South Square
Durham, NC
2005
100 %
109,590
97.1 % 1,935,908
18.19
The Interlock Retail* (5)
Atlanta, GA
2021
100 %
108,379
85.0 % 5,071,860
55.08
Wendover Village
Greensboro, NC
2004
100 %
176,997
99.3 % 3,635,403
20.69
Mid-Atlantic
Dimmock Square
Colonial Heights, VA
1998
100 %
106,166
100.0 % 1,932,887
18.21
Harrisonburg Regal
Harrisonburg, VA
1999
100 %
49,000
100.0 % 753,620
15.38
Liberty Retail*
Newport News, VA
2013
100 %
26,534
75.8 % 371,241
18.45
Marketplace at Hilltop (5)
Virginia Beach, VA
2001
100 %
116,953
97.3 % 2,810,566
24.71
Red Mill Commons
Virginia Beach, VA
2005
100 %
373,808
96.1 % 7,118,113
19.81
Southgate Square
Colonial Heights, VA
2016
100 %
260,131
81.2 % 3,256,484
15.42
Southshore Shops
Midlothian, VA
2006
100 %
40,307
100.0 % 885,326
21.96
The Edison Retail*
Richmond, VA
2014
100 %
20,196
— %
58,276
—
Total / Weighted Average
3,824,446
95.3 % $ 72,830,162 $
19.98
4
Property
Location
Year Built /
Renovated /
Redeveloped
Ownership
Interest
Net Rentable
Square Feet(1)
Occupancy (2)
ABR (3)
ABR per
Leased SF(3)
Office
Town Center of Virginia Beach
249 Central Park Office*
Virginia Beach, VA
2004
100 %
57,103
100.0 %
$ 1,448,997
$
25.38
4525 Main Street Office*
Virginia Beach, VA
2014
100 %
208,760
100.0 %
6,932,898
33.21
4605 Columbus Office*
Virginia Beach, VA
2002
100 %
19,335
100.0 %
522,045
27.00
Armada Hoffler Tower* (7)
Virginia Beach, VA
2002
100 %
296,200
98.6 %
9,196,624
31.49
One Columbus*
Virginia Beach, VA
1984
100 %
129,066
98.3 %
3,416,942
26.93
Two Columbus Office*
Virginia Beach, VA
2009
100 %
94,708
91.6 %
2,402,802
27.68
Harbor Point - Baltimore Waterfront
Constellation Office*
Baltimore, MD
2016
90 %
453,018
100.0 %
15,484,541
34.18
Thames Street Wharf* (7)
Baltimore, MD
2010
100 %
263,426
98.8 %
8,071,078
31.01
Wills Wharf* (5)
Baltimore, MD
2020
100 %
327,991
93.8 %
9,471,823
30.79
Southeast Sunbelt
Chronicle Mill Office*
Belmont, NC
2022
85 % (6)
5,932
100.0 %
177,960
30.00
One City Center Office*
Durham, NC
2019
100 %
128,920
95.3 %
3,270,013
26.63
Providence Plaza Office*
Charlotte, NC
2008
100 %
53,671
100.0 %
1,636,062
30.48
The Interlock Office* (5)
Atlanta, GA
2021
100 %
198,872
88.6 %
6,845,907
38.84
Mid-Atlantic
Brooks Crossing Office*
Newport News, VA
2019
100 %
98,061
100.0 %
2,002,945
20.43
Total / Weighted Average
2,335,063
97.2 %
$ 70,880,637
$
31.24
Property
Location
Year Built /
Renovated /
Redeveloped
Ownership
Interest
Units
Occupancy(2)
AQR (8)
Monthly Rent
per Occupied
Unit
Multifamily
Town Center of Virginia Beach
Encore Apartments*
Virginia Beach, VA
2014
100 %
286
93.7 %
$ 5,862,228
$
1,823
Premier Apartments*
Virginia Beach, VA
2018
100 %
131
96.2 %
3,046,848
2,015
The Cosmopolitan*
Virginia Beach, VA
2020
100 %
342
93.9 %
8,972,952
2,329
Harbor Point - Baltimore Waterfront
1305 Dock Street*
Baltimore, MD
2016
90 %
103
96.1 %
3,115,440
2,622
1405 Point* (5)
Baltimore, MD
2018
100 %
289
94.5 %
8,844,300
2,700
Southeast Sunbelt
Chronicle Mill Apartments*
Belmont, NC
2022
85 % (6)
238
96.6 %
5,055,672
1,832
Greenside Apartments
Charlotte, NC
2018
100 %
225
90.7 %
4,598,520
1,878
The Everly*
Gainesville, GA
2022
100 %
223
95.5 %
4,596,096
1,798
Mid-Atlantic
Liberty Apartments*
Newport News, VA
2013
100 %
197
98.5 %
4,070,124
1,748
Smith's Landing (5)
Blacksburg, VA
2009
100 %
284
100.0 %
6,121,680
1,796
The Edison*
Richmond, VA
2014
100 %
174
94.3 %
3,176,436
1,614
Total / Weighted Average
2,492
95.3 %
$ 57,460,296
$
2,015.30
________________________________________
* Mixed-use asset or located in a mixed-use development.
(1)
The net rentable square footage for each of our retail and office properties is the sum of (a) the square footage 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 consistent with the Building Owners and Managers Association 1996 measurement guidelines.
(2)
Occupancy for each of our retail and office properties is calculated as (a) square footage under executed leases as of December 31, 2024,
divided by (b) net rentable square feet, expressed as a percentage. Occupancy for our multifamily properties is calculated as (a) average
of the number of occupied units on the 20th day of each of the trailing three months from the reporting period end date, divided by (b)
total units available, as of such date expressed as a percentage.
(3)
For the properties in our retail and office portfolios, annualized base rent ("ABR") is calculated by multiplying (a) monthly base rent
(defined as cash base rent, before contractual tenant concessions and abatements, and excluding tenant reimbursements for expenses paid
by us) as of December 31, 2024 for in-place leases as of such date by (b) 12, and does not give effect to periodic contractual rent
increases or contingent rental revenue (e.g., percentage rent based on tenant sales thresholds). ABR per leased square foot is calculated
by dividing (a) ABR by (b) square footage under in-place leases as of December 31, 2024. In the case of triple net or modified gross
5
leases, our calculation of ABR does not include tenant reimbursements for real estate taxes, insurance, common area, or other operating
expenses.
(4)
Formerly known as Apex Entertainment.
(5)
We lease all or a portion of the land underlying this property pursuant to a ground lease.
(6)
We are entitled to a preferred return on our investment in this property.
(7)
As of December 31, 2024, we occupied 54,621 square feet at these two properties at an ABR of $1.7 million, or $30.37 per leased square
foot, which amounts are reflected in this table. The rent paid by us is eliminated in the consolidated financial statements in accordance
with U.S. generally accepted accounting principles ("GAAP").
(8)
For the properties in our multifamily portfolio, annualized quarterly rent ("AQR") is calculated by multiplying (a) revenue for the quarter
ended December 31, 2024 by (b) four.
Lease Expirations
The following tables summarize the scheduled expirations of leases in our retail and office operating property
portfolios as of December 31, 2024. The information in the following tables does not assume the exercise of any renewal
options.
Retail Lease Expirations
Year of Lease Expiration(1)
Number of Leases
Expiring
Square Footage of
Leases Expiring
% Portfolio
Net Rentable
Square Feet
ABR
% of Retail
Portfolio ABR
Available
—
179,770
4.7 % $
—
— %
Month-to-Month
2
1,602
— %
59,262
0.1 %
2024 (2)
3
10,872
0.3 %
499,064
0.7 %
2025
55
165,063
4.3 %
3,432,707
4.7 %
2026
84
436,858
11.4 %
8,988,445
12.3 %
2027
86
442,832
11.6 %
8,627,079
11.8 %
2028
74
332,105
8.7 %
7,399,089
10.2 %
2029
76
413,435
10.8 %
7,725,405
10.6 %
2030
72
528,541
13.8 %
10,806,498
14.8 %
2031
37
254,741
6.7 %
5,108,641
7.0 %
2032
30
302,420
7.9 %
5,476,435
7.5 %
2033
26
92,276
2.4 %
2,223,337
3.1 %
2034
18
86,110
2.3 %
1,855,067
2.5 %
Thereafter
41
577,821
15.1 %
10,629,133
14.7 %
Total / Weighted Average
604
3,824,446
100.0 % $
72,830,162
100.0 %
________________________________________
(1) Excludes leases from development and redevelopment properties that have been delivered but are not yet stabilized.
(2) Represents leases that expired on December 31, 2024. The spaces were available for lease as of January 1, 2025.
6
Office Lease Expirations
Year of Lease Expiration(1)
Number of Leases
Expiring
Square Footage of
Leases Expiring
% Portfolio
Net Rentable
Square Feet
ABR
% of Office
Portfolio ABR
Available
—
66,385
2.8 % $
—
— %
Month-to-Month
7
15,137
0.6 %
180,545
0.3 %
2024 (2)
1
2,174
0.1 %
64,263
0.1 %
2025
10
62,742
2.7 %
2,604,074
3.6 %
2026
10
46,312
2.0 %
1,429,004
2.0 %
2027
20
180,570
7.7 %
6,205,737
8.7 %
2028
14
111,841
4.8 %
3,441,772
4.8 %
2029
16
356,996
15.3 %
10,183,388
14.3 %
2030
14
169,665
7.3 %
5,433,353
7.6 %
2031
8
142,915
6.1 %
4,171,960
5.8 %
2032
4
43,522
1.9 %
1,228,475
1.7 %
2033
6
70,374
3.0 %
2,153,946
3.0 %
2034
6
119,019
5.1 %
2,986,668
4.2 %
Thereafter
13
947,411
40.6 %
31,320,571
43.9 %
Total / Weighted Average
129
2,335,063
100.0 % $
71,403,756
100.0 %
________________________________________
(1) Excludes leases from development and redevelopment properties that have been delivered but are not yet stabilized.
(2) Represents leases that expired on December 31, 2024. The spaces were available for lease as of January 1, 2025.
7
Tenant Diversification
The following table lists the 20 largest tenants in our retail and office operating property portfolios, based on ABR as
of December 31, 2024 ($ in thousands):
Tenant (1)
Number of
Leases
Lease
Expiration
ABR
% of Total
ABR/AQR
Constellation Energy Generation
1
2036
$
15,463
7.7 %
Morgan Stanley
3
2028 - 2035
8,883
4.4 %
Harris Teeter/Kroger
6
2026 - 2035
3,781
1.9 %
Clark Nexsen
1
2029
2,914
1.4 %
Canopy by Hilton
1
2045
2,698
1.3 %
Dick's Sporting Goods/Golf Galaxy
2
2028 - 2032
1,977
1.0 %
Franklin Templeton
1
2038
1,898
0.9 %
Huntington Ingalls Industries
2
2025 - 2029
1,774
0.9 %
Duke University
1
2029
1,742
0.9 %
TJ Maxx/Homegoods
5
2026 - 2030
1,554
0.8 %
PetSmart
5
2027 - 2030
1,527
0.8 %
Georgia Tech
1
2031
1,446
0.7 %
WeWork
1
2034
1,348
0.7 %
Mythics
1
2030
1,311
0.7 %
Puttshack
1
2036
1,203
0.6 %
Apex Entertainment
1
2035
1,176
0.6 %
Pindrop
1
2027
1,172
0.6 %
Kimley-Horn
1
2027
1,145
0.6 %
Amazon/Whole Foods
1
2040
1,144
0.6 %
Ross Dress for Less
3
2027 - 2030
1,122
0.6 %
Top 20 Total
$
55,278
27.7 %
________________________________________
(1) Excludes leases from development and redevelopment properties that have been delivered but are not yet stabilized.
Development Pipeline
In addition to the properties in our operating property portfolio as of December 31, 2024, we had the following
properties in various stages of development and stabilization. We generally consider a property to be stabilized upon the earlier
of: (i) the quarter after the property reaches 80% occupancy or (ii) the thirteenth quarter after the property receives its certificate
of occupancy.
Development, Not Delivered
Schedule (1)
Estimated
Initial
Stabilized
AHH
Property
Type
Property
Location
Size (1)
Start
Occupancy
Operation (2)
Ownership %
Southern Post Retail
Roswell, GA
42,000 sf retail
4Q21
3Q24
1Q26
100%
Retail*
Southern Post Office
Roswell, GA
95,000 sf office
4Q21
2Q24
1Q26
100%
Office*
Chandler Residences
Roswell, GA
137 multifamily units
4Q21
2Q24
2Q25
100%
Multifamily*
Redevelopment
AHH
Property
Type
Property
Location
Ownership %
Columbus Village II
Virginia Beach, VA
100%
Retail*
________________________________________
8
* Mixed-use asset or located in a mixed-use development.
(1)
Represents estimates that may change as the development/stabilization process proceeds.
(2)
Estimated first full quarter of stabilized operations. Estimates are inherently uncertain, and we can provide no assurance that our
assumptions regarding the timing of stabilization will prove accurate.
Our execution on all of the projects identified in the preceding tables are subject to, among other factors, regulatory
approvals, financing availability, and suitable market conditions.
Equity Method Investments - Development
Equity Method Investments
as of December 31, 2024 (1)
($ in '000s)
Schedule
Estimated
Estimated
Project
Cost
Equity
Requirement
Funded
to Date
Initial
Occupancy
Stabilized
Operation(2)
AHH
Property
Type
Property
Location
Size
Start
Ownership
%
T. Rowe Price
Global HQ |
(Harbor Point
Parcel 3)
Baltimore,
MD
553,000 sf
office / 20,200
sf retail / 250
parking spaces
$ 277,900
$
52,900
$ 46,400
2Q22
1Q25
1Q25
50%
Office*
Allied | (Harbor
Point Parcel 4)
Baltimore,
MD
312 units /
15,800 sf retail /
1,252 parking
spaces
239,300
115,900
115,900
2Q22
1Q25
3Q26
90%
(3)
Multifamily*
Total
$ 517,200
$
168,800
$ 162,300
________________________________________
* Mixed-use asset or located in a mixed-use development.
(1)
All items in the table (other than location, funded to date as of December 31, 2024, development start, our ownership percentage, and
property type) are estimates that may change as the development and redevelopment process proceeds.
(2)
Estimated first full quarter of stabilized operations. Estimates are inherently uncertain, and we can provide no assurance that our
assumptions regarding the timing of stabilization will prove accurate.
(3)
We currently have a 78% ownership interest and hold an option to increase our ownership interest to 90%.
Equity Method Investments
Harbor Point Parcel 3
During December 2020, we formed a 50/50 joint venture to develop and build T. Rowe Price's new global
headquarters in Baltimore's Harbor Point. T. Rowe Price agreed to a 15-year lease, with three 5-year extension options. They
will occupy at least 553,000 square feet of office space. Plans for this development may evolve as the development process
proceeds. Project costs at this time are subject to change and currently estimated at $277.9 million. We have a current projected
equity commitment of $52.9 million relating to this project, of which we had funded $46.4 million as of December 31, 2024.
We provided a completion guarantee to the lender for this project. The construction loan is cross-collateralized with Harbor
Point Parcel 4.
Harbor Point Parcel 4
In conjunction with the Harbor Point Parcel 3 project, we acquired a 78% interest in Harbor Point Parcel 4, a real
estate venture with Beatty Development Group, for purposes of developing a mixed-use project, which is planned to include
312 apartments units, 15,800 square feet of retail space, and 1,252 spaces of structured parking on a neighboring site to
accommodate T. Rowe Price's parking requirements and other parking requirements for the surrounding area. We hold an
option to increase our ownership to 90%. We have a current projected equity commitment of $115.9 million relating to this
project, which was fully funded as of December 31, 2024. Plans for this project may also evolve as the development process
proceeds. Current estimated project costs are $239.3 million. We have provided a completion guarantee and a partial payment
guarantee to the lender for this project. The construction loan is cross-collateralized with Harbor Point Parcel 3. As of
December 31, 2024, $77.2 million has been funded on this senior loan.
9
Real Estate Financing Investments
Solis City Park II
On March 23, 2022, we entered into a $20.6 million preferred equity investment for the development of a multifamily
property located in Charlotte, North Carolina. The investment has economic terms consistent with a note receivable, including a
mandatory redemption or maturity on April 28, 2026, and it is accounted for as a note receivable. Our investment bears interest
at a rate of 13%, compounded annually, with a minimum preferred return of $5.2 million, which represents approximately 24
months of interest. Our investment also earns an equity fee on our commitment of $0.2 million, which is amortized through the
date of redemption.
On July 10, 2024, the borrower paid off the Solis City Park II note receivable in full. We received a total of
$25.8 million, which consisted of $20.6 million outstanding principal and $5.2 million of accrued interest.
During the year ended December 31, 2024, we recognized $1.5 million of interest income on the note. See Note 7 to
our consolidated financial statements in Item 8 of this Annual Report on Form 10-K.
Solis Gainesville II
On October 3, 2022, we entered into a $19.6 million preferred equity investment for the development of a multifamily
property located in Gainesville, Georgia (Solis Gainesville II). This project is located nearby our recently completed
multifamily development project in Gainesville, The Everly. The preferred equity investment has economic and other terms
consistent with a note receivable, including a mandatory redemption or maturity on October 3, 2026, and it is accounted for as a
note receivable. Our investment bears interest at a rate of 14.0% through the first 24 months of the investment. Beginning on
October 3, 2024, the investment will bear interest at a rate of 10.0% for 12 months. On October 3, 2025, the investment will
again bear interest at a rate of 14.0% through maturity. Additionally, effective January 1, 2023, the investment earns an unused
commitment fee of 10.0% on the unfunded portion of the investment's maximum loan commitment and an equity fee on our
commitment of $0.3 million, which is amortized through the date of redemption. Both the interest and unused commitment fee
compound annually. The preferred equity investment is subject to a minimum interest guarantee of $5.9 million over the life of
the investment, which represents approximately 24 months of interest.
On July 10, 2024, we signed an amendment to the operating agreement for the entity through which we own our real
estate financing investment with respect to Solis Gainesville II to reduce the preference rate on the investment from 10.0% to
6.0% starting on January 1, 2025. We also received a call option to purchase a controlling interest in the entity that owns Solis
Gainesville II at fair market value during the period from January 1, 2025 to December 31, 2025, which option also gives us a
right of first refusal to buy the property during the same period.
The balance on the Solis Gainesville II note was $25.3 million as of December 31, 2024, which includes $5.4 million
of cumulative accrued interest, $0.4 million of cumulative accrued unused commitment fees, and a discount of $0.1 million due
to unamortized equity fees. During the year ended December 31, 2024, we recognized $3.0 million of interest income on the
note. As of December 31, 2024, this note was fully funded and the development property was approximately 69% leased. See
Note 7 to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K.
Solis Kennesaw
On May 25, 2023, we entered into a $37.9 million preferred equity investment for the development of a multifamily
property located in Marietta, Georgia. The investment has economic terms consistent with a note receivable, including a
mandatory redemption or maturity on May 25, 2027, and it is accounted for as a note receivable. Our investment bears interest
at a rate of 14.0% for the first 24 months. Beginning on May 25, 2025, the investment will bear interest at a rate of 9.0% for the
following 12 months. On May 25, 2026, the investment will again bear interest at a rate of 14.0% through maturity. The interest
compounds annually. We also earn an unused commitment fee of 11.0% on the unfunded portion of the investment's maximum
commitment, which does not compound, and an equity fee on our commitment of $0.6 million which is amortized through the
date of redemption. The preferred equity investment is subject to a minimum interest guarantee of $13.1 million over the life of
the investment, which represents approximately 27 months of interest.
The balance on the Solis Kennesaw note was $45.6 million as of December 31, 2024, which includes $5.2 million of
cumulative accrued interest, $2.9 million of cumulative accrued unused commitment fees, and a discount of $0.3 million due to
unamortized equity fees. During the year ended December 31, 2024, we recognized $5.4 million of interest income on the note.
See Note 7 to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K.
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Solis Peachtree Corners
On July 26, 2023, we entered into a $28.4 million preferred equity investment for the development of a multifamily
property located in Peachtree Corners, Georgia ("Solis Peachtree Corners"). The preferred equity investment has economic and
other terms consistent with a note receivable, including a mandatory redemption feature effective on October 27, 2027, and it is
accounted for as a note receivable. Our investment bears interest at a rate of 15.0% for the first 27 months. Beginning on
November 1, 2025, the investment will bear interest at a rate of 9.0% for 12 months. On November 1, 2026, the investment will
again bear interest at a rate of 15.0% through maturity. The interest compounds annually. We also earn an unused commitment
fee of 10.0% on the unfunded portion of the investment's maximum loan commitment, which also compounds annually, and an
equity fee on our commitment of $0.4 million, which is amortized through the date of redemption. The preferred equity
investment is subject to a minimum interest guarantee of $12.0 million over the life of the investment, which represents
approximately 30 months of interest.
The balance on the Solis Peachtree Corners note was $33.5 million as of December 31, 2024, which includes
$3.3 million of cumulative accrued interest, $2.1 million of cumulative accrued unused commitment fees, and a discount of
$0.3 million due to unamortized equity fees. During the year ended December 31, 2024, we recognized $4.1 million of interest
income on the note. See Note 7 to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K.
The Allure at Edinburgh
On July 26, 2023, we entered into a $9.2 million preferred equity investment for the development of a multifamily
property located in Chesapeake, Virginia ("The Allure at Edinburgh"). The preferred equity investment has economic and other
terms consistent with a note receivable, including a mandatory redemption feature effective on January 16, 2028, and it is
accounted for as a note receivable. Our investment bears interest at a rate of 15.0%, which does not compound. Upon The
Allure at Edinburgh obtaining a certificate of occupancy, the investment will bear interest at a rate of 10.0%. The common
equity partner in the development property holds an option to sell the property to us at a predetermined amount if certain
conditions are met. We also hold an option to purchase the property at any time prior to maturity of the preferred equity
investment, and at the same predetermined amount as the common equity partner's option to sell.
The balance on The Allure at Edinburgh note was $11.2 million as of December 31, 2024, which includes $2.0 million
of cumulative accrued interest. During the year ended December 31, 2024, we recognized $1.4 million of interest income on the
note. As of December 31, 2024, this note was fully funded and the development property was approximately 24% leased. See
Note 7 to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K.
Solis North Creek
On July 10, 2024, we entered into a $27.0 million preferred equity investment for the development of a multifamily
property located in Huntersville, North Carolina ("Solis North Creek"). The preferred equity investment has economic terms
consistent with a note receivable, including a mandatory redemption feature effective on August 8, 2030, and it is accounted for
as a note receivable. Our investment bears interest at a rate of 12.0% for the first 24 months. Beginning on July 10, 2026, the
investment will bear interest at a rate of 9.0% for 12 months. On July 10, 2027, the investment will again bear interest at 12.0%
through maturity. The interest compounds annually. We also earn an unused commitment fee of 4.5% on the unfunded portion
of the investment's maximum loan commitment, which also compounds annually. The preferred equity investment was initially
subject to a minimum interest guarantee of $8.9 million over the life of the investment.
On August 8, 2024, we signed an amendment to the operating agreement for the entity through which we own our real
estate financing investment with respect to Solis North Creek to reduce the equity funding requirement from $27.0 million to
$26.8 million and the minimum interest guarantee from $8.9 million to $8.8 million.
The balance on the Solis North Creek note was $5.8 million as of December 31, 2024, which includes $0.2 million of
cumulative accrued interest and $0.5 million of cumulative accrued unused commitment fees. During the year ended
December 31, 2024, we recognized $0.7 million of interest income on the note. See Note 7 to our consolidated financial
statements in Item 8 of this Annual Report on Form 10-K.
Acquisitions
The Company did not acquire any properties during the year ended December 31, 2024.
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Dispositions
On December 18, 2024, we completed the dispositions of the Market at Mill Creek and Nexton Square retail properties
for gross proceeds of $82.0 million, resulting in a combined net gain on real estate dispositions of $21.3 million.
Other Real Estate Transactions
During the year ended December 31, 2024, we recognized impairment of real estate of $1.5 million and wrote off
development costs of $5.5 million related to undeveloped land under predevelopment, which reflects the excess of the book
value of the property's assets over the estimated fair value of the property. An income tax benefit of $1.6 million related to the
impairment and development costs was recognized, creating an income tax benefit for the year ended December 31, 2024, that
was attributable to the profits and losses of our development and construction businesses operated through our TRS. On June
25, 2024, we entered into a non-binding letter of intent to sell the property to an unrelated third party for $4.8 million, which
was used as an approximation of fair value as a level 3 input in the fair value hierarchy. We anticipate completing the sale of the
property in 2025. The land parcel was classified as held-for-sale as of December 31, 2024.
Tax Status
We have elected and qualified to be taxed as a REIT for U.S. federal income tax purposes commencing with our
taxable year ended December 31, 2013. Our continued 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 Internal Revenue
Code of 1986, as amended (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 maintain the requirements for qualification and taxation as a REIT for U.S. federal income tax purposes. In
addition, we have elected to treat AHP Holding, Inc., which, through its wholly-owned subsidiaries, operates 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 at least 90% of their REIT taxable income each year, 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, such as 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 but one of the properties in our portfolio as of December 31, 2024 were located in Maryland, Virginia,
North Carolina, South Carolina, Florida and Georgia, 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 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 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
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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 of 1990 (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 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 material liability.
Environmental laws also govern the presence, maintenance, and removal of asbestos-containing building materials
("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
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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. However, 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 retail, office, and multifamily real estate, many of
which own properties similar to ours in the same markets in which our properties are located and some 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-lease 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, acquisition, and lending opportunities. Our competitors may be
able to pay higher property acquisition prices, may have private access to opportunities not available to us, may have more
financial resources than we do, and may 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 or increasing
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
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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.
Human Capital
As of December 31, 2024, we had 148 employees. We are committed to providing each employee with a safe,
welcoming, and inclusive work environment and culture that enables them to contribute fully and develop to their highest
potential. We invest heavily in our employees by providing quality training and learning opportunities; promoting inclusion and
diversity; and upholding a high standard of ethics and respect for human rights.
Attracting, developing, and retaining team members is crucial to executing our strategy. We offer a comprehensive
total rewards program aimed at the varying health, home-life, and financial services. This program includes market-competitive
pay, broad-based stock grants and bonuses, healthcare benefits with company paid premiums, retirement savings plans, paid
time off, paid parental leave, flexible work schedules, an Employee Assistance Program and other mental health services.
Additionally, we invest in developing employees through programs such as the High-Performance Leadership program, to help
ensure they have a strong pipeline of future leaders.
Additional information regarding our activities related to our people and sustainability, as well as our workforce
diversity data, can be found in our latest Sustainability Report, which is located on our website at https://armadahoffler.com/
sustainability/. The Sustainability Report is updated periodically. This website address is intended to be an inactive textual
reference only. None of the information on, or accessible through, our website is part of this Form 10-K or is incorporated by
reference herein.
Corporate Information
Our principal executive office is located at 222 Central Park Avenue, Suite 1000, Virginia Beach, Virginia 23462 in
the Armada Hoffler Tower at the Town Center of Virginia Beach. In addition, we have a construction office located at 1300
Thames Street, Suite 30, Baltimore, Maryland 21231 in Thames Street Wharf at Harbor Point. The telephone number for our
principal executive office is (757) 366-4000. We maintain a website located at 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 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 Corporate Secretary at the
address set forth above under "—Corporate Information."
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 Governance section of
the Investor Relations section of our website. Any amendment to or waiver of our Code of Business Conduct and Ethics will be
disclosed in the Corporate Governance section of the Investor Relations section of our website within four business days of the
amendment or waiver. In addition, we maintain a variety of other governance documents, including, among others, a Human
Rights Policy, an Insider Trading Policy, an Environmental Policy, a Vendor Conduct Policy, and the charter of our
Sustainability Committee, all of which are 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 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 and
15
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 stockholders to lose all or a part of their investment. Some statements in this Annual Report on Form 10-K,
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 Business
Adverse economic and geopolitical conditions and dislocations in the credit markets could have a material adverse effect on
our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt
obligations.
Our business has been, and may in the future be, affected by market and economic challenges experienced by the U.S.
economy or the real estate industry as a whole. Such conditions may materially and adversely affect us as a result of the
following potential consequences, among others:
•
decreased demand for retail, office, and multifamily space, which would cause market rental rates and property
values to be negatively impacted;
•
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 (as defined below) could refuse to fund their financing
commitment to us or could otherwise fail to do so, and we may not be able to replace the financing commitment
of any such lenders on favorable terms or at all.
If the U.S. economy experiences an economic downturn, we may see increases in bankruptcies and defaults by our
tenants, and we may experience higher vacancy rates and delays in re-leasing vacant space, which could negatively impact our
financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations.
We may be unable to identify and complete acquisitions of properties and development opportunities that meet our
investment criteria, which may materially and adversely affect our results of operations, cash flow, and growth prospects.
Our business and growth strategy involves the development and selective acquisition of retail, office, 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 acquisitions and development opportunities, including those that we are subsequently unable to
complete;
•
we have agreements for the acquisition or development of properties that 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 and successfully develop new properties, our results of
operations, cash flow, and growth prospects could be materially and adversely affected.
We may dispose of certain properties over time as we seek to pursue growth through our investment strategy. However,
investments in real estate are illiquid, and it may not be possible to dispose of assets in a timely manner or on favorable
terms, which could adversely affect our financial condition, operating results, and cash flows.
Our ability to dispose of properties on advantageous terms depends on factors beyond our control, including competition
from other sellers and the availability of attractive financing for potential buyers, and we cannot predict whether we will be able
to sell any property we desire to for the price or on the terms set by us or acceptable to us, or the length of time needed to find a
willing buyer and to close the sale. Upon sales of properties or assets, we may become subject to contractual indemnity
obligations, incur unusual or extraordinary distribution requirements, be required to expend funds to correct defects or make
16
capital improvements or, as a result of required debt repayment, face a shortage of liquidity. Therefore, as a result of the
foregoing events or circumstances, we may not be able to achieve our strategic reshaping of our portfolio promptly, on
favorable terms, or at all in response to changing economic, financial, and investment conditions, which may adversely affect
our cash flows and our ability to make distributions to stockholders.
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 majority of the properties in our portfolio are located in Virginia, Maryland, and North Carolina, which expose us
to greater economic risks than if we owned a more geographically diverse portfolio. As of December 31, 2024, our properties in
the Virginia, Maryland. and North Carolina markets represented approximately 41%, 28%, and 13%, respectively, of the total
rental revenues of the properties in our portfolio. Furthermore, many of our properties are located in the Town Center of
Virginia Beach and Harbor Point at Baltimore, and the rental revenues from such properties represented 22% and 27%,
respectively, of our total rental revenues for the year ended December 31, 2024. As a result of this geographic concentration, we
are particularly susceptible to adverse economic, regulatory or other conditions in the Virginia, Maryland, and North Carolina
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, Maryland, and North Carolina in which many of the properties in our portfolio are located contain high
concentrations of military personnel and operations, and 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 downturn in the economy in Virginia, Maryland, or North
Carolina, our operations, revenue, and cash available for distribution, including cash available to pay distributions to our
stockholders, could be materially and 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 retail, office, or multifamily properties. Our operations
may also be adversely 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 retail, office, or multifamily space resulting from the regulatory environment, business
climate or energy or fiscal problems, could materially and adversely affect our financial condition, results of operations, cash
flow, cash available for distribution, and ability to satisfy our debt service obligations.
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, including as a result of hurricanes or other disasters.
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. For example, all but one of the properties in our portfolio as of
December 31, 2024 are located in Maryland, Virginia, North Carolina, South Carolina, Georgia, and Florida, which are areas
particularly susceptible to hurricanes. While we carry insurance on certain of our properties, 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. Further, reconstruction or improvement of properties would likely require significant upgrades to
meet zoning and building code requirements. Environmental and legal restrictions could also restrict the rebuilding of our
properties.
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.
As of December 31, 2024, we had total debt of approximately $1.3 billion, including amounts drawn under our credit
facility, and we may incur significant additional debt to finance future acquisition and development activities. Excluding
unamortized fair value adjustments and debt issuance costs, the aggregate outstanding principal balance of our debt was $1.3
billion as of December 31, 2024. 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, particularly if interest rates remain elevated;
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•
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, cash flow, cash available for
distribution, and ability to service our debt obligations could be materially and 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."
Failure to maintain our current credit rating could adversely affect our cost of funds, related margins, liquidity, and access
to the debt capital markets.
Morningstar DBRS is expected to periodically evaluate our debt levels and other factors, which likely will include
Morningstar DBRS’s assessment of our financial strength, liquidity, capital structure, asset quality, and sustainability of cash
flow and earnings. Due to changes in these factors and market conditions, we may not be able to maintain our current credit
rating, which could adversely affect our cost of funds and related margins, liquidity, and access to the debt capital markets.
Increases in interest rates, or failure to hedge effectively against interest rate changes, will increase our interest expense and
may adversely affect our financial condition, results of operations, cash flow, cash available for distribution, and ability to
service our debt obligations.
We have incurred, and may in the future incur, additional indebtedness that bears interest at a variable rate. An
increase in interest rates would increase our interest expense and increase the cost of refinancing existing debt and issuing new
debt, which would adversely affect our cash flow and ability to make distributions to our stockholders. In addition, if we need
to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at
times that may not permit realization of the maximum return on such investments. The effect of prolonged interest rate
increases could adversely impact our ability to make acquisitions and develop properties.
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 included, and future
hedging transactions may include, entering into interest rate cap agreements or interest rate swap agreements, which involve
risk. Our failure to hedge effectively against interest rate changes may adversely affect our financial condition, results of
operations, cash flow, cash available for distribution, and ability to service our debt obligations. Additionally, as a result of
rising interest rates, the cost of hedging transactions has increased significantly and may continue to increase.
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 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 and Series A Preferred Stock.
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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.
We may be unable to renew leases, lease vacant space, or re-lease space on favorable terms or at all as leases expire, which
could materially and adversely affect our financial condition, results of operations, cash flow, cash available for
distribution, and ability to service our debt obligations.
As of December 31, 2024, approximately 4.0% of the square footage of the stabilized properties in our retail and office
portfolios was available. Additionally, 4.7% and 12.3% of the ABR in our retail portfolio was scheduled to expire in 2025 and
2026, respectively, and 3.6% and 2.0% of the ABR in our office portfolio was scheduled to expire in 2025 and 2026,
respectively. We cannot assure you that new leases will be entered into, that leases will be renewed, or that our properties will
be re-leased 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, fears of a recession, personal debt levels, the housing market, stock market volatility, and uncertainty
about the future. If rental rates for our properties decrease, our existing tenants do not renew their leases, or we do not re-lease a
significant portion of our available space and space for which leases expire, our financial condition, results of operations, cash
flow, cash available for distribution, and ability to service our debt obligations could be materially and adversely affected.
Tenant demand in our office portfolio may decline due to disruptions to the office sector, which could materially and
adversely affect us.
Companies have been increasing their utilization of work-from-home alternatives, videoconferencing, shared office
spaces, co-working spaces, telecommuting, and flexible work schedules. To the extent these trends continue, tenant demand for
our office space may be reduced, which could materially and adversely affect us.
The short-term leases in our multifamily portfolio expose us to the effects of declining market rents, which could adversely
affect our results of operations, cash flow and cash available for distribution.
Substantially all of the leases in our multifamily portfolio are for terms of 12 months or less. As a result, even if we are
able to renew or re-lease apartment units as leases expire, our rental revenues will be impacted by declines in market rents more
quickly than if all of our leases had longer terms, which could adversely affect our results of operations, cash flow, and cash
available for distribution.
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 than we do, 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.
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-family and
multifamily units. Competitive housing in a particular area and an increase in affordability of owner-occupied single-family and
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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, which could adversely affect our results of operations, cash
flow, and cash available for distribution.
The failure of properties that we acquire or develop to meet our financial expectations could have a material adverse effect
on us, including our financial condition, results of operations, cash flow, cash available for distribution, ability to service
our debt obligations, the per share trading price of our common stock and Series A Preferred Stock, and growth prospects.
Our 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 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 financial condition,
results of operations, cash flow, cash available for distribution, ability to service our debt obligations, the per share trading price
of our common stock and Series A Preferred Stock, and growth prospects could be materially and adversely affected.
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 and adversely affect our financial condition, results of operations, cash
flow, cash available for distribution, and ability to service our debt obligations.
Upon expiration of our leases to our tenants, 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 our financial condition, results of operations, cash flow, cash available for
distribution, and ability to service our debt obligations.
Failure to succeed in new markets may limit our growth.
We have acquired in the past, and we may acquire in the future if appropriate opportunities arise, properties that are
outside of our primary markets. Entering into new markets exposes us to a variety of risks, including difficulty evaluating local
market conditions and local economies, developing new business relationships in the area, competing with other companies that
already have an established presence in the area, hiring and retaining key personnel, evaluating quality tenants in the area, and a
lack of familiarity with local governmental and permitting procedures. Furthermore, expansion into new markets may divert
management time and other resources away from our current primary markets. As a result, we may not be successful in
expanding into new markets, which could adversely impact our financial condition, results of operations, cash flow, cash
available for distribution, and ability to service our debt obligations.
Real estate financing investments are subject to significant risks, and losses related to these investments could have a
material adverse effect on our financial condition and results of operations.
We have originated, and in the future expect to originate or acquire, mezzanine loans, preferred equity investments, or
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similar investments (together "real estate financing investments"), which take the form of subordinated loans secured by second
mortgages on the underlying property or loans secured by a pledge of the ownership interests of either the entity owning the
property or a pledge of the ownership interests of the entity that owns the interest in the entity owning the property. As of
December 31, 2024, we had approximately $121.4 million in outstanding real estate financing investments. These types of
investments involve a higher degree of risk than long-term senior mortgage loans secured by income-producing real property
because the investment may become unsecured as a result of foreclosure by the senior lender. In addition, these investments
may have higher "loan-to-value" ratios than conventional mortgage loans, with little or no equity invested by the borrower,
increasing the risk of loss of principal. If a borrower defaults on our real estate financing investment or debt senior to our
investment, or in the event of a borrower bankruptcy, our real estate financing investment will be satisfied only after the senior
debt is paid in full. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may
not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy our real estate
financing investment. As a result, we may not recover some or all of our initial investment. Additionally, in conjunction with
certain investments, we issue partial payment guarantees to the senior lender for the property, which may require us to make
payments to the senior lender in the event of a default on the senior note. Finally, in connection with our real estate financing
investments, we may have options to purchase all or a portion of the underlying property upon maturity of the investment;
however, if a developer’s costs for a project are higher than anticipated, exercising such options may not be attractive or
economically feasible, or we may not have sufficient funds to exercise such options even if we desire to do so. Significant
losses related to real estate financing investments could have a material adverse effect on our financial condition and results of
operations.
A bankruptcy or insolvency of any of our significant tenants in our office or retail properties could have a material adverse
effect on our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our
debt obligations.
