0001569187 ahh:DelrayPlazaMember us-gaap:FinancialGuaranteeMember 2019-12-31
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
FORM
10-K
 
x☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018 2019
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)

Maryland46-1214914
(State or Other Jurisdictionother jurisdiction of
Incorporation incorporation or Organization)
organization)
(IRSI.R.S. Employer
Identification No.)
222 Central Park Avenue,Suite 2100 
Virginia Beach,Virginia23462
(Address of Principal Executive Offices)principal executive offices)(Zip Code)
Registrant’s Telephone Number, Including Area Code (757) Code: (757) 366-4000

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Classeach classTrading Symbol(s) Name Of Each Exchange On Which Registeredof each exchange on which registered
Common Stock, $0.01 par value per share AHHNew York Stock Exchange
6.75% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per shareAHHPrANew 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.    Yesx 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  ◻    Nox
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.    Yesx   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).    Yesx    No  ◻ 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large"large accelerated filer,” “accelerated" "accelerated filer,” “smaller" "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 is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨☐    No  x

☒

As of June 29, 2018,28, 2019, 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 $716.0$861.5 million, based on the closing sales price of $14.90$16.55 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 26, 2019,20, 2020, the registrant had 50,335,24256,370,060 shares of common stock outstanding. In addition, as of February 26, 2019,20, 2020, Armada Hoffler, L.P., the registrant's operating partnership subsidiary (the "Operating Partnership"), had 16,991,93321,272,962 common units of limited partnership interest ("OP Units") outstanding (other than OP Units held by the registrant). Based on the 50,335,24256,370,060 shares of common stock and 16,991,93321,272,962 OP Units held by limited partners other than the registrant, the registrant had a total common equity market capitalization of $1,038,185,039$1,444,936,639 as of February 26, 201920, 2020 (based on the closing sales price of $15.42$18.61 on the New York Stock Exchange on such date).


Documents Incorporated by Reference
Portions of the registrant’s Definitive Proxy Statement relating to its 20192020 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, 2018.2019.  

Armada Hoffler Properties, Inc.
 
Form 10-K
For the Fiscal Year Ended December 31, 20182019
 
Table of Contents
 
PART I 
Item 1. 
Business.
1
Item 1A. 
Risk Factors.
16
Item 1B. 
Unresolved Staff Comments.
4441
Item 2. 
Properties.
4441
Item 3. 
Legal Proceedings.
4441
Item 4. 
Mine Safety Disclosures.
4441
PART II 
Item 5. 
Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
4542
Item 6. 
Selected Financial Data.
4744
Item 7. 
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
4945
Item 7A. 
Quantitative and Qualitative Disclosures About Market Risk.
6862
Item 8. 
Financial Statements and Supplementary Data.
6863
Item 9. 
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
6963
Item 9A. 
Controls and Procedures.
6963
Item 9B. 
Other Information.
6964
PART III 
Item 10. 
Directors, Executive Officers and Corporate Governance.
7065
Item 11. 
Executive Compensation.
7065
Item 12. 
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
7065
Item 13. 
Certain Relationships and Related Transactions, and Director Independence.
7065
Item 14. 
Principal Accountant Fees and Services.
7065
PART IV 
Item 15. 
Exhibits and Financial Statement Schedules.
7166
Item 16.
Form 10-K Summary.
7166
Index to Exhibits
7267
Signatures 
7469






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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”"anticipate," "believe," "expect," "intend," "may," "might," "plan," "estimate," "project," "should," "will," "result" and similar expressions, which do not relate solely to historical matters, are intended to identify forward-looking statements. Such statements are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. We caution you that while forward-looking statements reflect our good faith beliefs when we make them, they are not guarantees of future performance and are impacted by actual events when they occur after we make such statements. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.
 
Forward-looking statements involve numerous risks and uncertainties, and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data, or methods which may be incorrect or imprecise, and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:
adverse economic or real estate developments, either nationally or in the markets in which our properties are located;
our failure to develop the properties in our development pipeline successfully, on the anticipated timelines, or at the anticipated costs;
our failure to generate sufficient cash flows to service our outstanding indebtedness;
defaults on, early terminations of, or non-renewal of leases by tenants, including significant tenants;
bankruptcy or insolvency of a significant tenant or a substantial number of smaller tenants;
the inability of one or more mezzanine loan borrowers to repay mezzanine loans in accordance with their contractual terms;
difficulties in identifying or completing development, acquisition, or disposition opportunities;
our failure to successfully operate developed and acquired properties;
our failure to generate income in our general contracting and real estate services segment in amounts that we anticipate;
fluctuations in interest rates and increased operating costs;
our failure to obtain necessary outside financing on favorable terms or at all;
our inability to extend the maturity of or refinance existing debt or comply with the financial covenants in the agreements that govern our existing debt;
financial market fluctuations;
risks that affect the general retail environment or the market for office properties or multifamily units;
the competitive environment in which we operate;
decreased rental rates or increased vacancy rates;


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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”("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 the recent changes to the U.S. tax laws.
 
While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events, or other changes after the date of this Annual Report on Form 10-K, except as required by applicable law. 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 risk factors described in Item 1A herein and in other documents that we file from time to time with the Securities and Exchange Commission (the “SEC”"SEC").
 


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PARTI
Item 1.Business. 
 
Our Company
 
References to “we,” “our,” “us,”"we," "our," "us," and “our company”"our company" refer to Armada Hoffler Properties, Inc., a Maryland corporation, together with our consolidated subsidiaries, including Armada Hoffler, L.P., a Virginia limited partnership (the “Operating Partnership”"Operating Partnership"), of which we are the sole general partner.
 
We are a full-service real estate company with extensive experience developing, building, owning, and managing high-quality, institutional-grade office, retail, and multifamily properties in attractive markets primarily throughout the Mid-Atlantic and Southeastern United States. In addition to the ownership of our operating property portfolio, we develop and build properties for our own account and through joint ventures between us and unaffiliated partners and also invest in development projects through mezzanine lending arrangements. We also provide general contracting services to third parties. Our construction and development experience includes mid- and high-rise office buildings, retail strip malls, and retail power centers, multifamily apartment communities, hotels and conference centers, single- and multi-tenant industrial, distribution, and manufacturing facilities, educational, medical and special purpose facilities, government projects, parking garages, and mixed-use town centers. Our third-party construction contracts have included signature properties across the Mid-Atlantic region, such as the Inner Harbor East development in Baltimore, Maryland, including the Four Seasons Hotel and Legg Mason office tower, the Mandarin Oriental Hotel in Washington, D.C., and a $50.0 million proton therapy institute for Hampton University in Hampton, Virginia. Our construction company historically has been ranked among the “Top 400 General Contractors” nationwide by Engineering News Record and has been ranked among the “Top 50 Retail Contractors” by Shopping Center World.
 
We were formed on October 12, 2012 under the laws of the State of Maryland and are headquartered in Virginia Beach, Virginia. 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, 2018,2019, we owned, through a combination of direct and indirect interests, 74.5%72.6% of the common units of limited partnership interest in our Operating Partnership (“("OP Units”Units").  
 
20182019Highlights
 
The following highlights our results of operations and significant transactions for the year ended December 31, 2018:2019: 
 
Net income attributable to common stockholders and OP Unit holders of $23.5$21.6 million, or $0.36$0.41 per diluted share, compared to $29.9$17.2 million, or $0.50$0.36 per diluted share, for the year ended December 31, 2017.2018.


Funds from operations (“FFO”attributable to common stockholders and OP Unit holders ("FFO") of $64.3$80.0 million, or $0.99$1.10 per diluted share, compared to $59.7$64.3 million, or $0.99 per diluted share, for the year ended December 31, 2017.2018.


Normalized FFOfunds from operations attributable to common stockholders and OP Unit holders ("Normalized FFO") of $66.5$85.1 million, or $1.03$1.17 per diluted share, compared to $59.3$66.5 million, or $0.99$1.03 per diluted share, for the year ended December 31, 2017.2018.


Property segment net operating income (“NOI”("NOI") of $78.4$102.0 million compared to $72.8$78.4 million for the year ended December 31, 2017:2018:  


Office NOI of $12.8$21.1 million compared to $11.9$12.8 million  


Retail NOI of $50.3$58.0 million compared to $46.7$50.3 million 


•
Multifamily NOI of $22.9 million compared to $15.3 million
Multifamily NOI of $15.3 million compared to $14.2 million


Same store NOI of $59.0$71.1 million compared to $58.5$68.5 million for the year ended December 31, 2017:2018:  


•
Office same store NOI of $13.5 million compared to $13.2 million

•
Retail same store NOI of $44.4 million compared to $43.4 million
Office same store NOI of $8.6 million compared to $8.4 million

Retail same store NOI of $43.5 million compared to $43.5 million


Multifamily same store NOI of $6.9$13.2 million compared to $6.6$11.9 million 

Stabilized portfolio occupancy by segment, as of December 31, 20182019 compared to December 31, 2017:2018:


Office occupancy at 93.3%96.6% compared to 89.9%93.3%
•
Retail occupancy at 96.9% compared to 96.2%
•
Multifamily occupancy at 95.6% compared to 97.3%

RetailCore operating property portfolio occupancy at 96.2%96.5% as of December 31, 2019 compared to 96.5%
95.8% as of December 31, 2018.

Multifamily occupancyCompleted the acquisition and refinancing of the commercial office and retail components of our One City Center development project in downtown Durham, North Carolina from the joint venture partnership.

Exercised our purchase option to acquire a 79% controlling interest in 1405 Point, the 17-story luxury high-rise apartment building located in the Harbor Point area of the Baltimore waterfront, in exchange for the Company's mezzanine loan investment and the assumption of existing debt.

Completed the acquisitions of Red Mill Commons and Marketplace at 97.3% compared to 92.9%
Hilltop in Virginia Beach, Virginia for aggregate consideration of $105.0 million, including $63.8 million in OP Units.


Completed the acquisition of Thames Street Wharf, a certified LEED Gold Class A trophy office building located on the waterfront in the Harbor Point development of Baltimore, Maryland, for $101.0 million.

Completed the sale of Lightfoot Marketplace for $30.3 million, representing a 5.8% cap rate on in-place net operating income at the time of acquisition.

Introduced a redesigned website - ArmadaHoffler.com - to include additional functionality and enhancements including a new build-to-suit distribution facility in Richmond, Virginia for $25.9 million, resulting in a gain of $3.4 million.sustainability section.

Sold our at-cost purchase option to the developer of The Residences at Annapolis Junction for $5.0 million and received $11.1 million as partial repayment on the Company’s outstanding mezzanine loan.


Added $192.9$109.2 million in new contracts to third-party construction backlog.backlog during the fourth quarter and ended 2019 with total backlog of $242.6 million.


Announced that Apex Entertainment has entered into a long-term lease for all 84,000 square feet previously occupied by Dick's Sporting Goods in the Town Center of Virginia Beach.

Announced that the Company will be the majority partner in a joint venture to develop Ten Tryon, a new 220,000 square foot urban mixed-use development anchored by a new Publix grocery store and a Fortune 100 office tenant in Charlotte, North Carolina.

Announced that the Company will be the majority partner in a joint venture to redevelop the historic Chronicle Mill as part of a new multifamily development in Belmont, North Carolina.

Extended the maturity of our credit facility to 2024 for the senior unsecured revolving component and 2025 for the senior unsecured term loan component.

Raised $66.5$25.5 million of gross proceeds through our at-the-market equity offering program at an averagea weighted-average price of $14.39$18.30 per share during the quarter ended December 31, 2019. Raised $98.4 million of gross proceeds at a weighted-average price of $16.76 per share during the year ended December 31, 2019.

Raised $61.3 million of net proceeds before offering expenses through an underwritten public offering of 2.5 million shares of 6.75% Series A Cumulative Redeemable Perpetual Preferred Stock ("Series A Preferred Stock") at a public offering price of $25.00 per share.

Began a new development project at Wills Wharf, a site in the Harbor Point area of Baltimore, Maryland. We plan to develop a 325,000 square foot mixed-use building with an estimated development cost of $119 million.

Closed on our initial investment in the office, retail, and apartment components of The Interlock, a new mixed-use development in West Midtown Atlanta. The Company has agreed to invest up to $65 million of principal through a mezzanine loan on the commercial office and retail portions of the project as well as another $23 million of principal through a mezzanine loan on the multifamily apartment component of the project. In addition to providing development services, the Company will also serve as the general contractor for the majority of the project.

Closed on our investment in Nexton Square, a new open-air lifestyle center under construction in Summerville, South Carolina. The Company has agreed to invest approximately $15 million of principal through a mezzanine loan as well as provide construction management and development services to the project. The Company also holds an option to purchase the project upon completion.

Completed the acquisitions of:
Indian Lakes Crossing, a Harris Teeter-anchored center in Virginia Beach, Virginia
Parkway Centre, a Publix-anchored center in Moultrie, Georgia
Lexington Square, a new Lowes Foods-anchored retail center near Columbia, South Carolina.

Completed the disposition of the Wawa parcel at Indian Lakes Crossing.


Declared cash dividends of $0.80 per share compared to $0.76$0.84 per share for the year ended December 31, 2017.2019 compared to $0.80 per share for the year ended December 31, 2018.


For definitions and discussion of FFO, Normalized FFO, NOI, and same store NOI, see the sections below entitled “Item"Item 6. Selected Financial Data”Data" and “Item"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:
 
•
High-Quality, Diversified Portfolio. Our portfolio consists of institutional-grade, premier office, retail, and multifamily properties located primarily in Virginia, Maryland, North Carolina, South Carolina, and Georgia. Our properties are generally in the top tier of commercial properties in their markets and offer Class-A amenities and finishes.  

•
Seasoned, Committed and Aligned Senior Management Team with a Proven Track Record. Our senior management team has extensive experience developing, constructing, owning, operating, renovating, and financing institutional-grade office, retail, multifamily, and hotel properties in the Mid-Atlantic and Southeastern regions. As of December 31, 2019, our named executive officers and directors collectively owned approximately 13% of our company on a fully diluted basis, which we believe aligns their interests with those of our stockholders. 
High-Quality, Diversified Portfolio. Our portfolio consists of institutional-grade, premier office, retail, and multifamily properties located primarily in Virginia, Maryland, North Carolina, South Carolina, and Georgia. Our properties are generally in the top tier of commercial properties in their markets and offer Class-A amenities and finishes.  
•
Strategic Focus on Attractive Mid-Atlanticand SoutheasternMarkets. We focus our activities in our target markets in the Mid-Atlantic and Southeastern regions of the United States that demonstrate attractive fundamentals driven by favorable supply and demand characteristics and limited competition from other large, well-capitalized operators. We believe that our longstanding presence in our target markets provides us with significant advantages in sourcing and executing development opportunities, identifying and mitigating potential risks, and negotiating attractive pricing. 

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


Seasoned, Committed and Aligned Senior Management Team with a Proven Track Record. Our senior management team has extensive experience developing, constructing, owning, operating, renovating, and financing institutional-grade office, retail, multifamily, and hotel properties in the Mid-Atlantic and Southeastern regions. As of December 31, 2018, our named executive officers and directors collectively

owned approximately 15% of our company on a fully diluted basis, which we believe aligns their interests with those of our stockholders. 

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

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

Longstanding Public and Private Relationships. We have extensive experience with public/private real estate development projects dating back to 1984, having worked with the Commonwealth of Virginia, the State of Georgia, and the Kingdom of Sweden, as well as various municipalities. Through our experience and longstanding relationships with governmental entities such as these, we have learned to successfully navigate the often complex and time-consuming government approval process, which has given us the ability to capture opportunities that we believe many of our competitors are unable to pursue. 
•
Longstanding Public and Private Relationships. We have extensive experience with public/private real estate development projects dating back to 1984, having worked with the Commonwealth of Virginia, the State of Georgia, and the Kingdom of Sweden, as well as various municipalities. Through our experience and longstanding relationships with governmental entities such as these, we have learned to successfully navigate the often complex and time-consuming government approval process, which has given us the ability to capture opportunities that we believe many of our competitors are unable to pursue. 
 
Our Business and Growth Strategies
 
Our primary business objectives are to: (i) continue to develop, build, and own institutional-grade office, retail, and multifamily properties in our target markets, (ii) finance and operate our portfolio in a manner that increases cash flow and property values, (iii) execute new third-party construction work with consistent operating margins, and (iv) pursue selective acquisition opportunities, particularly when the acquisition involves a significant redevelopment aspect. We will seek to achieve our objectives through the following strategies: 


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


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

•
Leverage our Construction and Development Platform to Attract Additional Third-Party Clients. We believe that we have a unique advantage over many of our competitors due to our integrated construction and development business that provides expertise, oversight, and a broad array of client-focused services. We intend to continue to conduct and grow our construction business and other third-party services by pursuing new clients and expanding our relationships with existing clients. We also intend to continue to use our mezzanine lending program to leverage our development and construction expertise in serving clients.
Pursue New, and Expand Existing, Public/Private Relationships. We intend to continue to leverage our extensive experience in completing large, complex, mixed-use, public/private projects to establish relationships with new public partners while expanding our relationships with existing public partners.

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

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

Our Properties
 
The following table below sets forth certain information regarding our stabilized portfolio as of December 31, 2018.2019. We generally consider a property to be stabilized when itupon the earlier of: (i) the quarter after the property reaches 80% occupancy or thirteen quarters(ii) the thirteenth quarter after the property receives its certificate of occupancy: 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.
     Ownership Net Rentable     ABR per
Property 
Location  
 
Year Built 
 Interest 
Square Feet(1)  
 
Occupancy(2)  
 
ABR(3)  
 
Leased SF(3)  
 Location   Year Built  Ownership Interest 
Net Rentable Square Feet (1)
 
Occupancy (2)
 
ABR (3)
 
ABR per Leased SF(3)
Retail Properties                            
249 Central Park Retail(4)
 Virginia Beach, VA 2004 100% 92,710
 97.9% $2,597,881
 $28.63
Alexander Pointe Salisbury, NC 1997 100% 57,710
 95.1% 636,019
 11.58
249 Central Park Retail Virginia Beach, VA 2004 100% 92,400
 97.9% $2,559,701
 $28.30
Alexander Pointe (4)
 Salisbury, NC 1997 100% 64,724
 95.7% 649,308
 10.49
Apex Entertainment (5)
 Virginia Beach, VA 2002 100% 103,335
 100.0% 1,471,503
 14.24
Bermuda Crossroads(6)(4)
 Chester, VA 2001 100% 122,566
 98.4% 1,713,928
 14.22
 Chester, VA 2001 100% 122,566
 98.4% 1,755,052
 14.56
Broad Creek Shopping Center(6)(11)
 Norfolk, VA 1997/2001 100% 121,504
 95.5% 2,046,360
 17.63
Broad Creek Shopping Center(4)(6)
 Norfolk, VA 1997/2001 100% 121,504
 95.5% 2,071,357
 17.85
Broadmoor Plaza South Bend, IN 1980 100% 115,059
 96.5% 1,356,291
 12.21
 South Bend, IN 1980 100% 115,059
 97.5% 1,382,468
 12.32
Columbus Village(6)
 Virginia Beach, VA 1980/2013 100% 62,362
 100.0% 1,422,244
 22.81
Brooks Crossing Retail (7)
 Newport News, VA 2016 65% 18,349
 66.3% 169,740
 13.95
Columbus Village (4)
 Virginia Beach, VA 1980/2013 100% 62,362
 84.3% 1,556,163
 29.59
Columbus Village II Virginia Beach, VA 1995/1996 100% 92,061
 96.7% 1,595,334
 17.92
 Virginia Beach, VA 1995/1996 100% 92,061
 96.7% 1,595,334
 17.92
Commerce Street Retail(5)
 Virginia Beach, VA 2008 100% 19,173
 100.0% 863,799
 45.05
Commerce Street Retail (8)
 Virginia Beach, VA 2008 100% 19,173
 100.0% 881,292
 45.97
Courthouse 7-Eleven Virginia Beach, VA 2011 100% 3,177
 100.0% 139,311
 43.85
 Virginia Beach, VA 2011 100% 3,177
 100.0% 139,311
 43.85
Dick’s at Town Center Virginia Beach, VA 2002 100% 103,335
 100.0% 1,251,255
 12.11
Dimmock Square Colonial Heights, VA 1998 100% 106,166
 97.2% 1,768,353
 17.14
 Colonial Heights, VA 1998 100% 106,166
 97.2% 1,779,915
 17.25
Fountain Plaza Retail Virginia Beach, VA 2004 100% 35,961
 100.0% 1,019,584
 28.35
 Virginia Beach, VA 2004 100% 35,961
 100.0% 1,028,958
 28.61
Gainsborough Square Chesapeake, VA 1999 100% 88,862
 92.5% 1,261,426
 15.35
 Chesapeake, VA 1999 100% 88,862
 95.6% 1,324,529
 15.59
Greentree Shopping Center Chesapeake, VA 2014 100% 15,719
 83.7% 266,752
 20.28
 Chesapeake, VA 2014 100% 15,719
 92.6% 293,359
 20.15
Hanbury Village(6)(4)
 Chesapeake, VA 2006/2009 100% 116,635
 98.6% 2,486,153
 21.61
 Chesapeake, VA 2006/2009 100% 116,635
 100.0% 2,538,926
 21.77
Harper Hill Commons(6)(4)
 Winston-Salem, NC 2004 100% 96,914
 85.4% 942,167
 11.38
 Winston-Salem, NC 2004 100% 96,914
 85.0% 928,028
 11.26
Harrisonburg Regal Harrisonburg, VA 1999 100% 49,000
 100.0% 683,550
 13.95
 Harrisonburg, VA 1999 100% 49,000
 100.0% 717,850
 14.65
Indian Lakes Crossing(4) Virginia Beach, VA 2008 100% 64,973
 95.0% 839,174
 13.60
 Virginia Beach, VA 2008 100% 64,973
 95.0% 845,097
 13.70
Lexington Square Lexington, SC 2017 100% 85,531
 93.3% 1,698,782
 21.29
 Lexington, SC 2017 100% 85,540
 98.2% 1,829,558
 21.78
Lightfoot Marketplace(6)(7)
 Williamsburg, VA 2016 70% 124,735
 85.6% 1,819,389
 17.03
Market at Mill Creek (4)(7)
 Mount Pleasant, SC 2018 70% 80,405
 93.8% 1,700,522
 22.55
Marketplace at Hilltop (4)(6)
 Virginia Beach, VA 2000/2001 100% 116,953
 100.0% 2,654,816
 22.70
North Hampton Market Taylors, SC 2004 100% 114,935
 100.0% 1,473,083
 12.82
 Taylors, SC 2004 100% 114,935
 100.0% 1,479,285
 12.87
North Point Center(6)
 Durham, NC 1998/2009 100% 494,746
 100.0% 3,812,818
 7.71
Oakland Marketplace(6)
 Oakland, TN 2004 100% 64,538
 100.0% 475,387
 7.37
North Point Center (4)
 Durham, NC 1998/2009 100% 494,746
 100.0% 3,842,617
 7.77
Oakland Marketplace (4)
 Oakland, TN 2004 100% 64,538
 100.0% 478,857
 7.42
Parkway Centre Moultrie, GA 2017 100% 61,200
 98.0% 809,016
 13.48
 Moultrie, GA 2017 100% 61,200
 98.0% 812,760
 13.55
Parkway Marketplace Virginia Beach, VA 1998 100% 37,804
 100.0% 770,911
 20.39
 Virginia Beach, VA 1998 100% 37,804
 94.4% 726,757
 20.36
Patterson Place Durham, NC 2004 100% 160,942
 94.6% 2,384,886
 15.67
 Durham, NC 2004 100% 160,942
 94.3% 2,397,055
 15.79
Perry Hall Marketplace Perry Hall, MD 2001 100% 74,256
 100.0% 1,261,436
 16.99
 Perry Hall, MD 2001 100% 74,256
 100.0% 1,270,853
 17.11
Providence Plaza Charlotte, NC 2007/2008 100% 103,118
 97.5% 2,699,780
 26.86
 Charlotte, NC 2007/2008 100% 103,118
 98.8% 2,803,576
 27.53
Red Mill Commons (4)
 Virginia Beach, VA 2000-2005 100% 373,808
 96.5% 6,427,485
 17.81
Renaissance Square Davidson, NC 2008 100% 80,467
 88.0% 1,220,638
 17.23
 Davidson, NC 2008 100% 80,467
 90.4% 1,267,552
 17.43
Sandbridge Commons(6)
 Virginia Beach, VA 2015 100% 69,417
 100.0% 915,773
 13.74
Sandbridge Commons (4)
 Virginia Beach, VA 2015 100% 76,650
 98.5% 1,056,840
 14.00
Socastee Commons Myrtle Beach, SC 2000/2014 100% 57,273
 96.7% 630,451
 11.39
 Myrtle Beach, SC 2000/2014 100% 57,273
 96.7% 632,797
 11.43
South Retail Virginia Beach, VA 2002 100% 38,515
 100.0% 992,999
 25.78
South Square(6)(4)
 Durham, NC 1977/2005 100% 109,590
 98.1% 1,873,007
 17.42
Southgate Square Colonial Heights, VA 1991/2016 100% 220,131
 89.7% 2,699,553
 13.68
 Colonial Heights, VA 1991/2016 100% 260,131
 94.4% 3,365,533
 13.70
Southshore Shops Midlothian, VA 2006 100% 40,333
 93.2% 768,665
 20.44
 Chesterfield, VA 2006 100% 40,307
 85.3% 720,087
 20.94
South Retail Virginia Beach, VA 2002 100% 38,515
 100.0% 967,788
 25.13
South Square(6)(4)
 Durham, NC 1977/2005 100% 109,590
 95.3% 1,790,877
 17.14
Stone House Square(6)
 Hagerstown, MD 2008 100% 112,274
 93.1% 1,787,198
 17.10
Stone House Square (4)
 Hagerstown, MD 2008 100% 112,274
 93.1% 1,784,568
 17.07
Studio 56 Retail Virginia Beach, VA 2007 100% 11,594
 84.8% 419,296
 42.65
 Virginia Beach, VA 2007 100% 11,594
 100.0% 473,695
 40.86
Tyre Neck Harris Teeter(6)(11)
 Portsmouth, VA 2011 100% 48,859
 100.0% 533,052
 10.91
Tyre Neck Harris Teeter (4)(6)
 Portsmouth, VA 2011 100% 48,859
 100.0% 533,285
 10.91
Wendover Village Greensboro, NC 2004 100% 171,653
 99.1% 3,154,273
 18.54
 Greensboro, NC 2004 100% 176,939
 99.3% 3,510,597
 19.98
Total / Weighted Average       3,645,798
 96.2% $54,982,633
 $15.68
       4,169,784
 99.2% $66,322,992
 $16.44

     Ownership Net Rentable     ABR per
 
Location  
 
Year Built 
 Interest 
Square Feet(1)  
 
Occupancy(2)  
 
ABR(3)  
 
Leased SF(3)  
 Location   Year Built  Ownership Interest 
Net Rentable Square Feet (1)
 
Occupancy (2)
 
ABR (3)
 
ABR per Leased SF(3)
Office Properties                    
4525 Main Street Virginia Beach, VA 2014 100% 234,938
 96.0% $6,434,782
 $28.53
 Virginia Beach, VA 2014 100% 234,938
 98.1% $6,718,239
 $29.14
Armada Hoffler Tower(4)(5) Virginia Beach, VA 2002 100% 324,247
 91.4% 8,606,013
 29.05
One Columbus(5) Virginia Beach, VA 1984 100% 128,876
 92.2% 2,934,268
 24.68
Armada Hoffler Tower (8)(9)
 Virginia Beach, VA 2002 100% 320,680
 95.8% 8,889,551
 28.94
Brooks Crossing Office (7)
 Newport News, VA 2019 100% 98,061
 100.0% 1,814,129
 18.50
One City Center Durham, NC 2019 100% 152,815
 84.0% 4,145,189
 32.28
One Columbus (8)
 Virginia Beach, VA 1984 100% 128,876
 98.5% 3,184,938
 25.10
Thames Street Wharf (9)
 Baltimore, Maryland 2010 100% 263,426
 100.0% 7,141,829
 27.11
Two Columbus Virginia Beach, VA 2009 100% 108,448
 94.2% 2,672,688
 26.17
 Virginia Beach, VA 2009 100% 108,459
 100.0% 2,907,497
 26.81
Total / Weighted Average       796,509
 93.3% $20,647,751
 $27.80
       1,307,255
 96.6% $34,801,372
 $27.56
                    
        Ownership       Monthly Rent per Location Year Built Ownership Interest Units/Beds 
Occupancy (2)
 
ABR (10)
 
Monthly Rent per Occupied Unit/Bed (11)
 Location Year Built Interest Units 
Occupancy(2)
 
ABR(8)
 
Occupied Unit/Bed(9)
Multifamily Properties            
              
  
1405 Point (6)(12)
 Baltimore, MD 2018 79% 289
 92.0% $6,933,252
 $2,172
Encore Apartments Virginia Beach, VA 2014 100% 286
 94.4% $4,221,756
 $1,303.01
 Virginia Beach, VA 2014 100% 286
 95.8% 4,318,296
 1,313
Johns Hopkins Village(10)(11)
 Baltimore, MD 2016 100% 157
 99.8% 7,665,480
 1,126.61
Liberty Apartments(10)
 Newport News, VA 2013 100% 197
 96.2% 2,388,808
 1,050.41
Smith’s Landing(11)
 Blacksburg, VA 2009 100% 284
 99.6% 4,056,060
 1,194.36
The Cosmopolitan(10)(12)
 Virginia Beach, VA 2006 100% 306
 92.5% 5,520,375
 1,625.55
Greenside Apartments Charlotte, NC 2018 100% 225
 93.8% 4,010,676
 1,584
Hoffler Place (12)
 Charleston, SC 2019 93% 258
 89.1% 3,553,932
 1,244
Johns Hopkins Village (6)(12)
 Baltimore, MD 2016 100% 568
 98.8% 7,692,984
 1,143
Liberty Apartments (12)
 Newport News, VA 2013 100% 197
 93.9% 2,439,588
 1,099
Premier Apartments Virginia Beach, VA 2018 100% 131
 97.7% 2,212,920
 1,441
Smith’s Landing (6)
 Blacksburg, VA 2009 100% 284
 100.0% 4,250,868
 1,247
Total / Weighted Average       1,230
 97.3% $23,852,479
 $1,290.34
       2,238
 95.6% $35,412,516
 $1,379

(1)The net rentable square footage for each of our office and retail 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 office and retail properties is calculated as (a) square footage under executed leases as of December 31, 20182019 divided by (b) net rentable square feet, expressed as a percentage. Occupancy for our multifamily properties is calculated as (a) total units occupied as of December 31, 20182019 divided by (b) total units available, expressed as a percentage.
(3)For the properties in our office and retail 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, 20182019 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, 2018.2019. In the case of triple net or modified gross leases, our calculation of ABR does not include tenant reimbursements for real estate taxes, insurance, common area or other operating expenses.