If a significant tenant in our office or retail properties 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 concessions that we may not be able to recover. Any such
event could have a material adverse effect on our financial condition, results of operations, cash flow, cash available for
distribution, and ability to service our debt obligations.
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 our financial condition, results of
operations, cash flow, cash available for distribution, and ability to service our debt obligations.
Most of our costs, such as operating and general and administrative expenses, interest expense, and real estate acquisition
and construction costs, are subject to inflation.
In 2024, the consumer price index rose by approximately 3% over the previous year, following 2023's increase in the
index of 3%. Global supply chain disruptions, labor shortages, and increases in consumer demand still pose relevant risks in
today's landscape despite relatively stable inflation year-over-year. A significant portion of our operating expenses and
construction-related costs are sensitive to inflation. Operating expenses include those for property-related contracted services
such as janitorial and engineering services, utilities, repairs and maintenance, and insurance. Property taxes are also impacted
by inflationary changes as taxes are regularly reassessed based on changes in the fair value of our properties. We also have
ground lease expenses in certain of our properties. Ground lease costs are contractual, but in some cases, lease payments reset
every few years based on changes on consumer price indices.
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Our operating expenses, with the exception of ground lease rental expenses and multifamily properties, are typically
recoverable through our lease arrangements, which allow us to pass through substantially all expenses associated with property
taxes, insurance, utilities, repairs and maintenance, and other operating expenses (including increases thereto) to our tenants.
Our remaining leases are generally gross leases, which provide for recoveries of operating expenses above the operating
expenses from the initial year within each lease. During inflationary periods, we expect to recover increases in operating
expenses from our triple net leases and our gross leases. 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, although an extreme and sustained escalation in costs could have a
negative impact on our residents and their ability to absorb rent increases. As a result, we do not believe that inflation would
result in a significant adverse effect on our NOI and operating cash flows at the property level. However, there is no guarantee
that our tenants would be able to absorb these expense increases and be able to continue to pay us their portion of operating
expenses, capital expenditures, and rent.
Our general and administrative expenses consist primarily of compensation costs, technology services, and
professional service fees. Annually, our employee compensation is adjusted to reflect merit increases; however, to maintain our
ability to successfully compete for the best talent, rising inflation rates may require us to provide compensation increases
beyond historical annual merit increases, which may unexpectedly or significantly increase our compensation costs. Similarly,
technology services and professional service fees are also subject to the impact of inflation and expected to increase
proportionately with increasing market prices for such services. Consequently, inflation is expected to increase our general and
administrative expenses over time and may adversely impact our results of operations and operating cash flows.
Adverse conditions in the general retail environment could have a material adverse effect on our financial condition, results
of operations, cash flow, cash available for distribution, and ability to service our debt obligations.
Approximately 39.0% of our NOI for the year ended December 31, 2024 was from 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 in the future could 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 retail
companies, the ongoing consolidation in the retail sector, the excess amount of retail space in a number of markets, increasing
competition from discount retailers, outlet malls, internet retailers, and other online businesses, and epidemics, pandemics and
other health crises and measures intended to mitigate their spread. 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 and web services technologies, may increase competition for certain of our retail tenants. Further, the recent imposition
by the United States of tariffs on imported goods could cause certain retail tenants to raise the prices on their products, lowering
demand.
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, including the anchor stores or major tenants in our retail shopping center
properties, the loss of which could result in a material impact on our retail tenants. In turn, these conditions could negatively
affect market rents for retail space and could materially and adversely affect our financial condition, results of operations, cash
flow, cash available for distribution, and ability to service our debt obligations.
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 increase 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 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.
Our credit facility, M&T term loan facility (as defined below), and TD term loan facility (as defined below) restrict our
ability to engage in certain business activities, including our ability to incur additional indebtedness, make capital
expenditures, and make certain investments.
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Our credit facility, M&T term loan facility, and TD term loan facility contain 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 our 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 and adversely
affect our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt
obligations. In addition, our credit facility, M&T term loan facility, and TD term loan 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.
An epidemic, pandemic or other health crisis and measures intended to prevent the spread of such an event could have a
material adverse effect on our financial condition, results of operations, cash flow, cash available for distribution, and
ability to service our debt obligations.
We face risks related to an epidemic, pandemic or other health crisis which has impacted, and in the future could
impact, the markets in which we operate and could have a material adverse effect on our financial condition, results of
operations, cash flow, cash available for distribution, and ability to service our debt obligations. The impact of an epidemic,
pandemic or other health crisis and measures intended to prevent the spread of such an event could materially and adversely
affect our business in a number of ways. Our rental revenue and operating results depend significantly on the occupancy levels
at our properties and the ability of our tenants to meet their rent obligations to us, which have been in certain cases, and could in
the future be, adversely affected by, among other things, job losses, furloughs, store closures, lower incomes, uncertainty about
the future as a result of an epidemic, pandemic or other health crisis and related governmental actions including eviction
moratoriums, shelter-in-place orders, prohibitions on charging certain fees, and limitations on collection laws and rent
increases, which have in the past affected, and, may in the future affect, our ability to collect rent or enforce legal or contractual
remedies for the failure to pay rent, which negatively impacted, and may in the future negatively impact, our ability to remove
tenants who are not paying rent and our ability to rent their space to new tenants. In addition, the federal government has in the
past allocated, and may in the future allocate, funds to rent relief programs to be run by state and local authorities. In certain
locations, the funds available may not be sufficient to pay all past due rent and reallocation of such funds may result in markets
in which we operate not having access to the funds anticipated. Further, certain of our tenants with past due rent have not
qualified, and may not in the future qualify, to participate in such programs. In addition, some of such programs have required,
and programs in the future may require, the forgiveness of a portion of the past due rent or agreeing to other limitations that
may adversely affect our business in order to participate or may only provide funds to pay a portion of the past due rent. In
addition, while certain locations have adopted programs that may reimburse past due rent owed by tenants who have left a
community, such programs have only been adopted in a minority of our markets. Our development and construction projects
also have been and could in the future be adversely affected by factors related to an epidemic, pandemic or other health crisis,
although, to date, such impacts have not been material. An epidemic, pandemic or other health crisis, or related impacts thereof
also could adversely affect the businesses and financial conditions of our counterparties, including our joint venture partners
and general contractors and their subcontractors, and their ability to satisfy their obligations to us and to complete transactions
or projects with us as intended.
A cybersecurity incident or other technology disruptions could negatively impact our business, our relationships, and our
reputation.
We use computers and computer networks in most aspects of our business operations. We also use mobile devices to
communicate with our employees, suppliers, business partners, and tenants. These devices are used to transmit sensitive and
confidential information including financial and strategic information about us, employees, business partners, tenants, and other
individuals and organizations. Additionally, we utilize third-party service providers that host personally identifiable information
and other confidential information of our employees, business partners, tenants, and others. We also maintain confidential
financial and business information regarding us and persons and entities with which we do business on our information
technology systems. Cybersecurity incidents, including physical or electronic break-ins, computer viruses, malware, attacks by
hackers, ransomware attacks, phishing attacks, supply chain attacks, breaches due to employee error or misconduct and other
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similar breaches can create system disruptions, shutdowns or unauthorized access to information maintained in our information
technology systems and in the information technology systems of our third-party service providers. We have in the past
experienced cybersecurity incidents involving information technology systems, including through phishing attacks, but we have
not experienced any material cybersecurity incidents. We expect cybersecurity incidents to continue to occur in the future and
we are constantly attempting to mitigate efforts to infiltrate and compromise our information technology systems and data. The
theft, destruction, loss, or release of sensitive and confidential information or operational downtime of the systems used to store
and transmit our or our tenants’ confidential business and personal information could result in disruptions to our business,
negative publicity, brand damage, violation of privacy laws, financial liability, difficulty attracting and retaining tenants, loss of
business partners, and loss of business opportunities, any of which may materially and adversely affect our financial condition,
results of operations, cash flow, cash available for distribution, and ability to service our debt obligations. Although we carry
cybersecurity insurance that is designed to protect us against certain losses related to cybersecurity incidents, that insurance
coverage may not be sufficient or available to cover all expenses or other losses or all types of claims that may arise in
connection with cybersecurity incidents. Furthermore, in the future, such insurance may not be available on commercially
reasonable terms, or at all.
Any material weakness in our internal control over financial reporting could have an adverse effect on the trading price of
our common stock and Series A Preferred Stock.
Management is required to have an independent auditor assess the effectiveness of our internal control over financial
reporting, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”). 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 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 such material weaknesses 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, any of which could lead to a decline in the per share trading price of our
common stock and Series A Preferred Stock.
Our use of OP Units as consideration 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.
We have acquired, and in the future may acquire, properties or portfolios of properties through tax deferred
contribution transactions in exchange for 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 requiring 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 restrictions also
could limit our ability to sell properties at a time, or on terms, that would be favorable absent such restrictions. In addition,
future 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.
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 who have extensive market knowledge and relationships and exercise substantial influence over our operational,
financing, development, and construction activity. Individuals currently considered key personnel each have 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, and we have not currently entered into employment agreements with any
of these individuals. If we lose their services, our relationships with such industry 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
24
and adversely affect our financial condition, results of operations, cash flow, and the per share trading price of our common
stock and Series A Preferred Stock.
Joint venture investments could be materially and 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 noncontrolling 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. Furthermore, we are often a
joint venture partner in development projects. 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 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.
Expectations of our company relating to environmental, social and governance factors may impose additional costs and
expose us to new risks.
Certain investors, tenants, employees, and other stakeholders focus on corporate responsibility, specifically related to
environmental, social and governance factors. Various regulatory authorities, including the SEC, also focus on such matters,
and the activities and expense required to comply with new regulations or standards may be significant. Some investors may
use these factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our
policies relating to corporate responsibility are inadequate. Third-party providers of corporate responsibility ratings and reports
on companies have increased to meet growing investor demand for measurement of corporate responsibility performance. In
addition, the criteria by which companies’ corporate responsibility practices are assessed may change, which could result in
greater expectations of us and cause us to undertake costly initiatives to satisfy such new criteria. Alternatively, if we elect not
to or are unable to satisfy such new criteria, investors may conclude that our policies with respect to corporate responsibility are
inadequate. We may face reputational damage in the event that our corporate responsibility procedures or standards do not meet
the standards set by various constituencies. Furthermore, if our competitors’ corporate responsibility performance is perceived
to be greater than ours, potential or current investors may elect to invest with our competitors instead. In addition, we could fail,
or be perceived to fail, in our achievement of initiatives or goals regarding environmental, social, and governance matters
publicly communicated, including through our Sustainability Report, or we could be criticized for the scope of such initiatives
or goals. If we fail to satisfy the expectations of investors, tenants and other stakeholders or our initiatives are not executed as
planned, our reputation and financial results could be materially and adversely affected.
Conversely, in recent years “anti-ESG” sentiment has gained momentum across the U.S., with several states and
Congress having proposed or enacted “anti-ESG” policies, legislation, or initiatives or issued related legal opinions, and the
Trump Administration having recently issued an executive order opposing diversity equity, and inclusion (“DEI”) initiatives in
the private sector. Such anti-ESG and anti-DEI-related policies, legislation, initiatives, litigation, legal opinions, and scrutiny
25
could result in additional compliance obligations, becoming the subject of investigations and enforcement actions, or sustaining
reputational harm.
We may be subject to ongoing 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, the per share trading price of our common stock and
Series A Preferred Stock, cash available for distribution, and ability to service our debt obligations.
We may be subject to ongoing or future 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 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 flow, thereby having an
adverse effect on our financial condition, results of operations, cash flow, the per share trading price of our common stock and
Series A Preferred Stock, cash available for distribution, and 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 and
adversely affect our results of operations and cash flow, expose us to increased risks that would be uninsured, and adversely
impact our ability to attract officers and directors.
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 our 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 and adversely affect 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;
•
the inability to obtain or delays in obtaining necessary governmental or quasi-governmental permits and
authorizations could result in increased costs or abandonment of the project if necessary permits or
authorizations are not obtained;
•
delayed construction may give tenants the right to terminate pre-development leases, which may adversely
impact the financial viability of the project;
•
occupancy rates, rents and concessions of a completed project may fluctuate depending on a number of factors
and 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 may
result in delays or even abandonment of certain development activities.
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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 a material adverse effect on
our financial condition, results of operations, and cash flow.
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 and
adversely affect our financial condition, results of operations, cash flow, cash available for distribution, and 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 and interest 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," as well as the following:
•
oversupply or reduction in demand for retail, office, 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, rights to reduce leased-space during their lease,
or below-market renewal options, and the need to periodically repair, renovate, and re-lease space;
•
increased operating costs, including insurance premiums, utilities, real estate taxes, and state and local taxes;
•
increased property taxes due to property tax changes or reassessments;
•
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.
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 and 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 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 or may subject us to penalties in the event any sales of our properties are
not permitted under such laws. See “—The prohibited transactions tax may limit our ability to dispose of our properties.”
27
Therefore, we may not be able to vary our portfolio in response to economic or other conditions promptly or on favorable
terms.
Our tax protection agreements could limit our ability to sell or otherwise dispose of certain properties.
In connection with certain property acquisitions, we have entered into tax protection agreements that provide that if we
dispose of any interest in certain protected properties in a taxable transaction within a certain period of the acquisition, subject
to certain exceptions, we will indemnify the contributors for their tax liabilities attributable to the built-in gain that existed with
respect to such property interests as of the time of the acquisition, and the tax liabilities incurred as a result of such tax
protection payment, and may enter into similar agreements in connection with future property acquisitions. Therefore, although
it may be in our stockholders’ best interests that we sell one of these properties, it may be economically prohibitive or
unattractive for us to do so because of these obligations.
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
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 and 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 the properties may be used or businesses may be operated,
and these restrictions may require substantial expenditures. See "Part I—Business—Regulation."
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 "Part I—Business—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 surveys. 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
may routinely 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.
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We are subject to risks from natural disasters, such as hurricanes and flooding, and the risks associated with the physical
effects of climate change.
Natural disasters and severe weather such as flooding, earthquakes, tornadoes or hurricanes may result in significant
damage to our properties. Many of our properties are located in Virginia Beach, Virginia, Baltimore, Maryland, and elsewhere
in the Mid-Atlantic, which historically have experienced heightened risk for natural disasters like hurricanes and flooding. The
extent of our casualty losses and loss in operating income in connection with such events is a function of the severity of the
event and the total amount of exposure in the affected area. When we have geographic concentration of exposures, a single
catastrophe (such as an earthquake) or destructive weather event (such as a tornado or hurricane) affecting a region may have a
significant negative effect on our financial condition and results of operations. Our financial results may be adversely affected
by our exposure to losses arising from natural disasters or severe weather.
We also are exposed to risks associated with inclement winter weather, particularly in the Mid-Atlantic, including
increased costs for the removal of snow and ice. Inclement weather also could increase the need for maintenance and repair of
our properties.
Lastly, to the extent that climate change does occur, its physical effects could have a material adverse effect on our
properties, operations, and business. To the extent climate change causes changes in weather patterns, our markets could
experience increases in storm intensity. These conditions could result in physical damage to our properties or declining demand
for space in our buildings or the inability of us to operate the buildings at all in the areas affected by these conditions. Climate
change also may have indirect effects on our business by increasing the cost of (or making unavailable) property insurance on
terms we find acceptable, increasing the cost of energy, and increasing the cost of snow removal or related costs at our
properties. Proposed legislation and regulatory actions to address climate change could increase utility and other costs of
operating our properties which, if not offset by rising rental income, would reduce our net income. Should the impact of climate
change be material in nature or occur for lengthy periods of time, our properties, operations, or business would be adversely
affected.
We may be subject to unknown or contingent liabilities related to acquired properties and properties that we may acquire in
the future, which could have a material adverse effect on us.
Properties that we have acquired and properties that we may acquire in the future may be subject to unknown or
contingent liabilities for which we may have no recourse, or only limited recourse, against the sellers. In general, the
representations and warranties provided under the transaction agreements related to the purchase of properties that we acquire
may not survive the completion of the transactions. Furthermore, indemnification under such agreements may be limited and
subject to various materiality thresholds, a significant deductible, or an aggregate cap on losses. As a result, there is no
guarantee that we will recover any amounts with respect to losses due to breaches by the sellers of their representations and
warranties. In addition, the total amount of costs and expenses that may be incurred with respect to liabilities associated with
these properties may exceed our expectations, and we may experience other unanticipated adverse effects, all of which may
materially and adversely affect us.
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
29
restrictive covenants imposed by community developers may restrict our use of our properties and may require us to obtain
approval from local officials or 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 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, cash
flow, cash available for distribution, and ability to service our debt obligations.
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 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 historically undertaken construction projects in various states in the Southeast,
Northeast, and Midwest regions of the U.S. As a result of our concentration of construction projects in the Mid-Atlantic region
of the U.S., we are particularly susceptible to adverse economic or other conditions in markets in this region (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 we have the ability to provide a wide range of development and construction
services, any adverse economic or real estate developments in the Mid-Atlantic region could materially and adversely affect our
financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations.
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 and adversely affect our results of
operations, cash flow, and growth prospects.
For serving as general contractor, our construction business earns profit equal to the difference between the total
construction fees that we charge and the costs that we incur to build a 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 construction pipeline on time and on budget could be materially and 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, due to, among other things, trade
tensions, disruptions, or new and significant tariffs;
•
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.
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If we do not complete construction projects on time and on budget, it could have a material adverse effect on us,
including our results of operations, cash flow, and growth prospects.
We recognize revenue for the majority of our construction projects based on estimates; therefore, variations of actual results
from our assumptions may reduce our profitability.
In accordance with GAAP, we record revenue as work on the contract progresses. The cumulative amount of revenues
recorded on a contract at a specified point in time is that percentage of total estimated revenues that costs incurred to date bear
to estimated total costs. Accordingly, contract revenues and total cost estimates are reviewed and revised as the work
progresses. Adjustments are reflected in contract revenues in the period when such estimates are revised. Estimates are based on
management’s reasonable assumptions and experience, but are only estimates. Variations of actual results from assumptions on
an unusually large project or on a number of average size projects could be material. We are also required to immediately
recognize the full amount of the estimated loss on a contract when estimates indicate such a loss. Such adjustments and accrued
losses could result in reduced profitability, which could negatively impact our cash flow from 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 and 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 appropriate 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 and adversely affect our financial condition, results of operations,
cash flow, and reputation.
Our failure to successfully and profitably bid on construction contracts could materially and 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 backlog of third-party construction contracts, our results of
operations and cash flow could be materially and 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 and adversely affect
our financial condition, results of operations, cash flow, cash available for distribution, ability to service our debt
obligations, 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 and adversely affect our financial condition, results of operations, cash flow, cash available for distribution, and
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ability to service our debt obligations. 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 material 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 organized work stoppages, which would materially and adversely affect our ability
to meet our construction timetables and could significantly increase the cost of completing a construction project.
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 have the ability to exercise significant influence on our company and our Operating Partnership, including
the approval of significant corporate transactions.
As of December 31, 2024, Daniel Hoffler, our Chairman Emeritus, owned approximately 5.2% and, collectively,
Messrs. Hoffler, Haddad, and Kirk owned approximately 9.6% of the combined outstanding shares of our common stock and
OP Units (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,
and our Operating Partnership or any partner thereof. 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 Partnership or any partner, and the separate interests of our
company or our stockholders, 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 contractual 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: (i) 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, (ii) the person actually received an improper
personal benefit in violation or breach of the partnership agreement, or (iii) 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
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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.
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 if certain conditions are satisfied. 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 impose 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
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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.
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 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, make more difficult, or prevent
unsolicited acquisitions of us.
Provisions in the partnership agreement of our Operating Partnership may delay, make more difficult, or prevent
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 (other than us) owned approximately 21.4% of the outstanding OP
Units of our Operating Partnership as of December 31, 2024.
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
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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 and the indemnification agreements 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 and
preferred 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, 2024, we owned 78.6% of the outstanding OP Units in our Operating Partnership. We regularly
have issued OP Units to third parties as consideration for acquisitions, and we may continue to do so in the future. Any such
future 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.
Risks Related to Our Status as a REIT
Failure to maintain our qualification as a REIT would cause us to be taxed as a regular corporation, which would
substantially reduce funds available for distribution to our stockholders.
We have elected 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 ended 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 fail to qualify as a REIT or otherwise lose our
REIT status in any taxable year, we will face serious tax consequences that would substantially reduce the funds available for
distribution to our stockholders for each of the years involved 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 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 and Series A Preferred 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 distribution to our stockholders.
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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.
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 20% 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 the 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.
Changes to the U.S. federal income tax laws, including the enactment of certain tax reform measures, could have an adverse
impact on our business and financial results.
In recent years, numerous legislative, judicial and administrative changes have been made to the U.S. federal income
tax laws applicable to investments in real estate and REITs, and it is possible that additional legislation may be enacted in the
future. There can be no assurance that future changes to the U.S. federal income tax laws or regulatory changes will not be
proposed or enacted that could impact our business and financial results. The REIT rules are regularly under review by persons
involved in the legislative process and by the IRS and the U.S. Treasury Department, which may result in revisions to
regulations and interpretations in addition to statutory changes. If enacted, certain of such changes could have an adverse
impact on our business and financial results. In addition, various provisions of the Code are set to expire at the end of 2025,
including the 20% deduction described above and other provisions that may be favorable to REITs and their shareholders.
We cannot predict whether, when, or to what extent any new U.S. federal tax laws, regulations, interpretations, or
rulings will impact the real estate investment industry or REITs, including whether various favorable U.S. federal tax laws will
be extended. Prospective investors are urged to consult their tax advisors regarding the effect of potential future changes to the
federal tax laws on an investment in our shares.
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 the total return
to our stockholders.
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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 20% 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. 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 20% REIT subsidiaries limitation or to avoid
application of the 100% excise tax.
Shareholders may be restricted from acquiring or transferring certain amounts of our capital 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, 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. To help ensure 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 or preferred 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 restriction, 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. Instead, our ordinary dividends generally are taxed at the higher tax rates applicable to ordinary income, the
current maximum rate of which is 37%. However, for taxable years prior to 2026, individual stockholders are generally allowed
to deduct 20% of the aggregate amount of ordinary dividends distributed by us, subject to certain limitations, which would
reduce the maximum marginal effective tax rate for individuals on the receipt of such ordinary dividends to 29.6%.
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 and adversely affect our
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financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt
obligations.
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 (1) 85% of our ordinary income,
(2) 95% of our capital gain net income and (3) 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 Series A Preferred 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
and adversely affect our financial condition, results of operations, cash flow, cash available for distribution, and ability to
service our debt obligations.
Risks Related to Our Capital 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 and Series A Preferred 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, 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 and Series A Preferred Stock.
Our ability to make distributions may also be limited by our credit facility. Under the terms of the credit facility, we
may not pay cash dividends if a default has occurred and is continuing or would result therefrom. However, if certain defaults
or events of default exist, we may pay cash dividends to the extent necessary to (i) maintain our status as a REIT and (ii) avoid
federal or state income excise taxes.
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 per share price of our common stock
and Series A Preferred Stock.
The market price and trading volume of our common stock and Series A Preferred Stock may be volatile and could decline
substantially in the future.
The market price of our common stock and Series A Preferred Stock may be volatile in the future. In addition, the
trading volume in our common stock and Series A Preferred Stock may fluctuate and cause significant price variations to occur.
We cannot assure stockholders that the market price of our common stock and Series A Preferred Stock will not fluctuate or
decline significantly in the future, including as a result of factors unrelated to our operating performance or prospects in 2025
compared to 2024. In particular, the market price of our common stock and Series A Preferred 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 FFO, Normalized FFO, or earnings estimates;
•
publication of research reports about us or the real estate industry;
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•
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 views with respect to asset classes in which we invest;
•
adverse market reaction to any additional debt we incur in the future;
•
additions or departures of key management personnel;
•
actions by institutional stockholders;
•
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;
•
changes in the federal government, including the change from the Biden administration to the Trump
administration and policy changes resulting therefrom;
•
our underlying asset value;
•
investor confidence in the stock and bond markets generally;
•
further changes in tax laws;
•
future equity issuances;
•
failure to meet earnings estimates;
•
failure to meet and maintain REIT qualifications;
•
changes in our credit ratings;
•
general market and economic conditions;
•
our issuance of debt securities or additional preferred equity securities; and
•
our financial condition, results of operations, and prospects.
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 and adverse effect on our financial condition, results of operations, cash
flow, cash available for distribution, ability to service our debt obligations, and the per share trading price of our common stock
and Series A Preferred Stock.
The number of shares of our common stock available for future issuance or sale could adversely affect the per-share trading
price of our common stock and our ability to obtain additional capital.
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 of our common stock. The issuance of substantial numbers of
shares of our common stock in the public market, or upon redemption of OP Units for shares of our common stock, or the
perception that such issuances might occur, could adversely affect the per-share trading price of our common stock. As of
February 21, 2025, approximately 79,918,740 shares of our common stock were outstanding. In addition, approximately
21,401,367 OP Units were outstanding (other than OP Units held by us), all of which are eligible to be tendered for redemption
for cash or, at our option, for shares of our common stock on a one-for-one basis, subject to certain limitations. Additionally, as
of February 21, 2025, 209,897 LTIP Units in the Operating Partnership (“LTIP Units”) are outstanding. Subject to any agreed
upon exceptions (including pursuant to the applicable LTIP Unit award agreement), once vested (subject to certain
requirements), LTIP Units are convertible into OP Units on a one-for-one basis. As of February 21, 2025, none of the
outstanding LTIP Units are eligible to be converted into OP Units (except in connection with a Change of Control (as defined in
the Amended and Restated Agreement of Limited Partnership)). We have an effective resale shelf registration statement
pursuant to which we may issue freely tradeable shares of our common stock upon redemption of such OP Units. Accordingly,
a substantial number of shares of our common stock could be issued in the future pursuant to such resale shelf registration
statement. The sale of such shares, or the perception that such a sale may occur, could materially and adversely affect the per-
share trading price of our common stock. In addition, as of February 21, 2025, 975,518 shares of our common stock and other
equity-based awards were available for issuance in the future (including shares issuable upon the vesting of outstanding
performance units) under our Amended and Restated 2013 Equity Incentive Plan, as amended (our “Equity Plan”).
The redemption of OP Units (including OP Units issued upon conversion of LTIP Units) for shares of our common
stock, the vesting of any restricted stock and performance units granted to certain directors, executive officers, and other
employees under our Equity 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. The existence of OP Units, LTIP Units, and shares of our common stock reserved for future issuance under
our Equity Plan or upon redemption of OP Units may adversely affect the terms upon which we may be able to obtain
39
additional capital through the sale of equity securities. In addition, future issuances of shares of our common stock may be
dilutive to existing stockholders.
Increases in market interest rates may have a material adverse effect on the trading prices of our common stock and Series
A Preferred Stock as prospective purchasers of our common stock and Series A Preferred 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 and Series A Preferred Stock will be the
dividend yield on the stock (as a percentage of the price of our common stock or Series A Preferred Stock, as applicable)
relative to market interest rates. An increase in market interest rates may lead prospective purchasers of our common stock or
Series A Preferred Stock to expect a higher dividend yield (with a resulting decline in the trading prices of our common stock or
Series A Preferred Stock, as applicable) 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
or Series A Preferred Stock to decrease.
We cannot guarantee that our Share Repurchase Program will be fully consummated or that it will enhance long-term
stockholder value. Share repurchases could also increase the volatility of the trading price of our stock and could diminish
our cash reserves.
In June 2023, our board of directors authorized the Share Repurchase Program (as defined below) to repurchase up to
$50.0 million of our outstanding common stock and Series A Preferred Stock, with no expiration date. The Share Repurchase
Program does not obligate us to acquire any specific number of shares or acquire shares over any specific period of time. The
actual timing and amount of repurchases remain subject to a variety of factors, including stock price, trading volume, market
conditions and other general business considerations. The Share Repurchase Program may be modified, suspended, or
terminated at any time, and we cannot guarantee that the program will be fully consummated or that it will enhance long-term
stockholder value. The Share Repurchase Program could affect the trading price of our stock and increase volatility, and any
announcement of a termination of this program may result in a decrease in the trading price of our stock. In addition, the Share
Repurchase Program could diminish our cash and cash equivalents and marketable securities.
Our Series A Preferred Stock is subordinate to our existing and future debt, and the interests of holders of our Series A
Preferred Stock could be diluted by the issuance of additional shares of preferred stock and by other transactions.
Our Series A Preferred Stock ranks junior to all of our existing and future indebtedness, any classes and series of our
capital stock expressly designated as ranking senior to our Series A Preferred Stock as to distribution rights and rights upon our
liquidation, dissolution or winding up, and other non-equity claims on us and our assets available to satisfy claims against us,
including claims in bankruptcy, liquidation, or similar proceedings. Subject to limitations prescribed by Maryland law and our
charter, our board of directors is authorized to issue, from our authorized but unissued shares of capital stock, preferred stock in
such classes or series as our board of directors may determine and to establish from time to time the number of shares of
preferred stock to be included in any such class or series. The issuance of additional shares of Series A Preferred Stock or
additional shares of capital stock ranking on parity with our Series A Preferred Stock would dilute the interests of the holders of
our Series A Preferred Stock, and the issuance of shares of any class or series of our capital stock expressly designated as
ranking senior to our Series A Preferred Stock as to distribution rights and rights upon our liquidation, dissolution or winding
up, or the incurrence of additional indebtedness could adversely affect our ability to pay dividends on, redeem, or pay the
liquidation preference on our Series A Preferred Stock. Other than the conversion right afforded to holders of our Series A
Preferred Stock that may become exercisable in connection with a change of control (as defined in the articles supplementary
designating the terms of our Series A Preferred Stock), none of the provisions relating to our Series A Preferred Stock contain
any terms relating to or limiting our indebtedness or affording the holders of our Series A Preferred Stock protection in the
event of a highly leveraged or other transaction, including a merger or the sale, lease, or conveyance of all or substantially all
our assets, that might adversely affect the holders of our Series A Preferred Stock, so long as the rights of the holders of our
Series A Preferred Stock are not materially and adversely affected.
Holders of our Series A Preferred Stock have extremely limited voting rights.
Our common stock is the only class of our securities that carry full voting rights. Voting rights for holders of our
Series A Preferred Stock exist primarily with respect to the ability to elect, together with holders of our capital stock ranking on
parity with our Series A Preferred Stock and having similar voting rights, two additional directors to our board of directors in
the event that six quarterly dividends (whether or not consecutive) payable on our Series A Preferred Stock are in arrears, and
with respect to voting on amendments to our charter or articles supplementary relating to our Series A Preferred Stock that
materially and adversely affect the rights of the holders of our Series A Preferred Stock or create additional classes or series of
40
our capital stock expressly designated as ranking senior to our Series A Preferred Stock as to distribution rights and rights upon
our liquidation, dissolution, or winding up. Other than as described above and as set forth in more detail in the articles
supplementary designating the terms of our Series A Preferred Stock, holders of our Series A Preferred Stock will not have any
voting rights.
Holders of our Series A Preferred Stock may not be permitted to exercise conversion rights upon a change of control. If
exercisable, the change of control conversion feature of our Series A Preferred Stock may not adequately compensate
preferred stockholders, and the change of control conversion and redemption features of our Series A Preferred Stock may
make it more difficult for a party to take over our company or discourage a party from taking over our company.
Upon the occurrence of a change of control (as defined in the articles supplementary designating the terms of our
Series A Preferred Stock), holders of our Series A Preferred Stock will have the right to convert some or all of their Series A
Preferred Stock into shares of our common stock (or equivalent value of alternative consideration). We have a special optional
redemption right to redeem our Series A Preferred Stock in the event of a change of control, and holders of our Series A
Preferred Stock will not have the right to convert any shares of our Series A Preferred Stock that we have elected to redeem
prior to the change of control conversion date. Upon such a conversion, the holders will be limited to a maximum number of
shares of our common stock equal to the 2.97796 (i.e. the "Share Cap"), subject to certain adjustments, multiplied by the
number of our Series A Preferred Stock converted. If the Common Stock Price (as defined in the articles supplementary
designating the terms of our Series A Preferred Stock) is less than $8.395 (which is approximately 50% of the per-share closing
sale price of our common stock on June 10, 2019), subject to adjustment, each holder will receive a maximum of 2.97796
shares of our common stock per share of our Series A Preferred Stock, which may result in a holder receiving value that is less
than the liquidation preference of our Series A Preferred Stock. In addition, those features of our Series A Preferred Stock may
have the effect of inhibiting a third party from making an acquisition proposal for our company or of delaying, deferring or
preventing a change of control of our company under circumstances that otherwise could provide the holders of our common
stock and Series A Preferred Stock with the opportunity to realize a premium over the then-current market price or that
stockholders may otherwise believe is in their best interests.
Item 1B.
Unresolved Staff Comments.
None.
41
Item 1C.
Cybersecurity.
Cybersecurity Risk Management and Strategy
Cybersecurity represents a critical component of our overall approach to risk management. We generally approach
cybersecurity threats through a cross-functional, multilayered approach, with the specific goals of: (i) identifying, preventing
and mitigating cybersecurity threats to us; (ii) preserving the confidentiality, security, and availability of the information that we
collect and store to use in our business; (iii) protecting our intellectual property; (iv) maintaining the confidence of our tenants,
customers, clients, and business partners; and (v) providing appropriate public disclosure of cybersecurity risks and incidents
when applicable. Additionally, we maintain a cyber insurance policy that covers loss of data and associated recovery, loss of
revenue due to business interruptions from a cybersecurity event, loss of transferred funds from events such as fraud and social
engineering, and loss of funds from computer fraud and extortion.
Processes for Assessing Cybersecurity Threats
We manage cybersecurity threats by employing a comprehensive process that is integral to our overall risk
management framework. Our risk management approach is designed to be aligned with the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) 2017 Enterprise Risk Management (“ERM”) framework. This system
includes a risk assessment process specifically designed to identify information technology (“IT”) and cybersecurity risks that
could be material to our organization.
i.
Integration into the COSO-Based Enterprise Risk Management Framework
Our overall risk management system provides a structured and consistent approach to risk identification, assessment,
and response, including those related to cybersecurity. The integration of cyber risks into our ERM framework underscores our
commitment to upholding a robust governance structure that emphasizes the protection of our information systems. We also
have in the past year engaged a third-party consultant to conduct a detailed risk assessment workshop utilizing the Center for
Internet Security (CIS) framework v8. Additionally, our internal audit department performs periodic assessments of the design
and operating effectiveness of our cybersecurity controls.
ii.
Engagement with Third Parties
We maintain strategic partnerships with third-party assessors, consultants, and auditors to enhance our defense
mechanisms. This includes the use of third parties for penetration testing and log evaluation, and network monitoring to assist
in rapid identification and mitigation of any suspicious network access to ensure the effective detection and mitigation of
cybersecurity threats. The results of such tests and assessments are reported to our audit committee and our board of directors,
and we adjust our cybersecurity policies, standards, processes and practices as necessary based on the information provided by
the tests and assessments.
iii. Oversight of Third-Party Service Providers
Our vendor risk assessment program is designed to identify, evaluate, and manage risks associated with third-party
service providers. As a part of this program, we regularly review third-party attestation reports, such as SOC 1 and SOC 2, for
key service providers to validate the effectiveness of their cybersecurity policies and controls. This ensures alignment with our
standards for cybersecurity.
Additionally, we require all vendors with whom we have a direct contract or agreement, with limited exceptions, to
comply with the Vendor Code of Business Conduct. Vendors are required to maintain the confidentiality of information
entrusted to them by us. Additionally, the Vendor Code of Business Conduct provides instructions for vendors to report
violations confidentially.
Impact of Cybersecurity Threats
Cybersecurity threats have the potential to negatively impact us due to the use of information technology within our
business, and by our suppliers, business partners, and tenants. See “Risk Factors—Risks Related to Our Business—A
cybersecurity incident or other technology disruptions could negatively impact our business, our relationships, and our
reputation.” of Item 1A above for a discussion of cybersecurity risks and the potential impact on us.
Governance
Board Oversight
Our board of directors, including through delegation to our audit committee, exercises oversight over cybersecurity
risks and controls. Our audit committee and board of directors regularly receive updates (including, in the case of our audit
committee, quarterly updates) from our Chief Financial Officer, Senior Director of Information Technology, and other
42
members of management regarding the status of cybersecurity initiatives and the effectiveness of our internal control system
related to information security. In connection with such updates, our board of directors and audit committee discuss our
approach to cybersecurity risk management with management. Additionally, the audit committee periodically receives
presentations from third-party cybersecurity experts to remain informed of developments in cyber risk and mitigation. Our
board of directors and audit committee also receive prompt and timely information regarding any cybersecurity incident that
meets established reporting thresholds, as well as ongoing updates regarding such incident until it has been addressed.
Management’s Role
Management plays a critical role in cybersecurity risk assessment and management. The key roles and responsibilities
are summarized as follows:
i.
Management Responsibilities
Key management personnel, tasked with cybersecurity risk management, are equipped with expertise that encompasses
extensive experience in cybersecurity, academic credentials, and professional certifications. Specific cybersecurity expertise
and certifications held by management include bachelor’s degrees in technology and network security, industry certifications
(CompTIA A+, CompTIA Network+, CompTIA Security+, Microsoft Certified Professional, Cisco Certified Network
Associate), and public sector (military) experience in network security. Management personnel hone their skills to meet new
demands through continuing professional development. Additionally, all employees are subject to ongoing cybersecurity
training.
Members of management report to our Chief Financial Officer who is the member of management that is principally
responsible for overseeing our cybersecurity risk management program. Our Chief Financial Officer holds an undergraduate
and graduate degree in economics and has over 15 years of experience with managing risks at the Company and in
environments similar to the Company’s, including risks arising from cybersecurity threats. Additionally, our Senior Director of
IT has served in various roles in information technology and information security for over 24 years. Our Senior Director of IT
holds an undergraduate degree in information technology and has attained the following professional certifications: CompTIA
Network+, CompTIA Security+, and Microsoft Certified Professional. Further, our Director of Corporate Business Systems
holds a Bachelor of Science degree in Construction Science and Management and has over 9 years of experience with software
implementations, technology innovation, and corporate business systems.
ii.
Monitoring
The management team ensures the implementation of robust monitoring protocols for preventing, detecting,
mitigating, and remediating cybersecurity threats. We use a ‘defense in layers’ approach which constitutes a cybersecurity
strategy that involves the use of multiple types of securities measures, each designed to protect against a different vector of
attack. As noted above, management is supported by third-party monitoring, next-generation hardware, and automated logging
analysis. We utilize third parties for penetration testing and log evaluation, which provides 24/7 network monitoring to assist in
rapid identification and mitigation of any suspicious network access. We maintain an Incident Response Plan, based on
guidance within the National Institute of Standards and Technology's Computer Security Incident Handling Guide, which
provides an escalation policy for identified security incidents. Our escalation policy details specific escalation processes by
which senior leadership (Senior Director of IT, Chief Financial Officer, and Chief Executive Officer) are informed about and
monitor the prevention, detection, mitigation, and remediation of cybersecurity incidents.
iii. Reporting to the Board
There is a structured reporting mechanism in place through which our Chief Financial Officer regularly updates our
audit committee on cybersecurity risk management efforts, thus facilitating informed oversight by the board. Further, our Chief
Financial Officer and IT personnel monitor the prevention, detection, mitigation, and remediation of cybersecurity incidents in
real time, and report such incidents to our audit committee and/or board of directors when appropriate.