(4)Net rentable square feet at certain of our retail properties includes pad sites leased pursuant to the ground leases in the table below:
Properties Subject to Ground Lease Number of Ground Leases Square Footage
Leased Pursuant to
Ground Leases		 ABR
Alexander Pointe 1 7,014 $10,000
Bermuda Crossroads 2 11,000 179,685
Broad Creek Shopping Center 6 23,825 649,818
Columbus Village 1 3,403 200,000
Hanbury Village 2 55,586 1,082,118
Harper Hill Commons 1 41,520 373,680
Indian Lakes Crossing 1 50,311 592,385
Market at Mill Creek 1 7,014 63,000
Marketplace at Hilltop 1 4,211 150,000
North Point Center 4 280,556 1,146,700
Oakland Marketplace 1 45,000 186,347
Red Mill Commons 8 33,961 773,609
Sandbridge Commons 3 60,521 738,500
Stone House Square 1 3,650 181,500
Tyre Neck Harris Teeter 1 48,859 533,285
Total / Weighted Average 34 676,431 $6,860,627

(5)Dick's Sporting Goods, one of the anchor tenants at the property previously known as "Dick’s at Town Center," notified the Company during 2019 that it would not renew its lease beyond January 31, 2020, the end of the current term. In October 2019, the Company signed a lease with a replacement tenant, Apex Entertainment, which will take the entire space currently occupied by Dick's Sporting Goods after the redevelopment and buildout of the facility is completed, which is expected to occur by the end of 2020.
(6)We lease the land underlying this property pursuant to a ground lease.
(7)We are entitled to a preferred return on our investment in this property.
(8)Includes ABR pursuant to a rooftop lease.
(9)As of December 31, 2018,2019, we occupied 41,10355,390 square feet at these two properties at an ABR of $1.3$1.7 million, or $31.21$31.30 per leased square foot, which amounts are reflected in this table. The rent paid by us is eliminated in accordance with U.S. generally accepted accounting principles ("GAAP").
(5)Includes ABR pursuant to a rooftop lease.

(6)Net rentable square feet at certain of our retail properties includes pad sites leased pursuant to the ground leases in the table below:
    Square Footage  
  Number of Leased Pursuant to  
Properties Subject to Ground Lease Ground Leases Ground Leases ABR
Bermuda Crossroads 2 11,000 $179,685
Broad Creek Shopping Center 6 23,825 639,988
Columbus Village 1 3,403 200,000
Hanbury Village 2 55,586 1,082,118
Harper Hill Commons 1 41,520 373,680
Indian Lakes Crossing 1 50,311 592,385
Lightfoot Marketplace 3 60,442 660,375
North Point Center 4 280,556 1,139,610
Oakland Marketplace 1 45,000 186,300
Sandbridge Commons 1 53,288 583,000
South Square 1 1,778 60,000
Stone House Square 1 3,650 181,500
Tyre Neck Harris Teeter 1 48,859 533,052
Total / Weighted Average 25 679,218 $6,411,693

(7)We are entitled to a preferred return of 8% and 9% on our investment in Brooks Crossing and Lightfoot Marketplace, respectively.
(8)(10)For the properties in our multifamily portfolio, ABR is calculated by multiplying (a) base rental payments for the month ended December 31, 20182019 by (b) 12.
(9)(11)Monthly rent per occupied unit/bed is calculated by dividing total base rental payments for the month ended December 31, 20182019 by the number of occupied units (or, in the case of Johns Hopkins Village and Hoffler Place, occupied beds of the 568 and 258 total beds)beds, respectively) as of December 31, 2018.
(10)The ABR for Liberty, Cosmopolitan, and John Hopkins Village excludes $0.3 million, $0.7 million, and $1.2 million from ground floor retail leases, respectively.
(11)We lease the land underlying this property pursuant to a ground lease.2019.
(12)Excludes 36 units offlineThe ABR for redevelopment.Liberty, John Hopkins Village, Hoffler Place and 1405 Point excludes approximately $0.3 million, $1.1 million, $0.1million and $0.4 million, respectively from ground floor retail leases.





Lease Expirations


The following tables summarize the scheduled expirations of leases in our office and retail operating property portfolios as of December 31, 2018.2019. The information in the following tables does not assume the exercise of any renewal options.  
 
Office Lease Expirations
   Square     % of Office  
 Number of Footage of % Portfolio   Portfolio Annualized Base
 Leases Leases Net Rentable Annualized Annualized Rent per Leased
Year of Lease Expiration Expiring Expiring Square Feet Base Rent Base Rent Square Foot Number of Leases Expiring Square Footage of Leases Expiring % Portfolio Net Rentable Square Feet Annualized Base Rent % of Office Portfolio Annualized Base Rent Annualized Base Rent per Leased Square Foot
Available —
 53,704
 6.7% $—
 —% $—
 —
 44,285
 3.4% $—
 —% $—
Month-to-Month 3
 633
 0.1% 20,400
 0.1% 32.23
 2
 —
 —% 2,400
 —% —
2019 16
 75,516
 9.5% 1,942,629
 9.4% 25.72
 —
 —
 —% —
 —% —
2020 7
 26,537
 3.3% 765,538
 3.7% 28.85
 11
 24,796
 1.9% 781,419
 2.2% 31.51
2021 8
 46,798
 5.9% 1,339,418
 6.5% 28.62
 11
 48,532
 3.7% 1,312,408
 3.8% 27.04
2022 9
 73,394
 9.2% 2,083,571
 10.1% 28.39
 11
 77,259
 5.9% 2,213,506
 6.4% 28.65
2023 11
 63,441
 8.0% 1,816,072
 8.8% 28.63
 12
 103,647
 7.9% 2,707,291
 7.8% 26.12
2024 7
 102,931
 12.9% 2,796,210
 13.5% 27.17
 11
 136,575
 10.4% 3,442,021
 9.9% 25.20
2025 7
 70,062
 8.8% 1,931,218
 9.4% 27.56
 13
 131,701
 10.1% 3,859,343
 11.1% 29.30
2026 3
 15,140
 1.9% 331,665
 1.6% 21.91
 8
 36,863
 2.8% 926,963
 2.7% 25.15
2027 3
 49,081
 6.2% 1,416,099
 6.9% 28.85
 4
 244,864
 18.7% 6,921,178
 19.9% 28.27
2028 4
 56,844
 7.1% 1,512,745
 7.3% 26.61
 6
 63,319
 4.8% 1,754,231
 5.0% 27.70
2029 2
 86,759
 10.9% 2,646,518
 12.8% 30.50
 7
 242,709
 18.6% 6,136,048
 17.6% 25.28
Thereafter 2
 75,669
 9.5% 2,045,668
 9.9% 27.03
 6
 152,705
 11.8% 4,744,562
 13.6% 31.07
Total / Weighted Average 82
 796,509
 100.0% $20,647,751
 100.0% $27.80
 102
 1,307,255
 100.0% $34,801,370
 100.0% $27.55
 
Retail Lease Expirations
   Square     % of Retail  
 Number of Footage of % Portfolio   Portfolio Annualized Base
 Leases Leases Net Rentable Annualized Annualized Rent per Leased
Year of Lease Expiration Expiring Expiring Square Feet Base Rent Base Rent Square Foot Number of Leases Expiring Square Footage of Leases Expiring % Portfolio Net Rentable Square Feet Annualized Base Rent % of Office Portfolio Annualized Base Rent Annualized Base Rent per Leased Square Foot
Available —
 159,923
 4.3% $—
 —% $—
 —
 144,938
 3.4% $—
 —% $—
Month-to-Month 2
 2,600
 0.1% 48,470
 0.1% 18.64
 3
 4,200
 0.1% 83,758
 0.1% 19.94
2019 64
 287,943
 7.8% 4,922,077
 8.8% 17.09
 5
 25,565
 0.6% 457,889
 0.7% 17.91
2020 77
 589,349
 15.9% 8,321,449
 14.9% 14.12
 54
 240,266
 5.7% 3,578,216
 5.3% 14.89
2021 67
 301,451
 8.1% 5,439,595
 9.8% 18.04
 92
 351,636
 8.4% 6,781,107
 10.1% 19.28
2022 59
 422,280
 11.4% 7,003,826
 12.6% 16.59
 89
 507,590
 12.1% 8,349,932
 12.4% 16.45
2023 59
 432,951
 11.7% 6,632,066
 11.9% 15.32
 89
 514,434
 12.2% 8,398,508
 12.5% 16.33
2024 39
 305,397
 8.2% 4,862,548
 8.7% 15.92
 86
 530,254
 12.6% 8,696,487
 12.9% 16.40
2025 21
 236,602
 6.4% 2,666,200
 4.8% 11.27
 59
 544,465
 12.9% 7,332,252
 10.9% 13.47
2026 20
 169,355
 4.6% 2,934,654
 5.3% 17.33
 27
 164,729
 3.9% 3,209,776
 4.8% 19.49
2027 18
 118,786
 3.2% 2,544,828
 4.6% 21.42
 22
 136,840
 3.3% 3,019,722
 4.5% 22.07
2028 25
 270,005
 7.3% 3,973,549
 7.1% 14.72
 24
 252,999
 6.0% 3,521,547
 5.2% 13.92
2029 9
 48,665
 1.3% 1,042,083
 1.9% 21.41
 23
 108,253
 2.6% 2,152,130
 3.2% 19.88
Thereafter 17
 357,426
 9.7% 5,289,383
 9.5% 14.80
 41
 682,777
 16.2% 11,710,681
 17.4% 17.15
Total / Weighted Average 477
 3,702,733
 100.0% $55,680,728
 100.0% $15.72
 614
 4,208,946
 100.0% $67,292,005
 100.0% $16.56


Tenant Diversification
 
The following tables list the 10 largest tenants in each of our office and retail operating property portfolios, based on annualized base rent as of December 31, 20182019 ($ in thousands):  
   % of % of
   Office Total
   Portfolio Portfolio
 Annualized Annualized Annualized
Office Tenant
 
Base Rent  
 
Base Rent 
 
Base Rent 
 Annualized Base Rent   % of
Office
Portfolio
Annualized
Base Rent 		 % of
Total
Portfolio
Annualized
Base Rent 
Morgan Stanley $5,761
 16.6% 4.1%
Clark Nexsen $2,588
 12.5% 2.5% 2,639
 7.6% 1.9%
WeWork 2,259
 6.5% 1.6%
Duke University 1,540
 4.4% 1.1%
Huntington Ingalls 1,513
 4.3% 1.1%
Mythics 1,164
 5.6% 1.1% 1,187
 3.4% 0.8%
Hampton University 1,063
 5.1% 1.0%
Johns Hopkins Medicine 1,118
 3.2% 0.8%
Pender & Coward 882
 4.3% 0.9% 904
 2.6% 0.6%
Kimley-Horn 876
 4.2% 0.8% 894
 2.6% 0.6%
Troutman Sanders 855
 4.1% 0.8% 872
 2.5% 0.6%
The Art Institute 852
 4.1% 0.8%
City of Virginia Beach Development Authority 744
 3.6% 0.7%
Cherry Bekaert 718
 3.5% 0.7%
Williams Mullen 655
 3.2% 0.6%
Top 10 Total $10,397
 50.2% 9.9% $18,687
 53.7% 13.2%


 
   % of % of
   Retail Total
   Portfolio Portfolio
 Annualized Annualized Annualized
Retail Tenant Base Rent Base Rent Base Rent Annualized Base Rent % of
Retail
Portfolio
Annualized
Base Rent		 % of
Total
Portfolio
Annualized
Base Rent
Kroger/Harris Teeter $6,188
 11.1% 6.0%
Harris Teeter/Kroger $5,645
 8.4% 4.0%
Lowes Foods 1,976
 2.9% 1.4%
Regal Cinemas 1,679
 3.0% 1.6% 1,713
 2.5% 1.2%
Bed, Bath, & Beyond 1,677
 3.0% 1.6% 1,710
 2.5% 1.2%
PetSmart 1,438
 2.6% 1.4% 1,438
 2.1% 1.0%
Food Lion 1,291
 2.3% 1.3% 1,315
 2.0% 0.9%
Lowes Foods 930
 1.7% 0.9%
Dick's Sporting Goods 840
 1.5% 0.8%
Petco 877
 1.3% 0.6%
Weis Markets 802
 1.4% 0.8% 802
 1.2% 0.6%
Total Wine & More 765
 1.1% 0.5%
Ross Dress for Less 762
 1.4% 0.7% 762
 1.1% 0.5%
Petco 743
 1.3% 0.7%
Top 10 Total $16,350
 29.3% 15.8% $17,003
 25.1% 11.9%



Development Pipeline
 
In addition to the properties in our operating property portfolio as of December 31, 2018,2019, we had the following properties in various stages of development, redevelopment, and stabilization. We generally consider a property to be stabilized when itupon the earlier of: (i) the quarter after the property reaches 80% occupancy or thirteen quarters(ii) the thirteenth quarter after the property receives its certificate of occupancy.  
Development, Not Delivered     ($ in '000s) 
Schedule(1)
         ($ in '000s) 
Schedule (1)
    
             Stabilized       Estimated Estimated  Incurred    Initial Stabilized AHH     
   Estimated Estimated  Incurred    Initial Operation AHH     
Property Location  
Size(1) 
 
Cost(1) 
 Cost Start Occupancy (2) Ownership % Property Type Location  
Size (1) 
 
Cost (1) 
 Cost Start Occupancy 
Operation (2)
 Ownership % Property Type
Summit Place (Meeting Street) Charleston, SC 114 units $53,000
 $35,000
 3Q17 3Q19 3Q19 90 % Multifamily
Hoffler Place (King Street) Charleston, SC 74 units 48,000
 34,500
 3Q17 3Q19 3Q19 93 % Multifamily
Market at Mill Creek Mt. Pleasant, SC 73,000 sf 23,000
 19,500
 1Q18 1Q19 2Q19 
70% (3)
 Retail
Brooks Crossing - Office Newport News, VA 100,000 sf 20,000
 15,000
 1Q18 2Q19 3Q19 
65% (3)
 Office
Summit Place Charleston, SC 357 beds $56,000
 $51,300
 3Q17 3Q20 4Q20 90 % Multifamily
Wills Wharf Baltimore, MD 325,000 sf 119,000
 20,000
 3Q18 1Q20 3Q20 100% Office Baltimore, MD 325,000 sf 120,000
 86,500
 3Q18 2Q20 2Q21 100% Office
Total Development, Pending DeliveryTotal Development, Pending Delivery $263,000
 $124,000
          Total Development, Pending Delivery $176,000
 $137,800
          

Development, Delivered Not Stabilized   ($ in '000s) Schedule    
              Stabilized    
    Estimated Estimated  Incurred    Initial Operation AHH  
Property Location 
Size(1) 
 
Cost(1) 
 Cost  Start  Occupancy (1)(2) Ownership % Property Type
Brooks Crossing - Retail Newport News, VA 18,000 sf $3,000
 $3,000
 3Q15 3Q16 4Q19 
65% (3)
 Retail
Greenside (Harding Place) Charlotte, NC 225 units 50,000
 50,000
 3Q16 3Q18 4Q19 
80% (3)
 Multifamily
Premier Apartments (Town Center Phase VI) Virginia Beach, VA 131 units 30,000
 29,000
 4Q16 3Q18 3Q19 100% Multifamily
Premier Retail (Town Center Phase VI) Virginia Beach, VA 39,000 sf 15,000
 12,000
 4Q16 3Q18 1Q20 100% Retail
Lightfoot Outparcel Williamsburg, VA NA 4,000
 4,000
 1Q18 3Q18 1Q19 
70% (3)
 Retail
Total Development, Delivered Not Stabilized 102,000
 98,000
          
Total     $365,000
 $222,000
          
Development/Redevelopment, Delivered Not Stabilized   ($ in '000s) Schedule    
    Estimated Estimated  Incurred    Initial Stabilized AHH  
Property Location 
Size (1) 
 
Cost (1) 
 Cost  Start  Occupancy 
Operation (1)(2)
 Ownership % Property Type
Premier Retail Virginia Beach, VA 39,000 sf $15,000
 $15,000
 4Q16 3Q18 1Q21 100% Retail
The Cosmopolitan Virginia Beach, VA 342 units 14,000
 6,300
 1Q18 N/A 1Q21 100% Multifamily
Total Development/Redevelopment, Delivered Not Stabilized 29,000
 21,300
          
Total     $205,000
 $159,100
          

(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.
(3)We are entitled to a preferred return on our equity prior to any distributions to minority partners.
 
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.

Lightfoot outparcel is the outparcel phase of our Harris Teeter-anchored shopping center in Williamsburg, Virginia. This phase includes four outparcels. As of December 31, 2018, this phase of the project was 100% leased.

Summit Place (also known as Meeting Street) is a $53.0 million student housing property being developed in Charleston, South Carolina with expected delivery in 2019.

Hoffler Place (also known as King Street) is a $48.0 million student housing property being developed in Charleston, South Carolina with expected delivery in 2019.

Market at Mill Creek is a $23.0 million Lowes-Foods-anchored shopping center being developed in Mount Pleasant, South Carolina with expected delivery in 2019.

Brooks Crossing is our public-private partnership with the City of Newport News, Virginia designed to revitalize the east end of the city. The project includes 18,000 square feet of retail space and is leased by various small retailers. As of December 31, 2018, the retail component was approximately 66% leased. The project also includes an office component, which is a 100,000 square foot office building anchored by Newport News Shipbuilding, a division of Huntington Ingalls Industries (NYSE:HII). As of December 31, 2018, the office building was 100% leased.

Wills Wharf is a mixed-use development project in the Harbor Point area of Baltimore, Maryland. The project will consist primarily ofinclude office space anchoredoccupied primarily by WeWork and Ernst & Young and will also include a lease to the operator of a Canopy by Hilton hotel with expected delivery in 2020.


Greenside (also known as Harding Place) Summit Place is a $50.0$56.0 million Class A multifamilystudent housing property being developed in Midtown Charlotte, North Carolina. As of December 31, 2018, the property was approximately 39% leased.Charleston, South Carolina with expected delivery in 2020.


Premier (Town Center Phase VI)Retail is the nextretail portion of the most recent phase of development in the Town Center of Virginia Beach, our ongoing public-private partnership with the City of Virginia Beach. Premier Retail is part of a $45.0 million mixed-use project that includes 39,000 square feet of retail space, which is 75%was 75.6% leased as of December 31, 2018,2019, and 131 luxury apartments, which are 65%were 97.7% leased as of December 31, 2018.2019.


Other Investments

1405 Point
On October 15, 2015, we entered intoThe Cosmopolitan is a note receivable with$14.0 million redevelopment project of a maximum principal balance of $28.2 million for the 1405 Point projectmultifamily property in the Harbor Point areaTown Center of Baltimore, Maryland (also known as Point Street Apartments). On November 11, 2018, this loan was modified to increase the maximum principal amountVirginia Beach, which includes renovation of all 342 units and modernization of the loan to $31.0 million. Interest on this loan accrues at a rate of 8.0% per annum. 1405 Point is a developmentresidential clubhouse and the business center. The project for a 17-story building comprised of 289 residential units and 18,000 square feet of street-level retail space. Beatty Development Group (“BDG”) is the developer of the project and has engaged us to serve as construction general contractor. 1405 Point openedstarted during the first quarter of 2018 and is subjectexpected to a ground lease from an affiliate of BDG.
BDG secured a senior construction loan of up to $67.0 million to fund the development and construction of 1405 Point on November 10, 2016. We have agreed to guarantee $25.0 million of the senior construction loan. We have options to purchase up to a 100% interest in 1405 Point upon completion of the project as follows: (i) an option to purchase a 79% indirect interest in Point Street Apartments for $27.6 million, exercisable within one year from the project’s completion (the “First Option”) and (ii) provided that we have exercised the First Option, an option to purchase an additional 21% interest in Point Street Apartments prior to July 31, 2020 (the “Second Option”) in exchange for increased payments under the ground lease. The BDG mezzanine loan matures on the earliest of (i) November 1, 2019, which may be extended by BDG under a one-year extension option, (ii) the maturity date or earlier termination of the senior construction loan, or (iii) the date we exercise the Second Option.

We plan to exercise the First Optioncompleted during the firstfourth quarter of 2019. We currently have a $2.1 million letter of credit for the guarantee of the senior construction loan.2020.

As of December 31, 2018, the balance of the BDG loan was $30.2 million, and for the year ended December 31, 2018, we recognized $2.1 million of interest income on the BDG loan. See Note 6 to the accompanying consolidated financial statements.Other Investments
One City Center
On February 25, 2016, we announced our joint venture with Austin Lawrence Partners to develop and construct One City Center in Durham, North Carolina. One City Center is a 22-story mixed-use project that includes 130,000 square feet of office space, anchored by a 55,000 square foot lease with Duke University and a 62,000 square foot lease with WeWork, along with 22,000 square feet of street-level retail space and 139 residential units. We are a minority partner in the joint venture and serve as the project's general contractor, with rights to the operating cash flow of the office and retail portions of the project. The project at One City Center is an unconsolidated joint venture. We have agreed to guarantee the commercial component of the construction loan for City Center; however, the loan is collateralized by 100% of the assets of City Center. Our equity investment in the joint venture as of December 31, 2018 is approximately $21.3 million. The project is substantially complete and is in lease-up. During the first quarter of 2019, we plan to acquire the office and retail portions of the project in exchange for our minority partnership interest in the joint venture.



The Residences at Annapolis Junction


On April 21, 2016, we entered into a note receivable with a maximum principal balance of $48.1 million in the residential component of the Annapolis Junction Town Center project in Maryland (“("Annapolis Junction”Junction"). Annapolis Junction is an apartment development project with 416 residential units. It is part of a mixed-use development project that is also planned to have 17,000 square feet of retail space and a 150-room hotel. Annapolis Junction Apartments Owner, LLC (“AJAO”("AJAO") is the developer of the residential component and engaged us to serve as construction general contractor for the residential component. Annapolis Junction opened during 2017 and 2018 and is currently in lease-up.
 
Interest on the AJAO loan accrues at 10.0% per annum. On November 16, 2018, AJAO refinanced the senior construction loan with a one year senior loan of $83.0 million, which matures on November 16, 2019.million. This senior loan may be extended for one additional year if certainincludes two six-month extension options subject to minimum debt yields and minimum debt service coverage ratios are met by AJAO.ratios. We have agreed to guarantee $8.3 million of the senior loan, and the AJAO loan will mature concurrent with the new senior loan. In conjunction with this refinancing, we sold the First Option and Second Option to AJAO forreceived a price of $5.0 million loan modification fee, which is being accounted for as a loan discount that was recognized as interest income over the remainingone year loan term offrom November 2018 to November 2019 using the loan.effective interest method. Additionally, AJAO repaid $11.1 million of the outstanding mezzanine loan balance as part of this refinancing. On December 1, 2019, the first six-month extension option for the senior loan was exercised, and our mezzanine loan was extended in tandem. AJAO will pay an exit fee of $3.0 million upon full repayment of the loan, which is being recognized through the current remaining term of the loan as interest income using the effective interest method.


The balance on the Annapolis Junction note was $36.4$40.0 million as of December 31, 2018.2019. During the year ended December 31, 2018,2019, we recognized $4.9 million of interest income on the note, which includes amortization of the option sale. See Note 6 to the accompanying consolidated financial statements.

North Decatur Square

On May 15, 2017, we invested in the development of an estimated $34.0 million Whole Foods-anchored center located in Decatur, Georgia. The Company's investment is in the form of a mezzanine loan of up to $21.8 million to the developer, North Decatur Square Holdings, LLC ("NDSH"). Interest on the loan bears interest at a rate of 15.0% per annum. The note matures on the earliest of (i) May 15, 2022, (ii) the maturity of the senior construction loan, (iii) the sale of NDSH, or (iv) the sale of the center. During 2018, this loan was modified to increase the maximum amount of the loan to $29.7 million due to an increase in the scope of the project.

The balance on the North Decatur Square note was $18.5 million as of December 31, 2018. During the year ended December 31, 2018, we recognized $2.2$8.8 million of interest income on the note. See Note 6 to the accompanyingour consolidated financial statements.statements in Item 8 of this Annual Report on Form 10-K.

Delray Plaza


On October 27, 2017, we invested in the development of an estimated $20.0 million Whole Foods-anchored center located in Delray Beach, Florida. The Company's investment is in the form of a mezzanine loan of up to $13.1 million to the developer, Delray Plaza Holdings, LLC. On January 8, 2019, this loan was modified to increase the maximum amount of the loan to $15.0 million. The mezzanine loan bears interest at a rate 15.0% per annum. The note matures on the earliest of (i) October 27, 2020, (ii) the date of any sale or refinance of the development project, or (iii) the disposition or change in control of the development project. The balance on the Delray Plaza note was $7.0$13.0 million as of December 31, 2018.2019. During the year ended December 31, 2018,2019, we recognized $0.9$1.6 million of interest income on the note. See Note 6 to the accompanyingour consolidated financial statements.statements in Item 8 of this Annual Report on Form 10-K.


Nexton Square


On December 4, 2018, we entered into a mezzanine loan agreement with the developer of Nexton Square, a shopping center development project located in Summerville, South Carolina, which has a maximum capacity of $21.0$17.0 million. On February 8, 2019, the developer closed on a senior construction loan with a maximum borrowing capacity of $25.2 million. This loan bears interest at a rate of 15.0%10.0% per annum (which will decrease to 10.0% upon completion of certain portions of the project) andannum. The note matures on the earliest of (i) December 4, 2020, (ii) the maturity date of the senior construction loan, including any extension options available and exercised under that loan, or (iii) the date of any sale, transfer, or refinancing of the project.


We agreed to guarantee 50% of the senior construction loan in exchange for the option to purchase the property upon completion according to a predetermined formula primarily dependent upon the developer's leasing activities and the extent to which the developer elects to complete all or a portion of the total planned space, if applicable, in response to leasing activities.



The balance on the Nexton Square loan was $14.9$15.1 million as of December 31, 2018.2019. During the year ended December 31, 2018,2019, we recognized $0.2$2.0 million of interest income on the loan. See Note 6 to the accompanyingour consolidated financial statements.statements in Item 8 of this Annual Report on Form 10-K.
    
On February 8, 2019, the developer closed on a senior construction loan with a maximum borrowing capacity of $25.2 million and paid down $2.1 million of the mezzanine loan.

Interlock Commercial


On December 21, 2018, we entered into a mezzanine loan agreement with the developer of the office and retail components of The Interlock, a new mixed-use public-private partnership with Georgia Tech in West Midtown Atlanta. The loan has a maximum principal amount of $67.0 million and a total maximum commitment, including accrued interest reserves, of $95.0 million. The mezzanine loan bears interest at a rate of 15.0% per annum and matures on the earlier of (i) 24 months after the original maturity date or earlier termination date of the senior construction loan or (ii) any sale, transfer, or refinancing of the project. In the event that the maturity date is established as being 24 months after the original maturity date or earlier termination date of the senior construction loan, the developer will have the right to extend the maturity date for 5five years.


We have agreed to guarantee payment of 35% ofOn April 19, 2019, the borrower executed its senior construction loan. The borrower has not obtained a construction loan, asand the Company's payment guarantee of December 31, 2018.up to $30.7 million became effective.


The balance on the Interlock Commercial note was $18.3$59.2 million as of December 31, 2018.2019. During the year ended December 31, 2018,2019, we recognized $0.2$6.1 million of interest income on the note. See Note 6 to the accompanyingour consolidated financial statements.statements in Item 8 of this Annual Report on Form 10-K.


Solis Apartments at Interlock


On December 21, 2018, we entered into a mezzanine loan agreement with the developer of Solis Apartments at Interlock, which is the apartment component of The Interlock in West Midtown Atlanta. The mezzanine loan has a a maximum principal commitment of $25.2 million and a total maximum commitment, including accrued interest reserves, of $41.1 million. The mezzanine loan bears interest at a rate of 13.0% per annum and matures on the earlier of (a) the later of (i) December 21, 2021 or (ii) the maturity date or earlier termination date of the senior construction loan, including any extensions of the senior construction loan, or (b) the date of any sale of the project or refinance of the loan.


The balance on the Solis Apartments at Interlock note was $13.8$25.6 million as of December 31, 2018.2019. During the year ended December 31, 2018,2019, we recognized $0.1$2.3 million of interest income on the note. See Note 6 to the accompanyingour consolidated financial statements.statements in Item 8 of this Annual Report on Form 10-K.

Acquisitions and Dispositions
 
On November 30, 2017, we entered into a lease agreement with Bottling Group, LLC for a new distribution facility that we developed and constructed. On January 29, 2018, we acquired undeveloped land in Chesterfield, Virginia, a portion of which serves as the site for this facility, for a contract price of $2.4 million plus capitalized acquisition costs of $0.1 million. On December 20, 2018, we sold the completed facility for $25.9 million, resulting in a gain of $3.4 million.