Item 2.
Properties.
The information set forth under the captions "Our Properties" and "Development Pipeline" 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.
43
Item 4.
Mine Safety Disclosures.
Not Applicable.
44
PART II
Item 5.
Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
Market Information
Our common stock trades on the New York Stock Exchange under the symbol "AHH" and our Series A Preferred
Stock trades on the New York Stock Exchange under the symbol "AHHPrA."
Stock Performance Graph
The following graph sets forth the cumulative total stockholder return (assuming reinvestment of dividends) to our
stockholders during the period December 31, 2019 through December 31, 2024, as well as the corresponding returns on an
overall stock market index (Russell 2000) and a peer group index (MSCI US REIT Index). The stock performance graph
assumes that $100 was invested on December 31, 2019. 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 Securities Exchange Act of 1934, as amended (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 of 1933, as amended (the "Securities Act"), or the Exchange Act.
Period Ending
Index Value
Total Return Performance
Armada Hoffler Properties, Inc.
MSCI US REIT
Russell 2000
12/31/2019
12/31/2020
12/31/2021
12/31/2022
12/31/2023
12/31/2024
60
80
100
120
140
160
45
Period Ending
Index
12/31/2019
12/31/2020
12/31/2021
12/31/2022
12/31/2023
12/31/2024
Armada Hoffler Properties, Inc.
100.00
64.08
91.08
73.02
84.00
74.96
MSCI US REIT
100.00
92.43
132.23
99.82
113.54
123.47
Russell 2000
100.00
119.96
137.74
109.59
128.14
142.93
Distribution Information
Since our initial quarter as a publicly-traded REIT, we have made regular quarterly distributions to our stockholders,
other than in the second and third quarters of 2020 in order to preserve liquidity due to the uncertainty caused by the COVID-19
pandemic. Declared cash dividends were $0.82 per share for the year ended December 31, 2024. We intend to continue to
declare quarterly distributions. However, we cannot provide any assurance as to the amount or timing of future distributions.
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, operating cash
flows, 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 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 February 21, 2025, there were approximately 116 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 February 21, 2025, there were 107
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
None.
Issuer Purchases of Equity Securities
On June 15, 2023, we adopted a $50.0 million share repurchase program (the "Share Repurchase Program"). Under the
Share Repurchase Program, we may repurchase shares of our common stock and Series A Preferred Stock from time to time in
the open market, in block purchases, through privately negotiated transactions, the use of trading plans intended to qualify
under Rule 10b5-1 under the Exchange Act, or other means permitted. The Share Repurchase Program does not obligate us to
acquire any specific number of shares or acquire shares over any specific period of time. The Share Repurchase Program may
be suspended or discontinued at any time by us and does not have an expiration date.
During the three months ended December 31, 2024, we did not repurchase any common stock or Series A Preferred
Stock under the Share Repurchase Program. As of December 31, 2024, $37.4 million remained available for repurchases under
the Share Repurchase Program.
46
Item 6.
[Reserved].
Not applicable.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Business Description
We are a vertically-integrated, self-managed REIT with over four decades of experience managing high-quality
properties located primarily in the Mid-Atlantic and Southeastern United States. As of December 31, 2024, our stabilized
operating property portfolio was comprised of 46 retail properties, 14 office properties, and 11 multifamily properties. In
addition to our operating property portfolio, we had 2 retail properties, 1 office property, and 1 multifamily property in various
stages of predevelopment, development, redevelopment, or stabilization as of December 31, 2024. We also provide general
contracting services to third parties and invest in development projects through mezzanine lending arrangements and equity
investments.
Substantially all of our assets are held by, and all of our operations are conducted through, our Operating Partnership.
We are the sole general partner of our Operating Partnership and, as of December 31, 2024, we owned, through a combination
of direct and indirect interests, 78.6% of the outstanding OP Units in our Operating Partnership.
We elected to be taxed as a REIT for U.S. federal income tax purposes commencing with the taxable year ended
December 31, 2013.
Our principal executive office is located at 222 Central Park Avenue, Suite 1000, Virginia Beach, Virginia 23462 in
the Armada Hoffler Tower at the Virginia Beach Town Center. In addition, we have a construction office located at 1300
Thames Street, Suite 30, Baltimore, Maryland 21231 in Thames Street Wharf at Harbor Point. The telephone number for our
principal executive office is (757) 366-4000. We maintain a website at ArmadaHoffler.com. The information on, or accessible
through, our website is not incorporated into and does not constitute a part of this report.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated
financial statements that have been prepared in accordance with GAAP. Our accounting policies are more fully described in
Note 2 of our consolidated financial statements in Item 8 of this Annual Report on Form 10-K. As disclosed in Note 2, 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.
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 leasing 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 certain. 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.
Rental revenue is recognized subject to management’s evaluation of tenant credit risk. The extended collection period
for accrued straight-line rental revenue along with our evaluation of tenant credit risk may result in the nonrecognition of all or
a portion of straight-line rental revenue until the collection of substantially all such revenue for a tenant is probable.
General Contracting and Real Estate Services Revenues
We recognize general contracting revenues as a customer obtains control of promised goods or services in an amount
that reflects the consideration we expect to receive in exchange for those goods or services. For each construction contract, we
47
identify the performance obligations, which typically include the delivery of a single building constructed according to the
specifications of the contract. We estimate the total transaction price, which generally includes a fixed contract price and may
also include variable components such as early completion bonuses, liquidated damages, or cost savings to be shared with the
customer. Variable components of the contract price are included in the transaction price to the extent that it is probable that a
significant reversal of revenue will not occur. We recognize the estimated transaction price as revenue as we satisfy our
performance obligations; we estimate our progress in satisfying performance obligations for each contract using the input
method, based on the proportion of incurred costs relative to total estimated construction costs at completion. Construction
contract costs include all direct material, direct labor, subcontract costs, and overhead costs directly related to contract
performance. Changes in job performance, job conditions, and estimated profitability, including those arising from contract
penalty provisions and final contract settlements, are all significant judgments that may result in revisions to costs and income
and are recognized in the period in which they are determined. Additionally, the estimated costs at completion are affected by
management’s forecasts of anticipated costs to be incurred and contingency reserves for exposures related to unknown costs,
such as design deficiencies and subcontractor defaults. The estimated variable consideration is also affected by claims and
unapproved change orders, which may result from changes in the scope of the contract. Provisions for estimated losses on
uncompleted contracts are recognized immediately in the period in which such losses are determined.
We recognize real estate services revenues from property development and management as we satisfy our performance
obligations under these service arrangements.
We assess whether multiple contracts with a single counterparty may be combined into a single contract for the
revenue recognition purposes based on factors such as the timing of the negotiation and execution of the contracts and whether
the economic substance of the contracts was contemplated separately or in tandem.
Operating Property Acquisitions
Acquisitions of operating properties have been and will generally be accounted for as acquisitions of a group of assets,
with costs incurred to effect an acquisition, including title, legal, accounting, brokerage commissions, and other related costs
being capitalized as part of the cost of the assets acquired. In connection with operating property acquisitions, we identify and
recognize all assets acquired and liabilities assumed at their relative fair values as of the acquisition date. The purchase price
allocations to tangible assets, such as land, site improvements, and buildings and improvements, are presented within income
producing property in the consolidated balance sheets and depreciated over their estimated useful lives. Acquired lease
intangible assets are presented as a separate component of assets on the consolidated balance sheets. Acquired lease intangible
liabilities are presented within other liabilities in the consolidated balance sheets. We amortize in-place lease assets as
depreciation and amortization expense on a straight-line basis over the remaining term of the related leases. We amortize above-
market lease assets as reductions to rental revenues on a straight-line basis over the remaining term of the related leases. We
amortize below-market lease liabilities as increases to rental revenues on a straight-line basis over the remaining term of the
related leases. We amortize above and below-market ground lease assets as depreciation and amortization on a straight-line
basis over the remaining term of the related leases. We capitalize the costs related to operating property acquisitions that do not
meet the definition of a business.
We value land based on a market approach, looking to recent sales of similar properties, adjusting for differences due
to location, the state of entitlement, and the shape and size of the parcel. Improvements to land are valued using a replacement
cost approach. The approach applies industry standard replacement costs adjusted for geographic specific considerations and
reduced by estimated depreciation. The value of buildings acquired is estimated using the replacement cost approach, assuming
the buildings were vacant at acquisition. The replacement cost approach considers the composition of the structures acquired,
adjusted for an estimate of depreciation. The estimate of depreciation is made considering industry standard information and the
expected useful lives of the assets. The value of acquired lease intangible assets and liabilities considers the estimated cost of
leasing the properties as if the acquired buildings were vacant, as well as the value of the current leases relative to market-rate
leases. The in-place lease value is determined using an estimated total lease-up time and lost rental revenues during such time.
The value of current leases relative to market-rate leases is based on market rents obtained for comparable leases. Given the
significance of unobservable inputs used in the valuation of acquired real estate assets, we classify them as Level 3 inputs in the
fair value hierarchy.
We value debt assumed in connection with operating property acquisitions based on a discounted cash flow analysis of
the expected cash flows of the debt. Such analysis considers the contractual terms of the debt, including the period to maturity,
credit characteristics, and other terms of the arrangements, which are Level 3 inputs in the fair value hierarchy (as described in
Note 13 to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K).
48
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.
Interest Income
Interest income on notes receivable is accrued based on the contractual terms of the loans and when, in the opinion of
management, it is deemed collectible. Many loans provide for accrual of interest that will not be paid until maturity of the loan.
Interest is recognized on these loans at the accrual rate subject to management's determination that accrued interest is ultimately
collectible, based on the underlying collateral and the status of development activities, as applicable. If management cannot
make this determination, recognition of interest income may be fully or partially deferred until it is ultimately paid. Interest
income is also accrued as earned on interest-bearing deposits.
Expected Credit Losses
We evaluate the collectability of both the interest on and principal of each of our notes receivable based primarily upon
the value of the underlying development project. We consider factors such as the progress of development activities, including
leasing activities, projected development costs, and current and projected loan balances. We also consider historical industry
data, such as loan defaults and losses experienced on loans secured by other development projects, and current economic
conditions that may affect the collectability of the remaining cash flows. We measure expected credit losses to be incurred over
the remaining contractual term based on the risk rating of each loan. See Note 2 to our consolidated financial statements in Item
8 of this Annual Report on Form 10-K for details on risk rating determination. If a loan is rated as substandard, we then
estimate expected credit losses as the difference between the amortized cost basis of the outstanding loan and the estimated
projected sales proceeds of the underlying collateral.
Recent Accounting Pronouncements
For a summary of recent accounting pronouncements and the anticipated effects on our consolidated financial
statements see Note 2 to our consolidated financial statements included in Item 8 of this Form 10-K.
Segment Results of Operations
As of December 31, 2024, we operated our business in five segments: (i) retail real estate, (ii) office real estate,
(iii) multifamily residential real estate, (iv) general contracting and real estate services, and (v) real estate financing. See “—
Real Estate Financing Segment Data” below for additional information regarding the real estate financing segment and its
introduction as a reportable segment during the year ended December 31, 2024. Our general contracting and real estate services
segment is conducted through our TRS.
NOI is the primary measure used by our chief operating decision-maker to assess segment performance and allocate
our resources among our segments. We calculate NOI as segment revenues less segment expenses. Segment revenues include
rental revenues for our property segments, general contracting and real estate services revenues for our general contracting and
real estate services segment, and interest income for our real estate financing segment. Segment expenses include rental
expenses and real estate taxes for our property segments, general contracting and real estate services expenses for our general
contracting and real estate services segment, and interest expense for our real estate financing segment. NOI is not a measure of
operating income or cash flows from operating activities as measured by GAAP and is not indicative of cash available to fund
cash needs. As a result, NOI should not be considered an alternative to cash flows as a measure of liquidity. Not all companies
calculate NOI in the same manner. We consider NOI to be an appropriate supplemental measure to net income because it assists
both investors and management in understanding the core operations of our real estate, construction, and real estate financing
businesses. See Note 3 to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for a
reconciliation of NOI to net income, the most directly comparable GAAP measure.
49
We define same store properties as those that we owned and operated and that were stabilized for the entirety of both
periods compared. We generally consider a property to be stabilized upon the earlier of: (i) the quarter after the property reaches
80% occupancy or (ii) the thirteenth quarter after the property receives its certificate of occupancy. Additionally, any property
that is fully or partially taken out of service for the purpose of redevelopment is no longer considered stabilized until the
redevelopment activities are complete, the asset is placed back into service, and the stabilization criteria above are again met. A
property may also be fully or partially taken out of service as a result of a partial disposition, depending on the significance of
the portion of the property disposed. Finally, any property classified as held for sale is taken out of service for the purpose of
computing same store operating results.
Since our Annual Report on Form 10-K for the year ended December 31, 2023, we retrospectively reclassified certain
components of mixed-use properties between the retail, office, and multifamily real estate segments in order to align the
components of those properties with their tenant composition. As a result, (i) NOI for the year ended December 31, 2023
increased $1.6 million and $0.2 million for the retail and office real estate segments, respectively, and decreased $1.7 million
for the multifamily real estate segment and (ii) NOI for the year ended December 31, 2022 increased $1.0 million and $0.6
million for the retail and office real estate segments, respectively, and decreased $1.6 million for the multifamily real estate
segment. These reclassifications had no effect on total property NOI as previously reported. These reclassifications had no
impact on our general contracting and real estate services or real estate financing segments.
This section of this Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024
and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form
10-K can be found in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II,
Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Retail Segment Data
Retail rental revenues, property expenses, and NOI for the years ended December 31, 2024, 2023, and 2022 were as
follows ($ in thousands):
Years Ended December 31,
2024
2023
2022
Rental revenues
$
103,435
$
99,924
$
87,788
Property expenses
27,642
25,572
23,102
NOI
$
75,793
$
74,352
$
64,686
Square feet(1)
3,824,446
4,123,143
4,011,297
Occupancy(1)
95.3 %
95.2 %
96.3 %
________________________________________
(1)
Stabilized properties as of the end of the periods presented.
Rental revenues for the year ended December 31, 2024 increased $3.5 million, or 3.5%, compared to the year ended
December 31, 2023. The increase in rental revenues resulted primarily due to less bad debt recognized in 2024. NOI for the
year ended December 31, 2024 is materially consistent with the year ended December 31, 2023.
Retail Same Store Results
Retail same store rental revenues, property expenses, and NOI for the comparative years ended December 31, 2024
and 2023 and December 31, 2023 and 2022 were as follows (in thousands):
50
Years Ended
Years Ended
December 31,
December 31,
2024 (1)
2023 (1)
Change
2023 (2)
2022 (2)
Change
Rental revenues
$
84,716 $
84,248 $
468 $
84,248 $
79,071 $
5,177
Property expenses
21,318
20,314
1,004
20,314
19,514
800
Same Store NOI
$
63,398 $
63,934 $
(536) $
63,934 $
59,557 $
4,377
Non-Same Store NOI
12,395
10,418
1,977
10,418
5,129
5,289
Segment NOI
$
75,793 $
74,352 $
1,441 $
74,352 $
64,686 $
9,666
________________________________________
(1) Same store excludes Chronicle Mill Retail, Southern Post Retail, The Interlock Retail, and Columbus Village II, as well as Nexton Square and
Market at Mill Creek which were disposed in the fourth quarter of 2024.
(2)
Same store excludes Pembroke Square and The Interlock Retail, as well as Columbus Village II due to redevelopment.
Same store rental revenues and same store NOI for the year ended December 31, 2024 are materially consistent with the
year ended December 31, 2023.
Office Segment Data
Office rental revenues, property expenses, and NOI for the years ended December 31, 2024, 2023, and 2022 were as
follows ($ in thousands):
Years Ended December 31,
2024
2023
2022
Rental revenues
$
95,007
$
82,855
$
74,970
Property expenses
33,779
31,390
26,620
NOI
$
61,228
$
51,465
$
48,350
Square feet(1)
2,335,063
2,330,432
2,131,735
Occupancy(1)
97.2 %
95.2 %
98.0 %
________________________________________
(1)
Stabilized properties as of the end of the periods presented.
Rental revenues and NOI for the year ended December 31, 2024 increased $12.2 million, or 14.7%, and $9.8 million, or
19.0%, respectively, compared to the year ended December 31, 2023. The increases in rental revenues and NOI resulted primarily
due to the receipt of a termination fee from one of our tenants at Wills Wharf and the addition of new tenants at Wills Wharf, as well
as the acquisition of The Interlock Office in May 2023.
Office Same Store Results
Office same store rental revenues, property expenses, and NOI for the comparative years ended December 31, 2024
and 2023 and December 31, 2023 and 2022 were as follows (in thousands):
Years Ended
Years Ended
December 31,
December 31,
2024 (1)
2023 (1)
Change
2023 (2)
2022 (2)
Change
Rental revenues
$
81,337 $
76,568 $
4,769 $
76,568 $
74,970 $
1,598
Property expenses
29,380
28,342
1,038
28,342
25,665
2,677
Same Store NOI(3)
$
51,957 $
48,226 $
3,731 $
48,226 $
49,305 $
(1,079)
Non-Same Store NOI(3)
9,271
3,239
6,032
3,239
(955)
4,194
Segment NOI
$
61,228 $
51,465 $
9,763 $
51,465 $
48,350 $
3,115
________________________________________
(1)
Same store excludes Chronicle Mill Office, Southern Post Office, and The Interlock Office.
(2)
Same store excludes Wills Wharf and the Constellation Office.
(3)
Same Store NOI for the year ended December 31, 2024 excludes a $4.0 million termination fee received from one of our tenants at the
Wills Wharf property and the effect of $0.7 million of accelerated straight-line rent resulting from the termination of such tenant's
lease. The impact of the same is included in Non-Same Store NOI for the year ended December 31, 2024.
51
Same store rental revenues and same store NOI for the year ended December 31, 2024 increased $4.8 million, or 6.2%,
and $3.7 million, or 7.7%, respectively, compared to the year ended December 31, 2023. The increases in same store rental
revenues and same store NOI resulted primarily due to the receipt of a termination fee from one of our tenants at Wills Wharf
and the addition of new tenants at Wills Wharf
Multifamily Segment Data
Multifamily rental revenues, property expenses, and NOI for the years ended December 31, 2024, 2023, and 2022
were as follows ($ in thousands):
Years Ended December 31,
2024
2023
2022
Rental revenues
$
58,255
$
56,145
$
56,536
Property expenses
24,297
21,899
23,077
NOI
$
33,958
$
34,246
$
33,459
Apartment units/beds
2,492
2,492
2,254
Occupancy
95.3 %
95.5 %
96.1 %
Rental revenues for the year ended December 31, 2024 increased $2.1 million, or 3.8%, compared to the year ended
December 31, 2023. The increase in rental revenues resulted primarily due to the commencement of operations at Chandler
Residences in 2024 as well as increased occupancy at Chronicle Mill and The Everly. NOI for the year ended December 31,
2024 is materially consistent with the year ended December 31, 2023.
Multifamily Same Store Results
Multifamily same store rental revenues, property expenses, and NOI for the comparative years ended December 31,
2024 and 2023 and December 31, 2023 and 2022 were as follows (in thousands):
Years Ended
Years Ended
December 31,
December 31,
2024 (1)
2023 (1)
Change
2023 (2)
2022 (2)
Change
Rental revenues
$
52,522 $
51,589 $
933 $
51,589 $
47,794 $
3,795
Property expenses
21,167
19,725
1,442
19,725
18,753
972
Same Store NOI
$
31,355 $
31,864 $
(509) $
31,864 $
29,041 $
2,823
Non-Same Store NOI
2,603
2,382
221
2,382
4,418
(2,036)
Segment NOI
$
33,958 $
34,246 $
(288) $
34,246 $
33,459 $
787
________________________________________
(1)
Same store excludes Chronicle Mill Apartments and Chandler Residences.
(2) Same store excludes 1305 Dock Street, Chronicle Mill Apartments, and The Everly as well as properties disposed in 2022.
Same store rental revenues and same store NOI for the year ended December 31, 2024 are materially consistent with
the year ended December 31, 2023.
52
General Contracting and Real Estate Services Segment Data
General contracting and real estate services revenues, expenses, and gross profit for the years ended December 31,
2024, 2023, and 2022 were as follows ($ in thousands):
Years Ended December 31,
2024
2023
2022
General contracting and real estate services revenues
$
433,177
$
413,131
$
234,859
General contracting and real estate services expenses
419,302
399,713
227,158
Segment gross profit
13,875
13,418
7,701
Operating margin (1)
3.2 %
3.2 %
3.3 %
________________________________________
(1)
50% and 90% of gross profit attributable to our T. Rowe Price Global HQ and Allied | Harbor Point development projects, respectively,
is not reflected within general contracting and real estate services revenues due to elimination. The Company is still entitled to receive
cash proceeds in relation to the eliminated amounts. Prior to any gross profit eliminations attributable to these projects, operating margin
for the years ended December 31, 2024, 2023, and 2022 was 3.5%, 3.7%, and 3.7%, respectively.
General contracting and real estate services segment gross profit for the year ended December 31, 2024 was materially
consistent with the year ended December 31, 2023. We expect general contracting and real estate services revenues to gradually
decrease over time.
The changes in third party construction backlog for each of the years ended December 31, 2024, 2023, and 2022 were
as follows (in thousands):
Years Ended December 31,
2024
2023
2022
Beginning backlog
$
472,170 $
665,564 $
215,518
New contracts/change orders
85,883
221,474
685,754
Work performed
(434,269)
(414,868)
(235,708)
Ending backlog
$
123,784 $
472,170 $
665,564
During the year ended December 31, 2024, we executed new contracts or change orders with Beatty Development
Group related to the Harbor Point developments in Baltimore totaling $29.8 million in addition to the $0.4 million with
Terwilliger Pappas in connection with the development of Solis Kennesaw, and $53.4 million with Dominion Realty Partners.
Ending backlog as of December 31, 2024 included $23.2 million in contracts with Beatty Development Group, $78.6 million in
contracts with Dominion Realty Partners, and $15.9 million in contracts with Terwilliger Pappas.
During the year ended December 31, 2023, we executed new contracts or change orders with Beatty Development
Group related to the Harbor Point development in Baltimore totaling $89.6 million in addition to $64.8 million with Terwilliger
Pappas in connection with the development of Solis Kennesaw, and $49.6 million with Dominion Realty Partners. Ending
backlog as of December 31, 2023 included $225.0 million in contracts with Beatty Development Group, $162.7 million in
contracts with Dominion Realty Partners, and $58.3 million in contracts with Terwilliger Pappas.
Real Estate Financing Segment Data
Real estate financing interest income, interest expense, and gross profit for the years ended December 31, 2024, 2023,
and 2022 were as follows (in thousands):
Years Ended December 31,
2024
2023
2022
Interest income
$
16,077
$
14,176
$
16,461
Interest expense
6,588
3,667
3,497
Segment gross profit
$
9,489
$
10,509
$
12,964
Operating margin
59.0 %
74.1 %
78.8 %
53
Real estate financing gross profit for the year ended December 31, 2024 decreased 9.7% compared to the year ended
December 31, 2023, primarily due to the effect of increased funded balances and the increase to allocated interest expense in
connection therewith, partially offset by an increase in recognized interest income.
Consolidated Results of Operations
The following table summarizes our results of operations for the years ended December 31, 2024, 2023, and 2022 (in
thousands):
Years Ended December 31,
2024
2023
2024
2023
2022
Change
Change
Revenues
Rental revenues
$
256,697
$
238,924
$
219,294
$
17,773
$
19,630
General contracting and real estate services revenues
433,177
413,131
234,859
20,046
178,272
Interest income
18,596
15,103
16,978
3,493
(1,875)
Total revenues
708,470
667,158
471,131
41,312
196,027
Expenses
Rental expenses
62,410
56,419
50,742
5,991
5,677
Real estate taxes
23,308
22,442
22,057
866
385
General contracting and real estate services expenses
419,302
399,713
227,158
19,589
172,555
Depreciation and amortization
90,962
97,427
74,084
(6,465)
23,343
General and administrative expenses
20,225
18,122
15,691
2,103
2,431
Acquisition, development, and other pursuit costs
5,531
84
37
5,447
47
Impairment charges
1,494
102
416
1,392
(314)
Total expenses
623,232
594,309
390,185
28,923
204,124
Gain on real estate dispositions, net
21,305
738
53,466
20,567
(52,728)
Operating income
106,543
73,587
134,412
32,956
(60,825)
Interest expense
(78,965)
(57,810)
(39,680)
(21,155)
(18,130)
Loss on extinguishment of debt
(247)
—
(3,374)
(247)
3,374
Equity in income of unconsolidated real estate entities
245
—
—
245
—
Change in fair value of derivatives and other
14,251
(6,242)
8,698
20,493
(14,940)
Unrealized credit loss (provision)
(156)
(574)
(626)
418
52
Other income, net
209
31
378
178
(347)
Income before taxes
41,880
8,992
99,808
32,888
(90,816)
Income tax benefit (provision)
614
(1,329)
145
1,943
(1,474)
Net income
42,494
7,663
99,953
34,831
(92,290)
Net income attributable to noncontrolling interests in investment
entities
(43)
(605)
(5,948)
562
5,343
Preferred stock dividends
(11,548)
(11,548)
(11,548)
—
—
Net income (loss) attributable to common stockholders and
OP Unitholders
$
30,903
$
(4,490) $
82,457
$
35,393
$
(86,947)
54
Rental revenues by segment for the years ended December 31, 2024, 2023, and 2022 were as follows (in thousands):
Years Ended December 31,
2024
2023
2024
2023
2022
Change
Change
Retail
$ 103,435 $
99,924 $
87,788 $
3,511 $
12,136
Office
95,007
82,855
74,970
12,152
7,885
Multifamily
58,255
56,145
56,536
2,110
(391)
$ 256,697 $ 238,924 $ 219,294 $
17,773 $
19,630
Rental revenues increased $17.8 million, or 7.4%, during the year ended December 31, 2024 compared to the year
ended December 31, 2023.
Retail rental revenues for the year ended December 31, 2024 increased 3.5% compared to the year ended
December 31, 2023, primarily as a result of less bad debt recognized in 2024.
Office rental revenues for the year ended December 31, 2024 increased 14.7% compared to the year ended
December 31, 2023, primarily as a result of the receipt of termination fees from one of our tenants at Wills Wharf and the
addition of new tenants at Wills Wharf.
Multifamily rental revenues for the year ended December 31, 2024 increased 3.8% compared to the year ended
December 31, 2023, primarily due to the commencement of operations at Chandler Residences in 2024 as well as increased
occupancy at Chronicle Mill and The Everly.
General contracting and real estate services revenues for the year ended December 31, 2024 increased $20.0 million,
or 4.9%, compared to the year ended December 31, 2023, due to the execution of our backlog and the recognition of savings
from unused contingencies for certain contracts.
Interest income for the year ended December 31, 2024 increased $3.5 million, or 23.1%, compared to the year ended
December 31, 2023, due to higher outstanding principal balances on our real estate financing investments, interest earned on
unused commitments on real estate financing investments, and higher interest bearing cash deposits.
Rental expenses by segment for each of the years ended December 31, 2024, 2023, and 2022 were as follows (in
thousands):
Years Ended December 31,
2024
2023
2024
2023
2022
Change
Change
Retail
$
18,221 $
16,470 $
13,980 $
1,751 $
2,490
Office
25,048
22,708
19,003
2,340
3,705
Multifamily
19,141
17,241
17,759
1,900
(518)
$
62,410 $
56,419 $
50,742 $
5,991 $
5,677
Rental expenses increased $6.0 million, or 10.6%, during the year ended December 31, 2024 compared to the year
ended December 31, 2023.
Retail rental expenses for the year ended December 31, 2024 increased 10.6% compared to the year ended
December 31, 2023, primarily as a result of The Interlock acquisition in May 2023, the commencement of operations for
Southern Post Retail in 2024, and increased costs for contracted property services, utilities, and repairs and maintenance.
Office rental expenses for the year ended December 31, 2024 increased 10.3% compared to the year ended
December 31, 2023, primarily as a result of The Interlock acquisition in May 2023, the commencement of operations for
Southern Post Office in 2024, and increased costs for contracted property services.
Multifamily rental expenses for the year ended December 31, 2024 increased 11.0% compared to the year ended
December 31, 2023, primarily as a result of the commencement of operations at Chandler Residences, as well as higher costs
for contracted property services, utilities, compensation, and repairs and maintenance.
55
Real estate taxes by segment for the years ended December 31, 2024, 2023, and 2022 were as follows (in thousands):
Years Ended December 31,
2024
2023
2024
2023
2022
Change
Change
Retail
$
9,421 $
9,102 $
9,122 $
319 $
(20)
Office
8,731
8,682
7,617
49
1,065
Multifamily
5,156
4,658
5,318
498
(660)
$
23,308 $
22,442 $
22,057 $
866 $
385
Real estate taxes increased $0.9 million, or 3.9%, during the year ended December 31, 2024 compared to the year
ended December 31, 2023.
Retail real estate taxes for the year ended December 31, 2024 increased 3.5% compared to the year ended
December 31, 2023, primarily as a result of the commencement of operations for Southern Post Retail and the acquisition of
The Interlock in May 2023.
Office real estate taxes for the year ended December 31, 2024 increased 0.6%, and therefore was materially consistent
compared to the year ended December 31, 2023.
Multifamily real estate taxes for the year ended December 31, 2024 increased 10.7% compared to the year ended
December 31, 2023, primarily as a result of increased rate assessments across the portfolio, particularly Greenside Apartments
and The Edison Apartments, as well as commencement of operations for Chandler Residences.
General contracting and real estate services expenses for the year ended December 31, 2024 increased $19.6 million,
or 4.9%, compared to the year ended December 31, 2023, primarily due to an increase in work performed in the execution of
our backlog.
Depreciation and amortization for the year ended December 31, 2024 decreased $6.5 million, or 6.6%, compared to the
year ended December 31, 2023. The decrease was primarily attributable to accelerated amortization of intangible lease assets in
2023 recognized in connection with the termination of leases at One City Center and The Interlock. This was partially offset by
increased depreciation in 2024 related to the commencement of operations for Southern Post Office, Southern Post Retail, and
Chandler Residences, and the acquisition of The Interlock Office and The Interlock Retail in May 2023.
General and administrative expenses for the year ended December 31, 2024 increased $2.1 million, or 11.6%,
compared to the year ended December 31, 2023. The increase resulted primarily due to increased salaries and compensation and
severance costs.
Acquisition, development, and other pursuit costs for the year ended December 31, 2024 related to the write off of
development costs related to an undeveloped land parcel in predevelopment located in Charlotte, North Carolina. Refer to Note
5 to our condensed consolidated financial statements of this Annual Report on Form 10-K for more information. Acquisition,
development, and other pursuit costs for the year ended December 31, 2023 were immaterial.
Impairment charges during the year ended December 31, 2024 relate to the impairment of an undeveloped land parcel
in predevelopment located in Charlotte, North Carolina. Refer to Note 5 in our consolidated financial statements in Item 8 of
this Annual Report on Form 10-K for more information. Impairment charges during the year ended December 31, 2023 were
immaterial.
Gain on real estate dispositions, net for the year ended December 31, 2024 were due to the disposition of the Nexton
Square and Market at Mill Creek retail properties.
Interest expense for the year ended December 31, 2024 increased $21.2 million, or 36.6%, compared to the year ended
December 31, 2023 primarily due to higher levels of indebtedness throughout the year in connection with the funding of
development projects and real estate financing investments, as well as the expiration of derivatives designated as cash flow
hedges.
The loss on extinguishment of debt for the year ended December 31, 2024 was due to the payoff of the loans secured
by the Chronicle Mill, Premier Retail and Apartments, Market at Mill Creek, Nexton Square, and Southgate Square properties.
There was no loss on extinguishment of debt for the year ended December 31, 2023.
56
Change in fair value of derivatives and other for the year ended December 31, 2024 includes an increase in interest
receipts for non-designated derivatives due to an increase in the amount of non-designated derivatives, and a decrease in the fair
value of our derivative instruments due to decreases in forward SOFR (the Secured Overnight Financing Rate).
Changes in unrealized credit loss provision for the year ended December 31, 2024 were primarily the result of the
release of the provision related to the Solis City Park II real estate financing investment, which was partially offset by increases
in note receivable balances for the real estate financing investments and the closing of the Solis North Creek real estate
financing investment.
Changes in other income (expense), net for the year ended December 31, 2024 were immaterial.
The income tax benefit for the year ended December 31, 2024 was primarily attributable to the impairment of real
estate of $1.5 million and development costs of $5.5 million that were recognized during the period related to undeveloped land
under predevelopment, which had an attributable income tax benefit of $1.6 million. The income tax provision that we
recognized during the years ended December 31, 2024 and 2023, which for the year ended December 31, 2024 partially offset
the income tax benefit discussed above, were attributable to the taxable profits and losses of our development and construction
businesses that we operate through our TRS.
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, mezzanine loan funding requirements, and strategic acquisitions. We expect
to meet our short-term liquidity requirements through net cash provided by operations, reserves established from existing cash,
borrowings under construction loans to fund new real estate development and construction, borrowings available under our
amended credit facility, and net proceeds from the opportunistic sale of common stock through our at-the-market continuous
equity offering program (the "ATM Program"), which is discussed below.
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, the issuance of equity and debt securities, and the opportunistic disposition of non-core properties. We also may
fund property development and acquisitions and capital improvements using our credit facility pending long-term financing.
As of December 31, 2024, we had unrestricted cash and cash equivalents of $70.6 million available for both current
liquidity needs as well as development and redevelopment activities. As of December 31, 2024, we also had restricted cash in
escrow of $1.6 million, some of which is available for capital expenditures and certain operating expenses at our operating
properties. As of December 31, 2024, we had $113.0 million of available borrowings under our revolving credit facility to meet
our short-term liquidity requirements and $13.4 million of available borrowings under our construction loans to fund
development activities. During the three months ended December 31, 2024, we decreased outstanding borrowings on our
revolving credit facility by $19.0 million. The funds used to pay down the debt were procured through the closing of a loan
secured by the Premier mixed-use retail and multifamily property and through the disposition of the Market at Mill Creek and
Nexton Square retail properties.
During the year ended December 31, 2022, we began to implement a strategic transformation of the composition of
borrowings by refinancing secured property debt with unsecured property debt in order to increase the flexibility of our
financing cash flows. We continued to implement this transformation during the year ended December 31, 2024 and intend to
continue to implement the transformation during the year ended December 31, 2025. As of December 31, 2024, unsecured debt
represented 55.9% of our total borrowings compared to 54.4% as of December 31, 2023.
ATM Program
On March 10, 2020, we commenced the ATM Program through which we may, from time to time, issue and sell
shares of our common stock and Series A Preferred Stock having an aggregate offering price of up to $300.0 million, to or
through our sales agents and, with respect to shares of our common stock, may enter into separate forward sales agreements to
or through one or more forward purchasers.
57
During the year ended December 31, 2024, we issued and sold 2,288,541 shares of common stock at a weighted
average price of $11.58 per share under the ATM Program, receiving net proceeds, after offering costs and commissions, of
$26.1 million. During the year ended December 31, 2024, we did not issue any shares of Series A Preferred Stock under the
ATM Program. Shares having an aggregate offering price of $178.5 million remained unsold under the ATM Program as of
February 21, 2025.
Recent Common Stock Offering
On September 27, 2024, we completed an underwritten public offering of 9.00 million shares of common stock at a
public offering price of $10.50 per share, which resulted in gross proceeds of $94.5 million. We granted the underwriters an
option to purchase 1.35 million shares of common stock at a public offering price of $10.50 per share, which was exercised in
full, resulting in additional gross proceeds of $14.2 million. We received net proceeds, after deducting the underwriting
discount and offering expenses, of approximately $103.5 million.
Share Repurchase Program
On June 15, 2023, our board of directors authorized the $50.0 million Share Repurchase Program. Under the Share
Repurchase Program, we may repurchase shares of our common stock and Series A Preferred Stock from time to time in the
open market, in block purchases, through privately negotiated transactions, the use of trading plans intended to qualify under
Rule 10b5-1 under the Exchange Act, or other means permitted. The Share Repurchase Program does not obligate us to acquire
any specific number of shares or acquire shares over any specific period of time. The Share Repurchase Program may be
suspended or discontinued at any time by us and does not have an expiration date.
During the year ended December 31, 2024, we did not repurchase any shares of common stock or Series A Preferred
Stock. As of December 31, 2024, $37.4 million remained available for repurchases under the Share Repurchase Program.
Credit Facility
On August 23, 2022, we entered into an amended and restated credit agreement (the "Credit Agreement"), which
provides for a $550.0 million credit facility comprised of a $250.0 million senior unsecured revolving credit facility (the
"revolving credit facility") and a $300.0 million senior unsecured term loan facility (the "term loan facility" and, together with
the revolving credit facility, the "credit facility"), with a syndicate of banks. Subject to available borrowing capacity, we intend
to use future borrowings under the credit facility for general corporate purposes, including funding acquisitions, mezzanine
lending, and development and redevelopment of properties in our portfolio, and for working capital.
The credit facility includes an accordion feature that allows the total commitments to be increased up to $1.0 billion,
subject to certain conditions, including obtaining commitments from any one or more lenders. The revolving credit facility has
a scheduled maturity date of January 22, 2027, with two six-month extension options, subject to certain conditions, including
payment of a 0.075% extension fee at each extension. The term loan facility has a scheduled maturity date of January 21, 2028.
On August 29, 2023, we increased the capacity of the revolving credit facility by $105.0 million by exercising the
accordion feature in part, bringing the revolving credit facility capacity to $355.0 million and the total credit facility capacity to
$655.0 million.
On June 14, 2024, the term loan facility commitment increased to $350.0 million as a result of an existing lender
increasing its outstanding commitment.
The revolving credit facility bears interest at SOFR plus a margin ranging from 1.30% to 1.85% and a credit spread
adjustment of 0.10%, and the term loan facility bears interest at SOFR plus a margin ranging from 1.25% to 1.80% and a credit
spread adjustment of 0.10%, in each case depending on our total leverage. We also are obligated to pay an unused commitment
fee of 15 or 25 basis points on the unused portions of the commitments under the revolving credit facility, depending on the
amount of borrowings under the revolving credit facility. If the Company or the Operating Partnership attains investment grade
credit ratings from both S&P Global Ratings and Moody’s Investors Service, Inc., we may elect to have borrowings become
subject to interest rates based on such credit ratings. Our unencumbered borrowing pool will support revolving borrowings of
up to $258.0 million, as of December 31, 2024.
The Operating Partnership is the borrower under the credit facility, and its obligations under the credit facility are
guaranteed by us and certain of our subsidiaries that are not otherwise prohibited from providing such guaranty.
58
The Credit Agreement contains customary representations and warranties and financial and other affirmative and
negative covenants. Our ability to borrow under the credit facility is subject to our ongoing compliance with a number of
financial covenants, affirmative covenants and other restrictions, including the following:
•
Total leverage ratio of not more than 60% (or 65% for the two consecutive quarters following any acquisition with a
purchase price of at least $100.0 million, but only up to two times during the term of the credit facility);
•
Ratio of adjusted EBITDA (as defined in the Credit Agreement) to fixed charges of not less than 1.50 to 1.0;
•
Tangible net worth of not less than the sum of (i) $825.2 million and (ii) an amount equal to 75% of the net equity
proceeds received by us after June 30, 2022;
•
Ratio of secured indebtedness (excluding the credit facility if it becomes secured indebtedness) to total asset value of
not more than 40%;
•
Ratio of secured recourse debt (excluding the credit facility if it becomes secured indebtedness) to total asset value of
not more than 20%;
•
Total unsecured leverage ratio of not more than 60% (or 65% for the two consecutive quarters following any
acquisition with a purchase price of at least $100.0 million, but only up to two times during the term of the credit
facility);
•
Unencumbered interest coverage ratio (as defined in the Credit Agreement) of not less than 1.75 to 1.0;
•
Maintenance of a minimum of at least 15 unencumbered properties (as defined in the Credit Agreement) with an
unencumbered asset value (as defined in the Credit Agreement) of not less than $500.0 million at any time; and
•
Minimum occupancy rate (as defined in the Credit Agreement) for all unencumbered properties of not less than 80% at
any time.
The Credit Agreement limits our ability to pay cash dividends if a default has occurred and is continuing or would
result therefrom. However, if certain defaults or events of default exist, we may pay cash dividends to the extent necessary to (i)
maintain our status as a REIT and (ii) avoid federal or state income excise taxes. The Credit Agreement also restricts the
amount of capital that we can invest in specific categories of assets, such as unimproved land holdings, development properties,
notes receivable, mortgages, mezzanine loans and unconsolidated affiliates, and restricts our ability to repurchase stock and
units of limited partnership interest in the Operating Partnership during the term of the credit facility.
We may, at any time, voluntarily prepay any loan under the credit facility in whole or in part without significant
premium or penalty, except for those portions subject to an interest rate swap agreement.
The Credit Agreement includes customary events of default, in certain cases subject to customary periods to cure. The
occurrence of an event of default, following the applicable cure period, would permit the lenders to, among other things, declare
the unpaid principal, accrued and unpaid interest and all other amounts payable under the credit facility to be immediately due
and payable.
We are currently in compliance with all covenants under the Credit Agreement.
M&T Term Loan Facility
On December 6, 2022, we entered into a term loan agreement (the "M&T term loan agreement") with Manufacturers
and Traders Trust Company, which provides a $100.0 million senior unsecured term loan facility (the "M&T term loan
facility"), with the option to increase the total capacity to $200.0 million, subject to our satisfaction of certain conditions. The
M&T term loan facility has a scheduled maturity date of March 8, 2027, with a one-year extension option, subject to our
satisfaction of certain conditions, including payment of a 0.075% extension fee.
On June 21, 2024, the M&T term loan facility commitment increased to $135.0 million as a result of adding a new
lender to the facility.
The M&T term loan facility bears interest at a rate elected by us based on term SOFR, Daily Simple SOFR, or the
Base Rate (as defined below), and in each case plus a margin. A term SOFR or Daily Simple SOFR loan is also subject to a
credit spread adjustment of 0.10%. The margin under each interest rate election depends on our total leverage. The "Base Rate"
is equal to the highest of: (a) the rate of interest in effect for such day as publicly announced from time to time by M&T Bank
as its “prime rate” for such day, (b) the Federal Funds Rate for such day, plus 0.50%, (c) one month term SOFR for such day
plus 100 basis points and (d) 1.00%. We have elected for the loan to bear interest at term SOFR plus margin. If we attain
investment grade credit ratings from both S&P Global Ratings and Moody's Investor Service, Inc., we may elect to have
borrowings become subject to interest rates based on such credit ratings.
The Operating Partnership is the borrower under the M&T term loan facility, and its obligations under the M&T term
59
loan facility are guaranteed by us and certain of its subsidiaries that are not otherwise prohibited from providing such guaranty.
The M&T term loan agreement contains customary representations and warranties and financial and other affirmative
and negative covenants. Our ability to borrow under the M&T term loan facility is subject to ongoing compliance with a
number of financial covenants, affirmative covenants, and other restrictions, including the following:
•
Total leverage ratio of not more than 60% (or 65% for the two consecutive quarters following any acquisition with a
purchase price of at least $100.0 million, but only up to two times during the term of the M&T term loan facility);
•
Ratio of adjusted EBITDA (as defined in the M&T term loan agreement) to fixed charges of not less than 1.50 to 1.0;
•
Tangible net worth of not less than the sum of (i) $825.2 million and (ii) an amount equal to 75% of the net equity
proceeds received by us after June 30, 2022;
•
Ratio of secured indebtedness (excluding the M&T term loan facility if it becomes secured indebtedness) to total asset
value of not more than 40%;
•
Ratio of secured recourse debt (excluding the M&T term loan facility if it becomes secured indebtedness) to total asset
value of not more than 20%;
•
Total unsecured leverage ratio of not more than 60% (or 65% for the two consecutive quarters following any
acquisition with a purchase price of at least $100.0 million, but only up to two times during the term of the M&T term
loan facility);
•
Unencumbered interest coverage ratio (as defined in the M&T term loan agreement) of not less than 1.75 to 1.0;
•
Maintenance of a minimum of at least 15 unencumbered properties (as defined in the M&T term loan agreement) with
an unencumbered asset value (as defined in the M&T term loan agreement) of not less than $500.0 million at any time;
and
•
Minimum occupancy rate (as defined in the M&T term loan agreement) for all unencumbered properties of not less
than 80% at any time.
The M&T term loan agreement limits our ability to pay cash dividends if a default has occurred and is continuing or
would result therefrom. However, if certain defaults or events of default exist, we may pay cash dividends to the extent
necessary to (i) maintain our status as a REIT and (ii) avoid federal or state income excise taxes. The M&T term loan agreement
also restricts the amount of capital that we can invest in specific categories of assets, such as unimproved land holdings,
development properties, notes receivable, mortgages, mezzanine loans and unconsolidated affiliates, and restricts our ability to
repurchase stock and units of limited partnership interest in the Operating Partnership during the term of the M&T term loan
facility.
We may, at any time, voluntarily prepay the M&T term loan facility in whole or in part without premium or penalty,
provided certain conditions are met.
The M&T term loan agreement includes customary events of default, in certain cases subject to customary cure
periods. The occurrence of an event of default, if not cured within the applicable cure period, would permit the lenders to,
among other things, declare the unpaid principal, accrued and unpaid interest, and all other amounts payable under the M&T
term loan facility to be immediately due and payable. A default under the Credit Agreement would also constitute a default
under M&T term loan agreement.
We are currently in compliance with all covenants under the M&T term loan agreement.
TD Term Loan Facility
On May 19, 2023, we entered into a term loan agreement (the "TD term loan agreement") with Toronto Dominion
(Texas) LLC, as administrative agent, and TD Bank, N.A. as lender, which provides a $75.0 million senior unsecured term loan
facility (the "TD term loan facility"), with the option to increase the total capacity to $150.0 million, subject to our satisfaction
of certain conditions. The TD term loan facility has a scheduled maturity date of May 19, 2025, with a one-year extension
option, subject to our satisfaction of certain conditions, including an extension fee payment of 0.15% of the outstanding amount
of the loan as of such date.
The TD term loan facility bears interest at a rate elected by us based on term SOFR, Daily Simple SOFR, or the Base
Rate (as defined below), and in each case plus a margin. A term SOFR or Daily Simple SOFR loan is also subject to a credit
spread adjustment of 0.10%. The margin under each interest rate election depends on our total leverage. The "Base Rate" is
equal to the highest of: (a) the Federal Funds Rate for such day, plus 0.50% (b) the rate of interest in effect for such day as
60
publicly announced from time to time by the administrative agent as its “prime rate” for such day, (c) one month term SOFR for
such day plus 0.01 basis points and (d) 1.00%. We have elected for the loan to bear interest at term SOFR plus margin. If we
attain investment grade credit ratings from both S&P Global Ratings and Moody's Investor Service, Inc., we may elect to have
borrowings become subject to interest rates based on such credit ratings.
On June 29, 2023, the TD term loan facility commitment increased to $95.0 million as a result of the addition of a
second lender to the facility.
The Operating Partnership is the borrower under the TD term loan facility, and its obligations under the TD term loan
facility are guaranteed by us and certain of its subsidiaries that are not otherwise prohibited from providing such guaranty.
The TD term loan agreement contains customary representations and warranties and financial and other affirmative
and negative covenants. Our ability to borrow under the TD term loan facility is subject to ongoing compliance with a number
of financial covenants, affirmative covenants, and other restrictions, including the following:
•
Total leverage ratio of not more than 60% (or 65% for the two consecutive quarters following any acquisition with a
purchase price of at least $100.0 million, but only up to two times during the term of the TD term loan facility);
•
Ratio of adjusted EBITDA (as defined in the TD term loan agreement) to fixed charges of not less than 1.50 to 1.0;
•
Tangible net worth of not less than the sum of (i) $825.2 million and (ii) an amount equal to 75% of the net equity
proceeds received by us after June 30, 2022;
•
Ratio of secured indebtedness (excluding the TD term loan facility if it becomes secured indebtedness) to total asset
value of not more than 40%;
•
Ratio of secured recourse debt (excluding the TD term loan facility if it becomes secured indebtedness) to total asset
value of not more than 20%;
•
Total unsecured leverage ratio of not more than 60% (or 65% for the two consecutive quarters following any
acquisition with a purchase price of at least $100.0 million, but only up to two times during the term of the TD term
loan facility);
•
Unencumbered interest coverage ratio (as defined in the TD term loan agreement) of not less than 1.75 to 1.0;
•
Maintenance of a minimum of at least 15 unencumbered properties (as defined in the TD term loan agreement) with an
unencumbered asset value (as defined in the TD term loan agreement) of not less than $500.0 million at any time; and
•
Minimum occupancy rate (as defined in the TD term loan agreement) for all unencumbered properties of not less than
80% at any time.
The TD term loan agreement limits our ability to pay cash dividends if a default has occurred and is continuing or
would result therefrom. However, if certain defaults or events of default exist, we may pay cash dividends to the extent
necessary to (i) maintain our status as a REIT and (ii) avoid federal or state income excise taxes. The TD term loan agreement
also restricts the amount of capital that we can invest in specific categories of assets, such as unimproved land holdings,
development properties, notes receivable, mortgages, mezzanine loans, and unconsolidated affiliates, and restricts our ability to
repurchase stock and units of limited partnership interest in the Operating Partnership during the term of the TD term loan
facility.
We may, at any time, voluntarily prepay the TD term loan facility in whole or in part without premium or penalty,
provided certain conditions are met.
The TD term loan agreement includes customary events of default, in certain cases subject to customary cure periods.
The occurrence of an event of default, if not cured within the applicable cure period, would permit the lenders to, among other
things, declare the unpaid principal, accrued and unpaid interest, and all other amounts payable under the TD term loan facility
to be immediately due and payable. A default under the Credit Agreement would also constitute a default under the TD term
loan agreement.
We are currently in compliance with all covenants under the TD term loan agreement.
61
Consolidated Indebtedness
The following table sets forth our consolidated indebtedness as of December 31, 2024 ($ in thousands):
Amount
Outstanding
Interest Rate (a)
Effective Rate
for Variable-
Rate Debt
Maturity Date (b)
Balance at
Maturity
Secured Debt
Red Mill South
$
4,502
3.57 %
3.57 %
May 1, 2025
$
4,383
The Everly
30,000
SOFR+
1.50 %
5.83 %
December 20, 2025
30,000
Encore Apartments & 4525 Main Street
52,187
2.93 %
2.93 %
February 10, 2026
50,726
Southern Post
60,244
SOFR+
2.25 %
6.58 %
August 25, 2026
60,244
Thames Street Wharf
66,461
SOFR+
1.30 %
2.33 % (c)
September 30, 2026
64,072
Constellation Energy Building
175,000
SOFR+
1.50 %
5.95 %
November 1, 2026
175,000
Liberty
20,242
SOFR+
1.50 %
4.93 % (c)
September 27, 2027
19,230
Greenbrier Square
19,184
3.74 %
3.74 %
October 10, 2027
18,049
Lexington Square
13,293
4.50 %
4.50 %
September 1, 2028
12,044
Red Mill North
3,842
4.73 %
4.73 %
December 31, 2028
3,295
Premier Apartments and Retail
29,415
5.53 %
5.53 %
December 1, 2029
29,415
Greenside Apartments
30,321
3.17 %
3.17 %
December 15, 2029
26,095
Smith's Landing
13,584
4.05 %
4.05 %
June 1, 2035
384
The Edison
14,774
5.30 %
5.30 %
December 1, 2044
100
The Cosmopolitan
39,461
3.35 %
3.35 %
July 1, 2051
187
Total Secured Debt
$
572,510
$
493,224
Unsecured Debt
TD Unsecured Term Loan
$
95,000
SOFR+
1.35%-1.90%
4.85 % (c)
May 19, 2025
$
95,000
Senior Unsecured Revolving Credit Facility
140,000
SOFR+
1.30%-1.85%
6.42 %
January 22, 2027
140,000
Senior Unsecured Revolving Credit Facility
(Fixed)
5,000
SOFR+
1.30%-1.85%
4.80 %
(c)
January 22, 2027
5,000
M&T Unsecured Term Loan
35,000
SOFR+
1.25%-1.80%
6.22 %
March 8, 2027
35,000
M&T Unsecured Term Loan (Fixed)
100,000
SOFR+
1.25%-1.80%
4.90 % (c)
March 8, 2027
100,000
Senior Unsecured Term Loan
271,000
SOFR+
1.25%-1.80%
6.22 %
January 21, 2028
271,000
Senior Unsecured Term Loan (Fixed)
79,000
SOFR+
1.25%-1.80%
4.83 % (c)
January 21, 2028
79,000
Total Unsecured Debt
725,000
725,000
Total Principal Balances
$
1,297,510
$
1,218,224
Other notes payable(d)
6,121
Unamortized GAAP Adjustments
(8,072)
Indebtedness, Net
$
1,295,559
_______________________________________
(a) SOFR is determined by individual lenders.
(b) Does not reflect the effect of any maturity extension options.
(c) Includes debt subject to interest rate swap locks.
(d) Represents the fair value of additional ground lease payments at 1405 Point over the approximately 38-year remaining lease term.
As of December 31, 2024, we were in compliance with all loan covenants on our outstanding indebtedness.
As of December 31, 2024, our scheduled principal repayments and maturities during each of the next five years and
thereafter were as follows ($ in thousands):
Year(1)(2)(3)
Amount Due
Percentage of Total
2025
$
136,701
11 %
2026
355,710
27 %
2027
321,819
25 %
2028
369,322
28 %
2029
59,167
5 %
Thereafter
54,791
4 %
Total
$
1,297,510
100 %
________________________________________
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(1) Does not reflect the exercise of any maturity extension options.
(2) Includes debt incurred in connection with the development of properties.
(3) Debt principal payments and maturities exclude increased ground lease payments at 1405 Point which are classified as a note payable in
our consolidated balance sheets.
Interest Rate Derivatives
As of December 31, 2024, the Company held the following interest rate swap agreements ($ in thousands):
Related Debt
Notional Amount
Index
Swap Fixed
Rate
Debt Effective
Rate
Effective
Date
Expiration
Date
Harbor Point Parcel 3 senior
construction loan
$
90,000 (a) 1-month SOFR
2.75 %
4.82 %
10/2/2023
10/1/2025
Floating rate pool of loans
330,000 (b) 1-month SOFR
2.75 %
4.33 %
10/1/2023
10/1/2025
Harbor Point Parcel 4 senior
construction loan
100,000 (c) 1-month SOFR
2.75 %
5.12 %
11/01/2023
11/01/2025
Floating rate pool of loans
300,000 (d) 1-month SOFR
2.75 %
4.33 %
12/01/2023
12/01/2025
Revolving credit facility and TD
unsecured term loan
100,000 (e) Daily SOFR
3.20 %
4.70 %
05/19/2023
5/19/2026
Thames Street Wharf loan
66,057 (f) Daily SOFR
0.93 %
2.33 %
09/30/2021
9/30/2026
M&T unsecured term loan
100,000 (f) 1-month SOFR
3.50 %
4.90 %
12/06/2022
12/06/2027
Liberty Retail & Apartments loan
21,000 (g) 1-month SOFR
3.43 %
4.93 %
12/13/2022
1/21/2028
Senior unsecured term loan
79,000 (g) 1-month SOFR
3.43 %
4.83 %
12/13/2022
1/21/2028
Total
$
1,186,057
(a) This interest rate swap agreement reduces our interest rate exposure on the $180.4 million senior construction loan secured by our Harbor
Point Parcel 3 equity method investment. As such, the loan is not reflected on our consolidated balance sheets. We also paid $3.6 million to
reduce the swap fixed rate on September 8, 2023.
(b) We paid $13.3 million to reduce the swap fixed rate on September 8, 2023.
(c) This interest rate swap agreement reduces our interest rate exposure on the $109.7 million senior construction loan secured by our Harbor
Point Parcel 4 equity method investment. As such, the loan is not reflected on our consolidated balance sheets. We also paid $3.9 million to
reduce the swap fixed rate on October 13, 2023.
(d) We paid $10.5 million to reduce the swap fixed rate on November 16, 2023.
(e) Subject to cancellation by the counterparty beginning on May 1, 2025 and the first day of each month thereafter.
(f) Designated as a cash flow hedge.
(g) We novated an existing 3.43% fixed rate swap with a $100.0 million notional and assigned (A) $11.1 million notional to the loan secured
by Market at Mill Creek, effective April 17, 2024, and (B) $21.0 million to the loan secured by Liberty Retail & Apartments, effective
February 1, 2024. Once the Market at Mill Creek loan was repaid, the $67.9 million swap on the senior unsecured loan increased to
$79.0 million.
Contractual Obligations
The following table summarizes the future payments for known contractual obligations as of December 31, 2024 (in
thousands):
Payments due by period
Less than
More than
Contractual Obligations
1 year
1 year
Total
Principal payments and maturities of long-term indebtedness
$
136,701 $
1,160,809 $
1,297,510
Interest payments on long-term indebtedness (1) (2)
57,482
104,995
162,477
Ground and other operating leases
5,473
455,617
461,090
Tenant-related and other commitments
24,112
—
24,112
Total (3) (4)
$
223,768 $
1,721,421 $
1,945,189
________________________________________
(1)
For long-term debt that bears interest at variable rates, we estimated future interest payments using the SOFR forward curve as of
December 31, 2024. As of December 31, 2024, SOFR was 4.32%.
(2)
Assumes the $145.0 million revolving credit facility balance outstanding as of December 31, 2024 remains constant through maturity of
the facility. Amounts also include unused credit facility fees assuming the balance outstanding as of December 31, 2024 remains
constant through maturity of our revolving credit facility.
63
(3)
Contractual obligations above do not include funding obligations to non-wholly owned development projects as well as unfunded real
estate financing investment commitments due to the uncertainty of the timing and amounts of certain of these obligations. Refer to "Item
1. Business" for information about our development projects and real estate financing investments.
(4)
Contractual obligations above exclude increased ground lease payments at 1405 Point, which is classified as a note payable in the
consolidated balance sheets.
Off-Balance Sheet Arrangements
In connection with certain of our real estate financing activities and equity method investments, we have provided
guarantees to pay portions of certain senior loans of third parties associated with the development projects. As of December 31,
2024, we had an outstanding guarantee liability of $0.1 million related to the $32.9 million guarantee of the senior loan secured
by Harbor Point Parcel 4.
In connection with our Harbor Point Parcel 3 unconsolidated joint venture, we are responsible for providing a
completion guarantee to the lender for this project.
Unfunded Loan Commitments
We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the
financial needs of our borrowers. These commitments are not reflected on the consolidated balance sheet. As of December 31,
2024, our off-balance sheet arrangements consisted of $32.7 million of unfunded commitments of our notes receivable. These
unfunded commitments consist of $24.2 million of unfunded principal and $8.5 million of unfunded contingency. We consider
the probability of contingency funding to be remote. We have recorded a $0.5 million credit loss reserve in conjunction with the
total unfunded commitments. Such commitments are subject to our borrowers’ satisfaction of certain financial and nonfinancial
covenants and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated
balance sheets. The commitments may or may not be funded depending on a variety of circumstances including timing, credit
metric hurdles, and other nonfinancial events occurring.
Cash Flows
Years Ended
December 31,
2024
2023
Change
($ in thousands)
Operating Activities
$
112,020 $
93,314 $
18,706
Investing Activities
(26,701)
(237,266)
210,565
Financing Activities
(43,262)
122,253
(165,515)
Net increase (decrease) in cash, cash equivalents, and restricted cash
$
42,057 $
(21,699) $
63,756
Cash, cash equivalents, and restricted cash, beginning of period
$
30,166 $
51,865
Cash, cash equivalents, and restricted cash, end of period
$
72,223 $
30,166
Years Ended
December 31,
2023
2022
Change
($ in thousands)
Operating Activities
$
93,314 $
116,858 $
(23,544)
Investing Activities
(237,266)
(33,242)
(204,024)
Financing Activities
122,253
(72,194)
194,447
Net (decrease) increase in cash, cash equivalents, and restricted cash
$
(21,699) $
11,422 $
(33,121)
Cash, cash equivalents, and restricted cash, beginning of period
$
51,865 $
40,443
Cash, cash equivalents, and restricted cash, end of period
$
30,166 $
51,865
64
Net cash provided by operating activities for the year ended December 31, 2024 increased by $18.7 million compared
to the year ended December 31, 2023. The change was primarily attributable to an increase in portfolio NOI and timing of
receipts and payables for the construction business.
Net cash used for investing activities for the year ended December 31, 2024 decreased by $210.6 million compared to
the year ended December 31, 2023. The change was primarily attributable to the dispositions of the Nexton Square and Market
at Mill Creek retail properties, the payoff of the real estate financing investment secured by the Solis City Park II property, a
decrease in contributions to equity method investments, a decrease in payments made to purchase interest rate derivatives, and a
reduction to spending related to investments of real estate and building improvements.
Net cash provided by (used for) financing activities during the year ended December 31, 2024 decreased by $165.5
million compared to the year ended December 31, 2023. The change was primarily attributable to increases of cash paid to
extinguish debt, partially offset by the cash proceeds from the issuance of common stock throughout the year.
Non-GAAP Financial Measures
FFO and Normalized FFO
We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment
Trusts ("Nareit"). Nareit defines FFO as net income (loss) (calculated in accordance with GAAP), excluding depreciation and
amortization related to real estate, gains or losses from the sales of certain real estate assets, gains or losses from change in
control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly
attributable to decreases in the value of depreciable real estate held by the entity.
FFO is a supplemental non-GAAP financial measure. Management uses FFO as a supplemental performance measure
because we believe that FFO is beneficial to investors as a starting point in measuring our operational performance.
Specifically, in excluding real estate related depreciation and amortization and gains and losses from property dispositions
which do not relate to or are not indicative of operating performance, FFO provides a performance measure that, when
compared period-over-period, captures trends in occupancy rates, rental rates, and operating costs.
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 definition as we do, and, accordingly, our calculation of FFO may not be
comparable to such other REITs’ calculations of 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. Also, FFO should not be used
as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP.
We also believe that the computation of FFO in accordance with Nareit’s definition includes certain items that are not
indicative of the results provided by our operating property portfolio and affect the comparability of our period-over-period
performance. Accordingly, management believes that Normalized FFO is a more useful performance measure that excludes
certain items, including but not limited to, debt extinguishment losses and prepayment penalties, impairment and accelerated
amortization of intangible assets and liabilities, property acquisition, development, and other pursuit costs, mark-to-market
adjustments for interest rate derivatives not designated as cash flow hedges, amortization of payments made to purchase interest
rate caps and swaps designated as cash flow hedges, provision for unrealized non-cash credit losses, amortization of right-of-
use assets attributable to finance leases, severance related costs, and other non-comparable items. Other equity REITs may not
calculate Normalized FFO in the same manner as we do, and, accordingly, our Normalized FFO may not be comparable to such
other REITs' Normalized FFO.
65
The following table sets forth a reconciliation of FFO and Normalized FFO for each of the years ended December 31,
2024, 2023, and 2022 to net income, the most directly comparable GAAP measure:
Years Ended December 31,
2024
2023
2022
(in thousands, except per share and unit amounts)
Net income (loss) attributable to common stockholders and OP Unitholders
$
30,903
$
(4,490) $
82,457
Depreciation and amortization, net(1)
88,754
95,208
71,971
Gain on operating real estate dispositions, net(2)
(21,305)
—
(47,984)
Impairment of real estate assets
1,494
—
201
FFO attributable to common stockholders and OP Unitholders
99,846
90,718
106,645
Acquisition, development, and other pursuit costs
5,531
84
37
Accelerated amortization of intangible assets and liabilities
(5)
(653)
215
Loss on extinguishment of debt
247
—
3,374
Unrealized credit loss provision (release)
156
574
626
Amortization of right-of-use assets - finance leases
1,578
1,349
1,110
Increase (decrease) in fair value of derivatives not designated as cash flow hedges
9,612
14,185
(8,698)
Amortization of interest rate derivatives on designated cash flow hedges
422
4,210
3,849
Severance related costs
1,506
—
—
Normalized FFO available to common stockholders and OP Unitholders
$
118,893
$
110,467
$
107,158
Net income (loss) attributable to common stockholders and OP Unitholders
per diluted share and unit
$
0.33
$
(0.05) $
0.93
FFO attributable to common stockholders and OP Unitholders per diluted
share and unit
$
1.08
$
1.02
$
1.21
Normalized FFO attributable to common stockholders and OP Unitholders
per diluted share and unit
$
1.29
$
1.24
$
1.22
Weighted average common shares and units - diluted
92,326
88,864
88,192
________________________________________
(1) The adjustment for depreciation and amortization excludes amortization of above and below-market ground lease assets. The adjustment
for depreciation and amortization for the years ended December 31, 2024, 2023, and 2022 excludes $0.9 million, $0.9 million and $1.0
million, respectively, of depreciation attributable to our partners.
(2) The adjustment for gain on operating real estate dispositions for the year ended December 31, 2023 excludes $0.7 million for the gains
on the dispositions of non-operating parcels at the Market at Mill Creek and adjacent to Brooks Crossing Retail. The adjustment for gain on
real estate dispositions for the year ended December 31, 2022 excludes $5.4 million for the gain on the sale of The Residences at Annapolis
Junction that was allocated to our joint venture partner.
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, although
an extreme and sustained escalation in costs could have a negative impact on our residents and their ability to absorb rent
increases.
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 SOFR. We
use fixed interest rate financing and derivative financial instruments to manage interest rate risk. We do not use derivatives for
trading or other speculative purposes.
As of December 31, 2024 and excluding unamortized GAAP adjustments, 93.7% of our outstanding debt is either
fixed rate or economically hedged after the effect of interest rate swaps and caps. As of December 31, 2024, SOFR was
approximately 4.32%. Assuming no change in the level of our variable-rate debt or derivative instruments, if interest rates were
to increase by 100 basis points, our cash flow would decrease by approximately $1.9 million per year. Assuming no change in
66
the level of our variable-rate debt or derivative instruments, if interest rates were reduced by 100 basis points, our cash flow
would increase by approximately $1.9 million per year.
Item 8.
Financial Statements and Supplementary Data.
Our consolidated 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
We maintain disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the
Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is
processed, recorded, summarized, and reported within the time periods specified in the rules and regulations of the SEC and
that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to
apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
We have carried out an evaluation, under the supervision and with the participation of management, including our
Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of our disclosure controls and procedures as of
December 31, 2024, the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief
Financial Officer have concluded, as of December 31, 2024, that our disclosure controls and procedures were effective in
ensuring that information required to be disclosed by us in reports filed or submitted under the Exchange Act (i) is processed,
recorded, summarized, and reported within the time periods specified in the SEC's rules and forms and (ii) is accumulated and
communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to
allow for timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an
evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024 based on the Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework). Based on that evaluation, the Company’s management concluded that our internal control over financial reporting
was effective as of December 31, 2024.
Our internal control over financial reporting as of December 31, 2024 has been audited by Ernst & Young LLP, an
independent registered public accounting firm, as stated in their report, which is included elsewhere herein.
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) under the Exchange Act) during the quarter ended December 31, 2024 that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B.
Other Information.
During the three months ended December 31, 2024, none of our directors or officers adopted or terminated a “Rule
10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation
S-K.
67
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
68
PART III
Item 10.
Directors, Executive Officers and Corporate Governance.
This information is incorporated by reference from our Proxy Statement with respect to the 2025 Annual Meeting of
Stockholders to be filed with the SEC no later than April 30, 2025.
Item 11.
Executive Compensation.
This information is incorporated by reference from our Proxy Statement with respect to the 2025 Annual Meeting of
Stockholders to be filed with the SEC no later than April 30, 2025.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
This information is incorporated by reference from our Proxy Statement with respect to the 2025 Annual Meeting of
Stockholders to be filed with the SEC no later than April 30, 2025.
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
This information is incorporated by reference from our Proxy Statement with respect to the 2025 Annual Meeting of
Stockholders to be filed with the SEC no later than April 30, 2025.
Item 14.
Principal Accountant Fees and Services.
This information is incorporated by reference from our Proxy Statement with respect to the 2025 Annual Meeting of
Stockholders to be filed with the SEC no later than April 30, 2025.
69
PART IV
Item 15.
Exhibits and Financial Statement Schedules.
The following is a list of documents filed as a part of this report:
(1)
Financial Statements
Included herein at pages F-1 through F-58.
(2)
Financial Statement Schedules
The following financial statement schedule is included herein at pages F-59 through F-62:
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
statements and, therefore, have been omitted.
(3)
Exhibits
The exhibits required to be filed by Item 601 of Regulation S-K are listed in the Index to Exhibits of this report and
incorporated by reference herein.
Item 16.
Form 10-K Summary.
None.
70
INDEX TO EXHIBITS
3.1
Articles of Amendment and Restatement of Armada Hoffler Properties, Inc. (Incorporated by reference to
Exhibit 4.1 to the Company’s Registration Statement on Form S-3, filed on June 2, 2014)
3.2
Amended and Restated Bylaws of Armada Hoffler Properties, Inc. (Incorporated by reference to Exhibit 3.2 to
the Company's Annual Report on Form 10-K, filed on February 24, 2022)
3.3
Articles Supplementary Designating the Rights and Preferences of the 6.75% Series A Cumulative
Redeemable Perpetual Preferred Stock (Incorporated by reference to Exhibit 3.1 to the Company’s Current
Report on Form 8-K, filed on June 17, 2019)
3.4
Articles Supplementary relating to Section 3-802(c) of the Maryland General Corporation Law (Incorporated
by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on February 24, 2020)
3.5
Articles Supplementary Designating Additional 6.75% Series A Cumulative Redeemable Perpetual Preferred
Stock, dated March 6, 2020 (Incorporated by reference to Exhibit 4.10 to the Company’s Form S-3, filed on
March 9, 2020)
3.6
Articles Supplementary Designating Additional 6.75% Series A Cumulative Redeemable Perpetual Preferred
Stock, dated July 2, 2020 (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form
8-K, filed on July 6, 2020)
3.7
Articles Supplementary Designating Additional 6.75% Series A Cumulative Redeemable Perpetual Preferred
Stock, dated August 17, 2020 (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on
Form 8-K, filed on August 20, 2020)
4.1
Form of Certificate of Common Stock of Armada Hoffler Properties, Inc. (Incorporated by reference to Exhibit
4.1 to the Company’s Registration Statement on Form S-11/A, filed on May 2, 2013)
4.2
Description of Securities of Armada Hoffler Properties, Inc. (Incorporated by reference to Exhibit 4.2 to the
Company's Annual Report on Form 10-K, filed on February 25, 2020)
10.1
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)
10.2†
Armada Hoffler Properties, Inc. Amended and Restated 2013 Equity Incentive Plan (Incorporated by reference
to Exhibit 10.1 to the Company’s Registration Statement on Form S-8, filed on June 15, 2017)
10.3†
Form of Restricted Stock Award Agreement for Executive Officers (Incorporated by reference to Exhibit 10.3
to the Company’s Annual Report on Form 10-K, filed on February 24, 2020)
10.4†*
Indemnification Agreement between Armada Hoffler Properties, Inc. and each of the Directors and Officers
listed on Schedule A thereto
10.5†*
Armada Hoffler, L.P. Amended and Restated Executive Severance Benefit Plan with the participants listed on
Schedule A thereto
10.6
Form of Restricted Stock Award Agreement for Directors (Incorporated by reference to Exhibit 10.7 to the
Company’s Annual Report on Form 10-K, filed on February 24, 2020)
10.7
Amendment No. 1, dated as of March 19, 2014, to the First Amended and Restated Agreement of Limited
Partnership of Armada Hoffler, L.P., dated as of May 13, 2013 (Incorporated by reference to Exhibit 10.1 to
the Company’s Quarterly Report on Form 10-Q, filed on May 15, 2014)
10.8
Amendment No. 2, dated as of July 10, 2015, to the First Amended and Restated Agreement of Limited
Partnership of Armada Hoffler, L.P., dated as of May 13, 2013 (Incorporated by reference to Exhibit 10.1 to
the Company’s Current Report on Form 8-K, filed on July 16, 2015)
10.9
Amendment No. 3 to the First Amended and Restated Agreement of Limited Partnership of Armada Hoffler,
L.P., dated as of May 13, 2013 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K, filed on June 17, 2019)
10.10
Amendment No. 4, dated as of March 6, 2020, to the First Amended and Restated Agreement of Limited
Partnership of Armada Hoffler, L.P., dated as of May 13, 2013 (Incorporated by reference to Exhibit 10.1 to
the Company’s Quarterly Report on Form 10-Q, filed on November 6, 2020)
10.11
Amendment No. 5, dated as of July 2, 2020, to the First Amended and Restated Agreement of Limited
Partnership of Armada Hoffler, L.P., dated as of May 13, 2013 (Incorporated by reference to Exhibit 10.2 to
the Company’s Quarterly Report on Form 10-Q, filed on November 6, 2020)
Exhibit
Number
Description
71
10.12
Amendment No. 6, dated as of August 17, 2020, to the First Amended and Restated Agreement of Limited
Partnership of Armada Hoffler, L.P., dated as of May 13, 2013 (Incorporated by reference to Exhibit 10.3 to
the Company’s Quarterly Report on Form 10-Q, filed on November 6, 2020)
10.13
Second Amended and Restated Agreement of Limited Partnership of Armada Hoffler, L.P. (Incorporated by
reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on February 21, 2025)
10.14†
Armada Hoffler Properties, Inc. Amended and Restated Short-Term Incentive Program (Incorporated by
reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K, filed on February 28, 2019)
10.15
Third Amended and Restated Credit Agreement, dated August 23, 2022, among Armada Hoffler, L.P., as
Borrower, Armada Hoffler Properties, Inc., as Parent, Bank of America, N.A., as Administrative Agent, and
the other agents and Lenders party thereto (Incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K, filed on October 6, 2022)
10.16
Second Amended and Restated Guaranty Agreement, dated October 3, 2019, among certain subsidiaries of
Armada Hoffler, L.P. named therein for the benefit of the Administrative Agent and the Lenders named in the
Second Amended and Restated Credit Agreement (Incorporated by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K, filed on October 9, 2019)
10.17
Membership Interest Purchase Agreement, dated December 3, 2021, by and between AHP Acquisitions, LLC,
as Purchaser, and Harbor Point Parcel 2 Acquisition LLC, as Seller. (Incorporated by reference to Exhibit
10.17 to the Company's Annual Report on Form 10-K, filed on February 24, 2022)
10.18†*
Form of Restricted LTIP Unit Award Agreement for Directors
10.19†*
Form of Restricted LTIP Unit Award Agreement for Executive Officers
10.20†
Form of Time-Based LTIP Unit Award Agreement (Incorporated by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K, filed on February 21, 2025)
10.21†
Form of Performance LTIP Unit Award Agreement (Incorporated by reference to Exhibit 10.3 to the
Company's Current Report on Form 8-K, filed on February 21, 2025)
10.22†
Form of Performance Unit Award Agreement (Incorporated by reference to Exhibit 10.4 to the Company's
Current Report on Form 8-K, filed on February 21, 2025)
10.23†
Form of RSU Award Agreement (Incorporated by reference to Exhibit 10.5 to the Company's Current Report
on Form 8-K, filed on February 21, 2025)
10.24†
Separation and General Release Agreement, entered into as of July 23, 2024, between Shelly R. Hampton and
Armada Hoffler Properties, Inc. (Incorporated by reference to Exhibit 10.1 to the Company's Current Report
on Form 8-K, filed on July 24, 2024)
19.1*
Insider Trading Policy
21.1*
List of Subsidiaries of Armada Hoffler Properties, Inc.
23.1*
Consent of Ernst & Young LLP, Independent Public Accounting Firm
31.1*
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**
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
32.2**
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
97.1
Compensation Recoupment Policy (Incorporated by reference to Exhibit 97.1 to the Company’s Annual Report
on Form 10-K, filed on February 28, 2024)
101*
The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31,
2024, were formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Balance
Sheet, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Equity, (iv)
Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements. The instance
document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline
XBRL document.
104*
Cover page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL.
Exhibit
Number
Description
72
*
Filed herewith
**
Furnished herewith
†
Management contract or compensatory plan or arrangement
Exhibit
Number
Description
73
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: February 27, 2025
ARMADA HOFFLER PROPERTIES, INC.
By:
/s/ Shawn J. Tibbetts
Shawn J. Tibbetts
Chief Executive Officer and President
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/ Louis S. Haddad
Executive Chairman and Director
February 27, 2025
Louis S. Haddad
/s/ Shawn J. Tibbetts
Chief Executive Officer, President, and Director
February 27, 2025
Shawn J. Tibbetts
(principal executive officer)
/s/ Matthew T. Barnes-Smith
Chief Financial Officer, Treasurer, and Corporate Secretary
February 27, 2025
Matthew T. Barnes-Smith
(Principal financial officer and principal accounting officer)
/s/ Daniel A. Hoffler
Chairman Emeritus and Director
February 27, 2025
Daniel A. Hoffler
/s/ George F. Allen
Director
February 27, 2025
George F. Allen
/s/ James A. Carroll
Director
February 27, 2025
James A. Carroll
/s/ James C. Cherry
Director
February 27, 2025
James C. Cherry
/s/ Eva S. Hardy
Director
February 27, 2025
Eva S. Hardy
/s/ Dennis H. Gartman
Director
February 27, 2025
Dennis H. Gartman
/s/ A. Russell Kirk
Director
February 27, 2025
A. Russell Kirk
/s/ F. Blair Wimbush
Director
February 27, 2025
F. Blair Wimbush
74
Armada Hoffler Properties, Inc.