On January 9, 2018, we acquired Indian Lakes Crossing, a Harris Teeter-anchored shopping center in Virginia Beach, Virginia, for a contract price of $14.7 million plus capitalized acquisition costs of $0.2 million.

On January 18, 2018, we entered into an operating agreement with a partner to develop a Lowes Foods-anchored shopping center in Mount Pleasant, South Carolina. We have a 70% ownership interest in the partnership. The partnership, Market at Mill Creek Partners, LLC, acquired undeveloped land on February 16, 2018 for a contract price of $2.9 million plus capitalized acquisition costs of $0.1 million. As of December 31, 2018, the book value of our investment in the project totaled $21.1 million.

On January 29, 2018, we acquired Parkway Centre, a newly developed Publix-anchored shopping center in Moultrie, Georgia, for total consideration of $11.3 million (comprising $9.6 million in cash and $1.7 million in the form of Class A units of limited partnership interest in the Operating Partnership ("Class A Units") plus capitalized acquisition costs of $0.3 million.

On April 2, 2018, we acquired undeveloped land in Newport News, Virginia for less than $0.1 million. This land parcel is being used in the development of the Brooks Crossing Office property.

On May 24, 2018, we completed the sale of the Wawa outparcel at Indian Lakes Crossing for a contract price of $4.4 million. There was no gain or loss on the disposition.

On July 2, 2018, we executed a ground lease for the site of a new mixed-use development project at Wills Wharf, a site in the Harbor Point area of Baltimore, Maryland. The lease has an initial term of five years and includes ten extension options of seven years each.

On August 28, 2018, we acquired Lexington Square, a newly developed Lowes Foods-anchored shopping center in Lexington, South Carolina, for a purchase price of $26.8 million, consisting of cash consideration of $24.2 million and $2.6 million of additional consideration in the form of Class A Units issuable in increments to the seller upon the fulfillment of certain occupancy thresholds within the first 18 months of our ownership. No Class A Units have been issued as of December 31, 2018 for this acquisition. As part of this transaction, we also capitalized acquisition costs of $0.4 million.

On December 31, 2018, we sold the leasehold interest in the building previously leased by Home Depot at Broad Creek Shopping Center for $2.4 million, resulting in a gain on sale of $0.8 million.

Subsequent to December 31, 2018

On February 6, 2019, we acquired an additional outparcel phase of Wendover Village in Greensboro, North Carolina for a contract price of $2.7 million. This phase is leased by a single tenant.


On March 14, 2019, we acquired the office and retail portions of the One City Center project in Durham, North Carolina, in exchange for a redemption of our 37% equity ownership in the joint venture with Austin Lawrence Partners, which totaled $23.0 million as of the acquisition date, and a cash payment of $23.2 million.

On April 24, 2019, we purchased a 79% controlling interest in the partnership that owns 1405 Point, a 17-story luxury high-rise apartment building located in the emerging Harbor Point area of the Baltimore waterfront in exchange for extinguishing our $31.3 million note receivable on the project, making a cash payment of $0.3 million, and assuming a loan payable of $64.9 million.

On May 23, 2019, we acquired Red Mill Commons and Marketplace at Hilltop from Venture Realty Group for consideration comprised of 4.1 million OP Units, the assumption of $35.7 million of mortgage debt, and $4.5 million in cash. The negotiated price was $105.0 million, which contemplated the price of our common stock of $15.55 per share when the purchase and sale agreement was executed. In connection with the acquisition, we and the Operating Partnership entered into a tax protection agreement with the contributors pursuant to which we and the Operating Partnership agreed, subject to certain exceptions, to indemnify the contributors for up to 10 years against certain tax liabilities incurred by them, if such liabilities result from a transaction involving a direct or indirect taxable disposition of either or both of these properties or if the Operating Partnership fails to maintain and allocate to the contributors for taxation purposes minimum levels of Operating Partnership liabilities.

On June 26, 2019, we acquired Thames Street Wharf, a Class A office building located in the Harbor Point development of Baltimore, Maryland for $101.0 million in cash.

On October 25, 2019, we purchased land in Roswell, Georgia for a purchase price of $5.0 million. We plan to use the land to develop a mixed-use property.

Subsequent to December 31, 2019

On January 10, 2020, we purchased land in Charlotte, North Carolina for a purchase price of $6.3 million for the development of a mixed-use property.

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


Insurance
 
We carry comprehensive liability, fire, extended coverage, business interruption, and rental loss insurance covering all of the properties in our portfolio under a blanket insurance policy in addition to other coverage that may be appropriate for certain of our properties. We believe the policy specifications and insured limits are appropriate and adequate for our properties given the relative risk of loss, the cost of the coverage, and industry practice; however, our insurance coverage may not be sufficient to fully cover our losses. We do not carry insurance for certain losses, including, but not limited to, losses caused by riots or war. Some of our policies, 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 two of the properties in our portfolio as of December 31, 20182019 were located in Maryland, Virginia, Maryland, North Carolina, South Carolina, 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 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”"ADA"), to the extent that such properties are “public accommodations”"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, or ACBM, and may impose fines and penalties for failure to comply with these requirements or expose us to third-party liability. Such laws require that owners or operators of buildings containing ACBM (and employers in such buildings) properly manage and maintain the asbestos, adequately notify or train those who may come into contact with asbestos, and undertake special precautions, including removal or other abatement, if asbestos would be disturbed during renovation or demolition of a building. In addition, the presence of ACBM in our properties may expose us to third-party liability (e.g. liability for personal injury associated with exposure to asbestos). We are not presently aware of any material adverse issues at our properties including ACBM.
 
Similarly, environmental laws govern the presence, maintenance, and removal of lead-based paint in residential buildings, and may impose fines and penalties for failure to comply with these requirements. Such laws require, among other things, that owners or operators of residential facilities that contain or potentially contain lead-based paint notify residents of the presence or potential presence of lead-based paint prior to occupancy and prior to renovations and manage lead-based paint waste appropriately. In addition, the presence of lead-based paint in our buildings may expose us to third-party liability (e.g., liability for personal injury associated with exposure to lead-based paint). We are not presently aware of any material adverse issues at our properties involving lead-based paint.
 
In addition, the properties in our portfolio also are subject to various federal, state, and local environmental and health and safety requirements, such as state and local fire requirements. Moreover, some of our tenants may handle and use hazardous or regulated substances and wastes as part of their operations at our properties, which are subject to regulation. Such environmental and health and safety laws and regulations could subject us or our tenants to liability resulting from these activities. Environmental liabilities could affect a tenant’s ability to make rental payments to us. In addition, changes in laws could increase the potential liability for noncompliance. Our leases sometimes require our tenants to comply with environmental and health and safety laws and regulations and to indemnify us for any related liabilities. 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 office, retail, and multifamily real estate, many of which own properties similar to ours in the same markets in which our properties are located and some 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 do, which may put them at an advantage when competing with us for construction projects. Competition from other construction companies may reduce the number of construction projects that we are hired to complete and increase pricing pressure, either of which could reduce the profitability of our construction business.
 
Employees
 
As of December 31, 2018,2019, we had 156169 employees. None of our employees are represented by a collective bargaining unit. We believe that our relationship with our employees is good.
 
Corporate Information
 
Our principal executive office is located at 222 Central Park Avenue, Suite 2100, Virginia Beach, Virginia 23462 in the Armada Hoffler Tower at the Town Center of Virginia Beach. In addition, we have construction offices located at 249222 Central Park Avenue, Suite 300,1000, Virginia Beach, Virginia 23462 and 1300 Thames Street, Suite 30, Baltimore, Maryland 21231. The telephone number for our principal executive office is (757) 366-4000. We maintain a website located at www.armadahoffler.com.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 Corporate 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.
 
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 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"Special Note Regarding Forward-Looking Statements”Statements" at the beginning of this Annual Report on Form 10-K.
 
Risks Related to Our Business
 
Our failure to establish new development relationships with public partners and expand our development relationships with existing public partners could have a material adverse effect on our results of operations, cash flow, and growth prospects.
Our growth strategy depends significantly on our ability to leverage our extensive experience in completing large, complex, mixed-use public/private projects to establish new relationships with public partners and expand our relationships with existing public partners. Future increases in our revenues may depend significantly on our ability to expand the scope of the work we do with the state and local government agencies with which we currently have partnered and attract new state and local government agencies to undertake public/private development projects with us. Our ability to obtain new work with state and local governmental authorities on new public/private development and financing partnerships could be adversely affected by several factors, including decreases in state and local budgets, changes in administrations, the departure of government personnel with whom we have worked, and negative public perceptions about public/private partnerships. In addition, to the extent that we engage in public/private partnerships in states or local communities in which we have not previously worked, we could be subject to risks associated with entry into new markets, such as lack of market knowledge or understanding of the local economy, lack of business relationships in the area, competition with other companies that already have an established presence in the area, difficulties in hiring and retaining key personnel, difficulties in evaluating quality tenants in the area, and unfamiliarity with local governmental and permitting procedures. If we fail to establish new relationships with public partners and expand our relationships with existing public partners, it could have a material adverse effect on our results of operations, cash flow, and growth prospects.
We may be unable to identify and complete development opportunities and acquisitions of properties 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 office, retail, and multifamily properties. We may expend significant management time and other resources, including out-of-pocket costs, in pursuing these investment opportunities. Our ability to complete development projects or acquire properties on favorable terms, or at all, may be exposed to the following significant risks: 

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

we have agreements for the development or acquisition 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.


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.

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.

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, 2018,2019, our properties in the

Virginia, Maryland and North Carolina markets represented approximately 65%56%, 18%, and 17%18%, respectively, of the total annualized base rent of the properties in our portfolio. Furthermore, many of our properties are located in the Town Center of Virginia Beach, and rental revenues from our Town Center properties represented 41%31% of our total rental revenues for the year ended December 31, 2018.2019. 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. Aoperations, 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 office, retail, 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 office, retail 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 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, 2018,2019, we had total debt of approximately $694$950.5 million, including amounts drawn under our credit facility, a substantial portion of which is guaranteed by our Operating Partnership, 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 $701$960.8 million as of December 31, 2018.2019. Payments of principal and interest on borrowings may leave us with insufficient cash resources to operate our properties or to pay the dividends currently contemplated or necessary to maintain our REIT qualification. Our level of debt and the limitations imposed on us by our debt agreements could have significant adverse consequences, including the following:  


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


we may be unable to borrow additional funds as needed or on favorable terms, which could, among other things, adversely affect our ability to meet operational needs;


we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness;


we may be forced to dispose of one or more of our properties, possibly on unfavorable terms or in violation of certain covenants to which we may be subject;


we may default on our obligations, in which case the lenders or mortgagees may have the right to foreclose on any properties that secure the loans or collect rents and other income from our properties;


we may violate restrictive covenants in our loan documents, which would entitle the lenders to accelerate our debt obligations or reduce our ability to pay, or prohibit us from paying, distributions to our stockholders; and


our default under any loan with cross-default provisions could result in a default on other indebtedness.
 
If any one of these events were to occur, our financial condition, results of operations, 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"Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”"

The loss of, or a store closure by, one of the anchor stores or major tenants in our retail shopping center properties could result in a material decrease in our rental income, which would have a material adverse effect on us, including our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations.
Our retail shopping center properties typically are anchored by large, nationally recognized tenants. As of December 31, 2018, Kroger/Harris Teeter, Regal Cinemas, Bed Bath & Beyond, and PetSmart collectively represented approximately 19.7%, and individually represented 11.1%, 3.0%, 3.0% and 2.6%, respectively, of the total annualized base rent in our retail portfolio. In addition, several of our retail properties are single-tenant properties or are occupied primarily by a single tenant. As of December 31, 2018, the Courthouse 7-Eleven, Tyre Neck Harris Teeter, and Harrisonburg Regal retail properties in our portfolio were 100% occupied by 7-Eleven, Harris Teeter, and Regal Cinemas, respectively, and several shopping centers are more than 50% occupied by an anchor tenant. At any time, our tenants may experience a downturn in their businesses that may significantly weaken their financial condition. As a result, our tenants, including our anchor and other major tenants, may fail to comply with their contractual obligations to us, seek concessions in order to continue operations or declare bankruptcy, any of which could result in the termination of such tenants’ leases and the loss of rental income attributable to the terminated leases. In addition, certain of our tenants may cease operations while continuing to pay rent, which could decrease customer traffic, thereby decreasing sales for our other tenants at the applicable retail property. Furthermore, mergers or consolidations among retail establishments could result in the closure of existing stores or duplicate or geographically overlapping store locations, which could include stores at our retail properties.  
Loss of, or a store closure by, an anchor or major tenant could significantly reduce our occupancy level or the rent we receive from our retail properties, and we may not have the right, or otherwise may be unable, to re-lease the vacated space at attractive rents or at all. Moreover, in the event of default by a major tenant or anchor store, we may experience delays and costs in enforcing our rights as landlord to recover amounts due to us under the terms of our agreements with those parties. The occurrence of any of the situations described above, particularly if it involves an anchor tenant with leases in multiple locations, could seriously harm our performance and could adversely affect the value of the affected retail property.
In the event that any of the anchor stores, major tenants, or single-tenant property tenants in our retail properties do not renew their leases with us when they expire, we may be unable to re-lease such premises at market rents or at all, which could have a material adverse effect on our financial condition, results of operations, cash flow, cash available for distribution, and ability to satisfy our debt service obligations.

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, 2018,2019, approximately 4.4%3.4% of the square footage of the properties in our stabilized office and retail portfolios was available. Additionally, 9.4%2.2% and 3.7%3.8% of the annualized base rent in our office portfolio was scheduled to expire in 20192020 and 2020,2021, respectively, and 8.8%5.3% and 14.9%10.1% of the annualized base rent in our retail portfolio was scheduled to expire in 20192020 and 2020,2021, 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.  


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 and student housing 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 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 impact our results of operations, cash flow, and cash available for distribution.
 
The failure of properties that we develop or acquire in the future to meet our financial expectations could have a material adverse effect on us, including our financial condition, results of operations, cash flow, cash available for distribution, ability to service our debt obligations, the per share trading price of our common stock, and growth prospects.
 
Our future acquisitions and development projects and our ability to successfully operate these properties may be exposed to the following significant risks, among others:


we may acquire or develop properties that are not accretive to our results upon acquisition, and we may not successfully manage and lease those properties to meet our expectations;


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


we may spend more than budgeted amounts to make necessary improvements or renovations to acquired properties or to develop new properties;


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


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


we may acquire properties subject to liabilities 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 growth prospects could be materially and adversely affected.


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.
We depend on significant tenants in certain of our office properties, and an inability to pay rent by any of these tenants could result in a material decrease in our rental income, which would have an adverse effect on our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations.
As of December 31, 2018, the top ten largest tenants in our office portfolio collectively accounted for approximately 50.2% of the total annualized base rent in our office portfolio. Furthermore, Clark Nexsen, Mythics, and Hampton University accounted for 12.5%, 5.6%, and 5.1%, respectively, of the total annualized base rent in our office portfolio as of December 31, 2018. The inability of these or other significant tenants to pay rent or renew their leases upon expiration could materially and adversely affect the income produced by our office properties, which would have an adverse effect on our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations.

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.
Certain of the leases at our retail properties contain “co-tenancy” or “go-dark” provisions, which, if triggered, may allow tenants to pay reduced rent, cease operations, or terminate their leases, any of which could materially and adversely affect our performance or the value of the affected retail property.
Certain of the leases at our retail properties contain “co-tenancy” provisions that condition a tenant’s obligation to remain open, the amount of rent payable by the tenant, or the tenant’s obligation to continue occupancy on certain conditions, including: (i) the presence of a certain anchor tenant or tenants, (ii) the continued operation of an anchor tenant’s store, and (iii) minimum occupancy levels at the retail property. If a co-tenancy provision is triggered by a failure of any of these or other applicable conditions, a tenant could have the right to cease operations, to terminate its lease early, or to reduce its rent. In periods of prolonged economic decline, there is a higher than normal risk that co-tenancy provisions will be triggered as there is a higher risk of tenants closing stores or terminating leases during these periods. In addition to these co-tenancy provisions, certain of the leases at our retail properties contain “go-dark” provisions that allow the tenant to cease operations while continuing to pay rent. This could result in decreased customer traffic at the affected retail property, thereby decreasing sales for our other tenants at that property, which may result in our other tenants being unable to pay their minimum rents or expense recovery charges. These provisions also may result in lower rental revenue generated under the applicable leases. To the extent co-tenancy or go-dark provisions in our retail leases result in lower revenue, tenant sales, tenants’ rights to terminate their leases early, or a reduction of their rent, our revenues and the value of the affected retail property could be materially and adversely affected.
Our dependence on smaller businesses, particularly in our retail portfolio, to rent our space 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 tenants, particularly those that lease space in our retail properties are smaller businesses that generally do not have the financial strength or resources of larger corporate tenants. In particular, 226 of our retail leases (representing approximately 14% of our annualized base rent from retail properties as of December 31, 2018) lease 2,500 or less square feet from us, and many of those tenants are smaller independent businesses, which generally experience a higher rate of failure than larger businesses. As a result of our dependence on these smaller businesses, we could experience a higher rate of tenant defaults, turnover, and bankruptcies, which could have a material adverse effect on our 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.

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 54% of our total annualized base rent as of December 31, 2018 is 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, and increasing competition from discount retailers, outlet malls, internet retailers, and other online businesses. Increases in consumer spending via the internet may significantly affect our retail tenants’ ability to generate sales in their stores. New and enhanced technologies, including new digital technologies and new web services technologies, may increase competition for certain of our retail tenants.
Any of the foregoing factors could adversely affect the financial condition of our retail tenants and the willingness of retailers to lease space in our retail properties. In turn, these conditions could negatively affect market rents for retail space and could materially and adversely affect our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations.
Increases in interest rates will increase our interest expense and may adversely affect our cash flow and ability to pay distributions.
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.
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.


Most of our debt arrangements involve balloon payment obligations, which may materially and adversely affect our financial condition, cash flow, cash available for distribution, and ability to service our debt obligations.
Most of our debt arrangements require us to make a lump-sum or “balloon” payment at maturity. Our ability to make a balloon payment at maturity is uncertain and may depend upon our ability to obtain additional financing or our ability to sell the property. At the time the balloon payment is due, we may or may not be able to refinance the existing financing on terms as favorable as the original loan or sell the property at a price sufficient to make the balloon payment. In addition, balloon payments and payments of principal and interest on our indebtedness may leave us with insufficient cash to pay the distributions that we are required to pay to maintain our qualification as a REIT. Any of these factors may materially and adversely affect our financial condition, cash flow, cash available for distribution, and ability to service our debt obligations.
Our credit facility restricts our ability to engage in certain business activities, including our ability to incur additional indebtedness, make capital expenditures, and make certain investments.
Our credit facility contains customary negative covenants and other financial and operating covenants that, among other things:

restrict our ability to incur additional indebtedness;

restrict our ability to incur additional liens;

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

restrict our ability to merge with another company;

restrict our ability to sell or dispose of assets;

restrict our ability to make distributions to 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 may contain specific cross-default provisions with respect to specified other indebtedness, giving the lenders the right, in certain circumstances, to declare a default if we are in default under other loans.
Adverse economic and geopolitical conditions and dislocations in the credit markets could have a material adverse effect on our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations.
Our business may 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 office, retail 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 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.
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, information about 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. Information security risks have increased in recent years due to the rise in new technologies and the increased sophistication of perpetrators of cyber attacks. The theft, destruction, loss, or release of sensitive and confidential information or operational downtime of the systems used to store and transmit such 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 adversely affect our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations. 

Failure to hedge effectively against interest rate changes may adversely affect our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations.
Subject to maintaining our qualification as a REIT, we expect to continue to enter into hedging transactions to protect us from the effects of interest rate fluctuations on floating rate debt. Our existing hedging transactions have included, and future hedging transactions may include, entering into interest rate cap agreements or interest rate swap agreements. These agreements involve risks, such as the risk that (i) such arrangements may not be effective in reducing our exposure to interest rate changes, (ii) a court could rule that such agreements are not legally enforceable, (iii) hedging could actually increase our costs and reduce the overall returns on our investments, as interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates, (iv) counterparties to such arrangements could not perform, (v) we could incur significant costs associated with the settlement of the agreements, or (vi) the underlying transactions could fail to qualify as highly-effective cash flow hedges under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging. 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. 
We will continue to incur costs as a result of being a public company.
As a public company, we expect to continue to incur significant legal, accounting, insurance, and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect compliance with these public reporting requirements and associated rules and regulations to increase expenses, particularly now that we are no longer an emerging growth company, although we are currently unable to estimate these costs with any degree of certainty. 
We are required to have an independent auditor assess the effectiveness of our internal control over financial reporting.
As of December 31, 2018, we are no longer an emerging growth company under the Jumpstart Our Business Startups Act ("JOBS Act"), and 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. 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.

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.
Our use of units in our Operating Partnership as currency to acquire properties could result in stockholder dilution or limit our ability to sell such properties, which could have a material adverse effect on us.
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 may require that we agree to protect the contributors’ ability to defer recognition of taxable gain through restrictions on our ability to dispose of the acquired properties or the allocation of partnership debt to the contributors to maintain their tax bases. These 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.

Significant competition in the leasing market could have a material adverse effect on us, including our financial condition, results of operations, cash flow, cash available for distribution, and our ability to service our debt obligations.
We compete with numerous developers, owners, and operators of real estate, many of which own properties similar to ours in the same submarkets in which our properties are located. If our competitors offer space at rental rates below current market rates or below the rental rates we currently charge our tenants, we may lose existing or potential tenants and we may be pressured to reduce our rental rates below those we currently charge or to offer more substantial rent abatements, tenant improvements, early termination rights, or below-market renewal options in order to retain tenants when our tenants’ leases expire. As a result, our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations could be materially and adversely affected.
Our success depends on key personnel whose continued service is not guaranteed, and the loss of one or more of our key personnel could adversely affect our ability to manage our business and to implement our growth strategies or could create a negative perception of our company in the capital markets.
Our continued success and our ability to manage anticipated future growth depend, in large part, upon the efforts of key personnel, particularly Messrs. Hoffler (our Executive Chairman), Kirk (our Vice Chairman), Haddad (our President and Chief Executive Officer), Apperson (our President of Construction), and O’Hara (our Chief Financial Officer, Treasurer, and Corporate Secretary) and Ms. Hampton (our President of Asset Management), who have extensive market knowledge and relationships and exercise substantial influence over our operational, financing, development, and construction activity. Among the reasons that these individuals are important to our success is that each has a national or regional industry reputation that attracts business and investment opportunities and assists us in negotiations with lenders, existing and potential tenants, and industry personnel. 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

and adversely affect our financial condition, results of operations, cash flow, and the per share trading price of our common stock.
We may be subject to 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, 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, 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.
Potential losses from hurricanes in Virginia, Maryland, North Carolina, South Carolina, and Georgia may not be covered by insurance. 
All but two of the properties in our portfolio as of December 31, 2018 are located in Virginia, Maryland, North Carolina, South Carolina, and Georgia, 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. In addition, we may reduce or discontinue insurance on some or all of our properties in the future if the cost of premiums for any such policies exceeds, in our judgment, the value of the coverage discounted for the risk of loss. As a result, in the event of a hurricane, we may be required to incur significant costs, and, to the extent that a loss exceeds policy limits, we could lose the capital invested in the damaged properties as well as the anticipated future cash flows from those properties. In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged.  
We may not be able to rebuild our existing properties to their existing specifications if we experience a substantial or comprehensive loss of such properties.
In the event that we experience a substantial or comprehensive loss of one of our properties, we may not be able to rebuild such property to its existing specifications. Further, reconstruction or improvement of such a property would likely require significant upgrades to meet zoning and building code requirements. Environmental and legal restrictions could also restrict the rebuilding of our properties.

Joint venture investments could be 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, as of December 31, 2018, we were 70%, 65%, 80%, 93%, 90%, 70%, and 37% joint venture partners in our Lightfoot Marketplace, Brooks Crossing, Greenside, Hoffler Place, Summit Place, Market at Mill Creek, and City Center development projects, respectively. 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.  
Mezzanine loans and similar loan 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 or similar loans, 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, 2018,2019, we had approximately $139.1$153.0 million in outstanding mezzanine loans or similar investments. These types of loans involve a higher degree of risk than long-term senior mortgage loans secured by income-producing real property because the loan may become unsecured as a result of foreclosure by the senior lender. In addition, these loans 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 mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan 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 mezzanine loan. As a result, we may not recover some or all of our initial investment. Additionally, in conjunction with certain mezzanine loans, 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 loan investments, we may have options to purchase all or a portion of the underlying property upon maturity of the loan; 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 mezzanine or similar loan 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.

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 47.3% of our total annualized base rent as of December 31, 2019 is 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, and increasing competition from discount retailers, outlet malls, internet retailers, and other online businesses. Increases in consumer spending via the internet may significantly affect our retail tenants’ ability to generate sales in their stores. New and enhanced technologies, including new digital and web services technologies, may increase competition for certain of our retail tenants.
Any of the foregoing factors could adversely affect the financial condition of our retail tenants and the willingness of retailers to lease space in our retail properties, 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.
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.

The phase-out of LIBOR and transition to SOFR as a benchmark interest rate could have adverse effects.

The interest rate on our variable rate debt is based on LIBOR (the London Inter-Bank Offered Rate). In 2018, the Alternative Reference Rate Committee identified the Secured Overnight Financing Rate (“SOFR”) as the alternative to LIBOR. SOFR is a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities, published by the Federal Reserve Bank of New York. By the end of 2021, it is expected that no new contracts will reference LIBOR and will instead use SOFR. Due to the broad use of LIBOR as a reference rate, all financial market participants, including us, are impacted by the risks associated with this transition and, therefore, it could adversely affect our operations and cash flows.

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 restricts our ability to engage in certain business activities, including our ability to incur additional indebtedness, make capital expenditures, and make certain investments.
Our credit facility contains customary negative covenants and other financial and operating covenants that, among other things:

restrict our ability to incur additional indebtedness;

restrict our ability to incur additional liens;

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

restrict our ability to merge with another company;

restrict our ability to sell or dispose of assets;

restrict our ability to make distributions to 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 may contain specific cross-default provisions with respect to specified other indebtedness, giving the lenders the right, in certain circumstances, to declare a default if we are in default under other loans.
Adverse economic and geopolitical conditions and dislocations in the credit markets could have a material adverse effect on our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations.
Our business may 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 office, retail 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 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.
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. We have in the past experienced cyberattacks on our computers and computer networks, and, while none to date have been material, we expect that additional cyberattacks will occur in the future. 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 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.

Any material weakness in our internal control over financial reporting could have an adverse effect on the trading price of our common 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. 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.

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.
Our use of units in our Operating Partnership as currency to acquire properties could result in stockholder dilution or limit our ability to sell such properties, which could have a material adverse effect on us.
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 has a national or regional industry reputation that attracts business and investment opportunities and assists us in negotiations with lenders, existing and potential tenants, and industry personnel, 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 and adversely affect our financial condition, results of operations, cash flow, and the per share trading price of our common stock.

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 two of the properties in our portfolio as of December 31, 2019 are located in Maryland, Virginia, North Carolina, South Carolina, and Georgia, 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.

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, as of December 31, 2019, we were the 90% joint venture partner in our Summit Place development project. 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.  

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.
 
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.

Expectations of our company relating to environmental, social and governance factors may impose additional costs and expose us to new risks.

There is an increasing focus from certain investors, tenants, employees, and other stakeholders concerning corporate responsibility, specifically related to environmental, social and governance factors. 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, in the event that we communicate certain initiatives and goals regarding environmental, social and governance matters, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, 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.

We may not be ablesubject to sustainongoing or future litigation, including existing claims relating to the entities that owned the properties prior to our growth rate level.

Sinceinitial public offering and otherwise in the ordinary course of business, which could have a material adverse effect on our inception, we have achieved significant growth in our portfolio andfinancial condition, results of operations. We may not be able to sustain this level of growth, and over time we may experience a decline in our growth rate as a result of various factors, including our ability to successfully acquire and develop retail, office, and multifamily properties, changes inoperations, cash flow, the economic and other conditions in geographic markets in which we conduct business, changes in the real estate market generally, the competitiveness of the real estate market, and the other risks discussed in this section, which could adversely affect the marketper share trading price of our common stock.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, 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.

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 United States.U.S. As a result of our concentration of construction projects in the Mid-Atlantic region of the United States,U.S., we are particularly susceptible to adverse economic or other conditions in markets in this marketregion (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.
 
OurFor serving as general contractor, our construction business earns profit for serving as general contractor 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;

unforeseen engineering, environmental, or geological problems;


weather interferences;


difficulties in obtaining necessary permits or in meeting permit conditions;


client acceptance delays; or


work stoppages and other labor disputes.
 
If we do not complete construction projects on time and on budget, it could have a material adverse effect on us, including our results of operations, cash flow, and growth prospects.
 
Our dependence on third-party subcontractors and equipment and material providers could result in material shortages and project delays and could reduce our profits or result in project losses, which could materially and adversely affect our financial condition, results of operations, and cash flow.
 
Because our construction business provides general contracting services, we rely on third-party subcontractors and equipment and material providers. For example, we procure equipment and construction materials as needed when engaged in large construction projects. To the extent that we cannot engage subcontractors or acquire equipment and materials at reasonable costs or if the amount we are required to pay for subcontractors or equipment exceeds our estimates, our ability to complete a construction project in a timely fashion or at a profit may be impaired. In addition, if a subcontractor or a manufacturer is unable to deliver its services, equipment, or materials according to the negotiated terms for any reason, including the deterioration of its financial condition, we may be required to purchase the services, equipment, or materials from another source at a higher price. Additionally, while our construction contracts generally provide that our obligation to pay subcontractors is expressly made subject to the condition precedent that we shall have first received payment, we cannot assure you that these so called “pay-if-paid”"pay-if-paid" or “pay-when-paid”"pay-when-paid" provisions will be recognized in all jurisdictions in which we do business, or that a subcontractor or payment bond surety may not otherwise be entitled to payment or to record a lien on the affected property. In such event, we may be required to pay a payment bond surety or the subcontractors we engage even though we have yet to receive our fees as general contractor. This may reduce the profit to be realized or result in a loss on a project for which the services, equipment, or materials are needed, which may materially and adversely affect our financial condition, results of operations, and cash flow.
 
Our construction business recognizes certain revenue using the input method and upon the achievement of contractual milestones, and any delay or cancellation of a construction project could materially and adversely affect our cash flow and results of operations.
 
Our construction business recognizes certain revenue using the input method and, as a result, revenue from our construction business is driven by the performance of our contractual obligations. The input method of accounting is inherently subjective because it relies on estimates of total project cost as a basis for recognizing revenue and profit. Accordingly, revenue and profit recognized under the input method is potentially subject to adjustments in subsequent periods based on refinements in the estimated cost to complete a project, which could result in a reduction or reversal of previously recorded revenues and profits. In addition, delays in, or the cancellation of, any particular construction project could adversely impact our ability to recognize revenue in a particular period. Furthermore, changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income in the period in which they are determined. If any of the foregoing were to occur, it could have a material adverse effect on our cash flow and results of operations.


Construction project sites are inherently dangerous workplaces, and, as a result, our failure to maintain safe construction project sites could result in deaths or injuries, reduced profitability, the loss of projects or clients, and possible exposure to litigation, any of which could materially 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, or 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.
 
Supply shortages and other risks associated with demand for skilled labor could increase construction costs and delay performance of our obligations under construction contracts, which could materially and adversely affect the profitability of our construction business, our cash flow, and our results of operations.
 
There is a high level of competition in the construction industry for skilled labor. Increased costs, labor shortages, or other disruptions in the supply of skilled labor, such as carpenters, roofers, electricians, and plumbers, could cause increases in construction costs and construction delays. We may not be able to pass on increases in construction costs because of market conditions or negotiated contractual terms. Sustained increases in construction costs due to competition for skilled labor and delays in performance under construction contracts may materially and adversely affect the profitability of our construction business, our cash flow, and results of operations.
 
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 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 Development Business and Property Acquisitions
Our failure to establish new development relationships with public partners and expand our development relationships with existing public partners could have a material adverse effect on our results of operations, cash flow, and growth prospects.
Our growth strategy depends significantly on our ability to leverage our extensive experience in completing large, complex, mixed-use public/private projects to establish new relationships with public partners and expand our relationships with existing public partners. Future increases in our revenues may depend significantly on our ability to expand the scope of the work we do with the state and local government agencies with which we currently have partnered and attract new state and local government agencies to undertake public/private development projects with us. Our ability to obtain new work with state and local governmental authorities on new public/private development and financing partnerships could be adversely affected by several factors, including decreases in state and local budgets, changes in administrations, the departure of government personnel with whom we have worked, and negative public perceptions about public/private partnerships. In addition, to the extent that we engage in public/private partnerships in states or local communities in which we have not previously worked, we could be subject to risks associated with entry into new markets, such as lack of market knowledge or understanding of the local economy, lack of business relationships in the area, competition with other companies that already have an established presence in the area, difficulties in hiring and retaining key personnel, difficulties in evaluating quality tenants in the area, and unfamiliarity with local governmental and permitting procedures. If we fail to establish new relationships with public partners and expand our relationships with existing public partners, it could have a material adverse effect on our results of operations, cash flow, and growth prospects.
We may be unable to identify and complete development opportunities and acquisitions of properties 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 office, retail and multifamily properties. We may expend significant management time and other resources, including out-of-pocket costs, in pursuing these investment opportunities. Our ability to complete development projects or acquire properties on favorable terms, or at all, may be exposed to the following significant risks: 

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

we have agreements for the development or acquisition 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.

The risks associated with land holdings and related activities could have a material adverse effect on our results of operations.
We hold options to acquire undeveloped parcels of land for future development and may in the future acquire additional land holdings for development. The risks inherent in purchasing, owning, and developing land increase as demand or rental rates for office, retail or multifamily properties decreases. Real estate markets are highly uncertain and volatile and, as a result, the value of undeveloped land has fluctuated significantly and may continue to fluctuate. In addition, carrying costs, including interest and other pre-development costs, can be significant and can result in losses or reduced profitability. If there are subsequent changes in the fair value of our undeveloped land holdings that cause us to determine that the fair value of our

undeveloped land holdings is less than their carrying basis reflected in our financial statements plus estimated costs to sell, we may be required to take future impairment charges which would reduce our net income and could materially and adversely affect our results of operations.
The success of our activities to design, construct and develop properties in which we will retain an ownership interest is dependent, in part, on the availability of suitable undeveloped land at acceptable prices as well as our having sufficient liquidity to fund investments in such undeveloped land and subsequent development.
Our success in designing, constructing, and developing projects for our own account depends, in part, upon the continued availability of suitable undeveloped land at acceptable prices. The availability of undeveloped land for purchase at favorable prices depends on a number of factors outside of our control, including the risk of competitive over-bidding on land and governmental regulations that restrict the potential uses of land. If the availability of suitable land opportunities decreases, the number of development projects we may be able to undertake could be reduced. In addition, our ability to make land purchases will depend upon us having sufficient liquidity or access to external sources of capital to fund such purchases. Thus, the lack of availability of suitable land opportunities and insufficient liquidity to fund the purchases of any such available land opportunities could have a material adverse effect on our results of operations and growth prospects.

Our real estate development activities are subject to risks particular to development, such as unanticipated expenses, delays and other contingencies, any of which could materially 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;

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

the availability and pricing of financing to fund our development activities on favorable terms or at all.
These risks could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent completion of development or redevelopment activities once undertaken, any of which could have a material adverse effect on our financial condition, results of operations, and cash flow.
There can be no assurance that all of the properties in our development pipeline will be completed in their entirety in accordance with the anticipated cost, or that we will achieve the results we expect from the development of such properties, which could materially and adversely affect our financial condition, results of operations, and growth prospects.
The development of the projects in our development pipeline is subject to numerous risks, many of which are outside of our control. The cost necessary to complete the development of our development pipeline could be materially higher than we anticipate. Because we generally intend to commence the construction phase of an office or retail project for our own account only where a substantial percentage of the commercial space is pre-leased, we could decide not to undertake construction on one or more of the projects in our development pipeline if our pre-leasing efforts are unsuccessful. Furthermore, if we are delayed in the completion of any development project, tenants may have the right to terminate pre-development leases, which could materially and adversely affect the financial viability of the project. In addition, even if we decide to commence construction on a project, we can provide no assurances that we will complete any of the projects in our development pipeline on the anticipated schedule, or that, once completed, the properties in our development pipeline will achieve the results that we expect. If the development of the projects in our development pipeline is not completed in accordance with our anticipated timing or at the anticipated cost, or the properties fail to achieve the financial results we expect, it could have a material adverse effect on our financial condition, results of operations, and growth prospects.



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 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 office, retail, or multifamily space in our markets;


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


vacancies or our inability to rent space on favorable terms, including possible market pressures to offer tenants rent abatements, tenant improvements, early termination rights, or below-market renewal options, and the need to periodically repair, renovate, and re-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. Therefore, we may not be able to vary our portfolio in response to economic or other conditions promptly or on favorable terms.

Our property taxestax protection agreements could increase duelimit our ability to propertysell or otherwise dispose of certain properties.

In connection with the formation transactions related to our initial public offering, our Operating Partnership entered into tax rate changes or reassessment, which would adversely impact our cash flows and cash available for distribution.
Evenprotection agreements that provide that if we qualifydispose of any interest in certain protected properties in a taxable transaction prior to the seventh (or, in a limited number of cases, the tenth) anniversary of the completion of the formation transactions, subject to certain exceptions, we will indemnify certain contributors, including Messrs. Hoffler, Haddad, Kirk, and Apperson and their respective affiliates and certain of our other officers, for their tax liabilities attributable to the built-in gain that existed with respect to such property interests as of the time of our initial public offering, and the tax liabilities incurred as a REITresult of such tax protection payment. In addition, in connection with certain acquisitions completed since our initial public offering, we entered into tax protection agreements that require us to indemnify the contributors for federal incometheir tax purposes, we will be required to pay some state and local taxes on our properties. The real property taxes on our properties may increase as property tax rates change or as our properties are assessed or reassessed by taxing authorities. Therefore, the amount of property taxes we payliabilities in the event that we dispose of the properties subject to the tax protection agreements, and may enter into similar agreements in connection with future property acquisitions. Therefore, although it may increase substantially from whatbe 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. Moreover, as a result of these potential tax liabilities, Messrs. Hoffler, Haddad, Kirk, and Apperson and certain of our other officers may have paid in the past. If the property taxes we pay increase,a conflict of interest with respect to our cash flow and cash available for distribution would be adversely impacted.determination as to certain of our properties.
 
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"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"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 may handle and use hazardous or regulated substances and wastes as part of their operations at our properties, which are subject to regulation. Such environmental and health and safety laws and regulations could subject us or our tenants to liability resulting from these activities. Environmental liabilities could affect a tenant’s ability to make rental payments to us, and changes in laws could increase the potential liability for noncompliance. This may result in significant unanticipated expenditures or may otherwise materially and adversely affect our operations, or those of our tenants, which could in turn have an adverse effect on us. If we incur material environmental liabilities in the future, we may face significant remediation costs, and we may find it difficult to sell any affected properties.


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 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”("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 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, 2018,2019, Daniel Hoffler, our Executive Chairman, owned approximately 9%6% and, collectively, Messrs. Hoffler, Haddad, and Kirk owned approximately 15%11% of the combined outstanding shares of our common stock and OP Units of our Operating Partnership (which OP Units may be redeemable for shares of our common stock). Consequently, these individuals may be able to significantly influence the outcome of matters submitted for stockholder action, including the approval of significant corporate transactions, including business combinations, consolidations, and mergers. 
 
Conflicts of interest may exist or could arise in the future between the interests of our stockholders and the interests of holders of units in our Operating Partnership, which may impede business decisions that could benefit our stockholders.
 
Conflicts of interest may exist or could arise in the future as a result of the relationships between us and our affiliates, on the one hand, and our Operating Partnership or any partner thereof, on the other.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, on the one hand, and the separate interests of our company or our stockholders, on the other hand, we, in our capacity as the general partner of our Operating Partnership, are under no obligation not to give priority to the separate interests of our company or our stockholders, and that any action or failure to act on our part or on the part of our directors that gives priority to the separate interests of our company or our stockholders that does not result in a violation of the 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 Operating Partnership will not indemnify or advance funds to any person with respect to any action initiated by the person seeking indemnification without our approval (except for any proceeding brought to enforce such person’s right to indemnification under the partnership agreement) or if the person is found to be liable to our Operating Partnership on any portion of any claim in the action.

We may 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 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”"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”combination" provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder”"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”share" provisions that provide that holders of “control shares”"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"control share acquisition”acquisition" (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”"control shares") have no voting rights with respect to their control shares, except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.
 

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 25.5%27.4% of the outstanding OP Units of our Operating Partnership as of December 31, 2018.  
Our tax protection agreements could limit our ability to sell or otherwise dispose of certain properties.
In connection with the formation transactions related to our initial public offering, our Operating Partnership entered into tax protection agreements that provide that if we dispose of any interest in certain protected properties in a taxable transaction prior to the seventh (or, in a limited number of cases, the tenth) anniversary of the completion of the formation transactions, subject to certain exceptions, we will indemnify certain contributors, including Messrs. Hoffler, Haddad, Kirk, and Apperson and their respective affiliates and certain of our other officers, for their tax liabilities attributable to the built-in gain that existed with respect to such property interests as of the time of our initial public offering, and the tax liabilities incurred as a result of such tax protection payment. In addition, in connection with certain acquisitions completed since our initial public offering, we entered into tax protection agreements that require us to indemnify the contributors for their tax liabilities in the event that we dispose of the properties subject to the tax protection agreements, 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. Moreover, as a result of these potential tax liabilities, Messrs. Hoffler, Haddad, Kirk, and Apperson and certain of our other officers may have a conflict of interest with respect to our determination as to certain of our properties. 
Our board of directors may change our strategies, policies, and procedures without stockholder approval and we may become more highly leveraged, which may increase our risk of default under our debt obligations.
Our investment, financing, leverage, and distribution policies, and our policies with respect to all other activities, including growth, capitalization, and operations, will be determined exclusively by our board of directors and may be amended or revised at any time by our board of directors without notice to or a vote of our stockholders. This could result in us conducting operational matters, making investments, or pursuing different business or growth strategies than those contemplated in this Annual Report on Form 10-K. Further, our charter and bylaws do not limit the amount or percentage of indebtedness, funded or otherwise, that we may incur. Our board of directors may alter or eliminate our current policy on borrowing at any time without stockholder approval. If this policy changed, we could become more highly leveraged, which could result in an increase in our debt service costs. Higher leverage also increases the risk of default on our obligations. In addition, a change in our investment policies, including the manner in which we allocate our resources across our portfolio or the types of assets in which we seek to invest, may increase our exposure to interest rate risk, real estate market fluctuations

and liquidity risk. Changes to our policies with regards to the foregoing could materially and adversely affect our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations.2019.  
 
Our rights and the rights of our stockholders to take action against our directors and officers are limited.
 
Under Maryland law, generally, a director will not be liable if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. In addition, our charter limits the liability of our directors and officers to us and our stockholders for money damages, except for liability resulting from:


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


active and deliberate dishonesty by the director or officer that was established by a final judgment as being material to the cause of action adjudicated.
 
Our charter authorizes us to indemnify our directors and officers for actions taken by them in those capacities to the maximum extent permitted by Maryland law. Our bylaws require us to indemnify each director and officer, to the maximum extent permitted by Maryland law, in the defense of any proceeding to which he or she is made, or threatened to be made, a party by reason of his or her service to us. In addition, we may be obligated to advance the defense costs incurred by our

directors and officers. We have entered into indemnification agreements with each of our executive officers and directors whereby we agreed to indemnify our directors and executive officers to the fullest extent permitted by Maryland law against all expenses and liabilities incurred in their capacity as an officer or director, subject to limited exceptions. As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist absent the current provisions in our charter and bylaws 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, 2018,2019, we owned 74.5%72.6% 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 qualify as a REIT, or failure to remain qualified as a REIT, would cause us to be taxed as a regular corporation, which would substantially reduce funds available for 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”"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.
 

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


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


The ability of our board of directors to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders.
 
Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interests to continue to qualify as a REIT. If we cease to qualify as a REIT, we would become subject to U.S. federal income tax on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on our total return to our stockholders.
 
Our ownership of our TRS will be subject to limitations and our transactions with our TRS will cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms.
 
Overall, no more than 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. Furthermore, we will monitor the value of our respective investments in our TRS for the purpose of ensuring compliance with TRS ownership limitations and will structure our transactions with our TRS on terms that we believe are arm’s length to avoid incurring the 100% excise tax described above. There can be no assurance, however, that we will be able to comply with the 20% REIT subsidiaries limitation or to avoid application of the 100% excise tax. 
 

You may be restricted from acquiring or transferring certain amounts of our common stock.
 
The restrictions on ownership and transfer in our charter may inhibit market activity in our capital stock and restrict our business combination opportunities.
 
In order to qualify as a REIT for each taxable year after 2013, five or fewer individuals, as defined in the Code, may not own, beneficially or constructively, more than 50% in value of our issued and outstanding stock at any time during the last half of a taxable year. Attribution rules in the Code determine if any individual or entity beneficially or constructively owns our capital stock under this requirement. Additionally, at least 100 persons must beneficially own our capital stock during at least 335 days of a taxable year for each taxable year after 2013. To help 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"qualified dividend income”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%.
 
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.
    
The legislation commonly known as the Tax Cuts and Jobs Act (the "Tax Act") was enacted on December 22, 2017. The Tax Act significantly changed the U.S. federal income taxation of U.S. businesses and their owners, including REITs and their stockholders. The full impact of the act on us and our shareholders is uncertain and may not become evident for some period of time. For example, the act contained provisions that may reduce the relative competitive advantage of operating as a REIT, including the lowering of income tax rates on individuals and corporations, which eases the burden of double taxation on corporate dividends and potentially causes the single level of taxation on REIT distributions to become relatively less attractive. The act also contains provisions allowing the expensing of capital expenditures, which could result in the bunching of taxable income and required distributions for REITs, and provisions extending the depreciable lives of certain real estate assets and further limiting the deductibility of interest expense, which could negatively impact the real estate market. In addition, although the Tax Act was recently passed, 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 constantly under review by persons involved in the legislative process and by the Internal Revenue Service 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.    
    
We cannot predict whether, when, or to what extent the Tax Act and any new U.S. federal tax laws, regulations, interpretations, or rulings will impact the real estate investment industry or REITs. Prospective investors are urged to consult their tax advisors regarding the effect of the Tax Act and potential future changes to the federal tax laws on an investment in our shares.


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 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 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. In order to maintain our REIT status and avoid the payment of income and excise taxes, we may need to borrow funds to meet the REIT distribution requirements even if the then prevailing market conditions are not favorable for these borrowings. These borrowing needs could result from, among other things, differences in timing between the actual receipt of cash and inclusion of income for federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required principal or amortization payments. These sources, however, may not be available on favorable terms or at all. Our access to third-party

sources of capital depends on a number of factors, including the market’s perception of our growth potential, our current debt levels, the market price of our common stock, and our current and potential future earnings. We cannot assure you that we will have access to such capital on favorable terms at the desired times, or at all, which may cause us to curtail our investment activities or dispose of assets at inopportune times or on unfavorable terms, which could materially 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 CommonCapital 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.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.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, our ability to make distributions during any twelve-month period is limited to the greater of (1) 95% of our adjusted funds from operations (as defined in the credit agreement) or (2) the aggregate amount of Restricted Payments (as defined in the credit agreement) required for us to (a) maintain our REIT status and (b) avoid the payment of federal or state income or excise tax. In addition, if a default or events of default exist or would result from a distribution, we are precluded from making certain distributions other than those required to allow us to maintain our status as a REIT.

As a result of the foregoing, we may not be able to make distributions in the future, and our inability to make distributions, or to make distributions at expected levels, could result in a decrease in the market price of our common stock.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 20192020 compared to 2018.2019. 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;


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


changes in market valuations of similar companies;


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


additions or departures of key management personnel;


actions by institutional stockholders;


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;


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.stock and Series A Preferred Stock.
 
Increases in market interest rates may have an 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 common stock (as a percentage of the price of our common stock)stock or Series A Preferred Stock, as applicable) relative to market interest rates. An increase in market interest rates, which are currently at low levels relative to historical rates, may lead prospective purchasers of our common stock or Series A Preferred Stock to expect a higher dividend yield (with a resulting decline in the trading prices of our common stock)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.

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 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). Notwithstanding that we

generally may not redeem our Series A Preferred Stock prior to June 18, 2024, 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 available for future issuance orequal 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 could materially and adversely affect the per share trading price of our common stock and our abilityon June 10, 2019), subject to obtain additional capital.
We cannot predict whether future issuances or salesadjustment, each holder will receive a maximum of 2.97796 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 sharesSeries A Preferred Stock, which may result in a holder receiving value that is less than the liquidation preference of our common stock in the public market, the redemption of OP Units for sharesSeries A Preferred Stock. In addition, those features of our common stock,Series A Preferred Stock may have the effect of inhibiting a third party from making an acquisition proposal for our company or the perception that such issuances might occur could adversely affect the per share trading priceof delaying, deferring or preventing a change of control of our common stock. As of February 26, 2019, 50,335,242 shares of our common stock were outstanding. In addition, as of February 26, 2019, 16,991,933 OP Units in our Operating Partnership were outstanding (other than OP Units held by us), which were eligible to be tendered for redemption for cash or, at our option, for shares of our common stock on a one-for-one basis. 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 stockcompany under circumstances that otherwise could be issued inprovide the future pursuant to such resale shelf registration statement. In addition, we have an effective shelf registration statement covering the possible resale,

from time to time, of up to 2,000,000 shares of our common stock that were issued in connection with our acquisition of a retail property in October 2016. 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 26, 2019, 930,602 sharesholders of our common stock and other equity-based awards were available for future issuance under our 2013 Amended and Restated Equity Incentive Plan (our "Equity Plan").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.
The issuance of substantial numbers of shares of equity securities, including OP Units, or the perception that such issuances might occur, could materially and adversely affect us, including the per share trading price of shares of our common stock.
The redemption of OP Units for common stock, the vesting of any restricted stock granted to certain directors, executive officers, and other employees under our 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, and the existence of units, options, or shares of our common stock issuable under our Equity Plan or upon redemption of OP Units may adversely affect the terms upon which we may be able to obtain additional capital through the sale of equity securities. In addition, future issuances of shares of our common stock or OP Units may be dilutive to existing stockholders.

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


Item 1B.Unresolved Staff Comments.  
 
None.


Item 2.Properties.  
 
The information set forth under the captions “Our Properties”"Our Properties" and “Development Pipeline”"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.
 
Item 4. Mine Safety Disclosures.  
 
Not Applicable.

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 NYSENew York Stock Exchange under the symbol “AHH.”"AHH."
 
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, 20132014 through December 31, 2018,2019, as well as the corresponding returns on an overall stock market index (S&P 500)(Russell 2000) and a peer group index (MSCI US REIT Index). The stock performance graph assumes that $100 was invested on December 31, 2013.2014. 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”"soliciting material" or to be “filed”"filed" with the SEC or subject to Regulation 14A or 14C, other than as provided in Item 201 of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, except to the extent we specifically request that such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.


chart-9a075b5747fd59a1adea01.jpgchart-cd2ab5ad4a305a238f7.jpg
Period EndingPeriod Ending
Index12/31/201312/31/201412/31/201512/31/201612/31/201712/31/201812/31/201412/31/201512/31/201612/31/201712/31/201812/31/2019
Armada Hoffler Properties, Inc.100.00109.27128.84189.34213.05204.06100.00117.91173.27194.97186.74256.04
MSCI US REIT100.00130.38133.67145.16152.52145.55100.00102.52111.34116.98111.64140.48
S&P 500100.00113.69115.26129.05157.22150.33
Russell 2000100.0095.59115.95132.94118.30148.49



Distribution Information
 
Since our initial quarter as a publicly-traded REIT, we have made regular quarterly distributions to our stockholders. We intend to continue to declare quarterly distributions. However, we cannot provide any assurance as to the amount or timing of future distributions.


Any future distributions will be at the sole discretion of our board of directors, and their form, timing, and amount, if any, will depend upon a number of factors, including our actual and projected financial condition, liquidity, EBITDA, FFO, Normalized FFO, 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 26, 2019,20, 2020, there were approximately 111114 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 26, 2019,20, 2020, there were 84104 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
 
Subject to the satisfaction of certain conditions, holders of Class AOP Units in the Operating Partnership 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. During the three months ended December 31, 2018,2019, the Company elected to satisfy certain redemption requests by issuing a total of 17,2004,896 shares of common stock in reliance upon an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended.


Issuer Purchases of Equity Securities


During the three months ended December 31, 2018, certain of our employees surrendered shares of common stock owned by them to satisfy their minimum statutory federal and state tax obligations associated with the vesting of restricted shares of common stock issued under our Amended and Restated 2013 Equity Incentive Plan (the "Amended Plan")None. The following table summarizes all of these repurchases during the three months ended December 31, 2018.  


      Total Number of  
      Shares Purchased Maximum Number of
      as Part of Publicly Shares that May Yet be
  Total Number of Average Price Announced Plans Purchased Under the
Period 
Shares Purchased(1)
 
Paid for Shares(1)
 or Programs Plans or Programs
October 1, 2018 through October 31, 2018 —
 $—
 N/A N/A
November 1, 2018 through November 30, 2018 4,222
 15.32
 N/A N/A
December 1, 2018 through December 31, 2018 —
 —
 N/A N/A
Total 4,222
 15.32
    
(1)The number of shares purchased represents shares of common stock surrendered by one of our employees to satisfy his statutory minimum federal and state tax obligations associated with the vesting of restricted shares of common stock issued under the Amended Plan. With respect to these shares, the price paid per share is based on the fair value at the time of surrender.


Item 6.Selected Financial Data.  
 
The following selected historical consolidated and combined financial information should be read in conjunction with “Management’s"Management’s Discussion and Analysis of Financial Condition and Results of Operations”Operations" and the historical consolidated and combined financial statements as of December 31, 20182019 and 20172018 and for the three years ended December 31, 20182019 and the related notes included elsewhere in this Annual Report on Form 10-K. The selected historical consolidated financial information as of and for the years ended December 31, 2019, 2018, 2017, 2016 2015 and 20142015 has been derived from our audited historical financial statements.


Years Ended December 31, Years Ended December 31, 
2018 2017 2016 2015 20142019 2018 2017 2016 2015
($ in thousands, except per share data)($ in thousands, except per share data)
Operating Data:                                                
Rental revenues$116,958
 $108,737
 $99,355
 $81,172
 $64,746
$151,339
 $116,958
 $108,737
 $99,355
 $81,172
General contracting and real estate services revenues76,359
 194,034
 159,030
 171,268
 103,321
105,859
 76,359
 194,034
 159,030
 171,268
Rental expenses27,222
 25,422
 21,904
 19,204
 16,667
34,332
 27,222
 25,422
 21,904
 19,204
Real estate taxes11,383
 10,528
 9,629
 7,782
 5,743
14,961
 11,383
 10,528
 9,629
 7,782
General contracting and real estate services expenses73,628
 186,590
 153,375
 165,344
 98,754
101,538
 73,628
 186,590
 153,375
 165,344
Depreciation and amortization39,913
 37,321
 35,328
 23,153
 17,569
54,564
 39,913
 37,321
 35,328
 23,153
Interest expense(19,087) (17,439) (16,466) (13,333) (10,648)
Loss on extinguishment of debt(11) (50) (82) (512) —
Gain on real estate dispositions and acquisitions4,254
 8,087
 30,533
 18,394
 2,211
Interest expense on indebtedness(30,776) (19,087) (17,439) (16,466) (13,333)
Gain on real estate dispositions4,699
 4,254
 8,087
 30,533
 18,394
Net income$23,492
 $29,925
 $42,755
 $31,183
 $12,759
32,258
 23,492
 29,925
 42,755
 31,183
Net income attributable to stockholders$17,203
 $21,047
 $28,074
 $19,642
 $7,691
Net income per share—basic and diluted$0.36
 $0.50
 $0.85
 $0.75
 $0.36
Cash dividends declared per share$0.80
 $0.76
 $0.72
 $0.68
 $0.64
Net income attributable to common stockholders21,598
 17,203
 21,047
 28,074
 19,642
Net income attributable to common stockholders per share (basic and diluted)$0.41
 $0.36
 $0.50
 $0.85
 $0.75
Cash dividends declared per common share$0.84
 $0.80
 $0.76
 $0.72
 $0.68
Balance Sheet Data:                  
Real estate investments, at cost$1,176,586
 $994,437
 $908,287
 $633,591
 $595,000
$1,606,324
 $1,176,586
 $994,437
 $908,287
 $633,591
Accumulated depreciation(188,775) (164,521) (139,553) (125,380) (116,099)(224,738) (188,775) (164,521) (139,553) (125,380)
Net real estate investments987,811
 829,916
 768,734
 508,211
 478,901
1,381,586
 987,811
 829,916
 768,734
 508,211
Real estate investments held for sale929
 —
 —
 40,232
 8,538
1,460
 929
 —
 —
 40,232
Cash and cash equivalents21,254
 19,959
 21,942
 26,989
 25,883
39,232
 21,254
 19,959
 21,942
 26,989
Notes receivable138,683
 83,058
 59,546
 7,825
 —
159,371
 138,683
 83,058
 59,546
 7,825
Construction assets17,512
 24,178
 39,543
 36,623
 19,704
36,610
 17,512
 24,178
 39,543
 36,623
Total assets$1,265,382
 $1,043,123
 $982,468
 $689,547
 $588,022
1,804,897
 1,265,382
 1,043,123
 982,468
 689,547
Indebtedness, net694,239
 517,272
 522,180
 377,593
 356,345
950,537
 694,239
 517,272
 522,180
 377,593
Construction liabilities53,833
 51,036
 61,297
 54,291
 43,452
58,688
 53,833
 51,036
 61,297
 54,291
Total liabilities809,492
 622,840
 633,490
 463,827
 426,116
1,149,450
 809,492
 622,840
 633,490
 463,827
Total equity455,890
 420,283
 348,978
 225,720
 161,906
655,447
 455,890
 420,283
 348,978
 225,720
Other Data:                  
Funds from operations(1)
$64,339
 $59,651
 $47,980
 $35,942
 $28,117
Normalized funds from operations(1)
66,458
 59,332
 50,921
 38,659
 28,594
FFO attributable to common stockholders and OP Unit holders (1)
$79,986
 $64,339
 $59,651
 $47,980
 $35,942
Normalized FFO attributable to common stockholders and OP Unit holders (1)
85,088
 66,458
 59,332
 50,921
 38,659
Cash provided by operating activities56,087
 51,236
 56,985
 33,266
 31,362
67,729
 56,087
 51,236
 56,985
 33,266
Cash used for investing activities(240,563) (95,355) (223,031) (57,961) (105,306)(295,063) (240,563) (95,355) (223,031) (57,961)
Cash provided by financing activities185,611
 41,842
 161,426
 24,401
 80,945
246,862
 185,611
 41,842
 161,426
 24,401

(1)For definitions and discussion of FFO and Normalized FFO, see the section below entitled "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Non-GAAP Financial Measures." The following table sets forth a reconciliation of our FFO and Normalized FFO to net income, the most directly comparable GAAP equivalent, for the periods presented:


following table sets forth a reconciliation of our FFO and Normalized FFO to net income, the most directly comparable GAAP equivalent, for the periods presented:
Years Ended December 31, Years Ended December 31, 
2018 2017 2016 2015 20142019 2018 2017 2016 2015
($ in thousands)($ in thousands)
Net income$23,492
 $29,925
 $42,755
 $31,183
 $12,759
Net income attributable to common stockholders and OP Unit holders$29,590
 $23,492
 $29,925
 $42,755
 $31,183
Depreciation and amortization(1)
40,178
 37,321
 35,328
 23,153
 17,569
53,616
 40,178
 37,321
 35,328
 23,153
Gain on operating real estate dispositions(2)
(833) (7,595) (30,103) (18,394) (2,211)(3,220) (833) (7,595) (30,103) (18,394)
Impairment of real estate assets1,502
 —
 —
 —
 —
—
 1,502
 —
 —
 —
Funds from operations$64,339
 $59,651
 $47,980
 $35,942
 $28,117
FFO attributable to common stockholders and OP Unit holders79,986
 64,339
 59,651
 47,980
 35,942
Acquisition, development and other pursuit costs352
 648
 1,563
 1,935
 229
844
 352
 648
 1,563
 1,935
Impairment of intangible assets and liabilities117
 110
 355
 41
 15
252
 117
 110
 355
 41
Loss on extinguishment of debt11
 50
 82
 512
 —
30
 11
 50
 82
 512
Amortization of right-of-use assets - finance leases377
 —
 —
 —
 —
Change in fair value of interest rate derivatives951
 (1,127) 941
 229
 233
3,599
 951
 (1,127) 941
 229
Severance related costs688
 —
 —
 —
 —
—
 688
 —
 —
 —
Normalized funds from operations$66,458
 $59,332
 $50,921
 $38,659
 $28,594
Normalized FFO attributable to common stockholders and OP Unit holders$85,088
 $66,458
 $59,332
 $50,921
 $38,659

(1) The adjustment for depreciation and amortization for the year ended December 31, 2018 includes depreciation and amortization attributable to our investment in One City Center, which is an unconsolidated real estate investment.