Form 10-K
For the Fiscal Year Ended December 31, 2024
Item 8, Item 15(a)(1) and (2)
Index to Financial Statements and Schedule
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
F-2
Report of Independent Registered Public Accounting Firm
F-3
Consolidated Balance Sheets as of December 31, 2024 and 2023
F-5
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2024, 2023, and 2022
F-6
Consolidated Statements of Equity for the Years Ended December 31, 2024, 2023, and 2022
F-7
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024, 2023, and 2022
F-9
Notes to Consolidated Financial Statements
F-11
Schedule III—Consolidated Real Estate Investments and Accumulated Depreciation
F-58
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Armada Hoffler Properties, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Armada Hoffler Properties, Inc.’s internal control over financial reporting as of December 31, 2024, based on
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Armada Hoffler Properties, Inc. (the Company)
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the
COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the 2024 consolidated financial statements of the Company and our report dated February 27, 2025 expressed an
unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Richmond, Virginia
February 27, 2025
F-2
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Armada Hoffler Properties, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Armada Hoffler Properties, Inc. (the Company) as of
December 31, 2024 and 2023, the related consolidated statements of comprehensive income, equity and cash flows for each of
the three years in the period ended December 31, 2024, and the related notes and Financial Statement Schedule listed in the
Index at Item 15(3) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and
2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in
conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework), and our report dated February 27, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit
matter or on the accounts or disclosures to which they relate.
F-3
Allowance for Loan Losses - Notes Receivable
Description of
the Matter
At December 31, 2024, the Company’s notes receivable portfolio totaled $132.6 million, net of allowances
of $1.9 million. As discussed in Notes 2 and 7 to the consolidated financial statements, management
estimates the allowance for loan losses on outstanding notes receivable based primarily upon relevant
historical loan loss data sets, the forecast for macroeconomic conditions, loan-to-value of the underlying
project, remaining contractual loan term, and other relevant loan-specific factors. For loans experiencing
financial difficulty as of the measurement date, the Company recognizes expected credit losses calculated
as the difference between the amortized cost basis of the financial asset and the estimated fair value of the
collateral, net of selling costs, which includes an estimation of the projected sales proceeds from the sale of
the underlying property.
Auditing management’s estimate of the allowance for loan losses was complex and highly judgmental due
to the significant estimation required to determine the estimated fair value of the collateral. In particular,
the estimated fair value of the collateral was highly sensitive to significant assumptions based on
management’s expectations about future real estate market or economic conditions and the projected
operating results of the property.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over
the allowance for loan losses process. For example, we tested controls over management’s review of the
estimated allowance, the significant assumptions, and the data used to calculate the estimated fair value of
the collateral.
To test the allowance for loan losses, we performed audit procedures that included, among others,
assessing methodologies used and testing the significant assumptions and underlying data used by the
Company in calculating the estimated fair value of the collateral. We compared the significant assumptions
used by management to external evidence, including comparable market capitalization rates or recent
market activity of similar property transactions. We tested the projected operating results of properties by
comparing inputs and assumptions to executed lease agreements or recent market activity and operating
expenses incurred at similar operating properties owned by the Company. We performed sensitivity
analyses of significant assumptions to evaluate the changes to the estimated fair value of the collateral that
would result from changes in the assumptions. We also assessed the historical accuracy of management’s
estimates.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2012.
Richmond, Virginia
February 27, 2025
F-4
ARMADA HOFFLER PROPERTIES, INC.
Consolidated Balance Sheets
(In thousands, except par value and share data)
DECEMBER 31,
2024
2023
ASSETS
Real estate investments:
Income producing property
$
2,173,787 $
2,093,032
Held for development
5,683
11,978
Construction in progress
17,515
102,277
2,196,985
2,207,287
Accumulated depreciation
(451,907)
(393,169)
Net real estate investments
1,745,078
1,814,118
Real estate investments held for sale
4,800
—
Cash and cash equivalents
70,642
27,920
Restricted cash
1,581
2,246
Accounts receivable, net
52,860
45,529
Notes receivable, net
132,565
94,172
Construction receivables, including retentions, net
84,624
126,443
Construction contract costs and estimated earnings in excess of billings
6
104
Equity method investments
158,151
142,031
Operating lease right-of-use assets
22,841
23,085
Finance lease right-of-use assets
88,986
90,565
Acquired lease intangible assets
89,739
109,137
Other assets
60,990
87,548
Total Assets
$
2,512,863 $
2,562,898
LIABILITIES AND EQUITY
Indebtedness, net
$
1,295,559 $
1,396,965
Accounts payable and accrued liabilities
38,840
31,041
Construction payables, including retentions
104,495
128,290
Billings in excess of construction contract costs and estimated earnings
5,871
21,414
Operating lease liabilities
31,365
31,528
Finance lease liabilities
92,646
91,869
Other liabilities
54,418
56,613
Total Liabilities
1,623,194
1,757,720
Stockholders’ equity:
Preferred stock, $0.01 par value, 100,000,000 shares authorized:
6.75% Series A Cumulative Redeemable Perpetual Preferred Stock, 9,980,000 shares
authorized, 6,843,418 shares issued and outstanding as of December 31, 2024 and 2023
171,085
171,085
Common stock, $0.01 par value, 500,000,000 shares authorized; 79,695,938 and 66,793,294
shares issued and outstanding as of December 31, 2024 and 2023, respectively
797
668
Additional paid-in capital
714,640
580,687
Distributions in excess of earnings
(218,623)
(184,724)
Accumulated other comprehensive income
2,737
4,906
Total stockholders’ equity
670,636
572,622
Noncontrolling interests in investment entities
9,180
9,986
Noncontrolling interests in Operating Partnership
209,853
222,570
Total Equity
889,669
805,178
Total Liabilities and Equity
$
2,512,863 $
2,562,898
See Notes to Consolidated Financial Statements.
F-5
ARMADA HOFFLER PROPERTIES, INC.
Consolidated Statements of Comprehensive Income
(In thousands, except per share and unit data)
YEARS ENDED DECEMBER 31,
2024
2023
2022
Revenues
Rental revenues
$
256,697 $
238,924 $
219,294
General contracting and real estate services revenues
433,177
413,131
234,859
Interest income
18,596
15,103
16,978
Total revenues
708,470
667,158
471,131
Expenses
Rental expenses
62,410
56,419
50,742
Real estate taxes
23,308
22,442
22,057
General contracting and real estate services expenses
419,302
399,713
227,158
Depreciation and amortization
90,962
97,427
74,084
General and administrative expenses
20,225
18,122
15,691
Acquisition, development, and other pursuit costs
5,531
84
37
Impairment charges
1,494
102
416
Total expenses
623,232
594,309
390,185
Gain on real estate dispositions, net
21,305
738
53,466
Operating Income
106,543
73,587
134,412
Interest expense
(78,965)
(57,810)
(39,680)
Loss on extinguishment of debt
(247)
—
(3,374)
Equity in income of unconsolidated real estate entities
245
—
—
Change in fair value of derivatives and other
14,251
(6,242)
8,698
Unrealized credit loss (provision) release
(156)
(574)
(626)
Other (expense) income, net
209
31
378
Income before taxes
41,880
8,992
99,808
Income tax benefit (provision)
614
(1,329)
145
Net income
42,494
7,663
99,953
Net loss (income) attributable to noncontrolling interests:
Investment entities
(43)
(605)
(5,948)
Operating Partnership
(6,806)
1,229
(19,258)
Net income attributable to Armada Hoffler Properties, Inc.
35,645
8,287
74,747
Preferred stock dividends
(11,548)
(11,548)
(11,548)
Net income (loss) attributable to common stockholders
$
24,097 $
(3,261) $
63,199
Net income (loss) attributable to common stockholders per share (basic and
diluted)
$
0.34 $
(0.05) $
0.94
Weighted-average common shares outstanding (basic and diluted)
70,662
67,692
67,576
Comprehensive income:
Net income
$
42,494 $
7,663 $
99,953
Unrealized cash flow hedge gains
4,322
6,879
20,165
Realized cash flow hedge gains reclassified to net income
(7,289)
(20,047)
(800)
Comprehensive income (loss)
39,527
(5,505)
119,318
Comprehensive loss (income) attributable to noncontrolling interests:
Investment entities
(3)
(322)
(6,103)
Operating Partnership
(6,047)
4,341
(23,755)
Comprehensive income (loss) attributable to Armada Hoffler
Properties, Inc.
$
33,477 $
(1,486) $
89,460
See Notes to Consolidated Financial Statements.
F-6
ARMADA HOFFLER PROPERTIES, INC.
Consolidated Statements of Equity
(In thousands, except share data)
Preferred
stock
Common
stock
Additional
paid-in
capital
Distributions
in excess of
earnings
Accumulated
other
comprehensive
loss
Total
stockholders'
equity
Noncontrolling
interests in
investment
entities
Noncontrolling
interests in
Operating
Partnership
Total equity
Balance, January 1, 2022
$
171,085
$
630
$
525,030
$
(141,360) $
(33)
$
555,352
$
629
$
223,842
$
779,823
Net income
—
—
—
74,747
—
74,747
5,948
19,258
99,953
Unrealized cash flow hedge gains
—
—
—
—
15,333
15,333
148
4,684
20,165
Realized cash flow hedge (gains) losses reclassified
to net income
—
—
—
1
(621)
(620)
7
(187)
(800)
Net prceeds from issuance of common stock
—
45
65,114
—
—
65,159
—
—
65,159
Restricted stock awards, net
—
2
3,027
—
—
3,029
—
—
3,029
Noncontrolling interest in acquired real estate
entity
—
—
—
—
—
—
23,065
—
23,065
Acquisition of noncontrolling interest in real estate
entity
—
—
(5,401)
—
—
(5,401)
—
—
(5,401)
Redemption of operating partnership units
—
—
114
—
—
114
—
(244)
(130)
Distributions to noncontrolling interests
—
—
—
—
—
—
(5,742)
—
(5,742)
Dividends declared on preferred stock
—
—
—
(11,548)
—
(11,548)
—
—
(11,548)
Dividends and distributions declared on common
shares and units
—
—
—
(48,715)
—
(48,715)
—
(14,844)
(63,559)
Balance, December 31, 2022
171,085
677
587,884
(126,875)
14,679
647,450
24,055
232,509
904,014
Net income (loss)
—
—
—
8,287
—
8,287
605
(1,229)
7,663
Unrealized cash flow hedge gains
—
—
—
—
5,026
5,026
315
1,538
6,879
Realized cash flow hedge gains reclassified to net
income
—
—
—
—
(14,799)
(14,799)
(598)
(4,650)
(20,047)
Net costs from issuance of common stock
—
—
(208)
—
—
(208)
—
—
(208)
Retirement of common stock
—
(12)
(10,458)
(2,158)
—
(12,628)
—
—
(12,628)
Restricted stock awards, net
—
3
2,955
—
—
2,958
—
—
2,958
Issuance of operating partnership units for
acquisitions
—
—
—
—
—
—
—
12,194
12,194
Acquisition of noncontrolling interest in real estate
entity
—
—
—
—
—
—
(12,834)
—
(12,834)
Redemption of operating partnership units
—
—
514
—
—
514
—
(1,219)
(705)
Distributions to noncontrolling interests
—
—
—
—
—
—
(1,557)
—
(1,557)
Dividends declared on preferred stock
—
—
—
(11,548)
—
(11,548)
—
—
(11,548)
Dividends and distributions declared on common
shares and units
—
—
—
(52,430)
—
(52,430)
—
(16,573)
(69,003)
Balance, December 31, 2023
171,085
668
580,687
(184,724)
4,906
572,622
9,986
222,570
805,178
Net income (loss)
—
—
—
35,645
—
35,645
43
6,806
42,494
Unrealized cash flow hedge (losses) gains
—
—
—
—
3,322
3,322
29
971
4,322
Realized cash flow hedge gains reclassified to net
income
—
—
—
—
(5,491)
(5,491)
(68)
(1,730)
(7,289)
Net proceeds from issuance of common stock
—
126
129,295
—
—
129,421
—
—
129,421
Restricted stock awards, net
—
2
3,892
—
—
3,894
—
—
3,894
F-7
Redemption of operating partnership units
—
1
766
—
—
767
—
(972)
(205)
Distributions to noncontrolling interests
—
—
—
—
—
—
(810)
—
(810)
Dividends declared on preferred stock
—
—
—
(11,548)
—
(11,548)
—
—
(11,548)
Dividends and distributions declared on common
shares and units per share and unit
—
—
—
(57,996)
—
(57,996)
—
(17,792)
(75,788)
Balance, December 31, 2024
$
171,085
$
797
$
714,640
$
(218,623) $
2,737
$
670,636
$
9,180
$
209,853
$
889,669
See Notes to Consolidated Financial Statements.
F-8
ARMADA HOFFLER PROPERTIES, INC.
Consolidated Statements of Cash Flows
(In thousands)
YEARS ENDED DECEMBER 31,
2024
2023
2022
OPERATING ACTIVITIES
Net income
$
42,494
$
7,663
$
99,953
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of buildings and tenant improvements
68,282
63,462
54,548
Amortization of leasing costs, in-place lease intangibles and below market ground rents -
operating leases
22,680
33,965
19,536
Accrued straight-line rental revenue
(8,254)
(6,272)
(6,178)
Amortization of leasing incentives and above or below-market rents
(1,646)
(2,190)
(1,070)
Accrued straight-line ground rent expense
28
64
119
Unrealized credit loss provision
156
574
626
Adjustment for uncollectible lease accounts
2,020
4,013
515
Noncash acquisition, development, and other pursuit costs
5,528
—
—
Noncash stock compensation
5,098
3,677
3,273
Impairment charges
1,494
102
416
Noncash interest expense
3,726
7,106
6,828
Noncash loss on extinguishment of debt
247
—
3,374
Gain on real estate dispositions, net
(21,305)
(738)
(53,466)
Change in fair value of derivatives and other
9,612
14,185
(8,698)
Adjustment for receipts on off-market interest rate derivatives
(22,829)
(7,947)
—
Equity in income of unconsolidated real estate entities
(245)
—
—
Changes in operating assets and liabilities:
Property assets
(11,036)
(5,794)
(12,029)
Property liabilities
7,420
12,092
2,960
Construction assets
53,659
(59,226)
(60,756)
Construction liabilities
(33,463)
42,487
71,642
Interest receivable
(11,646)
(13,909)
(4,735)
Net cash provided by operating activities
112,020
93,314
116,858
INVESTING ACTIVITIES
Development of real estate investments
(29,831)
(58,793)
(76,182)
Tenant and building improvements
(30,355)
(24,650)
(17,085)
Acquisitions of real estate investments, net of cash received
—
(8,394)
(119,739)
Dispositions of real estate investments, net of selling costs
58,593
246
252,270
Notes receivable issuances
(47,721)
(48,184)
(37,791)
Notes receivable paydowns
20,594
—
35,848
Payments to purchase off-market interest rate derivatives
—
(31,311)
—
Receipts on off-market interest rate derivatives
22,829
7,947
—
Leasing costs
(4,935)
(4,059)
(7,640)
Leasing incentives
—
(20)
(51)
Contributions to equity method investments
(15,875)
(70,048)
(62,872)
Net cash used for investing activities
(26,701)
(237,266)
(33,242)
FINANCING ACTIVITIES
Proceeds (costs) from issuance of common stock, net of issuance cost
129,421
(208)
65,159
Common shares tendered for tax withholding
(1,566)
(1,111)
(774)
Repurchase and retirement of common stock, net
—
(12,628)
—
Debt issuances, credit facility, and construction loan borrowings
269,469
402,568
678,574
Debt and credit facility repayments, including principal amortization
(257,575)
(180,869)
(723,739)
Debt issuance costs
(2,221)
(2,839)
(8,316)
Cash paid on extinguishment of debt
(95,881)
—
—
Acquisition of NCI in consolidated RE investments
—
—
(4,651)
Redemption of operating partnership units
(205)
(705)
(130)
Distributions to noncontrolling interests
(810)
(1,557)
(5,756)
Contributions from noncontrolling interests
—
—
14
Dividends and distributions
(83,894)
(80,398)
(72,575)
Net cash (used for) provided by financing activities
(43,262)
122,253
(72,194)
Net increase (decrease) in cash, cash equivalents, and restricted cash
42,057
(21,699)
11,422
Cash, cash equivalents, and restricted cash, beginning of period
30,166
51,865
40,443
Cash, cash equivalents, and restricted cash, end of period
$
72,223
$
30,166
$
51,865
F-9
ARMADA HOFFLER PROPERTIES, INC.
Consolidated Statements of Cash Flows (Continued)
(In thousands)
YEARS ENDED DECEMBER 31,
2024
2023
2022
Supplemental Disclosures (noncash transactions):
Cash paid for interest
$
71,629
$
44,920
$
29,878
Cash refunded (paid) for income taxes
(1,145)
33
(1)
Increase in dividends and distributions payable
3,442
153
2,532
Note payable issued in acquisition of noncontrolling interest in real estate investment
—
—
750
Decrease in accrued capital improvements and development costs
(115)
(4,825)
110
Issuance of operating partnership units for acquisitions
—
12,194
—
Operating Partnership units redeemed for common shares
767
514
132
Debt assumed at fair value in conjunction with real estate purchases
—
105,584
156,071
Note receivable redeemed in conjunction with real estate purchase
—
90,232
—
Equity method investment redeemed for real estate acquisition
—
—
3,772
Acquisitions of noncontrolling interests
—
12,834
—
Noncontrolling interest in acquired real estate entity
—
—
23,065
Other liability satisfied in connection with a real estate disposal
—
750
—
Recognition of operating lease right-of-use assets
—
—
110
Recognition of operating lease liabilities
—
—
110
Recognition of finance lease right-of-use assets
—
47,742
—
Recognition of finance lease liabilities
—
46,616
—
Adjustment to finance lease ROU assets
—
1,705
—
Adjustment to finance lease liabilities
—
1,705
—
(1) The following table sets forth the items from the Company's consolidated balance sheets that are included in cash, cash equivalents, and restricted cash in
the consolidated statements of cash flows:
As of December 31,
2024
2023
Cash and cash equivalents
$
70,642
$
27,920
Restricted cash (a)
1,581
2,246
Cash, cash equivalents, and restricted cash
$
72,223
$
30,166
(a) Restricted cash represents amounts held by lenders for real estate taxes, insurance, and reserves for capital improvements.
See Notes to Consolidated Financial Statements.
F-10
ARMADA HOFFLER PROPERTIES, INC.
Notes to Consolidated Financial Statements
1.
Business and Organization
Armada Hoffler Properties, Inc. (the "Company") is a vertically integrated, self-managed real estate investment trust
("REIT") with over four decades of experience developing, building, acquiring, and managing high-quality retail,
office, and multifamily properties located primarily in the Mid-Atlantic and Southeastern United States. The Company
also provides general construction and development services to third-party clients, in addition to developing and
building properties to be placed in its stabilized portfolio.
The Company is the sole general partner of Armada Hoffler, L.P. (the "Operating Partnership"), and as of
December 31, 2024, owned 78.6% of the economic interest in the Operating Partnership, of which 0.1% is held as
general partnership units. The operations of the Company are carried on primarily through the Operating Partnership
and the wholly-owned subsidiaries thereof. 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 on May 13, 2013.
As of December 31, 2024, the Company's operating portfolio consisted of the following properties:
Retail
Town Center of Virginia Beach
249 Central Park Retail*
Virginia Beach, Virginia
100 %
4525 Main Street Retail* (1)
Virginia Beach, Virginia
100 %
4621 Columbus Retail* (2)
Virginia Beach, Virginia
100 %
Columbus Village*
Virginia Beach, Virginia
100 %
Commerce Street Retail*
Virginia Beach, Virginia
100 %
Fountain Plaza Retail*
Virginia Beach, Virginia
100 %
Pembroke Square*
Virginia Beach, Virginia
100 %
Premier Retail*
Virginia Beach, Virginia
100 %
South Retail*
Virginia Beach, Virginia
100 %
Studio 56 Retail*
Virginia Beach, Virginia
100 %
The Cosmopolitan Retail* (3)
Virginia Beach, Virginia
100 %
Two Columbus Retail* (1)
Virginia Beach, Virginia
100 %
West Retail* (1)
Virginia Beach, Virginia
100 %
Harbor Point - Baltimore Waterfront
Constellation Retail* (1)
Baltimore, Maryland
90 %
Point Street Retail* (3)
Baltimore, Maryland
100 %
Grocery Anchored
Broad Creek Shopping Center
Norfolk, Virginia
100 %
Broadmoor Plaza
South Bend, Indiana
100 %
Brooks Crossing Retail*
Newport News, Virginia
65 % (4)
Delray Beach Plaza*
Delray Beach, Florida
100 %
Greenbrier Square
Chesapeake, Virginia
100 %
Greentree Shopping Center
Chesapeake, Virginia
100 %
Hanbury Village
Chesapeake, Virginia
100 %
Lexington Square
Lexington, South Carolina
100 %
North Pointe Center
Durham, North Carolina
100 %
Parkway Centre
Moultrie, Georgia
100 %
Parkway Marketplace
Virginia Beach, Virginia
100 %
Property
Location
Ownership Interest
F-11
Perry Hall Marketplace
Perry Hall, Maryland
100 %
Sandbridge Commons
Virginia Beach, Virginia
100 %
Tyre Neck Harris Teeter
Portsmouth, Virginia
100 %
Southeast Sunbelt
Chronicle Mill Retail* (3)
Belmont, North Carolina
85 % (4)
North Hampton Market
Taylors, South Carolina
100 %
One City Center Retail* (1)
Durham, North Carolina
100 %
Overlook Village
Asheville, North Carolina
100 %
Patterson Place
Durham, North Carolina
100 %
Providence Plaza Retail*
Charlotte, North Carolina
100 %
South Square
Durham, North Carolina
100 %
The Interlock Retail*
Atlanta, Georgia
100 %
Wendover Village
Greensboro, North Carolina
100 %
Mid-Atlantic
Dimmock Square
Colonial Heights, Virginia
100 %
Harrisonburg Regal
Harrisonburg, Virginia
100 %
Liberty Retail* (3)
Newport News, Virginia
100 %
Marketplace at Hilltop
Virginia Beach, Virginia
100 %
Red Mill Commons
Virginia Beach, Virginia
100 %
Southgate Square
Colonial Heights, Virginia
100 %
Southshore Shops
Chesterfield, Virginia
100 %
The Edison Retail* (3)
Richmond, Virginia
100 %
Office
Town Center of Virginia Beach
249 Central Park Office* (5)
Virginia Beach, Virginia
100 %
4525 Main Street Office*
Virginia Beach, Virginia
100 %
4605 Columbus Office* (5)
Virginia Beach, Virginia
100 %
Armada Hoffler Tower*
Virginia Beach, Virginia
100 %
One Columbus*
Virginia Beach, Virginia
100 %
Two Columbus Office*
Virginia Beach, Virginia
100 %
Harbor Point - Baltimore Waterfront
Constellation Office*
Baltimore, Maryland
90 %
Thames Street Wharf*
Baltimore, Maryland
100 %
Wills Wharf*
Baltimore, Maryland
100 %
Southeast Sunbelt
Chronicle Mill Office* (3)
Belmont, North Carolina
85 % (4)
One City Center Office*
Durham, North Carolina
100 %
Providence Plaza Office* (5)
Charlotte, North Carolina
100 %
The Interlock Office*
Atlanta, Georgia
100 %
Mid-Atlantic
Brooks Crossing Office* (5)
Newport News, Virginia
100 %
Multifamily
Town Center of Virginia Beach
Encore Apartments*
Virginia Beach, Virginia
100 %
Premier Apartments*
Virginia Beach, Virginia
100 %
Property
Location
Ownership Interest
F-12
The Cosmopolitan*
Virginia Beach, Virginia
100 %
Harbor Point - Baltimore Waterfront
1305 Dock Street*
Baltimore, Maryland
90 %
1405 Point*
Baltimore, Maryland
100 %
Southeast Sunbelt
Chronicle Mill Apartments*
Belmont, North Carolina
85 % (4)
Greenside Apartments
Charlotte, North Carolina
100 %
The Everly*
Gainesville, Georgia
100 %
Mid-Atlantic
Liberty Apartments*
Newport News, Virginia
100 %
Smith's Landing
Blacksburg, Virginia
100 %
The Edison*
Richmond, Virginia
100 %
Property
Location
Ownership Interest
________________________________________
*Mixed-use asset or located in a mixed-use development.
(1) Formerly reported in the office real estate segment. Refer to Note 3 for further information.
(2) Formerly known as Apex Entertainment.
(3) Formerly reported in the multifamily real estate segment. Refer to Note 3 for further information.
(4) We are entitled to a preferred return on our investment in this property.
(5) Formerly reported in the retail real estate segment. Refer to Note 3 for further information.
As of December 31, 2024, the following properties were under development, under redevelopment or unstabilized:
Development, Not Stabilized
Segment
Location
AHH Ownership
Southern Post Retail
Retail*
Roswell, Georgia
100%
Southern Post Office
Office*
Roswell, Georgia
100%
Chandler Residences
Multifamily*
Roswell, Georgia
100%
Redevelopment
Segment
Location
AHH Ownership
Columbus Village II
Retail*
Virginia Beach, Virginia
100 %
________________________________________
*Mixed-use asset or located in a mixed-use development.
2.
Significant Accounting Policies
Basis of Presentation
The accompanying consolidated 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 and its
subsidiaries. The Company’s subsidiaries include the Operating Partnership and the subsidiaries that are, directly or
indirectly, wholly owned or in which the Company has a controlling interest, including where the Company has been
determined to be a primary beneficiary of a variable interest entity ("VIE") in accordance with the consolidation
guidance of the Financial Accounting Standards Board (the "FASB") Accounting Standards Codification ("ASC"). All
significant intercompany transactions and balances have been eliminated in consolidation.
F-13
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 significantly from management’s estimates.
Segments
In accordance with ASC 280, Segment Reporting, operating segments are defined as components of an enterprise for
which separate financial information is available and are regularly reviewed by the chief operating decision maker
("CODM") in deciding how to allocate resources and in assessing performance. Segment information is prepared on
the same basis that the CODM reviews information for operational decision-making purposes. The CODM evaluates
the performance of each of the Company’s properties and real estate ventures individually and aggregates such
properties into segments based on their economic characteristics and classes of tenants. The Company operates
in five business segments: (i) retail real estate, (ii) office real estate, (iii) multifamily real estate, (iv) general
contracting and real estate services, and (v) real estate financing. The Company’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. The Company's real estate financing segment includes the Company's real
estate financing loans and preferred equity investments on development projects. The Company's CODM has been
identified to collectively include the Company's Chief Executive Officer, Chief Financial Officer, and Chief Operating
Officer for the years ending December 31, 2024, 2023, and 2022.
Reclassifications
Certain items have been reclassified from their prior year classifications to conform to the current year presentation.
Effective for the year ended December 31, 2023 and future years, the Company changed the presentation of its
consolidated statements of comprehensive income. For the year ended December 31, 2022, the Company reclassified
interest income of $17.0 million from non-operating income to operating income. As a result, total revenues and
operating income increased by $17.0 million compared to the previous reporting. These reclassifications had no effect
on net income or stockholder's equity as previously reported. Refer to Note 3 for additional information.
For the years ended December 31, 2023 and 2022, the Company reclassified amortization of right-of-use assets -
finance leases of $1.3 million and $1.1 million, respectively, from its separate financial statement line item to be
included within depreciation and amortization. As a result, depreciation and amortization for the years then ended
increased similarly, compared to previous reporting. These reclassifications had no effect on net income or
stockholder's equity as previously reported.
Revenue Recognition
Rental Revenues
The Company leases its properties under operating leases and recognizes base rents when earned on a straight-line
basis over the lease term. Rental revenues include $8.3 million, $6.4 million and $6.2 million of straight-line rent
adjustments for the years ended December 31, 2024, 2023, and 2022, respectively. The Company begins recognizing
rental revenue when the tenant has the right to take possession of or controls the physical use of the property under
lease. The extended collection period for accrued straight-line rental revenue along with the Company’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 substantially all such revenue for a tenant is probable. The Company recognizes contingent rental revenue (e.g.,
percentage rents based on tenant sales thresholds) when the sales thresholds are met. The Company recognizes leasing
incentives as reductions to rental revenue on a straight-line basis over the lease term. Leasing incentive amortization
was $0.4 million, $0.6 million, and $0.7 million for the years ended December 31, 2024, 2023, and 2022. The
Company recognizes fair value adjustments recorded at the time of lease assumption in rental income on a straight-line
basis as a reduction to revenue over the remaining life of the lease or any renewal periods for which the Company
determines have value at the time of acquisition. The Company 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. The Company recognizes lease termination fees either upon termination or amortizes them over
any remaining lease term.
F-14
General Contracting and Real Estate Services Revenues
The Company recognizes general contracting revenues as a customer obtains control of promised goods or services in
an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. For
each construction contract, the Company identifies the performance obligations, which typically include the delivery
of a single building constructed according to the specifications of the contract. The Company estimates the total
transaction price, which generally includes a fixed contract price and may also include variable components such as
early completion bonuses, liquidated damages, or cost savings to be shared with the customer. Variable components of
the contract price are included in the transaction price to the extent that it is probable that a significant reversal of
revenue will not occur. The Company recognizes the estimated transaction price as revenue as it satisfies its
performance obligations; the Company estimates its progress in satisfying performance obligations for each contract
using the input method, based on the proportion of incurred costs relative to total estimated construction costs at
completion. Construction contract costs include all direct material, direct labor, subcontract costs, and overhead costs
directly related to contract performance. Changes in job performance, job conditions, and estimated profitability,
including those arising from contract penalty provisions and final contract settlements, are all significant judgments
that may result in revisions to costs and income and are recognized in the period in which they are determined.
Additionally, the estimated costs at completion are affected by management’s forecasts of anticipated costs to be
incurred and contingency reserves for exposures related to unknown costs, such as design deficiencies and
subcontractor defaults. The estimated variable consideration is also affected by claims and unapproved change orders,
which may result from changes in the scope of the contract. Provisions for estimated losses on uncompleted contracts
are recognized immediately in the period in which such losses are determined. The Company defers pre-contract costs
when such costs are directly associated with specific anticipated contracts and their recovery is probable.
The Company recognizes real estate services revenues from property development and management as it satisfies its
performance obligations under these service arrangements.
The Company assesses whether multiple contracts with a single counterparty may be combined into a single contract
for the revenue recognition purposes based on factors such as the timing of the negotiation and execution of the
contracts and whether the economic substance of the contracts was contemplated separately or in tandem.
Interest Income
Interest income on notes receivable is accrued based on the contractual terms of the loans and when it is deemed
collectible. Many loans provide for accrual of interest and fees that will not be paid until maturity of the loan. Interest
is recognized on these loans at the accrual rate subject to the determination that accrued interest and fees are ultimately
collectible, based on the underlying collateral and the status of development activities, as applicable. If this
determination cannot be made, recognition of interest income may be fully or partially deferred until it is ultimately
paid. Interest income is also accrued as earned on interest-bearing deposits.
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. The Company 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.
The Company capitalizes direct and indirect project costs associated with the initial development of a property until
the property is substantially complete and ready for its intended use. Capitalized project costs include pre-acquisition,
development, and preconstruction costs including overhead, salaries, and related costs of personnel directly involved,
real estate taxes, insurance, utilities, ground rent, and interest. Interest is also capitalized in relation to the Company's
equity method investments for development projects. Interest capitalized during the years ended December 31, 2024,
2023, and 2022 was $13.7 million, $8.3 million, and $4.0 million, respectively.
F-15
The Company capitalizes predevelopment costs directly identifiable with specific properties when the development of
such properties is probable. Capitalized predevelopment costs are presented within other assets in the consolidated
balance sheets. Land for which development activities have not yet commenced are presented separately as land held
for development in the consolidated balance sheets. Capitalized predevelopment costs as of December 31, 2024 and
2023, were $1.7 million, and $7.8 million, respectively. Costs attributable to unsuccessful projects are expensed.
Income producing property is depreciated on a straight-line basis over the following estimated useful lives:
Buildings
39 years
Capital improvements
5 — 20 years
Equipment
3—7 years
Tenant improvements
Term of the related lease (or estimated useful life, if shorter)
Operating Property Acquisitions
Acquisitions of operating properties have been and will generally be accounted for as acquisitions of a group of assets,
with costs incurred to effect an acquisition, including title, legal, accounting, brokerage commissions, and other related
costs, being capitalized as part of the cost of the assets acquired. In connection with such acquisitions, the Company
identifies and recognizes all assets acquired and liabilities assumed at their relative fair values as of the acquisition
date. The purchase price allocations to tangible assets, such as land, site improvements, and buildings and
improvements are presented within income producing property in the consolidated balance sheets and depreciated over
their estimated useful lives. Acquired lease intangible assets are presented as a separate component of assets on the
consolidated balance sheets. Acquired lease intangible liabilities are presented within other liabilities in the
consolidated balance sheets. The Company amortizes in-place lease assets as depreciation and amortization expense on
a straight-line basis over the remaining term of the related leases. The Company amortizes above-market lease assets
as reductions to rental revenues on a straight-line basis over the remaining term of the related leases. The Company
amortizes below-market lease liabilities as increases to rental revenues on a straight-line basis over the remaining term
of the related leases. The Company amortizes below-market ground lease assets as increases to depreciation and
amortization expense on a straight-line basis over the remaining term of the related leases. Conversely, the Company
amortizes above-market ground lease assets as decreases to depreciation and amortization expense on a straight-line
basis over the remaining term of the related leases.
The Company values land based on a market approach, looking to recent sales of similar properties, adjusting for
differences due to location, the state of entitlement, as well as the shape and size of the parcel. Improvements to land
are valued using a replacement cost approach. The approach applies industry standard replacement costs adjusted for
geographic specific considerations and reduced by estimated depreciation. The value of buildings acquired is estimated
using the replacement cost approach, assuming the buildings were vacant at acquisition. The replacement cost
approach considers the composition of the structures acquired, adjusted for an estimate of depreciation. The estimate
of depreciation is made considering industry standard information and depreciation curves for the identified asset
classes. The value of acquired lease intangibles considers the estimated cost of leasing the properties as if the acquired
buildings were vacant, as well as the value of the current leases relative to market-rate leases. The in-place lease value
is determined using an estimated total lease-up time and lost rental revenues during such time. The value of current
leases relative to market-rate leases is based on market rents obtained for comparable leases. Given the significance of
unobservable inputs used in the valuation of acquired real estate assets, the Company classifies them as Level 3 inputs
in the fair value hierarchy.
The Company values debt assumed in connection with operating property acquisitions based on a discounted cash flow
analysis of the expected cash flows of the debt. Such analysis considers the contractual terms of the debt, including the
period to maturity, credit characteristics, and other terms of the arrangements, which are Level 3 inputs in the fair
value hierarchy.
Real Estate Sales
The Company accounts for the sale of real estate assets and any related gain in accordance with the accounting
guidance applicable to sales of real estate, which establishes standards for recognition of profit on all real estate sales
F-16
transactions other than retail land sales. The Company recognizes the sale and associated gain or loss once it transfers
control of the real estate asset and the Company does not have significant continuing involvement.
Real Estate Investments Held for Sale
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 classified 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 property is available for
immediate sale in its present condition, subject only to conditions usual and customary for such sales, (iii) an active
program to locate a buyer and other actions required to complete the plan to sell have been initiated, (iv) the sale is
expected to be completed within one year, (v) the property is being actively marketed for sale at a price that is
reasonable in relation to its current fair value, and (vi) 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.
As of December 31, 2024, an undeveloped land parcel located in Charlotte, North Carolina was classified as held for
sale with disposal expected to be completed in 2025. As of December 31, 2023, no properties were classified as held
for sale.
Impairment of Long-Lived Assets
The Company 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, the Company 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. The impairment charges recognized during the year ended December 31, 2024 relate to an undeveloped land
parcel in predevelopment located in Charlotte, North Carolina. The impairment charges recognized during the years
ended December 31, 2023 and 2022 represent unamortized leasing or acquired intangible assets related to vacated
tenants. Refer to Note 5 for more information.
Equity Method Investments
The Company owns investments in partnerships in which it has significant influence, but its ownership interest does
not meet the criteria for consolidation in accordance with GAAP. Therefore, the Company accounts for these
investments using the equity method of accounting. Under the equity method of accounting, the investment is carried
at the cost of assets contributed, plus the Company's equity in earnings less distributions received and the Company's
share of losses.
The Company evaluates its equity method investments for impairments and records a loss if the carrying value is
greater than the fair value of the investment and the impairment is other-than-temporary. No other-than-temporary
impairment charges were recorded in relation to the Company's equity method investments for the years ended
December 31, 2024, 2023, and 2022.
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.
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. As of December 31, 2024 and 2023, accrued straight-line rental revenue presented
within accounts receivable in the consolidated balance sheets was $39.0 million and $33.6 million, respectively.
F-17
The Company’s evaluation of the collectability of accounts receivable and the adequacy of the allowance for doubtful
accounts is based primarily upon evaluations of individual accounts receivable, current economic conditions, historical
experience, and other relevant factors. The Company establishes a reserve for any receivable associated with a tenant
when collection of substantially all operating lease payments for a tenant is not probable. As of December 31, 2024
and 2023, the allowance for doubtful accounts was $2.3 million and $1.8 million, respectively. The Company reflects
these amounts as a component of rental income on the consolidated statements of comprehensive income.
Notes Receivable and Allowance for Loan Losses
Notes receivable primarily represent financing to third parties in the form of mezzanine loans or preferred equity
investments for the development of new real estate. The Company's loans are typically made to borrowers who have
little or no equity in the underlying development projects. Real estate financing investments are secured, in part, by
pledges of ownership interests of the entities that own the underlying real estate. The loans generally have junior liens
on the respective real estate projects.
The Company’s allowance for loan losses on notes receivable is evaluated using risk ratings that correspond to
probabilities of default and loss given default. Risk ratings are determined for each loan after consideration of progress
of development activities, including leasing activities, projected development costs, and current and projected
mezzanine and senior loan balances. The Company's risk ratings are as follows:
•
Pass: loans in this category are adequately collateralized by a development project with conditions materially
consistent with the Company's underwriting assumptions.
•
Special Mention: loans in this category show signs that the economic performance of the project may suffer as a
result of slower-than-expected leasing activity or an extended development or marketing timeline. Loans in this
category warrant increased monitoring by management.