(1) The adjustment for depreciation and amortization for the years ended December 31, 2019 and 2018 includes $0.2 million and $0.3 million, respectively, of depreciation attributable to the Company's investment in One City Center, which was an unconsolidated real estate investment until March 14, 2019. Additionally, the adjustment for depreciation and amortization for the year ended December 31, 2019 excludes $1.2 million of depreciation attributable to the Company's joint venture partners.
(2) The adjustment for gain on operating real estate dispositions for the year ended December 31, 2019 excludes the portion of the gain on Lightfoot Marketplace that was allocated to our joint venture partner and excludes the gain on sale of a non-operating land parcel. The adjustment for gain on operating real estate dispositions for the year ended December 31, 2018 excludes the gain on the River City industrial facility because this property was sold before being placed into service. The adjustment for gain on operating real estate dispositions for the year ended December 31, 2017 excludes the gain on the land outparcel at Sandbridge Commons because this was a non-operating parcel. Additionally, the adjustment for gain on real estate dispositions for the year ended December 31, 2016 excludes the gain on the Newport News Economic Authority building because this property was sold before being placed in service.
(2) The adjustment for gain on operating real estate dispositions for the year ended December 31, 2018 excludes the gain on the River City industrial facility because this property was sold before being placed into service. The adjustment for gain on operating real estate dispositions for the year ended December 31, 2017 excludes the gain on the land outparcel at Sandbridge Commons because this was a non-operating parcel. Additionally, the adjustment for gain on real estate dispositions for the year ended December 31, 2016 excludes the gain on the Newport News Economic Authority building because this property was sold before being placed in service.


Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
References to “we,” “our,” “us,”"we," "our," "us," and “our company”"our company" refer to Armada Hoffler Properties, Inc., a Maryland corporation, together with our consolidated subsidiaries, including Armada Hoffler, L.P., a Virginia limited partnership, of which we are the sole general partner and to which we refer in this Annual Report on Form 10-K as our Operating Partnership.
 
Business Description
 
We are a full servicefull-service real estate company with extensive experience developing, building, owning, and managing high-quality, institutional-grade office, retail, and multifamily properties in attractive markets throughout the Mid-Atlantic and Southeastern United States. As of December 31, 2018,2019, our stabilized operating property portfolio was comprised of 3942 retail properties, four7 office properties, and five8 multifamily properties. In addition to our operating property portfolio, we had twoone office properties, fourproperty, two multifamily properties, and threeone retail propertiesproperty in various stages of development, redevelopment, or stabilization as of December 31, 2018.2019. We also provide general contracting services to third parties and invest in development projects through mezzanine lending arrangements.


 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, 2018,2019, we owned, through a combination of direct and indirect interests, 74.5%72.6% 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 2100, Virginia Beach, Virginia 23462 in the Armada Hoffler Tower at the Virginia Beach Town Center. In addition, we have construction offices located at 249222 Central Park Avenue, Suite 300,1000, Virginia Beach, Virginia 23462 and 1300 Thames Street, Suite 30, Baltimore, Maryland 21231. The telephone number for our principal executive office is (757) 366-4000. We maintain a website at www.armadahoffler.com.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. The Company's 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 assured.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. We maintain control of the physical use of the property under lease if we serve as the general contractor for the buildout of leasehold improvements.


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 non-recognitionnonrecognition of all or a portion of straight-line rental revenue until the collection of substantially all such revenue for a tenant is reasonably assured.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 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 andare presented as a separate component of assets on the consolidated balance sheets. Acquired lease intangible liabilities are presented within other assets and liabilities in the consolidated balance sheets and amortized over their respective lease terms.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 below-market ground lease assets as increases to rental expenses on a straight-line basis over the remaining term of the related leases. Prior to October 1, 2016, we expensed all costs incurred related to operating property acquisitions. On October 1, 2016, we adopted newly issued accounting guidance that allows capitalization ofWe capitalize the costs related to operating property acquisitions.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 depreciation curves for the identified asset classes. 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 market comparables. 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.
 
Real Estate Project Costs
 
We capitalize direct and certain indirect costs clearly associated with the development, redevelopment, construction, leasing, or expansion of our real estate assets. Capitalized project costs include direct material, labor, subcontract costs, real estate taxes, insurance, utilities, ground rent, interest on borrowing obligations, and salaries and related personnel costs.
 
We capitalize direct and indirect project costs associated with the initial construction or redevelopment of a property up to the time the property is substantially complete and ready for its intended use. We believe the completion of the building shell is the proper basis for determining substantial completion of initial construction.
 
We also capitalize direct and indirect costs, including interest costs, on vacant space during extended lease-up periods after construction of the building shell has been completed if costs are being incurred to prepare the vacant space for its intended use. If costs and activities incurred to prepare the vacant space for its intended use cease, then cost capitalization is also discontinued until such activities are resumed. Once necessary work has been completed on a vacant space, project costs are no longer capitalized. In addition, all leasing commissions paid to third parties for new leases or lease renewals are capitalized.
 
We depreciate buildings on a straight-line basis over 39 years and tenant improvements over the shorter of their estimated useful lives or the term of the related lease.
 
Real Estate Impairment
 
We evaluate our real estate assets for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If such an evaluation is necessary, we compare the carrying amount of any such real

estate asset with the undiscounted expected future cash flows that are directly associated with, and that are expected to arise as a direct result of, its use and eventual disposition. Our estimate of the expected future cash flows attributable to a real estate asset is based upon, among other things, our estimates regarding future market conditions, rental rates, occupancy levels, tenant improvements, leasing commissions, tenant concessions, and assumptions regarding the residual value of our properties. If the carrying amount of a real estate asset exceeds its associated undiscounted expected future cash flows, we recognize an impairment loss to reduce the carrying amount of the real estate asset to its fair value based on marketplace participant assumptions.


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.



Allowance for Loan Losses
Notes Receivable Impairment


We evaluate the collectibilitycollectability of both the interest on and principal of each of our notes receivable based primarily upon the financial condition of the individual borrowers and the value of the underlying development project. We consider factors such as the progress of development activities, including leasing activities, projected development costs, current and projected loan balances, and the estimated realizable value of the loan. The calculation of the estimated realizable value includes an estimation of the projected sales proceeds from the sale of the underlying development property, which is largely dependent on the estimated fair value of the underlying development property and is 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. A loan is determined to be impaired when, based upon then-current information, it is no longer probable that we will be able to collect all contractual amounts then due from the borrower. We consider factors suchThe allowance for loan losses reflects management's estimate of loan losses inherent in the loan portfolio as the progress of development activities, including leasing activities, projected development costs, and current and projected loan balances. The amount of impairment loss recognized is measured as the difference between the carrying amount of the loanbalance sheet date.

Recent Accounting Pronouncements

For a summary of recent accounting pronouncements and its estimated realizable value.

Guarantees
We measure and record a liability for the fair value of our guarantees on a nonrecurring basis upon issuance using Level 3 internally-developed inputs. These guarantees typically relate to payments that we could be required to make to senior lendersanticipated effects on our mezzanine loan investments. We baseconsolidated financial statements see Note 2 to our estimated fair value on the market approach, which compares the guarantee terms and credit characteristicsConsolidated Financial Statements included in Item 8 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 guarantee. On a quarterly basis, we assess the likelihood of a contingent liability in connection with these guarantees and will record an additional guarantee liability if the remaining unamortized guarantee liability is determined to be insufficient.this Form 10-K.


Segment Results of Operations
 
As of December 31, 2018,2019, we operated our business in four segments: (i) office real estate, (ii) retail real estate, (iii) multifamily residential real estate, and (iv) general contracting and real estate services that are conducted through our taxable REIT subsidiaries (“TRS”("TRS"). Net operating income (segment revenues minus segment expenses) (“NOI”("NOI") is the measure used by management to assess segment performance and allocate our resources among our segments. 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 and construction 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.
 
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 occupancy criterionstabilization criteria above isare 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.

This section of this Form 10-K generally discusses 2019 and 2018 items and year-to-year comparisons between 2019 and 2018. Discussions of 2017 items and year-to-year comparisons between 2018 and 2017 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 the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
 
Office Segment Data

Office rental revenues, property expenses, and NOI for the years ended December 31, 2019, 2018 and 2017 were as follows ($ in thousands): 
Years Ended December 31, 
2018 2017 2016Years Ended December 31, 
($ in thousands)2019 2018 2017
Rental revenues$20,701
 $19,207
 $20,929
$33,269
 $20,701
 $19,207
Property expenses7,892
 7,342
 7,560
12,193
 7,892
 7,342
NOI$12,809
 $11,865
 $13,369
$21,076
 $12,809
 $11,865
Square feet(1)
796,509
 799,855
 847,240
1,307,255
 796,509
 799,855
Occupancy(1)
93.3% 89.9% 86.8%96.6% 93.3% 89.9%

(1)Stabilized properties as of the end of the periods presented.
 

Rental revenues for the year ended December 31, 20182019 increased $1.5$12.6 million compared to the year ended December 31, 2017.2018. NOI for the year ended December 31, 20182019 increased $0.9$8.3 million compared to the year ended December 31, 2017.2018. The increase in rental revenues and NOI resulted from new tenantsthe acquisition of One City Center in March 2019, the commencement of operations at Brooks Crossing Office in April 2019, and renewals across the Town Center office portfolio, most notably at 4525 Main Street. These increases were partially offset by the dispositionacquisition of the Commonwealth of Virginia-Chesapeake and Commonwealth of Virginia-Virginia Beach properties, which occurredThames Street Wharf in the third quarter of 2017.
Rental revenues for the year ended December 31, 2017 decreased $1.7 million compared to the year ended December 31, 2016. NOI for the year ended December 31, 2017 decreased $1.5 million compared to the year ended December 31, 2016. The decreases in rental revenues and NOI resulted from the disposition of four properties, including Richmond Tower and Oyster Point, which occurred in the first quarter and third quarter of 2016, respectively,June 2019, as well as increased occupancy across the Commonwealthrest of Virginia-Chesapeake and Commonwealth of Virginia-Virginia Beach properties, which occurred in the third quarter of 2017.office portfolio.


Office Same Store Results
 
Office same store rental revenues, property expenses, and NOI for the comparative years ended December 31, 2019 and 2018 and December 31, 2018 and 2017 and December 31, 2017 and 2016 were as follows:follows (in thousands):
 
Years Ended  
 Years Ended  
December 31,   
 December 31,   
Years Ended  
 Years Ended  
2018 (1)
 
2017 (1)
 Change 
2017 (2)
 
2016 (2)
 ChangeDecember 31,   
 December 31,   
($ in thousands)
2019 (1)
 
2018 (1)
 Change 
2018 (2)
 
2017 (2)
 Change
Rental revenues$14,125
 $13,615
 $510
 $13,615
 $14,323
 $(708)$21,239
 $20,701
 $538
 $14,125
 $13,615
 $510
Property expenses5,496
 5,196
 300
 5,435
 5,273
 162
7,735
 7,507
 228
 5,496
 5,196
 300
Same Store NOI$8,629
 $8,419
 $210
 $8,180
 $9,050
 $(870)$13,504
 $13,194
 $310
 $8,629
 $8,419
 $210
Non-Same Store NOI4,180
 3,446
 734
 3,685
 4,319
 (634)7,572
 (385) 7,957
 4,180
 3,446
 734
Segment NOI$12,809
 $11,865
 $944
 $11,865
 $13,369
 $(1,504)$21,076
 $12,809
 $8,267
 $12,809
 $11,865
 $944

(1)Same store excludes 4525 MainOne City Center, Brooks Crossing Office, and Thames Street and the Commonwealth of Virginia-Chesapeake and Commonwealth of Virginia-Virginia Beach office buildings.Wharf.
(2)Same store excludes 4525 Main Street, the Richmond Tower building, the Oyster Point building, and the Commonwealth of Virginia-Chesapeake, and Commonwealth of Virginia-Virginia Beach office buildings.
  
Same store rental revenues and NOI for the year ended December 31, 20182019 increased compared to the year ended December 31, 20172018 due to new tenants and renewalshigher occupancy across the same store office portfolio.
Same store rental revenues and NOI for the year ended December 31, 2017 decreased compared to the year ended December 31, 2016 due to the expansion and relocation of a tenant from One Columbus to 4525 Main Street during the fourth quarter of 2016 and the expansion and relocation of another tenant from Two Columbus to 4525 Main Street during the third quarter of 2017. For the year ended December 31, 2017, the NOI from these tenants that relocated to 4525 Main Street are included in Non-Same Store NOI. In addition, decreased occupancy at the Armada Hoffler Tower contributed to the period-over-period decrease in office same store NOI. 

Retail Segment Data

Retail rental revenues, property expenses, and NOI for the years ended December 31, 2019, 2018 and 2017 were as follows ($ in thousands): 
Years Ended December 31, 
2018 2017 2016Years Ended December 31, 
($ in thousands)2019 2018 2017
Rental revenues$67,959
 $63,109
 $56,511
$77,593
 $67,959
 $63,109
Property expenses17,704
 16,409
 14,511
19,572
 17,704
 16,409
NOI$50,255
 $46,700
 $42,000
$58,021
 $50,255
 $46,700
Square feet(1)
3,702,733
 3,498,480
 3,592,558
4,208,946
 3,702,733
 3,498,480
Occupancy(1)
96.2% 96.5% 95.8%96.9% 96.2% 96.5%

(1)Stabilized properties as of the end of the periods presented.
 
Rental revenues for the year ended December 31, 20182019 increased $4.9$9.6 million compared to the year ended December 31, 2017.2018. NOI for the year ended December 31, 20182019 increased $3.6$7.8 million compared to the year ended December 31, 2017.2018. The increases in rental revenues and NOI resulted primarily from the three property acquisitions and new real estate placed into servicecompleted during 2018, and 2017. During the year ended December 31, 2018, we acquired Indian Lakes Crossing, Parkway Centre, and Lexington Square and placed into servicecommencement of operations at Premier Retail as well as certain outparcels at Lightfoot Marketplace. Duringduring the year ended December 31, 2017, we acquired anthird quarter of 2018, the acquisition of the additional outparcel phase of Wendover Village.
Rental revenues forVillage in February 2019, the year endedcommencement of operations at Market at Mill Creek in April 2019, and the acquisition of Red Mill Commons and Marketplace at Hilltop in May 2019. These increases were partially offset by the disposal of the leasehold interest in the building previously leased by Home Depot at Broad Creek Shopping Center in December 31, 2017 increased $6.6 million compared to2018 as well as the year ended December 31, 2016. NOI for the year ended December 31, 2017 increased $4.7 million compared to the year ended December 31, 2016. The increasesdisposition of Waynesboro Commons in rental revenues and NOI resulted primarily from property acquisitions and new real estate placed into service during 2017 and 2016. During the year ended December 31, 2017, we acquired an outparcel phase of Wendover Village. During the year ended December 31, 2016, we acquired the 11-property retail portfolio, Southgate Square, Southshore Shops, Columbus Village II, and Renaissance Square and placed into service Brooks Crossing RetailApril 2019 and Lightfoot Marketplace.Marketplace in August 2019.

Retail Same Store Results
 
Retail same store rental revenues, property expenses, and NOI for the comparative years ended December 31, 2019 and 2018 and December 31, 2018 and 2017 and December 31, 2017 and 2016 were as follows:follows (in thousands): 
 
Years Ended  
 Years Ended  
December 31,   
 December 31,   
Years Ended  
 Years Ended  
2018 (1)
 
2017 (1)
 Change 
2017 (2)
 
2016 (2)
 ChangeDecember 31,   
 December 31,   
($ in thousands)
2019 (1)
 
2018 (1)
 Change 
2018 (2)
 
2017 (2)
 Change
Rental revenues$56,693
 $56,348
 $345
 $37,707
 $37,154
 $553
$57,651
 $56,435
 $1,216
 $56,693
 $56,348
 $345
Property expenses13,156
 12,844
 312
 10,757
 10,241
 516
13,247
 13,077
 170
 13,156
 12,844
 312
Same Store NOI$43,537
 $43,504
 $33
 $26,950
 $26,913
 $37
$44,404
 $43,358
 $1,046
 $43,537
 $43,504
 $33
Non-Same Store NOI6,718
 3,196
 3,522
 19,750
 15,087
 4,663
13,617
 6,897
 6,720
 6,718
 3,196
 3,522
Segment NOI$50,255
 $46,700
 $3,555
 $46,700
 $42,000
 $4,700
$58,021
 $50,255
 $7,766
 $50,255
 $46,700
 $3,555

(1)Same store excludes Broad Creek Shopping Center, Brooks Crossing Retail, Premier Retail, Lexington Square, Columbus Village (due to redevelopment), the additional outparcel phase of Wendover Village (acquired in February 2019), Market at Mill Creek, Red Mill Commons and Marketplace at Hilltop (acquired in May 2019), Parkway Centre and Indian Lakes Crossing (acquired in January 2018), Waynesboro Commons (disposed in April 2019), and Lightfoot Marketplace (disposed in August 2019).
(2)Same store excludes Lightfoot Marketplace, Brooks Crossing Retail, the outparcel phase of Wendover Village, Indian Lakes Crossing, Parkway Centre, Lexington Square, Premier Retail, Broad Creek Shopping Center, and Waynesboro Commons.
(2)Same store excludes the 11-property retail portfolio, Southgate Square, Lightfoot Marketplace, Southshore Shops, Brooks Crossing, Columbus Village II, Renaissance Square, and the outparcel phase of Wendover Village.

Same store rental revenues and NOI for the year ended December 31, 20182019 increased slightly compared to the year ended December 31, 2017.2018. The increases in rental revenues resulted primarily from newhigher occupancy as well as higher recoveries from tenants and renewals were mostly offset by increases in real estate taxes and operating expenses across the same store portfolio.for capital expenditures.
 

Same store rental revenues and NOI for the year ended December 31, 2017 increased compared to the year ended December 31, 2016 primarily because of higher occupancy at Sandbridge Commons, Broad Creek, Hanbury Village, North Point, Providence, and 249 Central Park. These increases were partially offset by lower occupancy at Columbus Village and increased administrative expense, maintenance and repair expense, and bad debt expense. 
Multifamily Segment Data

Multifamily rental revenues, property expenses, and NOI for the years ended December 31, 2019, 2018 and 2017 were as follows ($ in thousands): 
Years Ended December 31, 
2018 2017 2016Years Ended December 31, 
($ in thousands)2019 2018 2017
Rental revenues$28,298
 $26,421
 $21,915
$40,477
 $28,298
 $26,421
Property expenses13,009
 12,199
 9,462
17,528
 13,009
 12,199
NOI$15,289
 $14,222
 $12,453
$22,949
 $15,289
 $14,222
Apartment units1,586
 1,266
 1,266
Apartment units/beds2,580
 1,586
 1,266
Occupancy97.3% 92.9% 94.3%95.6% 97.3% 92.9%
 
Rental revenues for the year ended December 31, 20182019 increased $1.9$12.2 million compared to the year ended December 31, 2017.2018. NOI increased $1.1$7.7 million compared to the year ended December 31, 2017. The increases in rental revenues and NOI resulted primarily from increased occupancy and increased rental rates at Johns Hopkins Village, as well as the delivery of Premier Apartments, for which the final phase was placed into service during the fourth quarter of 2018, and the delivery of Greenside Apartments, portions of which were placed into service in the third and fourth quarters of 2018. Increased occupancy at Liberty Apartments and increased rates at Smith's Landing also contributed to the increases.
Rental revenues for the year ended December 31, 2017 increased $4.5 million compared to the year ended December 31, 2016. NOI increased $1.8 million compared to the year ended December 31, 2016. The increases in rental revenues and NOI resulted primarily from the deliverycommencement of operations at Greenside Apartments and Premier Apartments during the third quarter of 2018, the acquisition of 1405 Point in April 2019, the commencement of operations at Hoffler Place in August 2019, and increases in rental rates and occupancy across the rest of the multifamily portfolio, especially at Johns Hopkins Village in August 2016.and Smith’s Landing.
        
Multifamily Same Store Results
 
Multifamily same store rental revenues, property expenses, and NOI for the comparative years ended December 31, 2019 and 2018 and December 31, 2018 and 2017 and December 31, 2017 and 2016 were as follows:follows (in thousands):
 
Years Ended  
 Years Ended  
December 31,   
 December 31,   
Years Ended  
 Years Ended  
2018 (1)
 
2017 (1)
 Change 
2017 (2)
 
2016 (2)
 ChangeDecember 31,   
 December 31,   
($ in thousands)
2019 (1)
 
2018 (1)
 Change 
2018 (2)
 
2017 (2)
 Change
Rental revenues$11,834
 $11,473
 $361
 $18,892
 $19,194
 $(302)$21,849
 $20,241
 $1,608
 $11,834
 $11,473
 $361
Property expenses4,989
 4,869
 120
 8,876
 8,410
 466
8,666
 8,332
 334
 4,989
 4,869
 120
Same Store NOI$6,845
 $6,604
 $241
 $10,016
 $10,784
 $(768)$13,183
 $11,909
 $1,274
 $6,845
 $6,604
 $241
Non-Same Store NOI8,444
 7,618
 826
 4,206
 1,669
 2,537
9,766
 3,380
 6,386
 8,444
 7,618
 826
Segment NOI$15,289
 $14,222
 $1,067
 $14,222
 $12,453
 $1,769
$22,949
 $15,289
 $7,660
 $15,289
 $14,222
 $1,067

(1)Same store excludes Greenside Apartments and Premier Apartments (placed in service in August 2018), 1405 Point (acquired in April 2019), Hoffler Place (placed in service in August 2019), and The Cosmopolitan (due to redevelopment).
(2)Same store excludes Johns Hopkins Village, Greenside Apartments, Premier Apartments, and the Cosmopolitan.
(2)Same store excludes Johns Hopkins Village.

Same store rental revenues and NOI for the year ended December 31, 20182019 increased compared to the year ended December 31, 20172018 primarily as a result of increasedincreases in rental rates and occupancy across the same store multifamily portfolio, especially at Liberty ApartmentsJohns Hopkins Village and increased rates at Smith'sSmith’s Landing.
Same store rental revenues for the year ended December 31, 2017 decreased compared to the year ended December 31, 2016 primarily because of lower occupancy at The Cosmopolitan in the Town Center of Virginia Beach attributed to the loss of retail tenants at the property and construction activities at an adjacent property. In addition, NOI decreased due to higher expenses for repairs and maintenance, property taxes, administration, and utilities.
 

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, 2019, 2018 and 2017 were as follows ($ in thousands):
Years Ended December 31, 
2018 2017 2016Years Ended December 31, 
($ in thousands)2019 2018 2017
Segment revenues$76,359
 $194,034
 $159,030
$105,859
 $76,359
 $194,034
Gross profit$2,731
 $7,444
 $5,655
$4,321
 $2,731
 $7,444
Operating margin3.6% 3.8% 3.6%4.1% 3.6% 3.8%
Construction backlog$165,863
 $49,167
 $217,718
$242,622
 $165,863
 $49,167
 
Segment revenues for the year ended December 31, 2018 decreased $117.72019 increased $29.5 million compared to the year ended December 31, 2017.2018. Gross profit for the year ended December 31, 2018 decreased $4.72019 increased $1.6 million compared to the year ended December 31, 2017.2018. The decreaseincrease in segment revenues resulted primarily from a lower level of new third-party contracts during 2018 until December 2018, when the increase in revenues from Interlock Commercial and Solis Apartments at Interlock projects, commenced.which were executed at the end of 2018 and began construction in 2019.
    
Segment revenues for the year ended December 31, 2017 increased $35.0 million compared to the year ended December 31, 2016. Gross profit for the year ended December 31, 2017 increased $1.8 million compared to the year ended December 31, 2016. The increase in segment revenues resulted from work performed on several large projects in the backlog as of December 31, 2016, including Annapolis Junction, Point Street, and City Center.

The changes in construction backlog for each of the three years ended December 31, 2019, 2018 and 2017 were as follows:follows (in thousands):  
 
Years Ended December 31, 
2018 2017 2016Years Ended December 31, 
($ in thousands)2019 2018 2017
Beginning backlog$49,167
 $217,718
 $83,433
$165,863
 $49,167
 $217,718
New contracts/change orders192,852
 25,224
 293,115
182,495
 192,852
 25,224
Work performed(76,156) (193,775) (158,830)(105,736) (76,156) (193,775)
Ending backlog$165,863
 $49,167
 $217,718
$242,622
 $165,863
 $49,167


During the year ended December 31, 2019, we executed new contracts for the Bellyard Hotel at Interlock, Boulder Lakeside Apartments and 27th Street Apartments & Garage projects, which added $28.0 million, $35.4 million, and $79.3 million, respectively, to the December 31, 2019 backlog.

During the year ended December 31, 2018, we executed new contracts for the Interlock Commercial and Solis Apartments at Interlock projects, which added $84.9 million and $62.3 million, respectively, to the December 31, 2018 backlog.

During the year ended December 31, 2017, we performed work on several significant projects, including Annapolis Junction, Point Street, and City Center, resulting in work performed of $50.2 million, $40.7 million, and $31.3 million, respectively.     

During the year ended December 31, 2016, we executed several new contracts, including Annapolis Junction and the Dinwiddie County administration building, which added $50.2 million and $23.0 million, respectively, to the December 31, 2016 backlog.

 

Consolidated Results of Operations
 
The following table summarizes our results of operations for the years ended December 31, 2019, 2018, 2017, and 2016:2017: 
 
Years Ended December 31,  2018 2017Years Ended December 31,  2019 2018
2018 2017 2016 Change Change2019 2018 2017 Change Change
($ in thousands)(in thousands)
Revenues 
  
  
  
  
 
  
  
  
  
Rental revenues$116,958
 $108,737
 $99,355
 $8,221
 $9,382
$151,339
 $116,958
 $108,737
 $34,381
 $8,221
General contracting and real estate services revenues76,359
 194,034
 159,030
 (117,675) 35,004
105,859
 76,359
 194,034
 29,500
 (117,675)
Total revenues193,317
 302,771
 258,385
 (109,454) 44,386
257,198
 193,317
 302,771
 63,881
 (109,454)
         
Expenses                  
Rental expenses27,222
 25,422
 21,904
 1,800
 3,518
34,332
 27,222
 25,422
 7,110
 1,800
Real estate taxes11,383
 10,528
 9,629
 855
 899
14,961
 11,383
 10,528
 3,578
 855
General contracting and real estate services expenses73,628
 186,590
 153,375
 (112,962) 33,215
101,538
 73,628
 186,590
 27,910
 (112,962)
Depreciation and amortization39,913
 37,321
 35,328
 2,592
 1,993
54,564
 39,913
 37,321
 14,651
 2,592
Amortization of right-of-use assets - finance leases377
 —
 —
 377
 —
General and administrative expenses11,431
 10,435
 9,552
 996
 883
12,392
 11,431
 10,435
 961
 996
Acquisition, development and other pursuit costs352
 648
 1,563
 (296) (915)844
 352
 648
 492
 (296)
Impairment charges1,619
 110
 355
 1,509
 (245)252
 1,619
 110
 (1,367) 1,509
Total expenses165,548
 271,054
 231,706
 (105,506) 39,348
219,260
 165,548
 271,054
 53,712
 (105,506)
Gain on real estate dispositions4,254
 8,087
 30,533
 (3,833) (22,446)4,699
 4,254
 8,087
 445
 (3,833)
Operating income32,023
 39,804
 57,212
 (7,781) (17,408)42,637
 32,023
 39,804
 10,614
 (7,781)
Interest income10,729
 7,077
 3,228
 3,652
 3,849
23,215
 10,729
 7,077
 12,486
 3,652
Interest expense(19,087) (17,439) (16,466) (1,648) (973)
Interest expense on indebtedness(30,776) (19,087) (17,439) (11,689) (1,648)
Interest expense on finance leases(568) —
 —
 (568) —
Equity in income of unconsolidated real estate entities372
 —
 —
 372
 —
273
 372
 —
 (99) 372
Loss on extinguishment of debt(11) (50) (82) 39
 32
Change in fair value of interest rate derivatives(951) 1,127
 (941) (2,078) 2,068
(3,599) (951) 1,127
 (2,648) (2,078)
Other income388
 131
 147
 257
 (16)
Other income (expense), net585
 377
 81
 208
 296
Income before taxes23,463
 30,650
 43,098
 (7,187) (12,448)31,767
 23,463
 30,650
 8,304
 (7,187)
Income tax benefit (provision)29
 (725) (343) 754
 (382)491
 29
 (725) 462
 754
Net income$23,492
 $29,925
 $42,755
 $(6,433) $(12,830)32,258
 23,492
 29,925
 8,766
 (6,433)
Net income attributable to noncontrolling interests in investment entities(213) —
 —
 (213) —
Preferred stock dividends(2,455) —
 —
 (2,455) —
Net income attributable to common stockholders and OP Unit holders$29,590
 $23,492
 $29,925
 $6,098
 $(6,433)
 
Rental Revenues. Rental revenues by segment for the years ended December 31, 2019, 2018, 2017, and 20162017 were as follows:
follows (in thousands): 
Years Ended December 31,  2018 2017
2018 2017 2016 Change ChangeYears Ended December 31,  2019 2018
($ in thousands)2019 2018 2017 Change Change
Office$20,701
 $19,207
 $20,929
 $1,494
 $(1,722)$33,269
 $20,701
 $19,207
 $12,568
 $1,494
Retail67,959
 63,109
 56,511
 4,850
 6,598
77,593
 67,959
 63,109
 9,634
 4,850
Multifamily28,298
 26,421
 21,915
 1,877
 4,506
40,477
 28,298
 26,421
 12,179
 1,877
$116,958
 $108,737
 $99,355
 $8,221
 $9,382
$151,339
 $116,958
 $108,737
 $34,381
 $8,221
 

Rental revenues increased $8.2$34.4 million during the year ended December 31, 20182019 compared to the year ended December 31, 2017.2018. The increase in office rental revenues resulted primarily from new tenantsthe acquisition of One City Center in March 2019, the commencement of operations at Brooks Crossing Office in April 2019, and renewals most notably at 4525 Mainthe acquisition of Thames Street which more than offsetWharf in June 2019, as well as increased occupancy across the decreases in rental revenues resulting from dispositionsrest of the Commonwealth of Virginia-Chesapeake and Commonwealth of Virginia-Virginia Beach properties, which were sold in 2017.office portfolio. The increase in retail rental revenues resulted primarily from property acquisitionsthe acquisition of six additional properties during 2018 and new real estate placed into service. During the year ended December 31, 2018, we acquired Indian Lakes Crossing, Parkway Centre, and Lexington Square and placed into service Premier Retail2019, as well as certain outparcelsthe commencement of operations at Lightfoot Marketplace. During the year ended December 31, 2017, we acquired

an outparcel phase of Wendover Village. The increase in multifamily rental revenues resulted primarily from increased occupancy and increased rates at Johns Hopkins Village, the delivery of Premier Apartments, for which the final phase was placed into serviceRetail during the fourththird quarter of 2018 the delivery of Greenside Apartments, portions of which were placed into serviceand Market at Mill Creek in the third and fourth quarters of 2018, as well as increased occupancy at Liberty Apartments and increased rates at Smith's Landing.

Rental revenues increased $9.4 million during the year ended December 31, 2017 compared to the year ended December 31, 2016. The decrease in office rental revenues resulted primarily from the dispositions of Richmond Tower, Oyster Point, Commonwealth of Virginia-Chesapeake, and Commonwealth of Virginia-Virginia Beach properties, which we sold in 2016 and 2017. The increaseApril 2019. These increases in retail rental revenues resulted primarily from property acquisitionswere partially offset by the disposition of two properties and new real estate placed into service. During the year ended December 31, 2016, we acquired the 11-property retail portfolio, Southgate Square, Southshore Shops, Columbus Village II, and Renaissance Square and placed into service Brooks Crossing and Lightfoot Marketplace. During the year ended December 31, 2017, we acquired the outparcel phasea portion of Wendover Village.a third property. The increase in multifamily rental revenues resulted primarily from the deliverycommencement of Johns Hopkins Villageoperations at Greenside Apartments and Premier Apartments during the third quarter of 2018, the acquisition of 1405 Point in April 2019, the commencement of operations at Hoffler Place in August 2016 as well as increased2019, and increases in rental rates and occupancy at Encore Apartments and Smith's Landing.across the rest of the multifamily portfolio.

General Contracting and Real Estate Services Revenues. General contracting and real estate services revenues decreased $117.7increased $29.5 million during the year ended December 31, 20182019 compared to the year ended December 31, 2017.2018. The decreaseincrease resulted primarily from a lower level of new third-party contracts during 2018 until December 2018, when the increase in revenues from Interlock Commercial and Solis Apartments at Interlock projects commenced.that were executed at the end of 2018 and began construction in 2019.


General contracting and real estate services revenues increased $35.0 million during the year ended December 31, 2017 compared to the year ended December 31, 2016 as a result of several new large projects started subsequent to the first quarter of 2016.
Rental Expenses. Rental expenses by segment for each of the three years ended December 31, 20182019 were as follows: 
follows (in thousands):
Years Ended December 31,  2018 2017
2018 2017 2016 Change ChangeYears Ended December 31,  2019 2018
($ in thousands)2019 2018 2017 Change Change
Office$5,858
 $5,483
 $5,560
 $375
 $(77)$8,722
 $5,858
 $5,483
 $2,864
 $375
Retail10,903
 10,234
 9,116
 669
 1,118
11,656
 10,903
 10,234
 753
 669
Multifamily10,461
 9,705
 7,228
 756
 2,477
13,954
 10,461
 9,705
 3,493
 756
$27,222
 $25,422
 $21,904
 $1,800
 $3,518
$34,332
 $27,222
 $25,422
 $7,110
 $1,800
 
Rental expenses increased $1.8$7.1 million during the year ended December 31, 20182019 compared to the year ended December 31, 2017.2018. Office rental expenses increased primarily as a result of higher occupancy. Retailthe acquisition of One City Center in March 2019, the commencement of operations at Brooks Crossing Office in April 2019, and the acquisition of Thames Street Wharf in June 2019. The increase in retail rental expenses increasedresulted primarily from the acquisition of six additional properties during 2018 and 2019, as a resultwell as the commencement of property acquisitionsoperations at Premier Retail during the third quarter of 2018 and new real estate placed into service. MultifamilyMarket at Mill Creek in April 2019. These increases in retail rental expenses increased as a result of new real estate placed into service and higher expenses for repairs and maintenance and utilities.

Rental expenses increased $3.5 million during the year ended December 31, 2017 compared to the year ended December 31, 2016. Office rental expenses decreased primarily due towere partially offset by the disposition of four officetwo properties and a portion of a third property. The increase in 2016 and 2017. Retailmultifamily rental expenses increased becauseresulted primarily from the commencement of property acquisitionsoperations at Greenside Apartments and new real estate placed into service. Multifamily rental expenses increased becausePremier Apartments during the third quarter of 2018, the deliveryacquisition of Johns Hopkins Village1405 Point in April 2019, and the commencement of operations at Hoffler Place in August 2016 and higher expenses for repairs and maintenance, property taxes, administration, and utilities at the other multifamily properties.2019.
    

Real Estate Taxes. Real estate taxes by segment for the years ended December 31, 2019, 2018, 2017, and 20162017 were as follows:
follows (in thousands):
Years Ended December 31,  2018 2017
2018 2017 2016 Change ChangeYears Ended December 31,  2019 2018
($ in thousands)2019 2018 2017 Change Change
Office2,034
 1,859
 2,000
 $175
 $(141)3,471
 2,034
 1,859
 $1,437
 $175
Retail6,801
 6,175
 5,395
 626
 780
7,916
 6,801
 6,175
 1,115
 626
Multifamily2,548
 2,494
 2,234
 54
 260
3,574
 2,548
 2,494
 1,026
 54
$11,383
 $10,528
 $9,629
 $855
 $899
$14,961
 $11,383
 $10,528
 $3,578
 $855
 
Real estate taxes increased $0.9$3.6 million during the year ended December 31, 20182019 compared to the year ended December 31, 2017.2018. Office real estate taxes increased primarily as a result of higher occupancy. Retailthe acquisition of One City Center in March 2019, the commencement of operations at Brooks Crossing Office in April 2019, and the acquisition of Thames Street Wharf in June 2019. The increase in retail real estate taxes increasedresulted primarily from the acquisition of six additional properties during 2018 and 2019, as a resultwell as the commencement of property acquisitionsoperations at Premier Retail during the third quarter of 2018 and new real estate placed into service. MultifamilyMarket at Mill Creek in April 2019. These increases in retail real estate taxes increased primarily aswere partially offset by the disposition of two properties and a resultportion of new real estate placed into service.
Real estate taxes increased $0.9 million during the year ended December 31, 2017 compared to the year ended December 31, 2016. Officea third property. The increase in multifamily real estate taxes decreasedresulted primarily becausefrom the commencement of the disposition of four office properties in 2016 and 2017. Retail real estate taxes increased because of property acquisitions, new real estate placed into service, and reassessments, particularlyoperations at Wendover Village and North Hampton. Multifamily real estate taxes increased because of the reassessment of EncoreGreenside Apartments and The CosmopolitanPremier Apartments during the third quarter of 2018, the acquisition of 1405 Point in April 2019, and the deliverycommencement of the retail portion Johns Hopkins Villageoperations at Hoffler Place in August 2016.2019.
  

General Contracting and Real Estate Services Expenses.General contracting and real estate services expenses for the year ended December 31, 2018 decreased $113.02019 increased $27.9 million compared to the year ended December 31, 20172018. The decreaseincrease resulted primarily from a lower level of new third-party contracts during 2018 until December 2018, when the increase in expenses from Interlock Commercial and Solis Apartments at Interlock projects, commenced.General contractingwhich were executed at the end of 2018 and real estate services expense for the year ended December 31, 2017 increased $33.2 million compared to the year ended December 31, 2016 as a result of several new large projects started subsequent to the first quarter of 2016.began construction in 2019.
 
Depreciation and Amortization. Depreciation and amortization for the year ended December 31, 20182019 increased $2.6$14.7 million compared to the year ended December 31, 2017.2018. The increase was attributable to property acquisitions, new real estate placed into service, and accelerated depreciation relating to assets that were placed into redevelopment andredevelopment. The increase was partially offset by dispositions in 20172019 and certain assets that became fully depreciated. Depreciation and amortization

Amortization of right-of-use assets - finance leases. Amortization of right-of-use assets - finance leases relates to new ground leases acquired during 2019 for which the year ended December 31, 2017 increased $2.0 million comparedCompany is the lessee, which are classified as finance leases. See Note 2 to the year ended December 31, 2016. The increase was attributable to property acquisitions and new real estate placed into service and was partially offset by dispositionsour consolidated financial statements in 2016 and 2017.Item 8 of this Annual Report on Form 10-K.
 
General and Administrative Expenses. General and administrative expenses for the year ended December 31, 20182019 increased $1.0 million compared to the year ended December 31, 2017.2018. The increase was primarily due to $0.7 million of severance related costs. General and administrative expenses for the year ended December 31, 2017 increased $0.9 million compared to the year ended December 31, 2016 because ofresulted from higher regulatory and compliance costs, costs relating to information systems, as well as higher compensation expense and benefit costs from increased employee headcount.headcount and higher charitable contributions made during 2019.
 
Acquisition, Development and Other Pursuit Costs. During the year ended December 31, 2019 and 2018, we recognized $0.8 million and $0.4 million, respectively, of costs relating primarily to predevelopment costs for projects that are no longer being pursued. Duringviable.
Impairment Charges. Impairment charges during the year ended December 31, 2017, we recognized $0.6 million of costs relating primarily to abandoned acquisitions. During the year ended December 31, 2016, we recognized $1.6 million of costs primarily attributable to our acquisition of an 11-property retail portfolio,Southgate Square, and Southshore Shops. We adopted new accounting guidance on October 1, 2016 which allowed us to capitalize $0.7 million in costs related to the acquisitions of Renaissance Square and Columbus Village II.
Impairment Charges. Impairment charges during the years ended December 31, 20182019 primarily relate to the impairment of Waynesboro Commons, which has been classified as held for sale. Impairment charges during the years ended December 31, 2017 and 2016 primarily relate to tenants that vacated prior to their lease expiration.
Interest Income. Interest income for the years ended December 31, 2018, 2017, and 2016 totaled $10.7 million, $7.1 million, and $3.2 million respectively, and was attributable to our mezzanine loans. As of December 31, 2018, 2017, and 2016, our outstanding mezzanine loan balances Impairment charges were $139.1 million, $82.6 million, and $59.5 million, respectively.

Interest Expense. Interest expense forgreater than normal during the year ended December 31, 2018 increased $1.6 million comparedprimarily due to the year ended December 31, 2017 primarily as a resultimpairment of the increase in interest rates between periods and the increase in net indebtedness of $177.0 million during 2018 through increased borrowingsWaynesboro Commons.

Gain on the corporate credit facility, construction loans, and additional borrowings on the refinanced property loans. Interest expense for the year ended December 31, 2017 increased $1.0 million compared to the year ended December 31, 2016 primarily because of rising interest rates, which was partially offset by lower average debt balances.
Loss on Extinguishment of Debt.Real Estate Dispositions. During the year ended December 31, 2018, we did not recognize any significant losses on extinguishment of debt. During the year ended December 31, 2017,2019, we recognized gains on real estate dispositions of $4.7 million, related to the sale of Lightfoot Marketplace and a $0.1 million loss on extinguishment of debt as a result of the modification and extension of our credit facility which resulted in the departure of two syndicated lenders from the facility. During the year ended December 31, 2016, we recognized a $0.1 million loss on extinguishment of debt representing the unamortized debt issuance costs associated with our refinancing of the mortgages secured by 249 Central Park Retail, South Retail, Fountain Plaza, 4525 Main Street, and Encore Apartments.
Gain on Real Estate Dispositions.non-operating land parcel. During the year ended December 31, 2018, we recognized gains on real estate dispositions of $4.3 million, which included a gain of $3.4 million on our sale of the River City industrial facility and a gain of $0.8 million on our sale of the leasehold interest in the building previously leased by Home Depot building at Broad Creek Shopping Center. During
Interest Income. Interest income for the years ended December 31, 2019 and 2018 totaled $23.2 million and $10.7 million, respectively, and was attributable to our mezzanine loans. As of December 31, 2019 and 2018, our outstanding mezzanine loan balances were $153.0 million and $139.1 million, respectively.
Interest expense on indebtedness. Interest expense for the year ended December 31, 2017, we recognized gains on real estate dispositions of $8.12019 increased $11.7 million which included a gain of $3.4 million on our sale of the Greentree Wawa outparcel, a gain of $4.2 million on our sale of the Commonwealth of Virginia-Chesapeake and Commonwealth of Virginia-Virginia Beach office buildings, and a gain of $0.5 million on our sale of the land outparcel at Sandbridge Commons. Duringcompared to the year ended December 31, 2016, we recognized gains2018 primarily as a result of the increase in interest rates between periods and the increase in net indebtedness of $256.3 million during 2019 through increased borrowings on the corporate credit facility, construction loans, and additional borrowings on the refinanced property loans.

Interest expense on finance leases. Interest expense on finance leases relates to new ground leases acquired during 2019 for which the Company is the lessee, which are classified as finance leases. See Note 2 to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K.

Equity in income of unconsolidated real estate dispositionsentities. Equity in income of $30.5 million,unconsolidated real estate entities for the years ended December 31, 2019 and 2018 relates to our investment in One City Center, which consistedwas an unconsolidated real estate investment until we purchased the retail and office portion of a $26.2 million gainthe property from our partner on the sale of Richmond Tower, a $3.8 million gain on Oyster Point, and a $0.4 million gain on the Newport News Economic Development Authority building.March 14, 2019.

Change in Fair Value of Interest Rate Derivatives. During the year ended December 31, 2019, we recognized losses on changes in fair value of interest rate derivatives of $3.6 million due to projected decreases in interest rate forward curves.
During the year ended December 31, 2018, we recognized losses on changes in fair value of interest rate derivatives of $1.0 million, due to decreasesprojected increases in forward interest rate forward curves for time periods beginning two years from now. During the year ended December 31, 2017, we recognized gains on changes in fair value of interest rate derivatives of $1.1 million, due to increases in forward interest rate curves. During the year ended December 31, 2016, we recognized losses on changes in fair value of interest rate derivatives of $0.9 million, which was primarily due to the dedesignation of our interest rate swaps during the three months ended March 31, 2016. In 2016, all activity for both interest rate caps and swaps were reclassified out of other income to this line item.at that time.
 
Other Income. Other income for the years ended December 31, 2018, 2017,2019 and 20162018 was relatively unchanged, with a small increase in 20182019 due to miscellaneous non-tenant income.
 

Income Taxes. Our TRS, through which we conduct our development and construction business, is subject to federal, state, and local corporate income taxes. The income tax benefit (provision) recognized during the years ended December 31, 2018, 2017,2019 and 20162018 is attributable to the (losses)taxable profits and losses of our TRS. As a result of the Tax Reform Legislation in 2017,development and construction businesses that we remeasured deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 25%. The provisional amounts recorded related to the remeasurement of the deferred tax balance was approximately $0.2 million of tax expense during the year ended December 31, 2017.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 credit facility, and net proceeds from the 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, and the issuance of equity and debt securities. We also may fund property development and acquisitions and capital improvements using our credit facility pending long-term financing.
 
As of December 31, 2018,2019, we had unrestricted cash and cash equivalents of $21.3$39.2 million available for both current liquidity needs as well as development activities. As of December 31, 2018,2019, we also had restricted cash in escrow of $2.8$4.3 million, some of which is available for capital expenditures at our operating properties. As of December 31, 2018,2019, we had $21.9$40.0 million available under our credit facility to meet our short-term liquidity requirements.requirements and $58.1 million available under construction loans to fund development activities.

We paid off the North Point Center Note 1 loan on January 31, 2019. We have no other loans scheduled to mature during 2019.

ATM Program


On February 26, 2018, we commenced a new at-the-market continuous equity offering program (the "2018the ATM Program")Program through which we are able to,may, from time to time, issue and sell shares of common stock. On August 6, 2019, we entered into amendments (the "Amendments") to the separate sales agreements related to the ATM Program, which, among other things, increased the aggregate offering price of shares of our common stock under the ATM Program from $125.0 million to $180.7 million. Prior to the date of the ATM Amendments, we had sold shares having an aggregate offering price of up to $125.0 million.$105.7 million, resulting in shares having an aggregate offering price of $75.0 million remaining available for sale under the ATM Program as of August 6, 2019. During the year ended December 31, 2018,2019, we issued and sold 4,617,4095,871,519 shares of common stock at a weighted average price of $14.39$16.76 per share under the 2018 ATM Program, receiving net proceeds of $65.2$97.0 million after offering costs and commissions; commissions paid to underwriters totaled $1.0 million. During the three months ended December 31, 2018, we issued and sold 389,431 shares of common stock at a weighted average price of $15.05 per share under the 2018 ATM Program, receiving net proceeds of $5.7 million after offering costs and commissions; commissions paid to underwriters totaled $0.1 million.commissions.


As of December 31, 2018,2019, we had $58.5$15.9 million in availability under the 2018 ATM Program.


Series A Preferred Stock Offering

On June 18, 2019, we issued 2,530,000 shares of 6.75% Series A Preferred Stock with a liquidation preference of $25.00 per share, which included 330,000 shares issued upon the underwriters’ full exercise of their option to purchase additional shares. Net proceeds from the offering, after the underwriting discount but before offering expenses payable by us, were approximately $61.3 million. We used the net proceeds to fund a portion of the purchase price of Thames Street Wharf, a 263,426 square foot office building located in the Harbor Point neighborhood of Baltimore, Maryland. The balance of the net proceeds was used to repay a portion of the outstanding borrowings under our unsecured revolving credit facility and for general corporate purposes.

Credit Facility

On October 26, 2017,3, 2019, we entered into an amended and restated credit agreement (the "credit agreement”agreement"), which provides for a $300.0$355.0 million credit facility comprised of a $150.0 million senior unsecured revolving credit facility (the “revolving"revolving credit facility”facility") and a $150.0$205.0 million senior unsecured term loan facility (the “term"term loan facility”facility" and, together with the revolving credit facility, the “credit facility”"credit facility"), with a syndicate of banks. The credit facility replaced our prior $150.0 million revolving credit facility, which was scheduled to mature on February 20, 2019, and our prior $125.0 million term loan facility, which was scheduled to mature on February 20, 2021. 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 to as much as $450.0$700.0 million, subject to certain conditions, including obtaining commitments from any one or more lenders. On March 28, 2018, we increased the maximum commitments of the credit facility to $330.0 million using the accordion feature, with an increase of the term loan facility to $180.0 million. The revolving credit facility has a scheduled maturity date of October 26, 2021,January 24, 2024, 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 October 26, 2022.January 24, 2025.


The revolving credit facility bears interest at LIBOR (the London Inter-Bank Offered Rate) plus a margin ranging from 1.40%1.30% to 2.00%1.85%, and the term loan facility bears interest at LIBOR plus a margin ranging from 1.35%1.25% to 1.95%1.80%, in each case depending on our total leverage. We are 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 credit facility. As of December 31, 2019, the interest rates on the revolving credit facility and the term loan facility were 3.26% and 3.21%, respectively. If we attain investment grade credit ratings from S&P and Moody’s, we may elect to have borrowings become subject to interest rates based on oursuch credit ratings. We 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 under the credit facility, and its obligations under the credit facility are guaranteed by us 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. 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 that is equalwith a purchase price of at least up to or greater than 10% of our total asset value (as defined in the credit agreement),$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 75% of tangible net worth (as defined in the credit agreement) as of September 30, 2017$567,106,000 and amount equal to 75% of the net equity proceeds received after June 30, 2017;2019;
Ratio of secured indebtedness to total asset value of not more than 40%;
Ratio of secured recourse debt 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 that is equalwith a purchase price of at least up to or greater than 10% of our total asset value,$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;
Ratio of unencumbered NOI (as defined in the credit agreement) to all unsecured debt of not less than 12%;
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 $300.0 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.

Maximum aggregate rental revenue from any single tenant of not more than 30% of rental revenues with respect to all leases of unencumbered properties (as defined in the credit agreement).

The credit facilityagreement limits our ability to pay cash dividends. However, so long as no default or event of default exists, the credit agreement allows us to pay cash dividends with respect to any 12-month period in an amount not to exceed the greater of: (i) 95% of adjusted funds from operations (as defined in the credit agreement) or (ii) the amount required for us (a) to maintain our status as a REIT and (b) to avoid income or excise tax under the Code. If certain defaults or events of default exist, we may pay cash dividends with respect to any 12-month period to the extent necessary to maintain our status as a REIT. The credit facilityagreement 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 the amount of stock and OP units that we may repurchase 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 premium or penalty.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.

On January 31, 2019, we increased the maximum commitments under the credit facility to $355.0 million using the accordion feature, with an increase of the term loan facility to $205.0 million.




Consolidated Indebtedness
 
The following table sets forth our consolidated indebtedness as of December 31, 20182019 ($ in thousands):
     Effective Rate for         Effective Rate for    
 Amount Interest Variable-Rate   Balance at Amount Interest Variable-Rate   Balance at
Secured Debt Outstanding Rate(a) Debt    Maturity Date Maturity Outstanding 
Rate (a)
 Debt    Maturity Date Maturity
North Point Center Note 1 (b) $9,352
 6.45%   February 5, 2019 $9,333
Greenside (Harding Place) 25,902
 LIBOR + 2.95%
 5.45% February 24, 2020 25,902
Premier (Town Center Phase VI) 19,214
 LIBOR + 3.50%
 6.00% June 29, 2020 19,214
Hoffler Place (King Street) 11,445
 LIBOR + 3.24%
 5.74% January 1, 2021 11,445
Summit Place (Meeting Street) 11,057
 LIBOR + 3.24%
 5.74% January 1, 2021 11,057
Hoffler Place (b)
 $29,059
 LIBOR + 3.24%
 5.00% January 1, 2021 $29,059
Summit Place (b)
 28,824
 LIBOR + 3.24%
 5.00% January 1, 2021 28,824
Southgate Square 21,442
 LIBOR + 1.60%
 4.10% April 29, 2021 19,462
 20,562
 LIBOR + 1.60%
 3.36% April 29, 2021 19,462
Encore Apartments (c)
 24,842
 3.25% 

 September 10, 2021 23,993
4525 Main Street (c) 32,034
 3.25%   September 10, 2021 30,774
 31,876
 3.25% 

 September 10, 2021 30,786
Encore Apartments (c) 24,966
 3.25%   September 10, 2021 24,006
Red Mill West 11,296
 4.23% 

 June 1, 2022 10,187
Thames Street Wharf 70,000
 LIBOR + 1.30%
 3.06% June 26, 2022 70,000
Hanbury Village 19,019
 3.78%   August 15, 2022 17,109
 18,515
 3.78% 

 August 15, 2022 17,121
Marketplace at Hilltop 10,517
 4.42% 

 October 1, 2022 9,383
1405 Point 53,000
 LIBOR + 2.25%
 4.01% January 1, 2023 51,532
Socastee Commons 4,671
 4.57%   January 6, 2023 4,223
 4,567
 4.57% 

 January 6, 2023 4,223
Sandbridge Commons 8,258
 LIBOR + 1.75%
 4.25% January 17, 2023 7,248
 8,020
 LIBOR + 1.75%
 3.51% January 17, 2023 7,247
Wills Wharf 29,154
 LIBOR + 2.25%
 4.01% June 26, 2023 29,154
249 Central Park Retail (d) 17,045
 LIBOR + 1.60%
 4.10% August 10, 2023 15,935
 16,828
 LIBOR + 1.60%
 3.85%
(e) 
August 10, 2023 15,935
Fountain Plaza Retail (d)
 10,127
 LIBOR + 1.60%
 3.85%
(e) 
August 10, 2023 9,590
South Retail (d) 7,483
 LIBOR + 1.60%
 4.10% August 10, 2023 6,992
 7,388
 LIBOR + 1.60%
 3.85%
(e) 
August 10, 2023 6,996
Fountain Plaza Retail (d) 10,257
 LIBOR + 1.60%
 4.10% August 10, 2023 9,594
Lightfoot Marketplace 10,500
 LIBOR + 1.75%
 4.77%(e)October 12, 2023 10,500
One City Center 25,286
 LIBOR + 1.85%
 3.61% April 1, 2024 22,559
Red Mill Central 2,538
 4.80% 

 June 17, 2024 1,765
Premier Apartments (f)
 16,750
 LIBOR + 1.55%
 3.31% October 31, 2024 15,848
Premier Retail (f)
 8,250
 LIBOR + 1.55%
 3.31% October 31, 2024 7,806
Red Mill South 6,137
 3.57% 

 May 1, 2025 4,383
Brooks Crossing Office 6,910
 LIBOR + 1.60%
 4.10% July 1, 2025 6,910
 14,411
 LIBOR + 1.60%
 3.36% July 1, 2025 11,181
Market at Mill Creek 7,283
 LIBOR + 1.55%
 4.05% July 12, 2025 7,283
 14,727
 LIBOR + 1.55%
 3.31% July 12, 2025 11,167
Johns Hopkins Village 52,708
 LIBOR + 1.25%
 4.19%(e)August 7, 2025 45,967
 51,800
 LIBOR + 1.25%
 4.19%
(e) 
August 7, 2025 45,967
North Point Center Note 2 2,346
 7.25%   September 15, 2025 1,344
 2,214
 7.25% 

 September 15, 2025 1,328
Lexington Square 14,940
 4.50%   September 1, 2028 12,090
 14,696
 4.50% 

 September 1, 2028 12,044
Red Mill North 4,394
 4.73% 

 December 31, 2028 3,295
Greenside Apartments 34,000
 3.17% 

 December 15, 2029 26,329
Smith's Landing 18,985
 4.05%   June 1, 2035 —
 18,174
 4.05% 

 June 1, 2035 384
Liberty Apartments 14,437
 5.66%   November 1, 2043 —
 14,165
 5.66% 

 November 1, 2043 —
The Cosmopolitan 44,468
 3.35%   July 1, 2051 —
 43,702
 3.35%   July 1, 2051 —
Total secured debt $394,722
     $296,388
 $645,819
     $527,548
Unsecured Debt                
Senior unsecured revolving credit facility 126,000
 LIBOR+1.40%-2.00%
 4.05% October 26, 2021 126,000
 110,000
 LIBOR+1.30%-1.85%
 3.26% January 24, 2024 110,000
Senior unsecured term loan 80,000
 LIBOR+1.35%-1.95%
 4.00% October 26, 2022 80,000
 44,500
 LIBOR+1.25%-1.80%
 3.21% January 24, 2025 44,500
Senior unsecured term loan 50,000
 LIBOR+1.35%-1.95%
 3.50%(e)October 26, 2022 50,000
 160,500
 LIBOR+1.25%-1.80%
 3.55% - 4.57%
(e) 
January 24, 2025 160,500
Senior unsecured term loan 50,000
 LIBOR+1.35%-1.95%
 4.28%(e)October 26, 2022 50,000
Total unsecured debt $306,000
     $306,000
 $315,000
     $315,000
Total principal balances 700,722
     602,388
 960,819
     842,548
Unamortized GAAP adjustments (6,483)     —
 (10,282)     —
Indebtedness, net $694,239
     $602,388
 $950,537
     $842,548

(a)LIBOR is determined by individual lenders.
(b)On January 31, 2019, North Point Center Note 1 was paid off.
(c)
(a) LIBOR rate is determined by individual lenders.
(b) Cross collateralized.
(c) Cross collateralized.
(d) Cross collateralized.
(e) Includes debt subject to interest rate swap agreements.
(f) Cross collateralized.
(d)Cross collateralized.
(e)Subject to an interest rate swap agreement.