•
Substandard: loans in this category may not be fully collected by the Company unless remediation actions are
taken. Remediation actions may include obtaining additional collateral or assisting the borrower with asset
management activities to prepare the project for sale. The Company will also consider placing the loan on
nonaccrual status if it does not believe that additional interest accruals will ultimately be collected.
At the end of each reporting period, the Company measures expected credit losses to be incurred over the remaining
contractual term based on the risk rating of each loan. If a loan is rated as substandard, the Company then estimates
expected credit losses as the difference between the amortized cost basis of the outstanding loan and the estimated
projected sales proceeds of the underlying collateral. Changes to the allowance for loan losses resulting from quarterly
evaluations are recorded through provision for unrealized credit losses on the consolidated statements of
comprehensive income.
The Company's loans typically include commitments to fund incremental proceeds to the borrowers over the life of the
loan, which future funding commitments are also subject to the current expected credit losses ("CECL") model. The
CECL provision related to future loan fundings is recorded as a component of Other Liabilities on the Company's
consolidated balance sheet. This provision is estimated using the same process outlined above for the Company's
outstanding loan balances, and changes in this component of the provision will similarly impact the Company's
consolidated net income. For both the funded and unfunded portions of the Company's loans, the Company consider
the risk rating of each loan as the primary credit quality indicator underlying its assessment.
The Company places loans on nonaccrual status when the loan balance, together with the balance of any senior loans,
approximately equals the estimated realizable value of the underlying development project.
Guarantees
The Company measures and records a liability for the fair value of its guarantees on a nonrecurring basis upon
issuance using Level 3 internally-developed inputs. These guarantees typically relate to payments that could be
required of the Company to senior lenders on its real estate financing investments. The Company bases its estimated
fair value on the market approach, which compares the guarantee terms and credit characteristics of the underlying
development project to other projects for which guarantee pricing terms are available. The offsetting entry for the
guarantee liability is a premium on the related loan receivable. The liability is amortized on a straight-line basis over
the remaining term of the loan. On a quarterly basis, the Company assesses the likelihood of a contingent liability in
F-18
connection with these guarantees and will record an additional guarantee liability if the unamortized guarantee liability
is insufficient.
Leasing Costs
Commissions paid by the Company 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. Leasing costs are presented within other
assets in the consolidated balance sheets.
Leasing Incentives
Incentives paid by the Company to tenants are deferred and amortized as reductions to rental revenues on a straight-
line basis over the term of the related lease. Leasing incentives are presented within other assets in the consolidated
balance sheets.
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 as a direct deduction from the carrying value of the associated debt
liability in the consolidated balance sheets. The amortization of debt issuance costs as interest expense is also subject
to capitalization when those costs are associated with a development property, including equity method investments
for development projects.
Derivative Financial Instruments
The Company may enter into interest rate derivatives to manage exposure to interest rate risks. The Company does not
use derivative financial instruments for trading or speculative purposes. The Company recognizes derivative financial
instruments at fair value and presents them within other assets and liabilities in the consolidated balance sheets. Gains
and losses from derivatives that are neither designated nor qualify as hedging instruments are recognized within the
change in fair value of derivatives and other caption in the consolidated statements of comprehensive income. For
derivatives that qualify as cash flow hedges, the gain or loss is reported as a component of other comprehensive
income (loss) and reclassified into earnings in the periods during which the hedged forecasted transaction affects
earnings.
For interest rate caps that qualify as cash flow hedges, the premium paid by the Company at inception represents the
time value of the instrument and is excluded from the hedge effectiveness assessment. The excluded component is
amortized over the life of the derivative instrument and presented within interest expense in the consolidated
statements of comprehensive income. The Company recognized amortization of interest rate cap premiums of $0.4
million, $3.2 million and $3.8 million for the years ended December 31, 2024, 2023, and 2022, respectively.
Cash flows for derivative financial instruments are classified as cash flows from operating activities within the
consolidated statements of cash flows, unless there is an other-than-insignificant financing element present at inception
of the derivative financial instrument. For derivatives with an other-than-insignificant financing element at inception
due to off-market terms, cash flows are classified as cash flows from investing or financing activities within the
consolidated statements of cash flows depending on the derivative's off-market nature at inception.
Stock-Based Compensation
The Company may issue share-based awards as compensation to officers, employees, non-employee members of the
board of directors, and other eligible persons under the Company's Amended and Restated 2013 Equity Incentive Plan,
as amended (the "Equity Plan"). The vesting of the awards issued to the officers and employees is based on either the
continued service or employment (time-based), or the absolute and relative total shareholder returns of the Company
and continued employment (market-based), as determined by the board of directors at the date of grant. The vesting of
the awards issued to non-employee directors is based on continued service (time-based). For time-based awards, the
Company recognizes compensation expense for the unvested awards using the accelerated attribution method over the
vesting period based upon the fair market value of the shares on the date of grant. For performance-based awards, the
Company recognizes compensation expense over the requisite service period for each award, based on the fair market
value of the shares on the date of grant, as determined using a Monte Carlo simulation. The effect of forfeitures of
awards is recorded as they occur.
F-19
Non-employee directors may also elect to receive unrestricted shares under the 2013 Plan as compensation that would
otherwise be paid in cash for their services. The shares issued to the non-employee directors in lieu of cash
compensation are unrestricted and include no vesting conditions. The Company recognized compensation expense for
the unrestricted shares issued in lieu of cash compensation based upon the fair market value of the shares on the date of
issuance.
Compensation cost associated with the vesting of share-based awards is presented within either general and
administrative expenses or general contracting and real estate services expenses in the consolidated statements of
comprehensive income. Stock-based compensation for personnel directly involved in the construction and
development of a property is capitalized.
Income Taxes
The Company has elected to be taxed as a REIT for U.S. federal income tax purposes. For continued qualification as a
REIT for federal income tax purposes, the Company must meet certain organizational and operational requirements,
including a requirement to pay distributions to stockholders of at least 90% of 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 that have elected to be treated as a taxable REIT subsidiary
("TRS") subject to both federal and state income taxes. The Operating Partnership conducts its development and
construction businesses through a TRS. The related income tax provision or benefit attributable to the profits or losses
of a TRS and any taxable income of the Company is reflected in the consolidated financial statements.
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
carry back 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
Disposals representing a strategic shift that has or will have a major effect on the Company’s operations and financial
results are reported as discontinued operations.
Net Income Per Share
The Company calculates net income per share by dividing net income (loss) attributable to common shareholders by
the weighted average number of common shares outstanding during the period excluding the weighted-average
number of unvested restricted shares and unvested performance units outstanding during the period. Diluted net
income per share is calculated by dividing net income (loss attributable to common shareholders by the weighted-
average number of common shares outstanding during the period, plus any shares that could potentially be outstanding
during the period. The potential dilutive shares consist of unvested restricted stock awards calculated using the two-
class method and unvested performance units calculated using the treasury stock method. As of December 31, 2024,
the number of performance units vested and convertible was 26,500. However, there were no significant potential
dilutive shares outstanding for each of the three years ended December 31, 2024, 2023, and 2022. As a result, basic
and diluted outstanding shares were the same for each period presented.
F-20
Recent Accounting Pronouncements
Recently Adopted Accounting Standards:
Segment Reporting
In November 2023, the FASB issued ASU 2023-07 as an update to ASC Topic 280, which will be effective for fiscal
years beginning after December 15, 2023 and interim periods beginning after December 15, 2024. Early adoption is
permitted. ASU 2023-07 requires an entity to disclose significant segment expenses regularly provided to the chief
operating decision maker, a description of "other segment items," and the title and position of the chief operating
decision maker and allows for more than one measure of a segment's profit or loss if used by the chief operating
decision maker. The update also enhances interim disclosure requirements and requirements for entities with a single
reportable segment. The Company adopted ASU 2023-07 effective for the year ended December 31, 2024 and the
adoption did not have a material impact on the consolidated financial statements.
Stock Compensation
In March 2024, the FASB issued ASU 2024-01 as an update to ASC Topic 718, which will be effective for fiscal years
beginning after December 15, 2024 and interim periods beginning within those annual periods. Early adoption is
permitted. ASU 2024-01 was issued to improve GAAP by providing an illustrative example that includes four fact
patterns to demonstrate how an entity should apply the scope guidance in paragraph 718-10-15-3 to determine whether
a profits interest award should be accounted for in accordance with Topic 718 - Stock Compensation. The Company
adopted ASU 2024-01 effective for the year ending December 31, 2024 and the adoption did not have a material
impact on the consolidated financial statements.
Recently Issued Accounting Standards Not Yet Adopted:
Income Taxes
In December 2023, the FASB issued ASU 2023-09 as an update to ASC Topic 740, which will become effective for
fiscal years beginning after December 15, 2024. Early adoption is permitted. ASU 2023-09 enhances the disclosures
surrounding income taxes, specifically in relation to the rate reconciliation table and income taxes paid. The Company
is currently evaluating the impact of ASU 2023-09 on its consolidated financial statements.
Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU 2024-03 as an update to ASC Topic 220-40, which will be effective for
fiscal years beginning after December 15, 2026 and interim periods beginning after December 15, 2027. Early
adoption is permitted. ASU 2024-03 was issued to improve the disclosures about a public business entity's expenses
and address request from investors for more detailed information about the types of expenses (including employee
compensation, depreciation, and amortization) in commonly presented expense captions (such as general and
administrative expenses). The Company is currently evaluating the impact of ASU 2024-03 on its consolidated
financial statements.
3.
Segments
The Company operates its business in five reportable segments: (i) retail real estate, (ii) office real estate, (iii)
multifamily real estate, (iv) general contracting and real estate services, and (v) real estate financing. Refer to Note 1
for the composition of properties within each property segment.
F-21
Net operating income ("NOI") is the primary measure used by the Company’s CODM to assess segment performance.
NOI is calculated as segment revenues less segment expenses. Segment revenues include rental revenues for the
property segments, general contracting and real estate services revenues for the general contracting and real estate
services segment, and interest income for the real estate financing segment. Segment expenses include rental expenses
and real estate taxes for the property segments, general contracting and real estate services expenses for the general
contracting and real estate services segment, and interest expense for the real estate financing segment. Segment NOI
for the general contracting and real estate services and real estate financing segments is also referred to as segment
gross profit as illustrated in the table below. NOI is not a measure of operating income or cash flows from operating
activities as measured by GAAP and is not indicative of cash available to fund cash needs. As a result, NOI should not
be considered an alternative to cash flows as a measure of liquidity. Not all companies calculate NOI in the same
manner. The Company considers NOI to be an appropriate supplemental measure to net income because it assists both
investors and management in understanding the core operations of the Company’s real estate, construction, and real
estate financing businesses.
Since the Company's Annual Report on Form 10-K for the year ended December 31, 2023, the Company
retrospectively reclassified certain components of mixed-use properties between the retail, office, and multifamily real
estate segments in order to align the components of those properties with their tenant composition. As a result, (i) NOI
for the year ended December 31, 2023 increased $1.6 million and $0.2 million for the retail and office real estate
segments, respectively, and decreased $1.7 million for the multifamily real estate segment, and (ii) NOI for the year
ended December 31, 2022 increased $1.0 million and $0.6 million for the retail and office real estate segments,
respectively, and decreased $1.6 million for the multifamily real estate segment. These reclassifications had no effect
on total property NOI as previously reported. These reclassifications also had no impact on the Company's general
contracting and real estate services or real estate financing segments. Additionally, beginning in 2024 annual reporting
period, we adopted ASU 2023-07 retrospectively.
F-22
The following tables set forth financial information by segment for the years ended December 31, 2024, 2023, and 2022 (in thousands) and includes a reconciliation
of the primary measure of segment profit (NOI) to Net Income:
For the Year Ended December 31, 2024
Retail Real
Estate
Office Real
Estate
Multifamily
Real Estate
General
Contracting
and Real
Estate
Services
Real Estate
Financing
Other (a)
Total
Revenues
Rental revenues
$ 103,435 $
95,007 $
58,255 $
— $
— $
— $ 256,697
General contracting and real estate services revenues (b)
—
—
—
433,177
—
—
433,177
Interest income (real estate financing segment)
—
—
—
—
16,077
2,519
18,596
Total revenues
103,435
95,007
58,255
433,177
16,077
2,519
708,470
Expenses
Rental expenses (c)
18,221
25,048
19,141
—
—
—
62,410
Real estate taxes
9,421
8,731
5,156
—
—
—
23,308
General contracting and real estate services expenses (b)
—
—
—
419,302
—
—
419,302
Interest expense (real estate financing segment) (d)
—
—
—
—
6,588
—
6,588
Total segment operating expenses
27,642
33,779
24,297
419,302
6,588
—
511,608
Segment net operating income
75,793
61,228
33,958
13,875
9,489
2,519 $ 196,862
Interest income (excluding real estate financing segment)
84
11
120
—
—
(215)
—
Depreciation and amortization
(38,224)
(35,819)
(16,314)
—
—
(605)
(90,962)
General and administrative expenses
—
—
—
—
—
(20,225)
(20,225)
Acquisition, development and other pursuit costs
—
(5,528)
—
—
—
(3)
(5,531)
Impairment charges
—
(1,494)
—
—
—
—
(1,494)
Gain on real estate dispositions, net
21,305
—
—
—
—
—
21,305
Interest expense (excluding real estate financing segment)
(27,931)
(26,887)
(17,559)
—
—
—
(72,377)
Equity in income of unconsolidated real estate entities
2
238
5
—
—
—
245
Loss on extinguishment of debt
(192)
—
(55)
—
—
—
(247)
Change in fair value of derivatives and other
5,004
4,056
1,886
—
1,991
1,314
14,251
Unrealized credit loss (provision) release
—
—
—
—
(166)
10
(156)
Other (expense) income, net
73
139
(64)
—
—
61
209
Income tax benefit (provision)
—
1,634
—
(1,020)
—
—
614
Net income (loss)
$
35,914 $
(2,422) $
1,977 $
12,855 $
11,314 $
(17,144) $
42,494
F-23
For the Year Ended December 31, 2023
Retail Real
Estate
Office Real
Estate
Multifamily
Real Estate
General
Contracting
and Real
Estate
Services
Real Estate
Financing
Other (a)
Total
Revenues
Rental revenues
$
99,924 $
82,855 $
56,145 $
— $
— $
— $ 238,924
General contracting and real estate services revenues (b)
—
—
—
413,131
—
—
413,131
Interest income (real estate financing segment)
—
—
—
—
14,176
927
15,103
Total revenues
99,924
82,855
56,145
413,131
14,176
927
667,158
Expenses
Rental expenses (c)
16,470
22,708
17,241
—
—
—
56,419
Real estate taxes
9,102
8,682
4,658
—
—
—
22,442
General contracting and real estate services expenses (b)
—
—
—
399,713
—
—
399,713
Interest expense (real estate financing segment) (d)
—
—
—
—
3,667
—
3,667
Total segment operating expenses
25,572
31,390
21,899
399,713
3,667
—
482,241
Segment net operating income
74,352
51,465
34,246
13,418
10,509
927
184,917
Interest income (excluding real estate financing segment)
4
—
43
—
—
(47)
—
Depreciation and amortization
(39,149)
(44,805)
(12,977)
—
—
(496)
(97,427)
General and administrative expenses
—
—
—
—
—
(18,122)
(18,122)
Acquisition, development and other pursuit costs
—
—
—
—
—
(84)
(84)
Impairment charges
(102)
—
—
—
—
—
(102)
Gain on real estate dispositions
738
—
—
—
—
—
738
Interest expense (excluding real estate financing segment)
(21,561)
(18,810)
(13,772)
—
—
—
(54,143)
Change in fair value of derivatives and other
(1,826)
(1,481)
(340)
—
(561)
(2,034)
(6,242)
Unrealized credit loss release (provision)
—
—
—
—
(573)
(1)
(574)
Other income (expense), net
(123)
(51)
76
—
—
129
31
Income tax benefit (provision)
—
—
—
(1,329)
—
—
(1,329)
Net income (loss)
$
12,333 $
(13,682) $
7,276 $
12,089 $
9,375 $
(19,728) $
7,663
F-24
For the Year Ended December 31, 2022
Retail Real
Estate
Office Real
Estate
Multifamily
Real Estate
General
Contracting
and Real
Estate
Services
Real Estate
Financing
Other (a)
Total
Revenues
Rental revenues
$
87,788 $
74,970 $
56,536 $
— $
— $
— $ 219,294
General contracting and real estate services revenues (b)
—
—
—
234,859
—
—
234,859
Interest income (real estate financing segment)
—
—
—
—
16,461
517
16,978
Total revenues
87,788
74,970
56,536
234,859
16,461
517
471,131
Less
Rental expenses (c)
13,980
19,003
17,759
—
—
—
50,742
Real estate taxes
9,122
7,617
5,318
—
—
—
22,057
General contracting and real estate services expenses (b)
—
—
—
227,158
—
—
227,158
Interest expense (Real estate financing segment) (d)
—
—
—
—
3,497
—
3,497
Total segment operating expenses
23,102
26,620
23,077
227,158
3,497
—
303,454
Segment net operating income
64,686
48,350
33,459
7,701
12,964
517
167,677
Interest income (excluding Real estate financing segment)
—
—
9
—
—
(9)
—
Depreciation and amortization
(32,683)
(27,476)
(13,586)
—
—
(339)
(74,084)
General and administrative expenses
—
—
—
—
—
(15,691)
(15,691)
Acquisition, development and other pursuit costs
—
—
—
—
—
(37)
(37)
Impairment charges
(416)
—
—
—
—
—
(416)
Gain on real estate dispositions
23,306
—
30,160
—
—
—
53,466
Interest expense (excluding Real estate financing segment)
(10,685)
(13,178)
(12,320)
—
—
—
(36,183)
Equity in income of unconsolidated real estate entities
—
—
—
—
—
—
—
Loss on extinguishment of debt
(2,529)
(532)
(313)
—
—
—
(3,374)
Change in fair value of derivatives and other
2,376
1,023
6
—
3,814
1,479
8,698
Unrealized credit loss release (provision)
—
—
—
—
(386)
(240)
(626)
Other income (expense), net
170
(33)
150
—
—
91
378
Income tax benefit (provision)
—
—
—
145
—
—
145
Net income (loss)
$
44,225 $
8,154 $
37,565 $
7,846 $
16,392 $
(14,229) $
99,953
________________________________________
(a) Other includes items not directly associated with the operation and management of the Company’s real estate properties, general contracting and real estate services, and real estate
financing businesses. General and administrative expenses include corporate office personnel salaries and benefits, bank fees, accounting fees, legal fees, and other corporate office expenses.
F-25
(b) General contracting and real estate services revenues for the years ended December 31, 2024, 2023, and 2022 exclude revenues related to intercompany construction contracts of $18.1
million, $53.1 million, and $58.1 million, respectively, which are eliminated in consolidation. General contracting and real estate services expenses for the years ended December 31, 2024,
2023, and 2022 exclude expenses related to intercompany construction contracts of $17.9 million, $52.5 million, and $57.5 million, respectively, which are eliminated in consolidation.
(c) Rental expenses represent costs directly associated with the operation and management of the Company’s real estate properties. Rental expenses include asset management fees, property
management fees, repairs and maintenance, insurance, and utilities.
(d) Interest expense within the real estate financing segment is allocated based on the average outstanding principal of notes receivable in the real estate financing portfolio, and the effective
interest rate on the credit facility, the M&T term loan facility, and the TD term loan facility, each as defined in Note 9.
F-26
The following table summarizes key balance sheet data by segment (in thousands):
December 31, 2024
Real estate investments, at cost
$ 836,740 $ 812,679 $ 547,566 $
— $
— $
— $ 2,196,985
Notes receivable, net
—
—
—
—
132,565
—
132,565
Equity method investments
7,630
62,288
88,233
—
—
—
158,151
December 31, 2023
Real estate investments, at cost
$ 878,498 $ 798,857 $ 529,932 $
— $
— $
— $ 2,207,287
Notes receivable, net
—
—
—
—
94,172
—
94,172
Equity method investments
6,508
62,442
73,081
—
—
—
142,031
Retail real
estate
Office real
estate
Multifamily
real estate
General
contracting
and real
estate
services
Real estate
financing
Other
Total
4.
Leases
Lessee Disclosures
As a lessee, the Company has nine ground leases on nine properties. These ground leases have maximum lease terms
(including renewal options) that expire between 2074 and 2117. The exercise of lease renewal options is at the
Company's sole discretion. The depreciable life of assets and leasehold improvements are limited by the expected lease
term. Five of these leases have been classified as operating leases and four of these leases have been classified as
finance leases. The Company's lease agreements do not contain any residual value guarantees or material restrictive
covenants.
The components of lease cost for the years ended December 31, 2024, 2023, and 2022 were as follows (in thousands):
Years Ended December 31,
2024
2023
2022
Operating lease cost (a)
$
1,978 $
1,969 $
1,969
Finance lease cost:
Amortization of right-of-use assets (a)
1,578
1,349
1,110
Interest on lease liabilities
4,475
3,636
2,573
________________________________________
(a) Includes amortization of above & below-market ground lease intangible assets.
The table below presents supplemental cash flow information related to leases during the years ended December 31,
2024, 2023, and 2022 (in thousands):
Years Ended December 31,
2024
2023
2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
$
1,898 $
1,852 $
1,797
Operating cash flows from finance leases
3,624
2,876
2,256
Additional information related to leases as of December 31, 2024 and 2023 were as follows:
F-27
December 31,
2024
2023
Weighted Average Remaining Lease Term (years)
Operating leases
33.9
34.8
Finance leases
76.1
76.9
Weighted Average Discount Rate
Operating leases
5.5 %
5.5 %
Finance leases
4.5 %
4.5 %
The undiscounted cash flows to be paid on an annual basis for the next five years and thereafter are presented below
(in thousands). The total amount of lease payments, on an undiscounted basis, are reconciled to the lease liability, on
the consolidated balance sheet by considering the present value discount.
Year Ending December 31,
Operating Leases
Finance Leases
2025
$
1,897 $
3,575
2026
1,882
3,580
2027
1,890
3,602
2028
1,930
3,697
2029
1,969
3,817
Thereafter
62,596
370,654
Total lease liabilities
72,164
388,925
Less imputed interest
(40,799)
(296,279)
Present value of lease liabilities
$
31,365 $
92,646
Lessor Disclosures
As a lessor, the Company leases its properties under operating leases and recognizes base rents on a straight-line basis
over the lease term. The Company also recognizes revenue from tenant recoveries, through which tenants reimburse
the Company on an accrual basis for certain expenses such as utilities, janitorial services, repairs and maintenance,
security and alarms, parking lot and ground maintenance, administrative services, management fees, insurance, and
real estate taxes. Rental revenues are reduced by the amount of any leasing incentives amortized on a straight-line
basis over the term of the applicable lease. In addition, the Company recognizes contingent rental revenue (e.g.,
percentage rents based on tenant sales thresholds) when the sales thresholds are met. Many tenant leases include one or
more options to renew, with renewal terms that can extend the lease term from one to 25 years or more. The exercise
of lease renewal options is at the tenant's sole discretion. The Company includes a renewal period in the lease term
only if it appears at lease inception that the renewal is reasonably certain.
Rental revenue for the years ended December 31, 2024, 2023, and 2022 comprised the following (in thousands):
Years Ended December 31,
2024
2023
2022
Base rent and tenant charges
$
246,797 $
230,379 $
212,046
Accrued straight-line rental adjustment
8,254
6,355
6,178
Lease incentive amortization
(435)
(557)
(684)
(Above) below market lease amortization, net
2,081
2,747
1,754
Total rental revenue
$
256,697 $
238,924 $
219,294
F-28
The Company's commercial tenant leases provide for minimum rental payments during each of the next five years and
thereafter as follows (in thousands):
Year Ending December 31,
Operating Leases
2025
$
136,031
2026
135,952
2027
127,901
2028
117,542
2029
103,965
Thereafter
484,623
Total
$
1,106,014
5.
Real Estate Investments
The Company’s real estate investments comprised the following as of December 31, 2024 and 2023 (in thousands):
December 31, 2024
Income producing
property
Held for
development
Construction in
progress
Total
Land
$
273,020 $
5,683 $
— $
278,703
Land improvements
71,798
—
—
71,798
Buildings and improvements
1,828,969
—
—
1,828,969
Development and construction costs
—
—
17,515
17,515
Real estate investments
$
2,173,787 $
5,683 $
17,515 $
2,196,985
December 31, 2023
Income producing
property
Held for
development
Construction in
progress
Total
Land
$
279,135 $
11,978 $
5,000 $
296,113
Land improvements
73,313
—
—
73,313
Buildings and improvements
1,740,584
—
—
1,740,584
Development and construction costs
—
—
97,277
97,277
Real estate investments
$
2,093,032 $
11,978 $
102,277 $
2,207,287
2024 Operating Property Acquisitions
The Company did not acquire any properties during the year ended December 31, 2024.
2023 Operating Property Acquisitions
Constellation Energy Building
On January 14, 2023, the Company acquired an additional 11% membership interest in the Constellation Energy
Building, increasing its ownership interest to 90%, in exchange for full satisfaction of the $12.8 million loan that was
extended to the seller upon the acquisition of the property in January 2022.
The Interlock
F-29
On May 19, 2023, the Company acquired The Interlock, a 311,000 square foot Class A commercial mixed-use asset in
West Midtown Atlanta anchored by Georgia Tech. The Interlock consists of office and retail space as well as
structured parking. For segment reporting purposes, management has separated office and retail components of The
Interlock into two operating properties respectively presented in the office and retail real estate segments. The
Company acquired the asset for total consideration of $214.1 million plus capitalized acquisition costs of $1.2 million.
As part of this acquisition, the Company paid $6.1 million in cash, redeemed its outstanding $90.2 million mezzanine
loan, issued $12.2 million of common units of limited partnership interest in the Operating Partnership ("Common OP
Units") to the seller, and assumed the asset's senior construction loan of $105.6 million, that was paid off on the
acquisition date using the proceeds of the TD term loan facility and an increase in borrowings under the revolving
credit facility, as defined in Note 9. The Company also assumed the leasehold interest in the underlying land owned by
Georgia Tech. The ground lease has an expiration in 2117 after considering renewal options.
The following table summarizes the purchase price allocation (including acquisition costs) based on the relative fair
value of the assets acquired for the operating property purchased during the year ended December 31, 2023 (in
thousands):
The Interlock(1)
Building
$
183,907
In-place leases
35,234
Above-market leases
62
Below-market leases
(3,931)
Finance lease right-of-use assets(2)
46,616
Finance lease liabilities
(46,616)
Net assets acquired
$
215,272
________________________________________
(1) The net assets acquired attributable to the office and retail real estate segments were $134.6 million and $80.6 million, respectively.
(2) Excludes $1.1 million of rent for the finance lease, which was prepaid on the acquisition date. The total finance lease right-of-use asset
recognized on the acquisition date was $47.7 million.
2022 Operating Property Acquisitions
Constellation Energy Building
On January 14, 2022, the Company acquired a 79% membership interest and an additional 11% economic interest in
the partnership that owns the Constellation Energy Building for a purchase price of approximately $92.2 million in
cash and a loan to the seller of $12.8 million. The Constellation Energy Building is a mixed-use structure located in
Baltimore's Harbor Point and is comprised of an office building, the Constellation Office, that serves as the
headquarters for Constellation Energy Corp., which was spun-off from Exelon, a Fortune 100 energy company, in
February 2022, as well as a multifamily component, 1305 Dock Street. The Constellation Office includes a parking
garage and retail space. The Constellation Energy Building was subject to a $156.1 million loan, which the Company
immediately refinanced following the acquisition with a new $175.0 million loan. The new loan bears interest at a rate
of the Bloomberg Short-Term Bank Yield Index ("BSBY") plus a spread of 1.50% and will mature on November 1,
2026. This loan is hedged by an interest rate derivative of 1.00% and 3.00% as well as an interest rate cap of 4.00%.
See Note 10 for further details.
Pembroke Square
On November 4, 2022, the Company acquired a 124,000 square foot grocery-anchored shopping center in Virginia
Beach, Virginia for a purchase price of $26.5 million plus capitalized acquisition costs of $0.2 million.
F-30
The following table summarizes the purchase price allocation (including acquisition costs) based on the relative fair
value of the assets acquired for the three operating properties purchased during the year ended December 31, 2022 (in
thousands):
Constellation Energy
Building(1)
Pembroke Square
Land
$
23,317 $
14,513
Site improvements
141
465
Building
194,916
8,825
In-place leases
53,705
4,445
Above-market leases
306
—
Below-market leases
—
(1,557)
Net assets acquired
$
272,385 $
26,691
________________________________________
(1) The Constellation Energy Building is comprised of three properties which include Constellation Retail, Constellation Office, and 1305
Dock Street.
Other 2024 Real Estate Transactions
On June 25, 2024, the Company entered into a non-binding letter of intent to sell undeveloped land under
predevelopment to an unrelated third party for $4.8 million, which was used as an approximation of fair value as a
level 3 input in the fair value hierarchy. The Company anticipates completing the transaction in the year ended
December 31, 2025. During the year ended December 31, 2024, the Company recognized impairment of real estate of
$1.5 million and wrote off development costs of $5.5 million related to the property, which reflects the excess of the
book value of the property's assets over the estimated fair value of the property. The Company also recognized an
income tax benefit of $1.6 million as a result of the recognized impairment and the write-off of development costs.
The land parcel was reclassified as held-for-sale as of December 31, 2024.
On December 18, 2024, the Company completed the sale of the Market at Mill Creek and Nexton Square retail
properties for proceeds of $27.3 million and $54.7 million, respectively. The gain recognized upon sale was
$7.7 million and $13.6 million, respectively.
Other 2023 Real Estate Transactions
On April 11, 2023, the Company completed the sale of a non-operating outparcel at Market at Mill Creek in full
satisfaction of the outstanding consideration payable for the acquisition of the noncontrolling interest in the property
completed on December 31, 2022. The gain recorded on this disposition was $0.5 million.
On September 20, 2023, the Company exercised its option to purchase an outparcel adjacent to Brooks Crossing Retail
and subsequently sold the outparcel. The gain recorded on this disposition was $0.2 million.
Other 2022 Real Estate Transactions
On January 14, 2022, the Company acquired the remaining 20% ownership interest in the entity that is developing the
Ten Tryon project in Charlotte, North Carolina for a cash payment of $3.9 million. The Company recorded the amount
as an adjustment to additional paid-in-capital.
On April 1, 2022, the Company completed the sale of Hoffler Place for a sale price of $43.1 million. The loss
recognized upon sale was $0.8 million.
On April 11, 2022, the Company exercised its option to acquire an additional 16% of the partnership that owns The
Residences at Annapolis Junction, increasing its ownership to 95%. In exchange for this increased partnership interest,
the terms of the partnership waterfall calculation in the event of a capital event were modified.
On April 25, 2022, the Company completed the sale of Summit Place for a sale price of $37.8 million. The loss
recognized upon sale was $0.5 million.
F-31
In addition to the losses recognized on the sales of the Hoffler Place and Summit Place student-housing properties
during the year ended December 31, 2022 described above, the Company recognized impairment of real estate of
$18.3 million to record these properties at their fair values during the three months ended December 31, 2021.
On June 29, 2022, the Company completed the sale of the Home Depot and Costco outparcels at North Pointe for a
sale price of $23.9 million. The gain on disposition was $20.9 million.
On July 22, 2022, the Company completed the sale of The Residences at Annapolis Junction for a sale price of
$150.0 million. The gain recognized on disposition was $31.5 million, $5.4 million of which was allocated to the
Company's noncontrolling interest partner.
On July 26, 2022, the Company completed the sale of the AutoZone and Valvoline outparcels at Sandbridge Commons
for a sale price of $3.5 million. The gain recognized on disposition was $2.4 million.
On September 23, 2022, the Company completed the sale of the retail portion of The Everly for a sale price of
$1.5 million. There was no gain or loss on the disposition. In conjunction with the sale, the Company paid down The
Everly loan by $0.8 million.
In October 2022, the Company acquired the remaining 5% ownership interest in the entity that developed The Everly.
During 2022, the Company made earn-out payments totaling $4.2 million to its development partner in addition to
development cost savings of $0.8 million paid to the partner.
On December 31, 2022, the Company acquired the remaining 30% of the partnership that owns the Market at Mill
Creek shopping center in Mount Pleasant, South Carolina for total consideration of $1.5 million.
6.
Equity Method Investments
Harbor Point Parcel 3
The Company owns a 50% interest in Harbor Point Parcel 3, a joint venture with Beatty Development Group, for
purposes of developing T. Rowe Price's new global headquarters office building in Baltimore, Maryland. The
Company is a noncontrolling partner in the joint venture and serves as the project's general contractor. During the year
ended December 31, 2024, the Company invested $3.0 million in Harbor Point Parcel 3. The Company has a total
estimated equity commitment of $52.9 million relating to this project. For the years ended December 31, 2024 and
2023, Harbor Point Parcel 3 had no operating activity, and therefore the Company received no allocated income.
Based on the terms of the operating agreement, the Company has concluded that Harbor Point Parcel 3 is a VIE and
that the Company holds a variable interest. The Company has significant influence over the project due to its 50%
ownership interest; however, the Company does not have the power to direct the activities of the project that most
significantly impact its performance. This includes activity as the managing member of the entity, which is a power
that is retained by the Company's joint venture partner. Accordingly, the Company is not the project's primary
beneficiary and, therefore, does not consolidate Harbor Point Parcel 3 in its consolidated financial statements. The
Company's investment in the project is recorded as an equity method investment in the consolidated balance sheets.
F-32
A summary of Harbor Point Parcel 3's condensed financial data derived from the balance sheet are as follows ($ in
thousands):
December 31,
Condensed Balance Sheet
2024
2023
Current assets
$
1,393 $
26
Noncurrent assets
275,513
245,760
Current liabilities
37,289
61,872
Noncurrent liabilities
162,329
106,626
Total equity
77,288
77,288
Company's share of accumulated equity
38,644
38,644
Capitalized interest and other costs
7,777
4,265
Profit elimination, net of portion related to the Company's interest
(2,694)
(2,162)
Investments in and advances to unconsolidated affiliates
$
43,727 $
40,747
Harbor Point Parcel 4
On April 1, 2022, the Company acquired a 78% interest in Harbor Point Parcel 4, a real estate venture with Beatty
Development Group, for purposes of developing a mixed-use project, which is planned to include multifamily units,
retail space, and a parking garage. The Company holds an option to increase its ownership to 90%. The Company is a
noncontrolling partner in the real estate venture and serves as the project's general contractor. During the year ended
December 31, 2024, the Company invested $13.1 million in Harbor Point Parcel 4. The Company has an estimated
equity commitment of $115.9 million relating to this project.
Based on the terms of the operating agreement, the Company has concluded that Harbor Point Parcel 4 is a VIE and
that the Company holds a variable interest. The Company has significant influence over the project due to its 78%
ownership interest; however, the Company does not have the power to direct the activities of the project that most
significantly impact its performance. This includes activity as the managing member of the entity, which is a power
that is retained by the Company's partner. Accordingly, the Company is not the project's primary beneficiary and,
therefore, does not consolidate Harbor Point Parcel 4 in its consolidated financial statements. The Company's
investment in the project is recorded as an equity method investment in the consolidated balance sheets.
F-33
A summary of Harbor Point Parcel 4's condensed financial data derived from the balance sheet and statement of
comprehensive income are as follows ($ in thousands):
December 31,
Condensed Balance Sheet
2024
2023
Current assets
$
577 $
148
Noncurrent assets
221,092
145,346
Current liabilities
16,798
23,433
Noncurrent liabilities
76,903
—
Total equity
127,968
122,061
Company's share of accumulated equity
103,738
97,858
Capitalized interest and other costs
12,141
4,237
Profit elimination, net of portion related to the Company's
interest
(1,455)
(812)
Investments in and advances to unconsolidated affiliates
$
114,424 $
101,283
Year ended December 31,
Condensed Statement of Comprehensive Income
2024
2023
Rental revenues
$
835 $
—
Rental expenses
(37)
—
Interest expense
(249)
—
Depreciation and amortization
(277)
Net income
272
—
Equity in earnings in unconsolidated affiliates
$
245 $
—
F-34
7.
Notes Receivable and Current Expected Credit Losses
Notes Receivable
The Company had the following loans receivable outstanding as of December 31, 2024 and 2023 ($ in thousands):
Outstanding loan amount
December 31, 2024
December 31,
2023
Real Estate Financing
Project(a)
Maturity
Date
Principal
Accrued
interest
and fees(b)
Total loan
amount(c)
Total loan
amount(c)
Maximum
principal
commitment
Interest
rate
Interest
compounding
Solis Gainesville II
10/3/2026
$ 19,595 $ 5,696 $ 25,291 $
22,268 $
19,595
10.0 % (d)
Annually
Solis Kennesaw
5/25/2027
37,870
7,692 45,562
15,922
37,870
14.0 % (d)
Annually
Solis Peachtree Corners
10/31/2027
28,440
5,108 33,549
11,092
28,440
15.0 % (d)
Annually
The Allure at Edinburgh
1/16/2028
9,228
1,987 11,215
9,830
9,228
15.0 % (e)
None
Solis City Park II(f)
4/23/2028
—
—
—
24,313
—
13.0 %
Annually
Solis North Creek
8/8/2030
5,134
682
5,816
—
26,767
12.0 % (d)
Annually
Total mezzanine &
preferred equity
$ 100,267 $ 21,165 121,433
83,425 $ 121,900
Other notes receivable
12,984
12,219
Allowance for credit
losses(g)
(1,852)
(1,472)
Total notes receivable
$ 132,565 $
94,172
_______________________________________
(a) The Company does not intend to sell the real estate financing investments and it is not more likely than not that the Company will be
required to sell the investments before recovery of their amortized cost basis.
(b) Reflects accrued interest and unused commitment fees, net of discounts due to unamortized equity fees.
(c) Outstanding loan amounts include any accrued and unpaid interest, and accrued fees, as applicable.
(d) The interest rate varies over the life of the loans and the Company also earns an unused commitment fee on amounts not drawn on the
loans.
(e) The interest rate varies over the life of the loan.
(f) This note receivable was redeemed on July 10, 2024. Refer below under “Solis City Park II” for further details.
(g) The amounts as of December 31, 2024 and December 31, 2023 exclude $0.5 million and $0.7 million, respectively, of Current Expected
Credit Losses (“CECL”) allowance that relates to the unfunded commitments, which were recorded as a liability under other liabilities in the
consolidated balance sheets.