We currently are in compliance with all covenants on our outstanding indebtedness.


As of December 31, 2018,2019, our outstanding indebtedness maturesscheduled principal repayments and maturities during each of the followingnext five years and thereafter were as follows ($ in thousands):
   Percentage of   Percentage of
Year(1) 
Amount Due(1)
 
Total 
 Amount Due Total 
2019 $14,926
(2) 
2%
2020 51,742
 7% $10,191
 1%
2021 228,565
 33% 143,038
 15%
2022 201,912
 29% 116,374
 12%
2023 58,508
 8% 132,429
 14%
2024 164,960
 17%
Thereafter 145,069
 21% 393,827
 41%
 $700,722
 100% $960,819
 100%

(1) Includes scheduled principal amortization payments.
(2) North Point Note 1, which had an outstanding principal balanceDoes not reflect the exercise of $9,333, was paid off on January 31, 2019.any maturity extension options.
 
Interest Rate Derivatives
 
On February 20, 2015, we entered into a $50.0 millionAs of December 31, 2019, the Company held the following floating-to-fixed interest rate swap attributable to one-month LIBOR indexed interest payments. The $50.0 million interest rate swap has a fixed rate of 2.00%, an effective date of March 1, 2016, and a maturity date of February 20, 2020. We entered into this interest rate swap agreementswaps ($ in connection with the senior unsecured term loan facility with an original balance of $50.0 million that bears interest at LIBOR plus 1.35% to 1.95%, depending on our total leverage.thousands):

On April 23, 2018, we entered into a floating-to-fixed interest rate swap attributable to one-month LIBOR-indexed interest payments with a notional amount of $50.0 million. The interest rate swap has a fixed rate of 2.783%, an effective date of May 1, 2018, and a maturity date of May 1, 2023.
Related Debt Notional Amount  Index Swap Fixed Rate Debt effective rate Effective Date Expiration Date
Senior unsecured term loan $50,000
  1-month LIBOR 2.00% 3.45% 3/1/2016 2/20/2020
Senior unsecured term loan 50,000
  1-month LIBOR 2.78% 4.23% 5/1/2018 5/1/2023
John Hopkins Village 51,800
(a) 
 1-month LIBOR 2.94% 4.19% 8/7/2018 8/7/2025
Senior unsecured term loan 10,500
(a)(b) 
 1-month LIBOR 3.02% 4.47% 10/12/2018 10/12/2023
249 Central Park Retail, South Retail, and Fountain Plaza Retail 34,342
(a) 
 1-month LIBOR 2.25% 3.85% 4/1/2019 8/10/2023
Senior unsecured term loan 50,000
(a) 
 1-month LIBOR 2.26% 3.71% 4/1/2019 10/26/2022
Total $246,642
           


(a) Designated as a cash flow hedge.
(b) Prior to August 15, 2019, this swap was used as a hedge for the cash flows for the loan secured by Lightfoot Marketplace.
On July 27, 2018, we entered into a LIBOR interest rate swap agreement that effectively fixes the interest rate of the new Johns Hopkins Village note payable at 4.19% per annum with a maturity date of August 7, 2025. We designated the interest rate swap as a cash flow hedge for accounting purposes.

On October 12, 2018, we entered into a LIBOR interest rate swap agreement that effectively fixes the interest rate of the initial $10.5 million tranche of the new Lightfoot Marketplace note payable at 4.77% per annum until stabilization and 4.62% per annum thereafter. The swap matures on October 12, 2023. We designated the interest rate swap as a cash flow hedge for accounting purposes.


As of December 31, 2018,2019, we were party to the following LIBOR interest rate cap agreements ($ in thousands):  
Effective Date Maturity Date Strike Rate Notional Amount
February 7, 2017 March 1, 2019 1.50% $50,000
June 23, 2017 July 1, 2019 1.50% 50,000
September 18, 2017 October 1, 2019 1.50% 50,000
November 28, 2017 December 1, 2019 1.50% 50,000
March 7, 2018 April 1, 2020 2.25% 50,000
July 16, 2018 August 1, 2020 2.50% 50,000
December 11, 2018 January 1, 2021 2.75% 50,000
Total     $350,000
Effective Date Maturity Date Strike Rate Notional Amount
3/7/2018 4/1/2020 2.25% 50,000
7/16/2018 8/1/2020 2.50% 50,000
12/11/2018 1/1/2021 2.75% 50,000
5/15/2019 6/1/2022 2.50% 100,000
Total     $250,000
 

Contractual Obligations
 
The following table summarizes the future payments for known contractual obligations as of December 31, 20182019 (in thousands):
 
   Payments due by period   Payments due by period
   Less than 1 – 3 3 – 5 More than   Less than 1 – 3 3 – 5 More than
Contractual Obligations Total 1 year years years 5 years Total 1 year years years 5 years
Principal payments of long-term indebtedness (1)
 $700,722
 $14,926
 $280,307
 $260,420
 $145,069
Principal payments and maturities of long-term indebtedness $960,819
 $10,191
 $259,412
 $297,389
 $393,827
Ground and other operating leases 117,514
 2,127
 4,659
 4,767
 105,961
 162,309
 2,944
 6,230
 6,597
 146,538
Long-term debt—fixed interest 95,050
 13,408
 25,613
 15,954
 40,075
Long-term debt—variable interest(2) (3)
 46,976
 15,621
 24,011
 6,415
 929
Interest payments on long-term debt—fixed interest 126,282
 19,952
 36,223
 29,308
 40,799
Interest payments on long-term debt—variable interest (1)(2)
 57,206
 17,351
 26,866
 12,424
 565
Tenant-related and other commitments 25,772
 17,085
 8,572
 —
 115
 27,182
 26,262
 805
 —
 115
Total(4)(3)
 $986,034
 $63,167
 $343,162
 $287,556
 $292,149
 $1,333,798
 $76,700
 $329,536
 $345,718
 $581,844

(1)Does not reflect $12,000 in additional borrowings on the revolving line of credit in January 2019 and a $15,000 paydown on the revolving line of credit in February 2019. North Point Note 1, which had an outstanding principal balance of $9,333, was paid off on January 31, 2019.
(2)For long-term debt that bears interest at variable rates, we estimated future interest payments using the indexed rates as of December 31, 2018.2019. LIBOR as of December 31, 20182019 was 250176 basis points.
(3)(2)Assumes the balance outstanding of $126.0$110.0 million and the weighted average interest rate of 4.05%3.26% in effect at December 31, 20182019 remain in effect until maturity of our secured revolving credit facility. Amounts also include unused credit facility fees assuming the balance outstanding at December 31, 20182019 remains outstanding through maturity of our secured revolving credit facility.
(4)(3)Contractual obligations above do not include funding obligations to non-wholly owned development projects as well as unfunded mezzanine loan 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 mezzanine loans.


Off-Balance Sheet Arrangements
 
In connection with our mezzanine lending activities, we have made guarantees to pay portions of certain senior loans of third parties associated with the development projects. The following table summarizes the guarantees made by us as of December 31, 20182019 (in thousands):
Development project Payment guarantee amount 
1405 Point $25,000
 

 Payment guarantee amount
The Residences at Annapolis Junction 8,300
  $8,300
Delray Plaza 4,750
(a) 5,180
Nexton Square —
(b) 12,600
Interlock Commercial —
(c) 30,654
Solis Apartments at Interlock —
(d)
City Center 18,457
(e)
Total $56,507
  $56,734
   
(a) On January 8, 2019, the mezzanine loan and senior construction loan were modified, and the payment guarantee amount increased to $5.2 million.
(b) As of December 31, 2018, this payment guarantee was not yet effective because the senior construction loan had not yet been executed. On February 8, 2019, the senior construction loan was executed and the $12.6 million payment guarantee became effective. We have also guaranteed completion of the development project to the senior construction lender.
(c) As of December 31, 2018, this $30.7 million payment guarantee was not yet effective because the senior construction loan had not yet been executed. Once the senior construction loan is executed, we will also guarantee completion of the development project to the senior lender. We have also guaranteed completion of the development project to Georgia Tech, the ground lessor.
(d) There is no payment guarantee for the senior construction loan on this project. We have guaranteed completion of the development project to the senior lender.

(e) Durham City Center is accounted for as an equity method investment.

We have entered into a standby letter of credit for $2.1 million as a guarantee of the senior construction loan on the Point Street Apartments construction project and a standby letter of credit for $0.3 million as a guarantee of the tenant buildout for a tenant at Columbus Village. Letters of credit generally are available for draw down in the event we do not perform.

Cash Flows
 Years Ended  
 December 31,   
 2019 2018 Change
 ($ in thousands)
Operating Activities$67,729
 $56,087
 $11,642
Investing Activities(295,063) (240,563) (54,500)
Financing Activities246,862
 185,611
 61,251
Net Increase$19,528
 $1,135
 $18,393
Cash, Cash Equivalents, and Restricted Cash, Beginning of Period$24,051
 $22,916
  
Cash, Cash Equivalents, and Restricted Cash, End of Period$43,579
 $24,051
  


 Years Ended  
 December 31,   
 2018 2017 Change
 ($ in thousands)
Operating Activities$56,087
 $51,236
 $4,851
Investing Activities(240,563) (95,355) (145,208)
Financing Activities185,611
 41,842
 143,769
Net Increase (Decrease)$1,135
 $(2,277) $3,412
Cash, Cash Equivalents, and Restricted Cash, Beginning of Period$22,916
 $25,193
  
Cash, Cash Equivalents, and Restricted Cash, End of Period$24,051
 $22,916
  
 
Net cash provided by operating activities for the year ended December 31, 20182019 increased $4.9$11.6 million compared to the year ended December 31, 20172018 primarily as a result of increased cash provided by property operations, proceeds received from the sale of the Annapolis Junction purchase option, and interest payments received for the Annapolis Junction mezzanine loan. These increases were partially offset by timing differences in constructionoperating assets and liabilities.liabilities, as well as increased net operating income from the property portfolio.


Net cash used for investing activities for the year ended December 31, 20182019 increased $145.2$54.5 million compared to the year ended December 31, 20172018 primarily due to increased development activity, acquisition activity and issuancesincreased funding of mezzanine loans.loans, which was partially offset by the disposition of Lightfoot Marketplace and the collection of the Decatur mezzanine loan receivable.
 
Net cash provided by financing activities for the year ended December 31, 20182019 increased $143.8$61.3 million compared to the year ended December 31, 2017 primarily due to increased borrowing activity on our unsecured credit facility and construction loans.
 Years Ended  
 December 31,   
 2017 2016 Change
 ($ in thousands)
Operating Activities$51,236
 $56,985
 $(5,749)
Investing Activities(95,355) (223,031) 127,676
Financing Activities41,842
 161,426
 (119,584)
Net Increase (Decrease)$(2,277) $(4,620) $2,343
Cash, Cash Equivalents, and Restricted Cash, Beginning of Period$25,193
 $29,813
  
Cash, Cash Equivalents, and Restricted Cash, End of Period$22,916
 $25,193
  
Net cash provided by operating activities for the year ended December 31, 2017 decreased $5.7 million compared to the year ended December 31, 20162018 primarily as a result of the timingissuance of construction payables and receivables. This was partially offset by increased cash generated by property operations.the Series A Preferred Stock.
 
Net cash used for investing activities for the year ended December 31, 2017 decreased $127.7 million compared to the year ended December 31, 2016 primarily due to decreased acquisition and development activity. Cash outflows for acquisitions totaled $30.0 million for the year ended December 31, 2017 compared to $195.6 million for the year ended December 31, 2016.
Additionally, cash used for development activities and issuances of notes receivable was lower for the year ended December 31, 2017 compared to the year ended December 31, 2016.

Net cash provided by financing activities for the year ended December 31, 2017 decreased $119.6 million compared to the year ended December 31, 2016 primarily as a result of decreased net debt issuances and borrowings, which was partially offset by increased common stock issuances.

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 gains (or losses) from sales of depreciable operating property, real estate related depreciation and amortization (excluding amortization of deferred financing costs), impairment of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures.
 
FFO is a supplemental non-GAAP financial measure. Management uses FFO as a supplemental performance measure because 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 year-over-year, captures trends in occupancy rates, rental rates, and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs.
 
However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effects and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. In addition, other equity REITs may not calculate FFO in accordance with the Nareit definition as we do, and, accordingly, our calculation of FFO may not be comparable to such other REITs’ calculation 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. FFO also 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 year-over-year 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 of intangible assets and liabilities, property acquisition, development, and other pursuit costs, mark-to-market adjustments for interest rate

derivatives, amortization of right-of-use assets attributable to finance leases, severance related costs, and other non-comparable items.  
 

The following table sets forth a reconciliation of FFO and Normalized FFO for each of the three years ended December 31, 2019, 2018 and 2017 to net income, the most directly comparable GAAP measure:  
 Years Ended December 31, 
 2019 2018 2017
 (in thousands, except per share and unit amounts)
Net income attributable to common stockholders and OP Unit holders$29,590
 $23,492
 $29,925
Depreciation and amortization (1)
53,616
 40,178
 37,321
Gain on operating real estate dispositions (2)
(3,220) (833) (7,595)
Impairment of real estate assets—
 1,502
 —
FFO attributable to common stockholders and OP Unit holders79,986
 64,339
 59,651
Acquisition, development and other pursuit costs844
 352
 648
Impairment of intangible assets and liabilities252
 117
 110
Loss on extinguishment of debt30
 11
 50
Amortization of right-of-use assets - finance leases377
 —
 —
Change in fair value of interest rate derivatives3,599
 951
 (1,127)
Severance related costs—
 688
 —
Normalized FFO attributable to common stockholders and OP Unit holders$85,088
 $66,458
 $59,332
Net income attributable to common stockholders and OP Unit holders per diluted share and unit$0.41
 $0.36
 $0.50
FFO per diluted share and unit attributable to common stockholders and OP Unit holders$1.10
 $0.99
 $0.99
Normalized FFO per diluted share and unit attributable to common stockholders and OP Unit holders$1.17
 $1.03
 $0.99
Weighted average common shares and units - diluted72,644
 64,754
 60,181

 Years Ended December 31, 
 2018 2017 2016
 ($ in thousands)
Net income$23,492
 $29,925
 $42,755
Depreciation and amortization40,178
 37,321
 35,328
Gain on operating real estate dispositions(833) (7,595) (30,103)
Impairment of real estate assets1,502
 —
 —
Funds from operations$64,339
 $59,651
 $47,980
Acquisition, development and other pursuit costs352
 648
 1,563
Impairment of intangible assets and liabilities117
 110
 355
Loss on extinguishment of debt11
 50
 82
Change in fair value of interest rate derivatives951
 (1,127) 941
Severance related costs688
 —
 —
Normalized funds from operations$66,458
 $59,332
 $50,921
(1) The adjustment for depreciation and amortization for the years ended December 31, 2019 and 2018 includes $0.2 million and $0.3 million, respectively, of depreciation attributable to the Company's investment in One City Center, which was an unconsolidated real estate investment until March 14, 2019. Additionally, the adjustment for depreciation and amortization for the year ended December 31, 2019 excludes $1.2 million of depreciation attributable to the Company's joint venture partners.
(2) The adjustment for gain on operating real estate dispositions for the year ended December 31, 2019 excludes the portion of the gain on Lightfoot Marketplace that was allocated to our joint venture partner and excludes the gain on sale of a non-operating land parcel. The adjustment for gain on operating real estate dispositions for the year ended December 31, 2018 excludes the gain on the River City industrial facility because this property was sold before being placed into service. Additionally, the adjustment for gain on operating real estate dispositions for the year ended December 31, 2017 excludes the gain on the land outparcel at Sandbridge Commons because this was a non-operating parcel.

The adjustment for depreciation and amortization for the year ended December 31, 2018 includes depreciation and amortization attributable to our investment in One City Center, which is an unconsolidated real estate investment.

The adjustment for gain on operating real estate dispositions for the year ended December 31, 2018 excludes the gain on the River City industrial facility because this property was sold before being placed into service. The adjustment for gain on operating real estate dispositions for the year ended December 31, 2017 excludes the gain on the land outparcel at Sandbridge Commons because this was a non-operating parcel. Additionally, the adjustment for gain on real estate dispositions for the year ended December 31, 2016 excludes the gain on the Newport News Economic Authority building because this property was sold before being placed in service.


Inflation
 
Substantially all of our office and retail leases provide for the recovery of increases in real estate taxes and operating expenses. In addition, substantially all of the leases provide for annual rent increases. We believe that inflationary increases may be offset in part by the contractual rent increases and expense escalations previously described. In addition, our multifamily leases generally have lease terms ranging from 7 to 15 months with a majority having 12-month lease terms allowing negotiation of rental rates at term end, which we believe reduces our exposure to the effects of inflation.


Item 7A.Quantitative and Qualitative Disclosures About Market Risk.
 
The primary market risk to which we are exposed is interest rate risk. Our primary interest rate exposure is LIBOR. We primarily use fixed interest rate financing to manage our exposure to fluctuations in interest rates. On a limited basis, we also use derivative financial instruments to manage interest rate risk. We do not use these derivatives for trading or other speculative purposes.
 

As of December 31, 20182019 and excluding unamortized GAAP adjustments, approximately $348.4$488.3 million, or 49.7%50.8%, of our debt had fixed interest rates or was subject to interest rate swaps and approximately $352.3$472.5 million, or 50.3%49.2%, had variable interest rates. Considering interest rate swaps and caps, 99.7%76.8% of our debt is either fixed-rate or economically hedged. As of December 31, 2018,2019, LIBOR was approximately 250176 basis points. 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 $0.5$4.1 million per year due to our interest rate derivatives. Assuming no change in the level of our variable-rate debt or derivative instruments, if LIBOR were reduced by 100 basis points, our cash flow would increase by approximately $1.4$4.7 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 Securities Exchange Act of 1934, as amended (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, 2018,2019, 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, 2018,2019, 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, 20182019 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, 2018.2019.  
 
Our internal control over financial reporting as of December 31, 20182019 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, 20182019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.



Item 9B.Other Information.  
 
None.



PART III  


Item 10.Directors, Executive Officers and Corporate Governance.
 
This information is incorporated by reference from the Company’s Proxy Statement with respect to the 20192020 Annual Meeting of Stockholders to be filed with the SEC no later than April 30, 2019.29, 2020.  


Item 11.Executive Compensation.  
 
This information is incorporated by reference from the Company’s Proxy Statement with respect to the 20192020 Annual Meeting of Stockholders to be filed with the SEC no later than April 30, 2019.29, 2020. 


Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 
 
This information is incorporated by reference from the Company’s Proxy Statement with respect to the 20192020 Annual Meeting of Stockholders to be filed with the SEC no later than April 30, 2019.29, 2020. 


Item 13.Certain Relationships and Related Transactions, and Director Independence.
 
This information is incorporated by reference from the Company’s Proxy Statement with respect to the 20192020 Annual Meeting of Stockholders to be filed with the SEC no later than April 30, 2019.29, 2020. 
 
Item 14.Principal Accountant Fees and Services.
 
This information is incorporated by reference from the Company’s Proxy Statement with respect to the 20192020 Annual Meeting of Stockholders to be filed with the SEC no later than April 30, 2019.29, 2020. 



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-46.F-49.  
 
(2)Financial Statement Schedules
 
The following financial statement schedule is included herein at pages F-47F-50 through F-49:F-52:  
 
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.



INDEX TO EXHIBITS
 
Exhibit
Number
    Description
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 Referencereference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed on February 23, 2018)
   
4.13.3
 
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).
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)
   
10.14.2*
 
Description of Securities of Armada Hoffler Properties, Inc.
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 (Time Vesting) (Incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-11/A, filed on May 2, 2013)for Executive officers.
   
10.4†
 
Indemnification Agreement between Armada Hoffler Properties, Inc. and each of the Directors and Officers listed on Schedule A thereto (Incorporated by Referencereference to Exhibit 10.410.1 to the Company's AnnualQuarterly Report on Form 10-K for the fiscal year ended December 31, 2015,10-Q, filed on March 2, 2016)November 6, 2019)
   
10.5†*
 
Tax Protection Agreement by and among Armada Hoffler Properties, Inc. and the person listed on the signature page thereto. (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q, filed on November 12, 2013)
10.6†*
Armada Hoffler, L.P. Amended and Restated Executive Severance Benefit Plan with the participants listed on Schedule A thereto.
   
10.610.7*
 
Form of Restricted Stock Award Agreement for Directors (Incorporated by reference to Exhibit 10.44 to the Company’s Registration Statement on Form S-11/A, filed on May 2, 2013)Directors.
   
10.710.8
 
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)

   
10.810.9
 
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†*10.10†


 
Armada Hoffler Properties, Inc. Amended and Restated Short-Term Incentive Program.

10.10
Purchase and Sale Agreement, dated as of December 3, 2015, by and between DDR-SAU South Square, L.L.C., DDR-SAU Durham Patterson, L.L.C., DDR-SAU Wendover Phase II, L.L.C., DDR-SAU Salisbury Alexander, L.L.C., DDR-SAU Winston-Salem Harper Hill, L.L.C., DDR-SAU Greer North Hampton Market, L.L.C., DDR-SAU Nashville Willowbrook, L.L.C., DDR-SAU South Bend Broadmoor, L.L.C., DDR-SAU Oakland, L.L.C., DDR-SAU Waynesboro, L.L.C., DDR-SAU Pasadena Red Bluff Limited Partnership and AHP Acquisitions, LLC (Incorporated by reference to Exhibit 10.5510.9 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed on March 2, 2016)

10.11
First Amendment to Purchase and Sale Agreement, dated as of December 14, 2015, by and between DDR-SAU South Square, L.L.C., DDR-SAU Durham Patterson, L.L.C., DDR-SAU Wendover Phase II, L.L.C., DDR-SAU Salisbury Alexander, L.L.C., DDR-SAU Winston-Salem Harper Hill, L.L.C., DDR-SAU Greer North Hampton Market, L.L.C., DDR-SAU Nashville Willowbrook, L.L.C., DDR-SAU South Bend Broadmoor, L.L.C., DDR-SAU Oakland, L.L.C., DDR-SAU Waynesboro, L.L.C., DDR-SAU Pasadena Red Bluff Limited Partnership and AHP Acquisitions, LLC (Incorporated by reference to Exhibit 10.56 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed on March 2, 2016)

10.12
Form of Performance Unit Award Agreement (Incorporated by reference to Exhibit 10.57 to the Company'sCompany’s Annual Report on Form 10-K, filed March 1, 2017)on February 28, 2019)
   
10.1310.11
 
Second Amended and Restated Credit Agreement, dated as of October 26, 2017,3, 2019, 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 QuarterlyCurrent Report on Form 10-Q,8-K, filed November 1, 2017)on October 9, 2019)
10.12
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)
10.13
Amendment No. 3 to the First Amended and Restated Agreement of Limited Partnership of the Operating Partnership. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on June 17, 2019).
21.1*
List of Subsidiaries of Armada Hoffler Properties, Inc.
   

Exhibit
Number
    Description
10.1423.1*
 
Amended and Restated Guaranty Agreement, dated asConsent of October 26, 2017, among certain subsidiaries of Armada Hoffler, L.P. named therein for the benefit of the Administrative Agent and the Lenders named in the Amended and Restated Credit Agreement (Incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q, filed November 1, 2017)Ernst & Young LLP, Independent Public Accounting Firm
   
10.15†*31.1*
 
Separation Agreement by and among Armada Hoffler Properties, Inc. and Eric Smith, dated asCertification of November 9, 2018.
21.1*
List of Subsidiaries of Armada Hoffler Properties, Inc.
23.1*
Consent of Ernst & Young LLP, Independent Public Accounting Firm
31.1*
Certification ofthe 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 ExecutiveFinancial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   
101.INS*101* The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, were formatted in Inline XBRL Instance Document(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.
   
101.SCH*104* Cover page Interactive Data File - the cover page XBRL Taxonomy Extension Schema Document
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*XBRL Taxonomy Extension Label Linkbase Document
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*XBRL Taxonomy Extension Presentation Linkbase Documenttags are embedded within the Inline XBRL.
   
* Filed herewith
   
** Furnished herewith
   
† Management contract or compensatory plan or arrangement





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 28, 201924, 2020 
 
ARMADA HOFFLER PROPERTIES, INC.
  
By:/s/ Louis S. Haddad
 Louis S. Haddad
 President and Chief Executive Officer
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
Signature    Title    Date
     
/s/ Daniel A. Hoffler Executive Chairman and Director February 28, 201924, 2020
Daniel A. Hoffler
/s/ A. Russell KirkVice Chairman and DirectorFebruary 28, 2019
A. Russell Kirk    
     
/s/ Louis S. Haddad Vice Chairman, President, Chief Executive Officer and Director February 28, 201924, 2020
Louis S. Haddad (principal executive officer)  
     
/s/ Michael P. O’Hara Chief Financial Officer, Treasurer, and Secretary February 28, 201924, 2020
Michael P. O’Hara (principal financial officer and principal accounting officer)  
     
/s/ George F. Allen Director February 28, 201924, 2020
George F. Allen    
     
/s/ James A. Carroll Director February 28, 201924, 2020
James A. Carroll    
     
/s/ James C. Cherry Director February 28, 201924, 2020
James C. Cherry    
     
/s/ Eva S. Hardy Director February 28, 201924, 2020
Eva S. Hardy
/s/ A. Russell KirkDirectorFebruary 24, 2020
A. Russell Kirk
/s/ Dorothy S. McAuliffeDirectorFebruary 24, 2020
Dorothy S. McAuliffe    
     
/s/ John W. Snow Director February 28, 201924, 2020
John W. Snow    

Armada Hoffler Properties, Inc.
 
Form 10-K
For the Fiscal Year Ended December 31, 20182019 
 
Item 8, Item 15(a)(1) and (2)
 
Index to Financial Statements and Schedule
 
Report of Independent Registered Public Accounting Firm
F-2
Report of Independent Registered Public Accounting Firm
F-3
Consolidated Balance Sheets as of December 31, 20182019 and 20172018
F-4F-6
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2019, 2018, 2017, and 20162017
F-5F-7
Consolidated Statements of Equity for the Years Ended December 31, 2019, 2018, 2017, and 20162017
F-6F-8
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018, 2017, and 20162017
F-7F-9
Notes to Consolidated Financial Statements 
F-8F-10
Schedule III—Consolidated Real Estate Investments and Accumulated Depreciation 
F-46F-50



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, 2018,2019, 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, 2018,2019, 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 20182019 consolidated financial statements of the Company and our report dated February 28, 201924, 2020 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


Tysons, Virginia
February 28, 2019



24, 2020

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, 20182019 and 2017,2018, the related consolidatedstatements of comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2018,2019, and the related notes and Financial Statement Schedule listed in the Index at Item 15(2) (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, 20182019 and 2017,2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2019, 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, 2018,2019, 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 28, 201924, 2020 expressed an unqualified opinion thereon.
Adoption of ASU No. 2016-02
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of ASU No. 2016-02, Leases (Topic 842), and the related amendments.
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 matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for Loan Losses - Notes Receivable
Description of the Matter
/s/ Ernst & Young LLPAt December 31, 2019, the Company’s notes receivable portfolio totaled $159.4 million. As discussed in Notes 2 and 6 to the consolidated financial statements, management estimates the allowance for loan losses on outstanding notes receivable based primarily upon the value of the underlying development project. For loans determined to be impaired, the Company recognizes impairment losses calculated as the difference between the carrying amount of the loan and its estimated realizable value. The calculation of the estimated realizable value includes an estimation of the projected sales proceeds from the sale of the underlying development 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 realizable value of each loan. In particular, the estimated realizable value of each loan was largely dependent on the estimated fair value of the underlying development property, which 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 realizable values of loans.

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 realizable values of loans. We compared the significant assumptions used by management to external evidence, including comparable market capitalization rates and recent appraisals of the subject property. We tested the projected operating results of subject properties by comparing inputs and assumptions to executed or draft lease agreements 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 realizable value of each loan that would result from changes in the assumptions. We also assessed the historical accuracy of management’s estimates.
General contracting revenue recognition
Description of the Matter
For the year ended December 31, 2019, the Company’s general contracting revenues totaled approximately $105.9 million. As described in Note 2 to the consolidated financial statements, for each construction contract, the Company estimates its progress in satisfying performance obligations based on the proportion of incurred costs to total estimated costs at completion. The Company also estimates the total transaction price, including variable components, for each construction contract.

Auditing the Company’s measurement of general contracting revenue was challenging due to the significant estimation required to determine the estimated total costs at completion and variable consideration. 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. Estimated variable consideration is affected by claims and unapproved change orders, which may result from changes in the scope of the contract.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over the measurement of general contracting revenue. For example, we tested controls over management’s review and monitoring of the variable consideration calculation and the underlying assumptions related to estimates of costs at completion.

To test general contracting revenue recognition, our audit procedures included, among others, evaluating the estimates discussed above and testing the completeness and accuracy of the underlying data used by the Company to calculate variable consideration and total estimated costs at completion. For example, we tested variable consideration by inspecting subsequently executed change orders, reviewing legally enforceable terms of the contracts or confirming the value of executed change orders directly with the customers. We also confirmed directly with customers specific contract details, including the current and original contract value as well as the estimated percentage of completion. We tested the estimated costs at completion by comparing management’s cost estimates of materials, labor, and subcontractors to third-party evidence, such as subcontractor bids. In addition, we visited development sites, conducted interviews with the Company’s project management personnel, and involved our engineering specialists to assist in testing the Company’s estimated costs at completion. We also assessed the historical accuracy of management’s estimates of variable consideration and estimated costs at completion through retrospective review of actual gross-margins of completed projects compared to the anticipated gross margins during the projects.