F-35
Interest on notes receivable is accrued and funded utilizing the interest reserves for each loan, which are components
of the respective maximum loan commitments, and such accrued interest is added to the loan receivable balances. The
Company recognized interest income for the years ended December 31, 2024, 2023, and 2022 as follows (in
thousands):
Years Ended December 31,
Real Estate Financing Project
2024
2023
2022
Nexton Multifamily
$
—
$
—
$
5,348 (a)
Solis City Park II(b)
1,482 (c)
2,887 (c)
1,038
Solis Gainesville II
3,021 (c)(d)
2,757 (c)(d)
205
Solis Kennesaw
5,449 (c)(d)
2,810 (c)(d)
—
Solis North Creek
682 (d)
—
—
Solis Peachtree Corners
4,059 (c)(d)
1,472 (c)(d)
—
The Allure at Edinburgh
1,384
603
—
The Interlock(e)
—
3,647 (c)
9,870 (c)
Total mezzanine & preferred equity
16,077
14,176
16,461
Other interest income
2,519
927
517
Total interest income
$
18,596
$
15,103
$
16,978
________________________________________
(a) Includes prepayment premium of $2.7 million received from the early payoff of the loan.
(b) This note receivable was redeemed on July 10, 2024. Refer below under “Solis City Park II” for further details.
(c) Includes recognition of interest income related to fee amortization.
(d) Includes recognition of unused commitment fees.
(e) This note receivable was redeemed on May 19, 2023 in connection with the Company’s acquisition of The Interlock.
Solis City Park II
On March 23, 2022, the Company entered into a $20.6 million preferred equity investment for the development of a
multifamily property located in Charlotte, North Carolina ("Solis City Park II"). The investment has economic terms
consistent with a note receivable, including a mandatory redemption or maturity on April 28, 2026, and it is accounted
for as a note receivable. The Company's investment bears interest at a rate of 13%, compounded annually, with
minimum interest of $5.7 million over the life of the investment.
On July 10, 2024, the Company's preferred equity investment in Solis City Park II was redeemed in full for total
consideration of $25.8 million, including $5.2 million of interest. Interest for the month of June 2024 was waived as
part of the note redemption.
Solis Gainesville II
On October 3, 2022, the Company entered into a $19.6 million preferred equity investment for the development of a
multifamily property located in Gainesville, Georgia ("Solis Gainesville II"). The investment has economic terms
consistent with a note receivable, including a mandatory redemption or maturity on October 3, 2026, and it is
accounted for as a note receivable. The Company's investment bears interest at a rate of 14%, compounded annually,
with minimum interest of $5.9 million over the life of the investment.
On March 29, 2023, the Solis Gainesville II preferred equity investment agreement was modified to adjust the interest
rate. The interest rate of 14% remains effective through the first 24 months of the investment. Beginning on October 3,
2024, the investment will bear interest at a rate of 10% for 12 months. On October 3, 2025, the investment will again
bear interest at a rate of 14% per annum through maturity. Additionally, the amendment introduced an unused
commitment fee of 10% on the unfunded portion of the investment's maximum loan commitment, which is effective
January 1, 2023. Both the interest and unused commitment fee compound annually.
F-36
On July 10, 2024, the Company signed an amendment to the operating agreement for the entity in which the Company
owns its real estate financing investment with respect to Solis Gainesville II to reduce the preference rate on the
investment from 10.0% to 6.0% starting on January 1, 2025. The Company also received a call option to purchase a
controlling interest in the entity that owns Solis Gainesville II at fair market value during the period from January 1,
2025 to December 31, 2025, which option also gives the Company a right of first refusal to buy the property during the
same period.
Solis Kennesaw
On May 25, 2023, the Company entered into a $37.9 million preferred equity investment for the development of a
multifamily property located in Marietta, Georgia ("Solis Kennesaw"). The investment has economic terms consistent
with a note receivable, including a mandatory redemption or maturity on May 25, 2027, and it is accounted for as a
note receivable. The Company's investment bears interest at a rate of 14.0% for the first 24 months. Beginning on May
25, 2025, the investment will bear interest at a rate of 9.0% for 12 months. On May 25, 2026, the investment will again
bear interest at a rate of 14.0% through maturity. The interest compounds annually. The Company also earns an unused
commitment fee of 11.0% on the unfunded portion of the investment's maximum loan commitment, which does not
compound, and an equity fee on its commitment of $0.6 million to be amortized through redemption. The preferred
equity investment is subject to a minimum interest guarantee of $13.1 million over the life of the investment.
Solis Peachtree Corners
On July 26, 2023, the Company entered into a $28.4 million preferred equity investment for the development of a
multifamily property located in Peachtree Corners, Georgia ("Solis Peachtree Corners"). The preferred equity
investment has economic and other terms consistent with a note receivable, including a mandatory redemption feature
effective on October 27, 2027. The Company's investment bears interest at a rate of 15.0% for the first 27 months.
Beginning on November 1, 2025, the investment will bear interest at a rate of 9.0% for 12 months. On November 1,
2026, the investment will again bear interest at a rate of 15.0% through maturity. The interest compounds annually.
The Company also earns an unused commitment fee of 10.0% on the unfunded portion of the investment's maximum
loan commitment, which also compounds annually, and an equity fee on its commitment of $0.4 million to be
amortized through redemption. The preferred equity investment is subject to a minimum interest guarantee of
$12.0 million over the life of the investment.
The Allure at Edinburgh
On July 26, 2023, the Company entered into a $9.2 million preferred equity investment for the development of a
multifamily property located in Chesapeake, Virginia ("The Allure at Edinburgh"). The preferred equity investment
has economic and other terms consistent with a note receivable, including a mandatory redemption feature effective on
January 16, 2028. The Company's investment bears interest at a rate of 15.0%, which does not compound. Upon The
Allure at Edinburgh obtaining a certificate of occupancy, the investment will bear interest at a rate of 10.0%. The
common equity partner in the development property holds an option to sell the property to the Company at a
predetermined amount if certain conditions are met. The Company also holds an option to purchase the property at any
time prior to maturity of the preferred equity investment, and at the same predetermined amount as the common equity
partner's option to sell.
Solis North Creek
On July 10, 2024, the Company entered into a $27.0 million preferred equity investment for the development of a
multifamily property located in Huntersville, North Carolina ("Solis North Creek"). The preferred equity investment
has economic terms consistent with a note receivable, including a mandatory redemption feature effective on August 8,
2030, and is accounted for as a note receivable. The Company's investment bears interest at a rate of 12.0% for the first
24 months. Beginning on July 10, 2026, the investment will bear interest at a rate of 9.0% for 12 months. On July 10,
2027, the investment will again bear interest at 12.0% through maturity. The interest compounds annually. The
Company also earns an unused commitment fee of 4.5% on the unfunded portion of the investment's maximum loan
commitment, which also compounds annually. The preferred equity investment was initially subject to a minimum
interest guarantee of $8.9 million over the life of the investment.
On August 8, 2024, the Company signed an amendment to the operating agreement for the entity through which the
Company owns its real estate financing investment with respect to Solis North Creek to reduce the equity funding
requirement from $27.0 million to $26.8 million and the minimum interest guarantee from $8.9 million to $8.8 million.
F-37
The Interlock
On May 19, 2023, the Company acquired The Interlock. The consideration for such acquisition included the
repayment of the Company's outstanding $90.2 million mezzanine loan on the project.
Allowance for Loan Losses
The Company is exposed to credit losses primarily through its real estate financing investments. As of December 31,
2024, the Company had six real estate financing investments, which are accounted for as notes receivable, each of
which are financing development projects in various stages of completion or lease-up. Each of these projects is subject
to a loan that is senior to the Company’s loan. Interest on these loans is paid in kind and is generally not expected to be
paid until a sale of the project after completion of the development.
The Company's management performs a quarterly analysis of the loan portfolio to determine the risk of credit loss
based on the progress of development activities, including leasing activities, projected development costs, and current
and projected subordinated and senior loan balances. The Company estimates future losses on its notes receivable
using risk ratings that correspond to probabilities of default and loss given default. The Company's risk ratings are as
follows:
•
Pass: loans in this category are adequately collateralized by a development project with conditions materially
consistent with the Company's underwriting assumptions.
•
Special Mention: loans in this category show signs that the economic performance of the project may suffer
as a result of slower-than-expected leasing activity or an extended development or marketing timeline. Loans
in this category warrant increased monitoring by management.
•
Substandard: loans in this category may not be fully collected by the Company unless remediation actions are
taken. Remediation actions may include obtaining additional collateral or assisting the borrower with asset
management activities to prepare the project for sale. The Company will also consider placing the loan on
non-accrual status if it does not believe that additional interest accruals will ultimately be collected.
The Company updated the risk ratings for each of its notes receivable as of December 31, 2024 and obtained industry
loan loss data relative to these risk ratings. Each of the outstanding loans as of December 31, 2024 was "Pass" rated.
The Company’s analysis resulted in an allowance for loan losses of approximately $2.4 million for the year ended
December 31, 2024. An allowance related to unfunded commitments of approximately $0.5 million as of
December 31, 2024 was recorded as Other liabilities on the consolidated balance sheet.
At December 31, 2024, the Company reported $132.6 million of notes receivable, net of allowances of $1.9 million. At
December 31, 2023, the Company reported $94.2 million of notes receivable, net of allowances of $1.5 million.
Changes in the allowance for funded and unfunded commitments for the years ended December 31, 2024 and 2023
were as follows (in thousands):
Year ended December 31, 2024
Year ended December 31, 2023
Funded
Unfunded
Total
Funded
Unfunded
Total
Beginning balance
$
1,472 $
732 $
2,204 $
1,292 $
338 $
1,630
Unrealized credit loss provision (release)
440
(223)
217
645
394
1,039
Release due to redemption
(60)
—
(60)
(465)
—
(465)
Ending balance
$
1,852 $
509 $
2,361 $
1,472 $
732 $
2,204
The Company places loans on non-accrual status when the loan balance, together with the balance of any senior loan,
approximately equals the estimated realizable value of the underlying development project. As of December 31, 2024,
no loans were placed on non-accrual status.
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. The
F-38
Company expects to bill and collect substantially all construction contract costs and estimated earnings in excess of
billings as of December 31, 2024 during the next 12 to 24 months.
Billings in excess of construction contract costs and estimated earnings represent billings or collections on contracts
made in advance of revenue recognized.
The following table summarizes the changes to the balances in the Company’s construction contract costs and
estimated earnings in excess of billings account and the billings in excess of construction contract costs and estimated
earnings account for the years ended December 31, 2024 and 2023 (in thousands):
Year ended December 31, 2024
Year ended December 31, 2023
Construction
contract costs and
estimated earnings
in excess of
billings
Billings in excess
of construction
contract costs and
estimated earnings
Construction
contract costs and
estimated earnings
in excess of
billings
Billings in excess
of construction
contract costs and
estimated earnings
Beginning balance
$
104 $
21,414 $
342 $
17,515
Revenue recognized that was included in the
balance at the beginning of the period
—
(21,414)
—
(17,515)
Increases due to new billings, excluding amounts
recognized as revenue during the period
—
8,722
—
23,309
Transferred to receivables
(105)
—
(394)
—
Construction contract costs and estimated earnings
not billed during the period
6
—
104
—
Changes due to cumulative catch-up adjustment
arising from changes in the estimate of the stage of
completion
1
(2,851)
52
(1,895)
Ending balance
$
6 $
5,871 $
104 $
21,414
The Company defers pre-contract costs when such costs are directly associated with specific anticipated contracts and
their recovery is probable. Pre-contract costs of $1.9 million and $1.9 million were deferred as of December 31, 2024
and 2023, respectively. Amortization of pre-contract costs for the years ended December 31, 2024 and 2023 was $0.1
million and $0.2 million, respectively.
Construction receivables and payables include retentions, which are 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, 2024 and 2023, construction receivables included retentions of $38.2 million and $28.7 million,
respectively. The Company expects to collect substantially all construction receivables as of December 31, 2024
during the next 12 to 24 months. As of December 31, 2024 and 2023, construction payables included retentions of
$44.9 million and $38.2 million, respectively. The Company expects to pay substantially all construction payables as
of December 31, 2024 during the next 12 to 24 months.
The Company’s net position on uncompleted construction contracts comprised the following as of December 31, 2024
and 2023 (in thousands):
December 31,
2024
2023
Costs incurred on uncompleted construction contracts
$
1,006,508 $
718,571
Estimated earnings
37,250
26,089
Billings
(1,049,623)
(765,970)
Net position
$
(5,865) $
(21,310)
Construction contract costs and estimated earnings in excess of billings
$
6 $
104
Billings in excess of construction contract costs and estimated earnings
(5,871)
(21,414)
Net position
$
(5,865) $
(21,310)
F-39
The Company's balances and changes in construction contract price allocated to unsatisfied performance obligations
(backlog) for each of the three years ended December 31, 2024, 2023 and 2022 were as follows (in thousands):
Years Ended December 31,
2024
2023
2022
Beginning backlog
$
472,170 $
665,564 $
215,518
New contracts/change orders
85,883
221,474
685,754
Work performed
(434,269)
(414,868)
(235,708)
Ending backlog
$
123,784 $
472,170 $
665,564
The Company expects to complete a majority of the uncompleted contracts as of December 31, 2024 during the next
12 to 24 months.
F-40
9.
Indebtedness
The Company’s indebtedness comprised the following as of December 31, 2024 and 2023 (dollars in thousands):
Amount Outstanding
Interest Rate (a)
Effective Rate for
Variable-Rate Debt
Maturity Date (b)
Balance at
Maturity
December 31,
December 31,
2024
2023
2024
Secured Debt
Chronicle Mill(c)
$
—
$ 34,438
SOFR+ 3.00%
— %
May 5, 2024
$
—
Red Mill Central (d)
—
1,838
4.80%
— %
June 17, 2024
—
Premier Apartments and Retail(c)
—
23,934
SOFR+ 1.55%
— %
October 31, 2024
—
Red Mill South
4,502
4,853
3.57%
3.57 %
May 1, 2025
4,383
Market at Mill Creek(c)
—
11,347
SOFR+ 1.55%
— %
July 12, 2025
—
The Everly
30,000
30,000
SOFR+ 1.50%
5.83 %
December 20, 2025
30,000
Encore Apartments & 4525 Main Street
52,187
53,495
2.93%
2.93 %
February 10, 2026
50,726
Southern Post
60,244
30,546
SOFR+ 2.25%
6.58 %
August 25, 2026
60,244
Thames Street Wharf
66,461
67,894
SOFR+ 1.30%
2.33 % (e) September 30, 2026
64,072
Constellation Energy Building
175,000
175,000
SOFR+ 1.50%
5.95 %
November 1, 2026
175,000
Southgate Square
—
25,331
SOFR+ 1.90%
— %
December 21, 2026
—
Nexton Square(f)
—
21,581
SOFR+ 1.95%
— %
June 30, 2027
—
Liberty
20,242
20,588
SOFR+ 1.50%
4.93 %
September 27, 2027
19,230
Greenbrier Square
19,184
19,569
3.74%
3.74 %
October 10, 2027
18,049
Lexington Square
13,293
13,599
4.50%
4.50 %
September 1, 2028
12,044
Red Mill North
3,842
3,963
4.73%
4.73 %
December 31, 2028
3,295
Premier Apartments and Retail
29,415
—
5.53%
5.53 %
December 1, 2029
29,415
Greenside Apartments
30,321
31,104
3.17%
3.17 %
December 15, 2029
26,095
Smith's Landing
13,584
14,578
4.05%
4.05 %
June 1, 2035
384
The Edison
14,774
15,179
5.30%
5.30 %
December 1, 2044
100
The Cosmopolitan
39,461
40,367
3.35%
3.35 %
July 1, 2051
187
Total Secured Debt
$ 572,510
$ 639,204
$ 493,224
Unsecured Debt
TD Unsecured Term Loan
$
95,000
$
95,000
SOFR+ 1.35%-1.90%
4.85 % (e)
May 19, 2025
$
95,000
Senior Unsecured Revolving Credit
Facility
140,000
262,000
SOFR+ 1.30%-1.85%
6.42 %
January 22, 2027
140,000
Senior Unsecured Revolving Credit
Facility (Fixed)
5,000
5,000
SOFR+ 1.30%-1.85%
4.80 % (e)
January 22, 2027
5,000
M&T Unsecured Term Loan
35,000
—
SOFR+ 1.25%-1.80%
6.22 %
March 8, 2027
35,000
M&T Unsecured Term Loan (Fixed)
100,000
100,000
SOFR+ 1.25%-1.80%
4.90 % (e)
March 8, 2027
100,000
Senior Unsecured Term Loan
271,000
125,000
SOFR+ 1.25%-1.80%
6.22 %
January 21, 2028
271,000
Senior Unsecured Term Loan (Fixed)
79,000
175,000
SOFR+ 1.25%-1.80%
4.83 % (e)
January 21, 2028
79,000
Total Unsecured Debt
725,000
762,000
725,000
Total Principal Balances
$ 1,297,510
$ 1,401,204
$ 1,218,224
Other notes payable(g)
6,121
6,127
Unamortized GAAP Adjustments
(8,072)
(10,366)
Indebtedness, Net
$ 1,295,559
$ 1,396,965
________________________________________
(a) The Secured Overnight Financing Rate ("SOFR") is determined by individual lenders.
(b) Does not reflect the effect of any maturity extension options.
(c) On September 27, 2024, the loans secured by Chronicle Mill, Premier, and Market at Mill Creek were repaid in full.
(d) On June 10, 2024, the loan secured by Red Mill Central was repaid in full at maturity.
(e) Includes debt subject to interest rate swap locks.
(f) On December 18, 2024, the loan secured by Nexton Square was repaid in full in connection with the sale of the property.
(g) Represents the fair value of additional ground lease payments at 1405 Point over the approximately 38-year remaining lease term.
F-41
The Company’s indebtedness was comprised of the following fixed and variable-rate debt as of December 31, 2024
and 2023 (in thousands):
December 31,
2024
2023
Fixed-rate debt
$
586,266
$
816,439
Variable-rate debt
711,244
584,765
Total principal balance
$
1,297,510
$
1,401,204
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, 2024, the Company was in compliance with all loan covenants.
Scheduled principal repayments and maturities during each of the next five years and thereafter are as follows (in
thousands):
Year(1)(2)(3)
Scheduled Principal
Payments
Maturities
Amount Due
2025
$
7,318
$
129,383
$
136,701
2026
5,668
350,042
355,710
2027
4,540
317,279
321,819
2028
3,983
365,339
369,322
2029
3,657
55,510
59,167
Thereafter
54,120
671
54,791
Total
$
79,286
$
1,218,224
$
1,297,510
________________________________________
(1) Does not reflect the effect of any maturity extension options.
(2) Includes debt incurred in connection with the development of properties.
(3) Debt principal payments and maturities exclude increased ground lease payments at 1405 Point which are classified as a note payable in
our consolidated balance sheets.
Credit Facility
On August 23, 2022, the Company, as parent guarantor, and the Operating Partnership, as borrower, entered into an
amended and restated credit agreement (the "Credit Agreement"), which provides for a $550.0 million credit facility
comprised of a $250.0 million senior unsecured revolving credit facility (the "revolving credit facility") and a $300.0
million senior unsecured term loan facility (the "term loan facility" and, together with the revolving credit facility, the
"credit facility"), with a syndicate of banks.
The credit facility includes an accordion feature that allows the total commitments to be increased to $1.0 billion,
subject to certain conditions, including obtaining commitments from any one or more lenders. The revolving credit
facility has a scheduled maturity date of January 22, 2027, with two six-month extension options, subject to the
Company's satisfaction of certain conditions, including payment of a 0.075% extension fee at each extension. The term
loan facility has a scheduled maturity date of January 21, 2028.
On August 29, 2023, the Company increased the capacity of the revolving credit facility by $105.0 million by
exercising the accordion feature in part, bringing the revolving credit facility capacity to $355.0 million and the total
credit facility capacity to $655.0 million.
On June 14, 2024, the term loan facility commitment increased by $50 million to $350.0 million as a result of an
existing lender increasing its outstanding commitment.
The revolving credit facility bears interest at SOFR plus a margin ranging from 1.30% to 1.85% and a credit spread
adjustment of 0.10%, and the term loan facility bears interest at SOFR plus a margin ranging from 1.25% to 1.80% and
a credit spread adjustment of 0.10%, in each case depending on the Company's total leverage. The Company is also
obligated to pay an unused commitment fee of 15 or 25 basis points on the unused portions of the commitments under
the revolving credit facility, depending on the amount of borrowings under the revolving credit facility. If the
Company or the Operating Partnership attains investment grade credit ratings from both S&P Global Ratings and
F-42
Moody's Investors Service, Inc., the Operating Partnership may elect to have borrowings become subject to interest
rates based on such credit ratings.
As of December 31, 2024 and December 31, 2023, the outstanding balance on the revolving credit facility was $145.0
million and $267.0 million, respectively. The outstanding balance on the term loan facility was $350.0 million as of
December 31, 2024 and $300.0 million as of December 31, 2023. As of December 31, 2024, the effective interest rates
on the revolving credit facility and the term loan facility, before giving effect to interest rate swaps, were 6.42% and
6.22%, respectively. After giving effect to interest rate swaps, the effective interest rates on each of the revolving
credit facility and the term loan facility were 4.47% as of December 31, 2024. The Operating Partnership may, at any
time, voluntarily prepay any loan under the credit facility in whole or in part without premium or penalty.
The Operating Partnership is the borrower, and its obligations under the credit facility are guaranteed by the Company
and certain of its subsidiaries that are not otherwise prohibited from providing such guaranty. The Credit Agreement
contains customary representations and warranties and financial and other affirmative and negative covenants. The
Company's ability to borrow under the credit facility is subject to ongoing compliance with a number of financial
covenants, affirmative covenants, and other restrictions. The Credit Agreement includes customary events of default,
in certain cases subject to customary cure periods. The occurrence of an event of default, if not cured within the
applicable cure period, would permit the lenders to, among other things, declare the unpaid principal, accrued and
unpaid interest, and all other amounts payable under the credit facility to be immediately due and payable.
M&T Term Loan Facility
On December 6, 2022, the Company, as parent guarantor, and the Operating Partnership, as borrower, entered into a
term loan agreement (the "M&T term loan agreement") with Manufacturers and Traders Trust Company, as lender and
administrative agent, which provides a $100.0 million senior unsecured term loan facility (the "M&T term loan
facility"), with the option to increase the total capacity to $200.0 million, subject to the Company's satisfaction of
certain conditions. The proceeds from the M&T term loan facility were used to repay the loans secured by the Wills
Wharf, 249 Central Park Retail, Fountain Plaza Retail, and South Retail properties. The M&T term loan facility has a
scheduled maturity date of March 8, 2027, with a one-year extension option, subject to the Company's satisfaction of
certain conditions, including payment of a 0.075% extension fee.
The M&T term loan facility bears interest at a rate elected by the Operating Partnership based on term SOFR, Daily
Simple SOFR, or the Base Rate (as defined below), and in each case plus a margin. A term SOFR or Daily Simple
SOFR loan is also subject to a credit spread adjustment of 0.10%. The margin under each interest rate election depends
on the Company's total leverage. The "Base Rate" is equal to the highest of: (a) the rate of interest in effect for such
day as publicly announced from time to time by M&T Bank as its “prime rate” for such day, (b) the Federal Funds
Rate for such day, plus 0.50%, (c) one month term SOFR for such day plus 100 basis points and (d) 1.00%. The
Operating Partnership has elected for the loan to bear interest at term SOFR plus margin. If the Company or the
Operating Partnership attains investment grade credit ratings from both S&P Global Ratings and Moody's Investor
Service, Inc., the Operating Partnership may elect to have borrowings become subject to interest rates based on such
credit ratings. The Company may, at any time, voluntarily prepay the M&T term loan facility in whole or in part
without premium or penalty, provided certain conditions are met.
On June 21, 2024, the M&T term loan facility commitment increased by $35 million to $135.0 million as a result of
adding a new lender to the facility.
As of December 31, 2024 and 2023, the outstanding balance on the M&T term loan facility was $135.0 million and
$100.0 million, respectively. As of December 31, 2024, the effective interest rate on the M&T term loan facility,
before giving effect to interest rate swaps, was 6.22%. After giving effect to interest rate swaps, the effective interest
rate on the M&T term loan facility was 4.76% as of December 31, 2024. The Operating Partnership may, at any time,
voluntarily prepay the M&T term loan facility in whole or in part without premium or penalty, provided certain
conditions are met.
The Operating Partnership is the borrower under the M&T term loan facility, and its obligations under the M&T term
loan facility are guaranteed by the Company and certain of its subsidiaries that are not otherwise prohibited from
providing such guaranty. The M&T term loan agreement contains customary representations and warranties and
financial and other affirmative and negative covenants. The Company's ability to borrow under the M&T term loan
facility is subject to ongoing compliance with a number of financial covenants, affirmative covenants, and other
restrictions. The term loan agreement includes customary events of default, in certain cases subject to customary cure
F-43
periods. The occurrence of an event of default, if not cured within the applicable cure period, would permit the lenders
to, among other things, declare the unpaid principal, accrued and unpaid interest, and all other amounts payable under
the M&T term loan facility to be immediately due and payable.
TD Term Loan Facility
On May 19, 2023, the Company, as parent guarantor, and the Operating Partnership, as borrower, entered into a term
loan agreement (the "TD term loan agreement") with Toronto Dominion (Texas) LLC, as administrative agent, and TD
Bank, N.A. as lender, which provides a $75.0 million senior unsecured term loan facility (the "TD term loan facility"),
with the option to increase the total capacity to $150.0 million, subject to the Company's satisfaction of certain
conditions. The proceeds from the TD term loan facility were used in connection with the acquisition of The Interlock,
which is detailed in Note 5. The TD term loan facility has a scheduled maturity date of May 19, 2025, with a one-year
extension option, subject to the Company's satisfaction of certain conditions, including payment of a 0.15% extension
fee.
The TD term loan facility bears interest at a rate elected by the Operating Partnership based on term SOFR, Daily
Simple SOFR, or the Base Rate (as defined below), and in each case plus a margin. A term SOFR or Daily Simple
SOFR loan is also subject to a credit spread adjustment of 0.10%. The margin under each interest rate election depends
on the Company's total leverage. The "Base Rate" is equal to the highest of: (a) the Federal Funds Rate for such day,
plus 0.50% (b) the rate of interest in effect for such day as publicly announced from time to time by the administrative
agent as its “prime rate” for such day, (c) one month term SOFR for such day plus 100 basis points and (d) 1.00%. The
Operating Partnership has elected for the loan to bear interest at term SOFR plus margin. If the Company or the
Operating Partnership attains investment grade credit ratings from both S&P Global Ratings and Moody's Investor
Service, Inc., the Operating Partnership may elect to have borrowings become subject to interest rates based on such
credit ratings. The Operating Partnership may, at any time, voluntarily prepay the TD term loan facility in whole or in
part without premium or penalty, provided certain conditions are met.
On June 29, 2023, the TD term loan facility commitment increased to $95.0 million as a result of the addition of a
second lender to the facility.
As of December 31, 2024 and 2023, the outstanding balance on the TD term loan facility was $95.0 million and
$95.0 million, respectively. As of December 31, 2024, the effective interest rate on the TD term loan facility, before
giving effect to interest rate swaps, was 6.47%. After giving effect to interest rate swaps, the effective interest rate on
the TD term loan facility was 4.85% as of December 31, 2024.
The Operating Partnership is the borrower under the TD term loan facility, and its obligations under the TD term loan
facility are guaranteed by the Company and certain of its subsidiaries that are not otherwise prohibited from providing
such guaranty. The TD term loan agreement contains customary representations and warranties and financial and other
affirmative and negative covenants. The Company's ability to borrow under the TD term loan facility is subject to
ongoing compliance with a number of financial covenants, affirmative covenants, and other restrictions. The TD term
loan agreement includes customary events of default, in certain cases subject to customary cure periods. The
occurrence of an event of default, if not cured within the applicable cure period, would permit the lenders to, among
other things, declare the unpaid principal, accrued and unpaid interest, and all other amounts payable under the TD
term loan facility to be immediately due and payable.
The Company is currently in compliance with all covenants under the Credit Agreement, the M&T term loan
agreement, and TD term loan agreement, all of which are substantially similar.
Other 2024 Financing Activity
The Company exercised its option to extend the maturity date on the loan secured by Chronicle Mill by one year,
which will now mature on May 5, 2025. The Company paid a nominal extension fee.
On June 10, 2024, the Company paid off the $1.76 million balance of the loan secured by the Red Mill Central
shopping center and added the property to the unencumbered borrowing base.
On September 27, 2024, the Company paid off the $35.0 million, $23.7 million, and $10.9 million balances of the
loans secured by the Chronicle Mill mixed-use multifamily, retail, and office property, the Premier mixed-use
multifamily and retail property, and the Market at Mill Creek retail property, respectively.
F-44
On November 27, 2024, the Company closed on a loan secured by the Premier Retail and Premier Apartments
properties, using the $29.4 million in proceeds to pay off the $24.5 million balance of the loan secured by the
Southgate Square retail property and pay down $4.9 million on the revolving credit facility.
On December 18, 2024, the Company paid off the $21.1 million loan secured by the Nexton Square retail property in
connection with the disposition.
During the twelve months ended December 31, 2024, the Company borrowed $64.8 million under its existing
construction loans to fund ongoing development and construction.
Other 2023 Financing Activity
Effective April 3, 2023, the Company transitioned the $69.0 million loan secured by Thames Street Wharf to SOFR,
previously indexed to the Bloomberg Short-Term Yield Index (BSBY). The modified loan bears interest at a rate of
SOFR plus a spread of 1.30% and a credit spread adjustment of 0.10%.
Effective April 3, 2023, the Company transitioned the $175.0 million loan secured by the Constellation Energy
Building to SOFR, previously indexed to BSBY. The modified loan bears interest at a rate of SOFR plus a spread of
1.50% and a credit spread adjustment of 0.11%.
On April 11, 2023, the Company paid down $0.5 million of the loan secured by Market at Mill Creek in connection
with the disposition of a non-operating outparcel.
During the year ended December 31, 2023, the Company borrowed $37.4 million under its existing construction loans
to fund new development and construction.
F-45
10.
Derivative Financial Instruments
The Company enters into interest rate derivative contracts to manage exposure to interest rate risks. The Company
does not use derivative financial instruments for trading or speculative purposes. Derivative financial instruments are
recognized at fair value and presented within other assets and other liabilities in the condensed consolidated balance
sheets. Gains and losses resulting from changes in the fair value of derivatives that are neither designated nor qualify
as hedging instruments are recognized within the change in fair value of derivatives and other in the condensed
consolidated statements of comprehensive income. For derivatives that qualify as cash flow hedges, the gain or loss is
reported as a component of other comprehensive income (loss) and reclassified into earnings in the periods during
which the hedged forecasted transaction affects earnings.
As of December 31, 2024, the Company held the following floating-to-fixed interest rate swaps ($ in thousands):
Related Debt
Notional
Amount
Index
Swap
Fixed
Rate
Debt
effective
rate
Effective
Date
Expiration
Date
Harbor Point Parcel 3 senior
construction loan
$
90,000 (a)
1-month SOFR
2.75 %
4.82 %
10/2/2023
10/1/2025
Floating rate pool of loans
330,000 (b)
1-month SOFR
2.75 %
4.33 %
10/1/2023
10/1/2025
Harbor Point Parcel 4 senior
construction loan
100,000 (c)
1-month SOFR
2.75 %
5.12 %
11/1/2023
11/1/2025
Floating rate pool of loans
300,000 (d)
1-month SOFR
2.75 %
4.33 %
12/1/2023
12/1/2025
Revolving credit facility and TD
unsecured term loan
100,000
Daily SOFR
3.20 %
4.70 %
5/19/2023
5/19/2026
(e)
Thames Street Wharf loan
66,057 (f)
Daily SOFR
0.93 %
2.33 %
9/30/2021
9/30/2026
M&T unsecured term loan
100,000 (f)
1-month SOFR
3.50 %
4.90 %
12/6/2022
12/6/2027
Liberty Retail & Apartments loan
21,000 (g)
1-month SOFR
3.43 %
4.93 %
12/13/2022
1/21/2028
Senior unsecured term loan
79,000 (g)
1-month SOFR
3.43 %
4.83 %
12/13/2022
1/21/2028
Total
$
1,186,057
________________________________________
(a) This interest rate swap agreement reduces the Company's interest rate exposure on the $180.4 million senior construction loan secured by
the Company's Harbor Point Parcel 3 equity method investment. As such, the loan is not reflected on the Company's consolidated balance
sheets. The Company also paid $3.6 million to reduce the swap fixed rate on September 8, 2023.
(b) The Company paid $13.3 million to reduce the swap fixed rate on September 8, 2023.
(c) This interest rate swap agreement reduces the Company's interest rate exposure on the $109.7 million senior construction loan secured by
the Company's Harbor Point Parcel 4 equity method investment. As such, the loan is not reflected on the Company's consolidated balance
sheets. The Company also paid $3.9 million to reduce the swap fixed rate on October 13, 2023.
(d) The Company paid $10.5 million to reduce the swap fixed rate on November 16, 2023.
(e) Subject to cancellation by the counterparty beginning on May 1, 2025 and the first day of each month thereafter.
(f) Designated as a cash flow hedge.
(g) The Company novated an existing 3.43% fixed rate swap with a $100.0 million notional and assigned (A) $11.1 million notional to the
loan secured by Market at Mill Creek, effective April 17, 2024, and (B) $21.0 million to the loan secured by Liberty Retail & Apartments,
effective February 1, 2024. Once the Market at Mill Creek loan was repaid, the $67.9 million swap on the senior unsecured loan increased to
$79.0 million.
For the interest rate swaps and caps designated as cash flow hedges for accounting purposes, realized gains and losses
are reclassified out of accumulated other comprehensive gain (loss) to interest expense in the consolidated statements
of comprehensive income due to payments received from and paid to the counterparty. During the next 12 months, the
Company anticipates reclassifying approximately $2.5 million of net hedging gains as reductions to interest expense.
These amounts will be reclassified from accumulated other comprehensive gain into earnings to offset the variability
of the hedged items during this period.
F-46
The Company’s derivatives comprised the following as of December 31, 2024 and 2023 (in thousands):
December 31, 2024
December 31, 2023
Fair Value
Fair Value
Notional
Amount
Asset
Liability
Notional
Amount
Asset
Liability
Derivatives not designated as accounting
hedges
Interest rate swaps
$ 1,020,000 $
11,149 $
— $ 1,020,000 $
20,761 $
—
Derivatives designated as accounting
hedges
Interest rate swaps
166,057
4,712
—
667,894
7,141
—
Interest rate caps
—
—
—
98,269
960
—
Total derivatives
$ 1,186,057 $
15,861 $
— $ 1,786,163 $
28,862 $
—
The unrealized changes in the fair value of the Company’s derivatives during the years ended December 31, 2024,
2023, and 2022 was as follows (in thousands):
Year Ended December 31,
2024
2023
2022
Interest rate swaps
$
(5,312) $
(6,981) $
16,210
Interest rate caps
22
(325)
12,841
Total unrealized change in fair value of interest rate derivatives
$
(5,290) $
(7,306) $
29,051
Comprehensive income statement presentation:
Change in fair value of derivatives and other(a)
$
(9,612) $
(14,185) $
8,886
Unrealized cash flow hedge gains
4,322
6,879
20,165
Total unrealized change in fair value of interest rate derivatives
$
(5,290) $
(7,306) $
29,051
(a) Excludes $23.9 million and $7.9 million of realized changes in the fair value of derivatives for the years ended
December 31, 2024 and 2023, respectively.
11.
Equity
Stockholders’ Equity
As of each of December 31, 2024 and 2023, the Company’s authorized capital was 500.0 million shares of common
stock and 100.0 million shares of preferred stock. The Company had 79.7 million and 66.8 million shares of common
stock issued and outstanding as of December 31, 2024 and 2023, respectively. The Company had 6.8 million shares of
its Series A Preferred Stock (as defined below) issued and outstanding as of each of December 31, 2024 and 2023.
Common Stock
On March 10, 2020, the Company commenced a new at-the-market continuous equity offering program (the "ATM
Program") through which the Company may, from time to time, issue and sell shares of its common stock and shares
of its 6.75% Series A Cumulative Redeemable Perpetual Preferred Stock (the "Series A Preferred Stock") having an
aggregate offering price of up to $300.0 million, to or through its sales agents and, with respect to shares of its
common stock, may enter into separate forward sales agreements to or through one or more forward purchasers.
During the year ended December 31, 2024, the Company issued and sold 2,288,541 shares of common stock under the
ATM Program at a weighted average price of $11.58, receiving net proceeds, after offering costs and commissions, of
$26.1 million. During the year ended December 31, 2023, the Company did not issue any shares of common stock
under the ATM Program. During the year ended December 31, 2022, the Company issued and sold 475,074 shares of
common stock under the ATM Program at a weighted average price of $15.21, receiving net proceeds, after offering
costs and commissions, of $7.1 million. During the years ended December 31, 2024, 2023, and 2022, the Company did
not issue any shares of the Series A Preferred Stock under the ATM Program. Shares having an aggregate offering
price of $178.5 million remained unsold under the ATM Program as of February 21, 2025.
F-47
On April 3, 2023, in connection with the tender by a holder of Common OP Units of 51,000 Common OP Units for
redemption by the Operating Partnership, the Company elected to satisfy the redemption request with a cash payment
of $0.6 million.
On July 14, 2023, in connection with the tender by a holder of Common OP Units of 10,146 Common OP Units for
redemption by the Operating Partnership, the Company elected to satisfy the redemption request with a cash payment
of $0.1 million.
On October 2, 2023, in connection with the tender by a holder of Common OP Units of 50,000 Common OP Units for
redemption by the Operating Partnership, the Company elected to satisfy the redemption request through the issuance
of an equal number of shares of common stock.
On January 2, 2024, in connection with the tender by a holder of 9,286 Common OP Units for redemption by the
Operating Partnership, the Company elected to satisfy the redemption request with a cash payment of $0.1 million.
On July 1, 2024, in connection with the tender by holders of Common OP Units of 79,650 Common OP Units for
redemption by the Operating Partnership, the Company elected to satisfy the redemption requests through the issuance
of an equal number of shares of common stock.
On August 16, 2024, in connection with the tender by a holder of 6,053 Common OP Units for redemption by the
Operating Partnership, the Company elected to satisfy the redemption request with a cash payment of $0.1 million.
On September 27, 2024, the Company completed an underwritten public offering of 9.00 million shares of common
stock at a public offering price of $10.50 per share, which resulted in gross proceeds of $94.5 million. The Company
granted the underwriters an option to purchase 1.35 million shares of common stock at a public offering price of
$10.50 per share, which was exercised in full, resulting in additional gross proceeds of $14.2 million. The Company
had net proceeds, after deducting the underwriting discount and offering expenses, of $103.5 million.
On October 1, 2024, in connection with the tender by holders of Common OP Units of 1,550 Common OP Units for
redemption by the Operating Partnership, the Company elected to satisfy the redemption request with a cash payment
of less than $0.1 million.
Preferred Stock
Dividends on the Series A Preferred Stock are payable quarterly in arrears on or about the 15th day of each January,
April, July, and October. The first dividend on the Series A Preferred Stock was paid on October 15, 2019. The Series
A Preferred Stock does not have a stated maturity date and is not subject to any sinking fund or mandatory redemption
provisions. Upon liquidation, dissolution or winding up, the Series A Preferred Stock will rank senior to the
Company's common stock with respect to the payment of distributions and other amounts. Except in instances relating
to preservation of the Company's qualification as a REIT or pursuant to the Company’s special optional redemption
right, the Series A Preferred Stock was not redeemable prior to June 18, 2024. On and after June 18, 2024, the
Company may, at its option, redeem the Series A Preferred Stock, in whole, at any time, or in part, from time to time,
for cash at a redemption price of $25.00 per share, plus any accrued and unpaid dividends (whether or not declared) to,
but excluding, the redemption date.
Upon the occurrence of a change of control (as defined in the articles supplementary designating the terms of the
Series A Preferred Stock), the Company has a special optional redemption right that enables it to redeem the Series A
Preferred Stock, in whole or in part and within 120 days after the first date on which a change of control has occurred
resulting in neither the Company nor the surviving entity having a class of common stock listed on the New York
Stock Exchange, NYSE American, or NASDAQ or the acquisition of beneficial ownership of its stock entitling a
person to exercise more than 50% of the total voting power of all our stock entitled to vote generally in election of
directors. The special optional redemption price is $25.00 per share, plus any accrued and unpaid dividends (whether
or not declared) to, but excluding, the date of redemption.
Upon the occurrence of a change of control, holders will have the right (unless the Company has elected to exercise its
special optional redemption right to redeem their Series A Preferred Stock) to convert some or all of such holder’s
Series A Preferred Stock into a number of shares of the Company's common stock equal to the lesser of:
F-48
•
the quotient obtained by dividing (i) the sum of the $25.00 liquidation preference plus the amount of any accrued
and unpaid distributions to, but not including, the change of control conversion date (unless the change of control
conversion date is after a record date for a Series A Preferred Stock distribution payment and prior to the
corresponding Series A Preferred Stock distribution payment date, in which case no additional amount for such
accrued and unpaid distribution will be included in this sum) by (ii) the Common Stock Price (as defined in the
articles supplementary designating the terms of the Series A Preferred Stock); and
•
2.97796 (i.e., the Share Cap), subject to certain adjustments;
Such conversions are subject to certain adjustments and provisions for the receipt of alternative consideration of
equivalent value as described in the articles supplementary designating the terms of the Series A Preferred Stock.
Noncontrolling Interests
As of December 31, 2024 and 2023, the Company held a 78.6% and 75.6% common interest in the Operating
Partnership, respectively. As of December 31, 2024, the Company also held a preferred interest in the Operating
Partnership in the form of preferred units with a liquidation preference of $171.1 million. The Company is the primary
beneficiary of the Operating Partnership as it has the power to direct the activities of the Operating Partnership and the
rights to absorb 78.6% of the net income of the Operating Partnership. As the primary beneficiary, the Company
consolidates the financial position and results of operations of the Operating Partnership. Noncontrolling interests in
the Operating Partnership represent units of limited partnership interest in the Operating Partnership not held by the
Company. As of December 31, 2024, there were 21,456,523 Common OP Units and 209,897 LTIP Units (as defined
below) in the Operating Partnership not held by the Company. The Company's financial position and results of
operations are the same as those of the Operating Partnership. See Note 12 for a description of LTIP Units.
Additionally, the Operating Partnership owns a majority interest in certain non-wholly-owned operating and
development properties. The noncontrolling interest in investment entities was $9.2 million and $10.0 million as of
December 31, 2024 and 2023, respectively, which represents the minority partners' interest in certain consolidated real
estate entities.
Holders of Common OP Units may not transfer their units without the Company's prior consent as general partner of
the Operating Partnership. Subject to the satisfaction of certain conditions, holders of Common OP Units 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 Common OP Units of the Operating
Partnership not held by the Company as noncontrolling interests within equity in the consolidated balance sheets.
Share Repurchase Program
On June 15, 2023, the Company adopted a $50.0 million share repurchase program (the "Share Repurchase Program").
Under the Share Repurchase Program, the Company may repurchase shares of common stock and Series A Preferred
Stock from time to time in the open market, in block purchases, through privately negotiated transactions, the use of
trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, or other
means. The Share Repurchase Program does not obligate the Company to acquire any specific number of shares or
acquire shares over any specific period of time. The Share Repurchase Program may be suspended or discontinued at
any time by the Company and does not have an expiration date.
During the year ended December 31, 2024, the Company did not repurchase any shares of common stock or Series A
Preferred Stock. As of December 31, 2024, $37.4 million remained available for repurchases under the Share
Repurchase Program.
Dividends and Distributions
During the years ended December 31, 2024, 2023, and 2022, the Company declared dividends per common share and
distributions per Common OP Unit of $0.82, $0.775, and $0.72, respectively. During the years ended December 31,
2024, 2023, and 2022, these common stock dividends totaled $58.0 million, $52.4 million, and $48.7 million,
respectively, and these Operating Partnership distributions totaled $17.8 million, $16.6 million, and $14.8 million,
respectively.
F-49
The tax treatment of dividends paid to common stockholders during the years ended December 31, 2024, 2023, and
2022 was as follows (unaudited):
Years ended December 31,
2024
2023
2022
Capital gains
36.80 %
2.84 %
— %
Ordinary income
36.62 %
35.77 %
65.64 %
Return of capital
26.58 %
61.39 %
34.36 %
Total
100.00 %
100.00 %
100.00 %
During each of the years ended December 31, 2024, 2023, and 2022, the Company declared dividends of $1.6875 per
share to holders of Series A Preferred Stock. During each of the years ended December 31, 2024, 2023, and 2022,
these preferred stock dividends totaled $11.5 million.
The tax treatment of dividends paid to preferred stockholders during the years ended December 31, 2024, 2023, and
2022 was as follows (unaudited):
Years ended December 31,
2024
2023
2022
Capital gains
50.12 %
5.03 %
— %
Ordinary income
49.88 %
94.97 %
100.00 %
Total
100.00 %
100.00 %
100.00 %
12.
Stock-Based Compensation
The Equity Plan permits the grant of restricted stock awards, stock options, stock appreciation rights, LTIP units,
performance units, and other equity-based awards up to an aggregate of 3,400,000 shares of common stock. As of
December 31, 2024, there were 975,518 shares available for issuance under the Equity Plan.
Restricted or Unrestricted Stock Awards
The Company issues performance-based awards in the form of restricted stock to certain employees (executive and
non-executive). Employee restricted stock awards generally vest over a period of two years: one-third immediately on
the grant date and the remaining two-thirds in equal amounts on the first two anniversaries following the grant date,
subject to continued service to the Company. Executive officers’ restricted shares generally vest over a period of three
years: two-fifths immediately on the grant date and the remaining three-fifths in equal amounts on the first three
anniversaries following the grant date, subject to continued service to the Company. Non-employee director restricted
stock awards may vest either immediately upon grant or over a period of one year, subject to continued service to the
Company. Unvested restricted stock awards are entitled to receive distributions from their grant date.
The fair value of the restricted stock awards was determined using the closing stock price as of the day before the grant
date.
A summary of the unvested restricted shares is as follows:
2024
2023
2022
Number of
Shares
Weighted
Average Grant
Date Fair
Value Per Share
Number of
Shares
Weighted
Average Grant
Date Fair
Value Per Share
Number of
Shares
Weighted
Average Grant
Date Fair
Value Per Share
Unvested as of January 1
271,540 $
12.93
219,306 $
14.15
151,812 $
14.24
Granted
289,779
10.73
394,359
12.70
288,677
14.60
Vested
(381,554)
11.81
(254,030)
13.42
(190,525)
14.90
Forfeited
(14,268)
11.27
(88,095)
13.52
(30,658)
14.23
Unvested as of December 31
165,497 $
11.81
271,540 $
12.93
219,306 $
14.15
F-50
During the years ended December 31, 2024, 2023, and 2022, in connection with the vesting of restricted stock awards,
employees tendered 99,538, 87,986, and 52,088 shares, respectively, to satisfy minimum statutory tax withholding
obligations. As of December 31, 2024, the total unrecognized compensation expense related to unvested shares of
restricted stock was $0.5 million, which the Company expects to recognize over the next 11 months. The total fair
value of the shares vested (calculated as the number of shares multiplied by the vesting date share price) during the
years ended December 31, 2024, 2023, and 2022 was approximately $3.8 million, $3.1 million, and $2.2 million,
respectively.
LTIP Unit Awards
LTIP Units are a special class of partnership interests in the Operating Partnership ("LTIP Units"). Each LTIP Unit
awarded will be deemed equivalent to an award of one share of stock under the Equity Plan, reducing the availability
for other equity awards on a one-for-one basis. The vesting period for LTIP Units, if any, will be determined at the
time of issuance. Under the terms of the Operating Partnership's agreement of limited partnership, the Operating
Partnership will revalue for tax purposes its assets upon the occurrence of certain specified events, and any increase in
valuation from the time of grant until such event will be allocated first to the holders of LTIP Units to equalize the
capital accounts of such holders with the capital accounts of Common OP unitholders. Subject to any agreed upon
exceptions (including pursuant to the applicable LTIP Unit award agreement), once vested and having achieved parity
with Common OP unitholders, LTIP Units are convertible into Common OP Units on a one-for-one basis. LTIP Unit
awards granted to members of the Company's board of directors generally vest on the date of the first annual meeting
of stockholders of the Company after the date of grant, subject to continued service to the Company. LTIP Unit awards
granted to executives generally vest over a period of three years: two-fifths immediately on the grant date and the
remaining three-fifths in equal amounts on the first three anniversaries following the grant date, subject to continued
service to the Company. Unvested LTIP Units are entitled to receive distributions from their grant date.
The fair value of the LTIP Units was determined using a Monte Carlo simulation considering the Company's stock
price as of the grant date. The Company estimates the compensation expense for the LTIP Units on a straight-line basis
using a calculation that recognizes 100% of the grant date fair value over three years for employees (based on vesting
schedule explained in the previous paragraph), or over one year for directors.
A summary of the unvested LTIP Unit awards is as follows:
2024
2023
2022
Number of
Shares
Weighted
Average Grant
Date Fair
Value Per Share
Number of
Shares
Weighted
Average Grant
Date Fair
Value Per Share
Number of
Shares
Weighted
Average Grant
Date Fair
Value Per Share
Unvested as of January 1
39,694 $
10.14
— $
—
— $
—
Granted
170,203
9.65
39,694
10.14
—
—
Vested
(90,025)
9.86
—
—
—
—
Forfeited
—
—
—
—
—
—
Unvested as of December 31
119,872 $
9.66
39,694 $
10.14
— $
—
During the years ended December 31, 2024, 2023, and 2022, in connection with the vesting of LTIP Units, there were
no LTIP Units tendered to satisfy minimum statutory tax withholding obligations. As of December 31, 2024, the total
unrecognized compensation expense related to unvested LTIP Units was $0.6 million, which the Company expects to
recognize over the next 15 months. The total fair value of the LTIP Units vested (calculated as the number of shares
multiplied by the vesting date share price) during the year ended December 31, 2024 was approximately $0.9 million.
No LTIP Units vested during the years ended December 31, 2023 and 2022.
Performance Unit Awards
The Company endeavors to further align the incentives of certain members of management with its long-term investors
by awarding a portion of their equity compensation in the form of multi-year performance unit awards that use the
level of achievement of the total shareholder return as the primary metric ("Performance Units"). The Performance
Units may convert into shares of common stock at a range of 0% to 200% of the number of Performance Units granted
contingent upon the participant’s continued employment and the Company’s relative total stockholder return ("TSR")
at specified percentiles of the peer group. Vesting of 50% of the target award is based solely on continued employment
and vesting of the remainder of the award (50%) is based on the Company’s relative TSR performance over the 3-year
period following execution of each agreement. For unvested Performance Units granted in 2021 and prior, vesting of
50% of the target award is based on absolute TSR and vesting of the remainder of the award (50%) is based on relative
TSR. At the end of the Performance Units’ measurement period, if the applicable criterion are met, Performance Units
generally vest two-fifths on the last day of the three-year performance period, and the remaining three-fifths in equal
amounts on the first three anniversaries following the end of the three-year performance period, subject to continued
F-51
service to the Company and certain market conditions. Unvested Performance Units are entitled to accumulate
distributions from their grant date, payable in cash or in additional shares of common stock upon issuance of the
common stock to which those dividends relate.
The fair value of the performance units was determined using a Monte Carlo simulation considering the stock price as
of the grant date. The Company estimates the compensation expense for the performance units on a straight-line basis
using a calculation that recognizes 100% of the grant date fair value over five years for performance units granted prior
to 2022 and six years for performance units granted in 2022 and beyond.
A summary of the unvested Performance Unit awards is as follows:
2024
2023
2022
Number of
Shares
Weighted
Average Grant
Date Fair
Value Per Share
Number of
Shares
Weighted
Average Grant
Date Fair
Value Per Share
Number of
Shares
Weighted
Average Grant
Date Fair
Value Per Share
Unvested as of January 1
110,625 $
13.74
96,421 $
13.10
93,107 $
9.99
Granted
50,000
9.23
47,500
12.61
47,500
17.12
Vested(1)
(26,500)
14.01
(30,796)
9.72
(21,421)
10.35
Forfeited
(23,750)
12.13
(2,500)
17.12
(22,765)
11.36
Unvested as of December 31
110,375 $
11.98
110,625 $
13.74
96,421 $
13.10
________________________________________
(1)
For 2024, this represents 26,500 Performance Units which were vested as of December 31, 2024, but not settled as common shares until
the following period.
Date of Award
Number of Units
Granted
Grant Date Fair
Value
Conversion
Range
Risk Free
Interest Rate
Volatility
Expected
Dividends
2019
22,500 $
10.13
0% to 200%
2.57 %
24.0 %
5.8 %
2020
35,000
11.57
0% to 200%
1.66 %
18.0 %
5.0 %
2021
42,500
9.67
0% to 200%
0.17 %
49.0 %
4.7 %
2022
47,500
17.12
0% to 200%
(1)
0.98 %
50.0 %
4.7 %
2023
47,500
12.61
0% to 200%
(1)
4.23 %
51.0 %
5.4 %
2024
50,000
9.23
0% to 200%
(1)
4.32 %
27.0 %
6.2 %
________________________________________
(1)
For Performance Units granted in 2022 and beyond, only 50% of each Award is subject to the conversion range. The remainder (50%) is
guaranteed 1 to 1 conversion as long as the employee remains employed at the Company.
Performance Unit awards granted and vested during the years ended December 31, 2024, include 6,184 shares
tendered by employees to satisfy minimum statutory tax withholding obligations. No shares were tendered by
employees during the years ended December 31, 2023 and 2022. As of December 31, 2024, the total unrecognized
compensation expense related to unvested Performance Units was $0.7 million, which the Company expects to
recognize over the next 33 months. The total fair value of the Performance Units vested (calculated as the number of
shares multiplied by the vesting date share price) during the years ended December 31, 2024, 2023, and 2022 was
approximately $0.3 million, $0.4 million, and $0.2 million, respectively.
13.
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 the Company’s financial instruments approximate their fair values.
Financial assets and liabilities whose fair values are measured on a recurring basis using Level 2 inputs consist of
interest rate swaps and caps. The Company measures the fair values of these assets and liabilities based on prices
provided by independent market participants that are based on observable inputs using market-based valuation
techniques.
F-52
Financial assets and liabilities whose fair values are not measured at fair value but for which the fair value is disclosed
include the Company's notes receivable and indebtedness. The fair value is estimated by discounting the future cash
flows of each instrument at estimated market rates consistent with the maturity, credit characteristics, and other terms
of the arrangements, which are Level 3 inputs under the fair value hierarchy.
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.
Considerable judgment is used to estimate the fair value of financial instruments. The estimates of fair value presented
herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial
instruments.
The carrying amounts and fair values of the Company’s financial instruments as of December 31, 2024 and 2023 were
as follows (in thousands):
December 31,
2024
2023
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
Indebtedness, net(a)
$
1,303,650 $
1,288,014 $
1,407,323 $
1,389,296
Notes receivable, net
132,565
132,565
94,172
94,172
Interest rate swap and cap assets
15,861
15,861
28,862
28,862
_______________________________________
(a) Excludes $8.1 million and $10.4 million of deferred financing costs as of December 31, 2024 and 2023, respectively.
14.
Income Taxes
The income tax benefit (provision) for the years ended December 31, 2024, 2023, and 2022 comprised the following
(in thousands):
Years Ended December 31,
2024
2023
2022
Federal income taxes:
Current
$
(184) $
(496) $
—
Deferred
729
(559)
122
State income taxes:
Current
(23)
(166)
—
Deferred
92
(108)
23
Income tax benefit (provision)
$
614 $
(1,329) $
145
As of December 31, 2024 and 2023, the Company had $1.6 million and $0.7 million, respectively, of net deferred tax
assets representing net operating losses of the TRS that are being carried forward and basis differences in the assets of
the TRS. The deferred tax assets are presented within other assets in the consolidated balance sheets.
Management has evaluated the Company’s income tax positions and concluded that the Company has no uncertain
income tax positions as of December 31, 2024 and 2023. The Company is generally subject to examination by the
applicable taxing authorities for the tax years 2020 through 2024. The Company does not currently have any ongoing
tax examinations by taxing authorities.
F-53
15.
Other Assets
Other assets were comprised of the following as of December 31, 2024 and 2023 (in thousands):
December 31,
2024
2023
Leasing costs, net
$
23,902 $
15,753
Leasing incentives, net
1,726
2,160
Interest rate swaps and caps
15,861
28,862
Prepaid expenses and other
17,789
33,006
Pre-acquisition and pre-development costs
1,712
7,767
Other assets
$
60,990 $
87,548
16.
Other Liabilities
Other liabilities were comprised of the following as of December 31, 2024 and 2023 (in thousands):
December 31,
2024
2023
Dividends and distributions payable
$
23,666 $
19,930
Acquired lease intangibles, net
15,457
19,021
Prepaid rent and other
10,530
12,763
Security deposits
4,709
4,752
Guarantee liability
56
147
Other liabilities
$
54,418 $
56,613
17.
Acquired Lease Intangibles
The following table summarizes the Company’s acquired lease intangibles as of December 31, 2024 (in thousands):
December 31, 2024
Gross Carrying
Accumulated
Net Carrying
Amount
Amortization
Amount
In-place lease assets
$
210,593 $
122,527 $
88,066
Above-market lease assets
7,810
6,138
1,672
Above/Below-market ground lease assets
5,075
1,223
3,852
Below-market lease liabilities
34,406
18,949
15,457
The following table summarizes the Company’s acquired lease intangibles as of December 31, 2023 (in thousands):
December 31, 2023
Gross Carrying
Accumulated
Net Carrying
Amount
Amortization
Amount
In-place lease assets
$
215,832 $
108,772 $
107,060
Above-market lease assets
7,810
5,733
2,077
Above/Below-market ground lease assets
5,075
1,085
3,990
Below-market lease liabilities
36,282
17,261
19,021
F-54
During the years ended December 31, 2024, 2023, and 2022, the Company recognized the following amortization of
intangible lease assets and liabilities (in thousands):
Years Ended December 31,
2024
2023
2022
Intangible lease assets
In-place lease assets
$
17,016 $
29,351 $
15,767
Above-market lease assets
404
577
641
Above/Below-market ground lease assets
138
138
138
Intangible lease liabilities
Below-market lease liabilities
1,689
3,324
2,395
As of December 31, 2024, the weighted-average remaining lives of in-place lease assets, above-market lease assets,
above/below-market ground lease assets, and below-market lease liabilities were 8.1 years, 4.8 years, 40.1 years and
10.5 years, respectively. As of December 31, 2024, the weighted-average remaining life of below-market lease
renewal options was 8.6 years.
Estimated amortization of acquired lease intangibles for each of the five succeeding years is as follows (in thousands):
Rental Revenues
Depreciation and
Amortization
Year ending December 31,
2025
$
1,877 $
13,106
2026
1,890
12,459
2027
1,752
11,619
2028
1,310
7,882
2029
1,278
7,440
18.
Related Party Transactions
The Company provides general contracting and real estate services to certain related party entities that are included in
these consolidated financial statements. Revenue and gross profits from construction contracts with these entities were
nominal for the years ended December 31, 2024, 2023, and 2022. As of each of December 31, 2024, 2023, and 2022
there were no outstanding balances from related parties of the Company. Real estate services fees from affiliated
entities of the Company were not material for any of the years ended December 31, 2024, 2023, and 2022. In addition,
affiliated entities also reimburse the Company for monthly maintenance and facilities management services provided
to the properties. Cost reimbursements earned by the Company from affiliated entities were not material for any of the
years ended December 31, 2024, 2023, and 2022.
The Company provides general contracting services to the Harbor Point Parcel 3 and Harbor Point Parcel 4 ventures.
See Note 5 for more information. During the years ended December 31, 2024 and 2023, the Company recognized
gross profit of $0.6 million and $1.4 million, respectively, relating to these construction contracts, associated with 50%
of gross profit on contracts for Harbor Point Parcel 3 and 10% of gross profit on contracts for Harbor Point Parcel 4.
19.
Commitments and Contingencies
Legal Proceedings
The Company is from time to time involved in various disputes, lawsuits, warranty claims, environmental and other
matters arising in the ordinary course of its business. Management makes assumptions and estimates concerning the
likelihood and amount of any potential loss relating to these matters.
The Company currently is a party to various legal proceedings, none of which management expects will have a
material adverse effect on the Company’s financial position, results of operations, or liquidity. Management accrues a
liability for litigation if an unfavorable outcome is determined to be probable and the amount of loss can be reasonably
estimated. If an unfavorable outcome is determined by management to be probable and a range of loss can be
F-55
reasonably estimated, management accrues the best estimate within the range; however, if no amount within the range
is a better estimate than any other, the minimum amount within the range is accrued. Legal fees related to litigation are
expensed as incurred. Management does not believe that the ultimate outcome of these matters, either individually or
in the aggregate, could have a material adverse effect on the Company’s financial position or results of operations;
however, litigation is subject to inherent uncertainties.
Under the Company’s leases, tenants are typically obligated to indemnify the Company from and against all liabilities,
costs, and expenses imposed upon or asserted against it as owner of the properties due to certain matters relating to the
operation of the properties by the tenant.
Guarantees
In connection with the Company's real estate financing activities and equity method investments, the Company has
made guarantees to pay portions of certain senior loans of third parties associated with the development projects. As of
December 31, 2024, the Company had an outstanding guarantee liability of $0.1 million related to the $32.9 million
guarantee of the senior loan on the Harbor Point Parcel 4.
Commitments
The Company has a bonding line of credit for its general contracting construction business and is contingently liable
under performance and payment bonds, bonds for cancellation of mechanics liens, and defect bonds. Such bonds
collectively totaled $8.3 million and $6.5 million as of December 31, 2024 and 2023, respectively.
Unfunded Loan Commitments
The Company has certain commitments related to its notes receivable investments that it may be required to fund in
the future. The Company is generally obligated to fund these commitments at the request of the borrower or upon the
occurrence of events outside of the Company's direct control. As of December 31, 2024, the Company had six notes
receivable with a total of $32.7 million of unfunded commitments. These unfunded commitments consist of
$24.2 million of unfunded principal and $8.5 million of unfunded contingency. The Company considers the probability
of contingency funding to be remote. If commitments are funded in the future, interest will be charged at rates
consistent with the existing investments. As of December 31, 2024, the Company has recorded a $0.5 million CECL
allowance that relates to the unfunded commitments, which was recorded as a liability in other liabilities in the
consolidated balance sheet. See Note 7 for more information.
Concentrations of Credit Risk
The majority of the Company’s properties are located in Hampton Roads, Virginia. For the years ended December 31,
2024, 2023, and 2022, rental revenues from Hampton Roads properties represented 35%, 37% and 38%, respectively,
of the Company’s rental revenues. Many of the Company’s Hampton Roads properties are located in the Town Center
of Virginia Beach. For the years ended December 31, 2024, 2023, and 2022, rental revenues from Town Center
properties represented 22%, 24% and 25%, respectively, of the Company’s rental revenues.
The Company also has a concentration of properties at Harbor Point in Baltimore, Maryland. For the years ended
December 31, 2024, 2023, and 2022, rental revenues from Harbor Point properties represented 27%, 25% and 26%,
respectively, of the Company's rental revenues.
A group of three construction customers comprised 78%, 94%, and 89% of the Company’s general contracting and
real estate services revenues for the years ended December 31, 2024, 2023, and 2022, respectively. These three
construction customers comprised 19%, 18%, and 10% of the Company's total revenues for the year ended
December 31, 2024, 27%, 21%, and 10% of the Company's total revenues for the year ended December 31, 2023, and
28%, 13%, and 6% of the Company's total revenues for the year ended December 31, 2022.
20.
Subsequent Events
The Company has evaluated subsequent events through the date on which this Form 10-K was filed, the date on which
these financial statements were issued, and identified the items below for discussion.
F-56
Indebtedness
From January 1, 2025 through February 21, 2025, the Company had net borrowings of $29.0 million on the revolving
credit facility.
On February 25, 2025, the Company borrowed $4.8 million on its construction loan to fund development activities.
Derivative Financial Instruments
On January 3, 2025, the Company entered into an interest rate swap agreement with a notional of $150.0 million and a
SOFR rate of 2.50%. The interest rate swap is effective January 2, 2025 and will expire on January 1, 2027. The
Company paid a $4.6 million premium for this transaction.
Equity
On January 2, 2025, in connection with the tender by a holder of Common OP Units of 435 Common OP Units for
redemption by the Operating Partnership, the Company elected to satisfy the redemption request with a cash payment
of less than $0.1 million.
On January 2, 2025, in connection with the tender by holders of Common OP Units of 264,618 Common OP Units for
redemption by the Operating Partnership, the Company elected to satisfy the redemption requests through the issuance
of an equal number of shares of common stock.
F-57
SCHEDULE III—Consolidated Real Estate Investments and Accumulated Depreciation
December 31, 2024
Retail
249 Central Park Retail
$
— (2)
$
271
$
—
$
5,660
$
271
$
5,660
$
5,931
$
3,321
$
2,610
2004
4525 Main Street Retail
—
108
—
5,157
108
5,157
5,265
2,184
3,081
2014
4621 Columbus Retail
— (2)
54
—
16,262
54
16,262
16,316
7,679
8,637
2002
Broad Creek Shopping Center
— (2)
—
—
10,485
—
10,485
10,485
5,813
4,672
1997/2001
Broadmoor Plaza
— (2)
2,410
9,010
2,604
2,410
11,614
14,024
4,374
9,650
1980/2016
Brooks Crossing Retail
—
117
—
2,570
117
2,570
2,687
629
2,058
2016
Chronicle Mill
—
43
15
1,559
43
1,574
1,617
107
1,510
2021
Columbus Village
— (2)
7,630
10,135
8,897
7,630
19,032
26,662
7,002
19,660
1980/2015
Columbus Village II
— (2)(3)
8,852
10,922
2,324
8,852
13,246
22,098
6,343
15,755
1995/2016
Commerce Street Retail
— (2)
118
—
3,440
118
3,440
3,558
2,253
1,305
2008
Constellation Retail
—
1,692
2,361
43
1,692
2,404
4,096
243
3,853
2016/2022
Delray Beach Plaza
— (2)
—
27,151
1,208
—
28,359
28,359
3,693
24,666
2021
Dimmock Square
— (2)
5,100
13,126
2,372
5,100
15,498
20,598
4,366
16,232
1998/2014
Fountain Plaza Retail
— (2)
425
—
8,582
425
8,582
9,007
4,863
4,144
2004
Greenbrier Square
19,184
8,549
21,170
652
8,549
21,822
30,371
2,421
27,950
2017/2021
Greentree Shopping Center
— (2)
1,103
—
4,373
1,103
4,373
5,476
1,853
3,623
2014
Hanbury Village
— (2)
2,565
—
16,832
2,565
16,832
19,397
9,056
10,341
2006
Harrisonburg Regal
— (2)
1,554
—
4,148
1,554
4,148
5,702
2,734
2,968
1999
Lexington Square
13,293
3,035
20,581
518
3,035
21,099
24,134
4,728
19,406
2017/2018
Liberty Retail
—
3,007
8,534
1,461
3,007
9,995
13,002
8,883
4,119
2013/2014
Marketplace at Hilltop
— (2)
2,023
19,886
1,473
2,023
21,359
23,382
3,448
19,934
2000/2019
North Hampton Market
— (2)
7,250
10,210
1,486
7,250
11,696
18,946
3,828
15,118
2004/2016
North Pointe Center
— (2)
1,276
—
23,783
1,276
23,783
25,059
13,458
11,601
1998
One City Center Retail
— (2)
437
469
106
437
575
1,012
410
602
2019
Overlook Village
— (2)
6,328
20,101
756
6,328
20,857
27,185
2,508
24,677
1990/2021
Parkway Centre
— (2)
1,372
7,864
253
1,372
8,117
9,489
1,722
7,767
2017/2018
Parkway Marketplace
— (2)
1,150
—
4,627
1,150
4,627
5,777
2,680
3,097
1998
Patterson Place
— (2)
15,060
20,180
2,489
15,060
22,669
37,729
5,859
31,870
2004/2016
Pembroke Square
— (2)
14,513
9,290
522
14,513
9,812
24,325
1,519
22,806
1966/ 2015/2022
Perry Hall Marketplace
— (2)
3,240
8,316
686
3,240
9,002
12,242
3,369
8,873
2001/2015
Point St. Retail
— (2)
—
7,822
430
—
8,252
8,252
1,312
6,940
2018/2019
Premier Retail
9,496
319
—
16,189
319
16,189
16,508
3,330
13,178
2018
Providence Plaza Retail
— (2)
4,771
6,094
1,427
4,771
7,521
12,292
2,210
10,082
2007/2015
Red Mill Commons
8,344 (4)
44,252
30,348
7,683
44,252
38,031
82,283
10,934
71,349
2000/2019
Sandbridge Commons
— (2)
4,118
—
7,531
4,118
7,531
11,649
3,211
8,438
2015
South Retail
— (2)
190
—
8,683
190
8,683
8,873
5,876
2,997
2002
Initial Cost
Cost Capitalized
Gross Carrying Amount
Year of
Building and
Subsequent to
Building and
Accumulated
Net Carrying
Construction/
Encumbrances
Land
Improvements
Acquisition
Land
Improvements
Total
Depreciation
Amount (1)
Acquisition
F-58
South Square
— (2)
14,130
12,670
1,530
14,130
14,200
28,330
4,244
24,086
1977/2016
Southern Post Retail
14,844
931
—
22,624
931
22,624
23,555
364
23,191
2021
Southgate Square
—
10,238
25,950
7,290
10,238
33,240
43,478
9,853
33,625
1991/2016
Southshore Shops
— (2)
1,770
6,509
851
1,770
7,360
9,130
2,008
7,122
2006/2016
Studio 56 Retail
— (2)
76
—
3,810
76
3,810
3,886
1,540
2,346
2007
The Cosmo Retail
—
108
—
6,867
108
6,867
6,975
5,020
1,955
2006
The Edison Retail
—
549
2,689
247
549
2,936
3,485
498
2,987
1919/ 2014/2020
The Interlock Retail
— (2)
—
66,104
1,468
—
67,572
67,572
3,035
64,537
2021/2023
Two Columbus Retail
— (2)
7
—
2,644
7
2,644
2,651
1,339
1,312
2009
Tyre Neck Harris Teeter
— (2)
—
—
3,309
—
3,309
3,309
2,087
1,222
2011
Wendover Village
— (2)
19,894
22,638
2,013
19,894
24,651
44,545
6,035
38,510
2004/2016/2019
West Retail
— (2)
138
—
215
138
215
353
109
244
2002
Total retail
$
65,161
$ 200,773
$
400,145
$
230,139
$ 200,773
$
630,284
$ 831,057
$
184,351
$
646,706
Office
249 Central Park Office
— (2)
442
—
12,477
442
12,477
12,919
8,035
4,884
2014
4525 Main Street
29,341
874
—
42,240
874
42,240
43,114
15,518
27,596
2014
4605 Columbus Office
—
12
—
1,760
12
1,760
1,772
1,618
154
2002
Armada Hoffler Tower
— (2)
1,838
—
74,999
1,838
74,999
76,837
48,719
28,118
2002
Brooks Crossing Office
— (2)
295
—
19,525
295
19,525
19,820
3,784
16,036
2016/2019
Chronicle Mill Office
—
344
7
700
344
707
1,051
37
1,014
2021
Constellation Office
175,000
19,459
174,582
3,163
19,459
177,745
197,204
13,779
183,425
2016/2022
One City Center
— (2)
2,474
27,733
6,235
2,474
33,968
36,442
5,712
30,730
2019
One Columbus
— (2)
960
10,269
16,843
960
27,112
28,072
17,268
10,804
1984
Providence Plaza Office
— (2)
5,179
6,275
1,469
5,179
7,744
12,923
2,621
10,302
2007/2015
Southern Post Office
15,272
1,575
—
38,263
1,575
38,263
39,838
831
39,007
2024
Thames Street Wharf
66,461
15,861
64,689
2,369
15,861
67,058
82,919
9,472
73,447
2010/2019
The Interlock Office
— (2)
—
117,864
579
—
118,443
118,443
5,073
113,370
2021/2023
Two Columbus Office
— (2)
47
—
21,299
47
21,299
21,346
11,146
10,200
2009
Wills Wharf
— (2)
—
—
119,979
—
119,979
119,979
17,887
102,092
2020
Total office
$
286,074
$ 49,360
$
401,419
$
361,900
$ 49,360
$
763,319
$ 812,679
$
161,500
$
651,179
Mutifamily
1305 Dock Street
$
—
$
2,165
$
18,114
$
434
$
2,165
$
18,548
$
20,713
$
1,479
$
19,234
2016/2022
1405 Point
— (2)
—
87,644
4,819
—
92,463
92,463
16,671
75,792
2018/2019
Chandler Residences
30,128
2,507
—
52,774
2,507
52,774
55,281
1,511
53,770
2021
Chronicle Mill Apartments
—
1,401
537
55,411
1,401
55,948
57,349
4,164
53,185
2021
Encore Apartments
22,846
1,293
—
32,996
1,293
32,996
34,289
10,193
24,096
2014
Greenside Apartments
30,321
5,711
—
46,071
5,711
46,071
51,782
9,295
42,487
2018
Liberty Apartments
20,242
573
14,960
2,561
573
17,521
18,094
465
17,629
2013/2014
Premier Apartments
19,919
647
—
30,032
647
30,032
30,679
5,667
25,012
2018
Smith’s Landing
13,584
—
35,105
6,533
—
41,638
41,638
14,307
27,331
2009/2013
Initial Cost
Cost Capitalized
Gross Carrying Amount
Year of
Building and
Subsequent to
Building and
Accumulated
Net Carrying
Construction/
Encumbrances
Land
Improvements
Acquisition
Land
Improvements
Total
Depreciation
Amount (1)
Acquisition
F-59
The Cosmopolitan
39,461
877
—
73,878
877
73,878
74,755
35,502
39,253
2006
The Edison
14,774
2,879
15,893
1,459
2,879
17,352
20,231
3,242
16,989
1919/ 2014/2020
The Everly
30,000
4,834
—
45,458
4,834
45,458
50,292
3,560
46,732
2020
Total multifamily
$
221,275
$ 22,887
$
172,253
$
352,426
$ 22,887
$
524,679
$ 547,566
$
106,056
$
441,510
Held for development
$
— (5)
$
5,683
$
—
$
—
$
5,683
$
—
$
5,683
$
—
$
5,683
Real estate investments
$
572,510
$ 278,703
$
973,817
$
944,465
$ 278,703
$
1,918,282
$ 2,196,985
$
451,907
$
1,745,078
Initial Cost
Cost Capitalized
Gross Carrying Amount
Year of
Building and
Subsequent to
Building and
Accumulated
Net Carrying
Construction/
Encumbrances
Land
Improvements
Acquisition
Land
Improvements
Total
Depreciation
Amount (1)
Acquisition
________________________________________
(1)
The net carrying amount of real estate for federal income tax purposes was $1,575.9 million as of December 31, 2024.
(2)
Borrowing base collateral for the credit facility, M&T term loan facility, and TD term loan facility as of December 31, 2024.
(3)
As of December 31, 2024, $5.7 million of this property's land value was included in held for development related to redevelopment plans.
(4)
A portion of this property is borrowing base collateral for the credit facility, M&T term loan facility, and TD term loan facility as of December 31, 2024.
(5)
Held for development includes Columbus Village II land held for redevelopment, which is borrowing base collateral for the credit facility, M&T term loan facility, and TD term loan
facility as of December 31, 2024.
F-60
Income producing property is depreciated on a straight-line basis over the following estimated useful lives:
Buildings
39 years
Capital improvements
5—20 years
Equipment
3—7 years
Tenant improvements
Term of the related lease (or estimated useful life, if shorter)
Real Estate
Accumulated
Investments
Depreciation
December 31,
2024
2023
2024
2023
Balance at beginning of the year
$
2,207,287
$
1,943,575
$
393,169
$
329,963
Construction costs and improvements
62,057
80,089
—
—
Acquisitions
—
183,982
—
—
Dispositions
(66,618)
(260)
(9,543)
(260)
Reclassifications
(5,741)
(99)
1,371
—
Depreciation
—
—
66,910
63,466
Balance at end of the year
$
2,196,985
$
2,207,287
$
451,907
$
393,169
F-61
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CORPORATE
INFORMATION
BOARD OF
DIRECTORS
Louis S. Haddad
Executive Chairman of the Board
Eva S. Hardy
Lead Independent Director
George F. Allen
Independent Director
Jennifer R. Boykin
Independent Director
James A. Carroll
Independent Director
James C. Cherry
Independent Director
Dennis H. Gartman
Independent Director
Daniel A. Hoffler
Chairman Emeritus of the Board
A. Russell Kirk
Director
Shawn J. Tibbetts
Director, Chief Executive
Officer and President
F. Blair Wimbush
Independent Director
EXECUTIVE
MANAGEMENT
Shawn J. Tibbetts
Chief Executive Officer
and President
Matthew T. Barnes-Smith
Chief Financial Officer
and Treasurer/Secretary
Eric E. Apperson
President of Construction
and Development
SHAREHOLDER
INFORMATION
Corporate Office
Armada Hoffler
222 Central Park Avenue
Suite 1000
Virginia Beach, VA 23462
757.366.4000
Independent Registered Public
Accounting Firm
Ernst & Young LLP
The Edgeworth Building
2100 East Cary Street, Suite 201
Richmond, VA 23223
804.344.6000
Transfer Agent
Broadridge Corporate Issuer
Solutions
51 Mercedes Way
Brentwood, NY 11717
Investor Services
For questions regarding security
ownership or to request
printed information, please
contact or visit:
investorrelations@armadahoffler.com
www.ir.armadahoffler.com
ARMADA HOFFLER | 2024 ANNUAL REPORT 7
WWW.ARMADAHOFFLER.COM