Accounting for Acquisition of Operating Properties
Description of the Matter
During 2019, the Company completed a series of six operating property acquisitions for a total purchase price of $361.1 million as described in Notes 2 and 5 to the consolidated financial statements. These transactions were accounted for as asset acquisitions.

Auditing the Company's accounting for these acquisitions was challenging due to the significant estimation required by management to determine the fair values of the acquired assets used to allocate costs of the acquisitions on a relative fair value basis. The significant estimation was primarily due to the sensitivity of the respective fair values to underlying assumptions. The significant assumptions used to estimate the values of the tangible and intangible assets included the replacement cost of the properties, total lease-up time and lost rental revenues during such time, market rents, estimated future cash flows and other valuation assumptions.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s acquisition and purchase price allocation process, including controls over management’s review of the significant assumptions described above. For example, we tested controls over management’s review of the valuation methodology, the purchase price allocation, and the significant assumptions used.

To test the costs allocated to the tangible and intangible assets, we involved our valuation specialists and performed audit procedures that included, among others, evaluating the Company’s valuation methodologies, testing the significant assumptions described above and testing the completeness and accuracy of the underlying data. For example, we compared the significant assumptions to observable market data, including other properties within the same submarkets and to historical costs incurred by the Company in developing and constructing similar assets. We also performed sensitivity analyses of the significant assumptions to evaluate the change in fair values resulting from the changes in assumptions. In addition, we compared the Company’s estimated fair values of acquired assets to independent estimates developed by our valuation specialist.

/s/ Ernst & Young LLP

We have served as the Company'sCompany’s auditor since 2012.

Tysons, Virginia
February 28, 2019 24, 2020




ARMADA HOFFLER PROPERTIES, INC.
Consolidated Balance Sheets
(In thousands, except par value and share data)
DECEMBER 31, DECEMBER 31,
2018 20172019 2018
ASSETS      
Real estate investments:      
Income producing property$1,037,917
 $910,686
$1,460,723
 $1,037,917
Held for development2,994
 680
5,000
 2,994
Construction in progress135,675
 83,071
140,601
 135,675
1,176,586
 994,437
1,606,324
 1,176,586
Accumulated depreciation(188,775) (164,521)(224,738) (188,775)
Net real estate investments987,811
 829,916
1,381,586
 987,811
Real estate held for sale929
 —
Real estate investments held for sale1,460
 929
Cash and cash equivalents21,254
 19,959
39,232
 21,254
Restricted cash2,797
 2,957
4,347
 2,797
Accounts receivable, net19,016
 15,691
23,470
 19,016
Notes receivable138,683
 83,058
159,371
 138,683
Construction receivables, including retentions16,154
 23,933
36,361
 16,154
Construction contract costs and estimated earnings in excess of billings1,358
 245
249
 1,358
Equity method investments22,203
 11,411
—
 22,203
Operating lease right-of-use assets33,088
 —
Finance lease right-of-use assets24,130
 —
Acquired lease intangible assets, net68,702
 27,561
Other assets55,177
 55,953
32,901
 27,616
Total Assets$1,265,382
 $1,043,123
$1,804,897
 $1,265,382
LIABILITIES AND EQUITY      
Indebtedness, net$694,239
 $517,272
$950,537
 $694,239
Accounts payable and accrued liabilities15,217
 15,180
17,803
 15,217
Construction payables, including retentions50,796
 47,445
53,382
 50,796
Billings in excess of construction contract costs and estimated earnings3,037
 3,591
5,306
 3,037
Operating lease liabilities41,474
 —
Finance lease liabilities17,903
 —
Other liabilities46,203
 39,352
63,045
 46,203
Total Liabilities809,492
 622,840
1,149,450
 809,492
Stockholders’ equity:      
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued and outstanding as of December 31, 2018 and 2017, respectively—
 —
Common stock, $0.01 par value, 500,000,000 shares authorized, 50,013,731 and 44,937,763 shares issued and outstanding as of December 31, 2018 and 2017, respectively500
 449
Preferred stock, $0.01 par value, 100,000,000 shares authorized; 6.75% Series A Cumulative Redeemable Perpetual Preferred Stock, 2,530,000 shares issued and outstanding as of December 31, 2019 and zero shares issued and outstanding as of December 31, 201863,250
 —
Common stock, $0.01 par value, 500,000,000 shares authorized; 56,277,971 and 50,013,731 shares issued and outstanding as of December 31, 2019 and 2018, respectively563
 500
Additional paid-in capital357,353
 287,407
455,680
 357,353
Distributions in excess of earnings(82,699) (61,166)(106,676) (82,699)
Accumulated other comprehensive loss(1,283) —
(4,240) (1,283)
Total stockholders’ equity273,871
 226,690
408,577
 273,871
Noncontrolling interests182,019
 193,593
Noncontrolling interests in investment entities4,462
 —
Noncontrolling interests in Operating Partnership242,408
 182,019
Total Equity455,890
 420,283
655,447
 455,890
Total Liabilities and Equity$1,265,382
 $1,043,123
$1,804,897
 $1,265,382

See Notes to Consolidated Financial Statements.


ARMADA HOFFLER PROPERTIES, INC.
Consolidated Statements ofComprehensiveIncome  
(In thousands, except per shareand unitdata)
YEARS ENDED DECEMBER 31,YEARS ENDED DECEMBER 31,
2018 2017 20162019 2018 2017
Revenues                            
Rental revenues$116,958
 $108,737
 $99,355
$151,339
 $116,958
 $108,737
General contracting and real estate services revenues76,359
 194,034
 159,030
105,859
 76,359
 194,034
Total revenues193,317
 302,771
 258,385
257,198
 193,317
 302,771
Expenses          
Rental expenses27,222
 25,422
 21,904
34,332
 27,222
 25,422
Real estate taxes11,383
 10,528
 9,629
14,961
 11,383
 10,528
General contracting and real estate services expenses73,628
 186,590
 153,375
101,538
 73,628
 186,590
Depreciation and amortization39,913
 37,321
 35,328
54,564
 39,913
 37,321
Amortization of right-of-use assets - finance leases377
 —
 —
General and administrative expenses11,431
 10,435
 9,552
12,392
 11,431
 10,435
Acquisition, development and other pursuit costs352
 648
 1,563
844
 352
 648
Impairment charges1,619
 110
 355
252
 1,619
 110
Total expenses165,548
 271,054
 231,706
219,260
 165,548
 271,054
Gain on real estate dispositions4,254
 8,087
 30,533
4,699
 4,254
 8,087
Operating income32,023
 39,804
 57,212
42,637
 32,023
 39,804
Interest income10,729
 7,077
 3,228
23,215
 10,729
 7,077
Interest expense(19,087) (17,439) (16,466)
Interest expense on indebtedness(30,776) (19,087) (17,439)
Interest expense on finance leases(568) —
 —
Equity in income of unconsolidated real estate entities372
 —
 —
273
 372
 —
Loss on extinguishment of debt(11) (50) (82)
Change in fair value of interest rate derivatives(951) 1,127
 (941)(3,599) (951) 1,127
Other income388
 131
 147
Other income (expense), net585
 377
 81
Income before taxes23,463
 30,650
 43,098
31,767
 23,463
 30,650
Income tax benefit (provision)29
 (725) (343)491
 29
 (725)
Net income23,492
 29,925
 42,755
32,258
 23,492
 29,925
Net income attributable to noncontrolling interests(6,289) (8,878) (14,681)
Net income attributable to stockholders$17,203
 $21,047
 $28,074
Net income per share and unit:     
Basic and diluted$0.36
 $0.50
 $0.85
Weighted-average outstanding:     
Common shares47,512
 42,423
 33,057
Common units17,242
 17,758
 17,167
Basic and diluted64,754
 60,181
 50,224
Net income attributable to noncontrolling interests:     
Investment entities(213) —
 —
Operating Partnership(7,992) (6,289) (8,878)
Net income attributable to Armada Hoffler Properties, Inc.24,053
 17,203
 21,047
Preferred stock dividends(2,455) —
 —
Net income attributable to common stockholders$21,598
 $17,203
 $21,047
Net income attributable to common stockholders per share (basic and diluted)$0.41
 $0.36
 $0.50
Weighted-average Common shares outstanding (basic and diluted)53,119
 47,512
 42,423
     
Comprehensive income: 
  
  
 
    
Net income$23,492
 $29,925
 $42,755
$32,258
 $23,492
 $29,925
Unrealized cash flow hedge losses(1,894) —
 —
(4,504) (1,894) —
Realized cash flow hedge losses reclassified to net income169
 —
 —
501
 169
 —
Comprehensive income21,767
 29,925
 42,755
28,255
 21,767
 29,925
Comprehensive income attributable to noncontrolling interests(5,847) (8,878) (14,681)     
Comprehensive income attributable to stockholders$15,920
 $21,047
 $28,074
Investment entities(213) —
 —
Operating Partnership(6,946) (5,847) (8,878)
Comprehensive income attributable to Armada Hoffler Properties, Inc.$21,096
 $15,920
 $21,047


See Notes to Consolidated Financial Statements.

ARMADA HOFFLER PROPERTIES, INC.
Consolidated Statements of Equity  
(In thousands, except share data)
Shares of
common
stock
 
Common
stock
 
Additional
paid-
in capital
 
Distributions
in excess of
earnings
 
Accumulated
other
comprehensive
loss
 
Total
stockholders’
equity
 
Noncontrolling
interests
 
Total
Equity
Preferred stock Common stock Additional paid-in capital Distributions in excess of earnings Accumulated other comprehensive loss Total stockholders' equity (deficit) Noncontrolling interests in investment entities Noncontrolling interests in Operating Partnership Total equity
Balance, January 1, 201630,076,359
 $300
 $102,906
 $(53,010) $(648) $49,548
 $176,172
 $225,720
Net income—
 —
 —
 28,074
 —
 28,074
 14,681
 42,755
Dedesignation of cash flow hedge—
 —
 —
 —
 648
 648
 400
 1,048
Net proceeds from sales of common stock5,312,855
 53
 66,969
 —
 —
 67,022
 —
 67,022
Restricted stock awards, net of tax withholding101,147
 1
 1,161
 —
 —
 1,162
 —
 1,162
Acquisitions of real estate investments2,000,000
 20
 26,080
 —
 —
 26,100
 21,178
 47,278
Redemption of operating partnership units—
 —
 (2) —
 —
 (2) (56) (58)
Dividends and distributions declared—
 —
 —
 (24,409) —
 (24,409) (11,540) (35,949)
Balance, December 31, 201637,490,361
 374
 197,114
 (49,345) —
 148,143
 200,835
 348,978
Balance, January 1, 2017$—
 $374
 $197,114
 $(49,345) $—
 $148,143
 $—
 $200,835
 $348,978
Net income—
 —
 —
 21,047
 —
 21,047
 8,878
 29,925
—
 —
 —
 21,047
 —
 21,047
 —
 8,878
 29,925
Net proceeds from sales of common stock7,350,690
 74
 91,307
 —
 —
 91,381
 —
 91,381
—
 74
 91,307
 —
 —
 91,381
 —
 —
 91,381
Restricted stock awards, net of tax withholding97,173
 1
 1,442
 —
 —
 1,443
 —
 1,443
—
 1
 1,442
 —
 —
 1,443
 —
 —
 1,443
Restricted stock award forfeitures(461) —
 (2) —
 —
 (2) —
 (2)—
 —
 (2) —
 —
 (2) —
 —
 (2)
Acquisitions of noncontrolling interests in real estate investments—
 —
 (1,493) —
 —
 (1,493) 982
 (511)—
 —
 (1,493) —
 —
 (1,493) —
 982
 (511)
Redemption of operating partnership units—
 —
 (961) —
 —
 (961) (4,194) (5,155)—
 —
 (961) —
 —
 (961) —
 (4,194) (5,155)
Dividends and distributions declared—
 —
 —
 (32,868) —
 (32,868) (12,908) (45,776)—
 —
 —
 (32,868) —
 (32,868) —
 (12,908) (45,776)
Balance, December 31, 201744,937,763
 449
 287,407
 (61,166) —
 226,690
 193,593
 420,283
—
 449
 287,407
 (61,166) —
 226,690
 —
 193,593
 420,283
Net income—
 —
 —
 17,203
 —
 17,203
 6,289
 23,492
—
 —
 —
 17,203
 —
 17,203
 —
 6,289
 23,492
Unrealized cash flow hedge losses—
 —
 —
 —
 (1,410) (1,410) (484) (1,894)—
 —
 —
 —
 (1,410) (1,410) —
 (484) (1,894)
Realized cash flow hedge losses reclassified to net income—
 —
 —
 —
 127
 127
 42
 169
—
 —
 —
 —
 127
 127
 —
 42
 169
Net proceeds from sales of common stock4,617,409
 46
 65,198
 —
 —
 65,244
 —
 65,244
—
 46
 65,198
 —
 —
 65,244
 —
 —
 65,244
Restricted stock awards, net of tax withholding124,258
 2
 1,562
 —
 —
 1,564
 —
 1,564
—
 2
 1,562
 —
 —
 1,564
 —
 —
 1,564
Restricted stock award forfeitures(4,403) —
 (32) —
 —
 (32) —
 (32)—
 —
 (32) —
 —
 (32) —
 —
 (32)
Issuance of operating partnership units for acquisitions—
 —
 (5) —
 —
 (5) 2,201
 2,196
—
 —
 (5) —
 —
 (5) —
 2,201
 2,196
Redemption of operating partnership units338,704
 3
 3,223
 —
 —
 3,226
 (5,821) (2,595)—
 3
 3,223
 —
 —
 3,226
 —
 (5,821) (2,595)
Dividends and distributions declared—
 —
 —
 (38,736) —
 (38,736) (13,801) (52,537)—
 —
 —
 (38,736) —
 (38,736) —
 (13,801) (52,537)
Balance, December 31, 201850,013,731
 $500
 $357,353
 $(82,699) $(1,283) $273,871
 $182,019
 $455,890
—
 500
 357,353
 (82,699) (1,283) 273,871
 —
 182,019
 455,890
Cumulative effect of accounting change (1)
—
 —
 —
 (125) —
 (125) —
 (42) (167)
Net income—
 —
 —
 24,053
 —
 24,053
 213
 7,992
 32,258
Unrealized cash flow hedge losses—
 —
 —
 —
 (3,321) (3,321) —
 (1,183) (4,504)
Realized cash flow hedge losses reclassified to net income—
 —
 —
 —
 364
 364
 —
 137
 501
Net proceeds from issuance of cumulative redeemable perpetual preferred stock63,250
 —
 (2,249) —
 —
 61,001
 —
 —
 61,001
Net proceeds from sales of common stock—
 59
 96,786
 —
 —
 96,845
 —
 —
 96,845
Restricted stock awards, net of tax withholding—
 2
 2,029
 —
 —
 2,031
 —
 —
 2,031
Noncontrolling interest in acquired real estate entity—
 —
 —
 —
 —
 —
 4,870
 —
 4,870
Restricted stock award forfeitures—
 —
 (7) —
 —
 (7) —
 —
 (7)
Issuance of operating partnership units for acquisitions—
 —
 (986) —
 —
 (986) —
 73,169
 72,183
Redemption of operating partnership units—
 2
 2,754
 —
 —
 2,756
 —
 (2,756) —
Distributions to Joint Venture Partners—
 —
 —
 —
 —
 —
 (621) —
 (621)
Dividends and distributions declared on preferred stock      (2,455)   (2,455) —
 —
 (2,455)
Dividends and distributions declared on common shares and units—
 —
 —
 (45,450) —
 (45,450) —
 (16,928) (62,378)
Balance, December 31, 2019$63,250
 $563
 $455,680
 $(106,676) $(4,240) $408,577
 $4,462
 $242,408
 $655,447

(1) The Company recorded cumulative effect adjustments related to the new lease standard in the first quarter of 2019. See "Financial Statements — Note 2 — Significant Accounting Policies — Recent Accounting Pronouncements” for additional information.
See Notes to Consolidated Financial Statements.

ARMADA HOFFLER PROPERTIES, INC.
Consolidated Statements of Cash Flows  
(In thousands)
YEARS ENDED DECEMBER 31, YEARS ENDED DECEMBER 31, 
2018 2017 20162019 2018 2017
OPERATING ACTIVITIES                            
Net income$23,492
 $29,925
 $42,755
$32,258
 $23,492
 $29,925
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation of buildings and tenant improvements30,395
 25,974
 23,453
37,839
 30,395
 25,974
Amortization of leasing costs and in-place lease intangibles9,518
 11,347
 11,875
Amortization of leasing costs, in-place lease intangibles and below market ground rents - operating leases16,725
 9,518
 11,347
Accrued straight-line rental revenue(2,731) (1,222) (1,091)(3,402) (2,731) (1,222)
Amortization of leasing incentives and above or below-market rents(266) (195) (85)(629) (266) (195)
Amortization of right-of-use assets - finance leases377
 —
 —
Accrued straight-line ground rent expense214
 530
 371
(16) 214
 530
Bad debt expense419
 564
 203
Adjustment for uncollectable accounts511
 419
 564
Noncash stock compensation1,281
 1,323
 1,082
1,613
 1,281
 1,323
Impairment charges1,619
 110
 355
252
 1,619
 110
Noncash interest expense1,116
 1,274
 980
1,258
 1,116
 1,274
Noncash loss on extinguishment of debt11
 50
 82
Interest expense on finance leases568
 —
 —
Gain on real estate dispositions(4,254) (8,087) (30,533)(4,699) (4,254) (8,087)
Adjustment for Annapolis Junction purchase option (1)
4,489
 —
 —
Adjustment for Annapolis Junction modification fee (1)
(4,489) 4,489
 —
Change in the fair value of interest rate derivatives951
 (1,127) 941
3,599
 951
 (1,127)
Equity in income of unconsolidated real estate entities(372) —
 —
(273) (372) —
Changes in operating assets and liabilities:          
Property assets(3,539) (2,415) (2,964)(2,499) (3,539) (2,415)
Property liabilities1,709
 2,793
 3,979
3,368
 1,720
 2,843
Construction assets7,554
 17,573
 (6,385)(20,356) 7,554
 17,573
Construction liabilities(15,248) (20,110) 15,189
18,671
 (15,248) (20,110)
Interest receivable(271) (7,071) (3,222)(12,947) (271) (7,071)
Net cash provided by operating activities56,087
 51,236
 56,985
67,729
 56,087
 51,236
INVESTING ACTIVITIES          
Development of real estate investments(133,791) (45,730) (57,425)(133,445) (133,791) (45,730)
Tenant and building improvements(11,723) (12,252) (6,698)(19,721) (11,723) (12,252)
Acquisitions of real estate investments, net of cash received(57,544) (30,026) (195,645)(138,380) (57,544) (30,026)
Dispositions of real estate investments, net of selling costs34,673
 12,557
 96,670
32,944
 34,673
 12,557
Notes receivable issuances(58,208) (16,219) (48,499)(54,555) (58,208) (16,219)
Notes receivable paydowns1,165
 —
 —
22,522
 1,165
 —
Leasing costs(4,607) (2,235) (2,374)(3,893) (4,607) (2,235)
Leasing incentives(108) (274) (236)—
 (108) (274)
Contributions to equity method investments(10,420) (1,176) (8,824)(535) (10,420) (1,176)
Net cash used for investing activities(240,563) (95,355) (223,031)(295,063) (240,563) (95,355)
FINANCING ACTIVITIES          
Proceeds from sales of common stock66,457
 96,044
 68,475
Offering costs(1,213) (4,663) (1,453)
Proceeds from issuance of cumulative redeemable perpetual preferred stock, net61,001
 —
 —
Proceeds from issuance of common stock, net96,845
 65,244
 91,381
Common shares tendered for tax withholding(409) (289) (218)(369) (409) (289)
Debt issuances, credit facility and construction loan borrowings349,580
 162,585
 316,852
427,286
 349,580
 162,585
Debt and credit facility repayments, including principal amortization(173,855) (160,661) (186,533)(270,851) (173,855) (160,661)
Debt issuance costs(1,457) (2,403) (1,796)(5,546) (1,457) (2,403)
Redemption of operating partnership units(2,595) (5,155) (58)—
 (2,595) (5,155)
Dividends and distributions(50,897) (43,616) (33,843)(61,504) (50,897) (43,616)
Net cash provided by financing activities185,611
 41,842
 161,426
246,862
 185,611
 41,842
Net increase (decrease) in cash, cash equivalents, and restricted cash1,135
 (2,277) (4,620)19,528
 1,135
 (2,277)
Cash, cash equivalents, and restricted cash, beginning of period (2)
22,916
 25,193
 29,813
24,051
 22,916
 25,193
Cash, cash equivalents, and restricted cash, end of period (2)
$24,051
 $22,916
 $25,193
$43,579
 $24,051
 $22,916


See Notes to Consolidated Financial Statements.

ARMADA HOFFLER PROPERTIES, INC.
Consolidated Statements of Cash Flows (Continued) 
(In thousands)

YEARS ENDED DECEMBER 31, 
2019 2018 2017
Supplemental cash flow information:          
Cash paid for interest$(17,319) $(16,318) $(15,326)$28,878
 $(17,319) $(16,318)
Cash refunded (paid) for income taxes$555
 $(371) $(121)247
 31
 (371)
Increase in dividends payable$1,640
 $2,160
 $2,106
3,950
 1,640
 2,160
Common shares and OP units issued for acquisitions (3)
$1,702
 $506
 $47,278
73,169
 1,702
 506
Change in accrued capital improvements and development costs$18,310
 $10,899
 $(8,183)
(Decrease) increase in accrued capital improvements and development costs(12,666) 18,310
 10,899
Operating Partnership units redeemed for common shares$3,715
 $—
 $—
2,756
 3,715
 —
Debt principal extinguished in conjunction with real estate sales$—
 $5,594
 $6,400
—
 —
 5,594
Debt principal assumed in conjunction with real estate acquisitions$—
 $—
 $21,150
Debt assumed at fair value in conjunction with real estate purchases101,390
 —
 —
Redeemable noncontrolling interest from development$—
 $2,000
 $—
—
 —
 2,000
Deferred payment for land acquisition$—
 $600
 $—
—
 —
 600
Note receivable extinguished in conjunction with real estate purchase31,252
 —
 —
Equity method investment redeemed for real estate acquisition23,011
 —
 —
Noncontrolling interest in acquired real estate entity4,870
 —
 —
Recognition of operating lease ROU assets (4)
33,965
 —
 —
Recognition of operating lease liabilities (4)
41,631
 —
 —
Recognition of finance lease ROU assets24,500
 —
 —
Recognition of finance lease liabilities17,871
 —
 —
De-recognition of operating lease ROU assets - lease termination440
 —
 —
De-recognition of operating lease liabilities - lease termination440
 —
 —




(1) See Note 6 to the consolidated financial statements. Borrower paid $5.0 million in 2018 in exchange for the Company's purchase option. Recognition ofThis was accounted for as a loan modification fee; interest income was initially deferrred and is being recognized as additional interest income on the note receivable over the one-year remaining term.

(2) 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,
 2019 2018
Cash and cash equivalents$39,232
 $21,254
Restricted cash (a)
4,347
 2,797
Cash, cash equivalents, and restricted cash$43,579
 $24,051

 As of December 31
 2018 2017
Cash and cash equivalents$21,254
 $19,959
Restricted cash2,797
 2,957
Cash, cash equivalents, and restricted cash$24,051
 $22,916
(a) Restricted cash represents amounts held by lenders for real estate taxes, insurance, and reserves for capital improvements.


(3) 2017 issuance consists of OP Units contingently issuable upon the satisfaction of certain conditions relating to the Johns Hopkins Village property. These OP Units were issued in 2018.



(4) Net of $0.4 million disposal related to the Company's preexisting lease at the Thames Street Wharf property, which was acquired on June 26, 2019.






See Notes to Consolidated Financial Statements.

ARMADA HOFFLER PROPERTIES, INC.
Notes to Consolidated Financial Statements  
 
1.Business and Organization
 
Armada Hoffler Properties, Inc. (the “Company”"Company") is a full service real estate company with extensive experience developing, building, owning, and managing high-quality, institutional-grade office, retail, and multifamily properties in attractive markets primarily throughout the Mid-Atlantic and Southeastern United States.
 
The Company is a real estate investment trust ("REIT"), and is the sole general partner of Armada Hoffler, L.P. (the “Operating Partnership”"Operating Partnership"), and as of December 31, 2018,2019, owned 74.5%72.6% 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 of the Operating Partnership. Both the Company and the Operating Partnership were formed on October 12, 2012 and commenced operations upon completion of the underwritten initial public offering of shares of the Company’s common stock (the “IPO”"IPO") and certain related formation transactions on May 13, 2013.
 




As of December 31, 2018,2019, the Company's operating portfolio consisted of the following properties:  
Property    Segment Location Ownership Interest 
4525 Main Street Office Virginia Beach, Virginia* 100% 
Armada Hoffler Tower Office Virginia Beach, Virginia* 100% 
One Columbus Office Virginia Beach, Virginia* 100% 
Two Columbus Office Virginia Beach, Virginia* 100% 
249 Central Park Retail Retail Virginia Beach, Virginia* 100% 
Alexander Pointe Retail Salisbury, North Carolina 100% 
Bermuda Crossroads Retail Chester, Virginia 100% 
Broad Creek Shopping Center Retail Norfolk, Virginia 100% 
Broadmoor Plaza Retail South Bend, Indiana 100% 
Columbus Village Retail Virginia Beach, Virginia* 100% 
Columbus Village II Retail Virginia Beach, Virginia* 100% 
Commerce Street Retail Retail Virginia Beach, Virginia* 100% 
Courthouse 7-Eleven Retail Virginia Beach, Virginia 100% 
Dick’s at Town Center Retail Virginia Beach, Virginia* 100% 
Dimmock Square Retail Colonial Heights, Virginia 100% 
Fountain Plaza Retail Retail Virginia Beach, Virginia* 100% 
Gainsborough Square Retail Chesapeake, Virginia 100% 
Greentree Shopping Center Retail Chesapeake, Virginia 100% 
Hanbury Village Retail Chesapeake, Virginia 100% 
Harper Hill Commons Retail Winston-Salem, North Carolina 100% 
Harrisonburg Regal Retail Harrisonburg, Virginia 100% 
Indian Lakes Crossing Retail Virginia Beach, Virginia 100% 
Lexington Square Retail Lexington, South Carolina 100% 
Lightfoot Marketplace Retail Williamsburg, Virginia 70%(1)
North Hampton Market Retail Taylors, South Carolina 100% 
North Point Center Retail Durham, North Carolina 100% 
Oakland Marketplace Retail Oakland, Tennessee 100% 
Parkway Centre Retail Moultrie, Georgia 100% 
Parkway Marketplace Retail Virginia Beach, Virginia 100% 
Patterson Place Retail Durham, North Carolina 100% 
Perry Hall Marketplace Retail Perry Hall, Maryland 100% 
Providence Plaza Retail Charlotte, North Carolina 100% 
Renaissance Square Retail Davidson, North Carolina 100% 
Sandbridge Commons Retail Virginia Beach, Virginia 100% 
Socastee Commons Retail Myrtle Beach, South Carolina 100% 
Southgate Square Retail Colonial Heights, Virginia 100% 
Southshore Shops Retail Chesterfield, Virginia 100% 
South Retail Retail Virginia Beach, Virginia* 100% 
South Square Retail Durham, North Carolina 100% 
Stone House Square Retail Hagerstown, Maryland 100% 
Studio 56 Retail Retail Virginia Beach, Virginia* 100% 
Tyre Neck Harris Teeter Retail Portsmouth, Virginia 100% 
Wendover Village Retail Greensboro, North Carolina 100% 
Encore Apartments Multifamily Virginia Beach, Virginia* 100% 
Johns Hopkins Village Multifamily Baltimore, Maryland 100% 
Liberty Apartments Multifamily Newport News, Virginia 100% 
Smith’s Landing Multifamily Blacksburg, Virginia 100% 
The Cosmopolitan Multifamily Virginia Beach, Virginia* 100% 

PropertySegmentLocationOwnership Interest
4525 Main StreetOfficeVirginia Beach, Virginia*100%
Armada Hoffler TowerOfficeVirginia Beach, Virginia*100%
Brooks Crossing OfficeOfficeNewport News, Virginia100%
One City CenterOfficeDurham, North Carolina100%
One ColumbusOfficeVirginia Beach, Virginia*100%
Thames Street WharfOfficeBaltimore, Maryland100%
Two ColumbusOfficeVirginia Beach, Virginia*100%
249 Central Park RetailRetailVirginia Beach, Virginia*100%
Alexander PointeRetailSalisbury, North Carolina100%
Apex Entertainment (1)
RetailVirginia Beach, Virginia*100%
Bermuda CrossroadsRetailChester, Virginia100%
Broad Creek Shopping CenterRetailNorfolk, Virginia100%
Broadmoor PlazaRetailSouth Bend, Indiana100%
Brooks Crossing Retail (2)
RetailNewport News, Virginia65%
Columbus VillageRetailVirginia Beach, Virginia*100%
Columbus Village IIRetailVirginia Beach, Virginia*100%
Commerce Street RetailRetailVirginia Beach, Virginia*100%
Courthouse 7-ElevenRetailVirginia Beach, Virginia100%
Dimmock SquareRetailColonial Heights, Virginia100%
Fountain Plaza RetailRetailVirginia Beach, Virginia*100%
Gainsborough SquareRetailChesapeake, Virginia100%
Greentree Shopping CenterRetailChesapeake, Virginia100%
Hanbury VillageRetailChesapeake, Virginia100%
Harper Hill CommonsRetailWinston-Salem, North Carolina100%
Harrisonburg RegalRetailHarrisonburg, Virginia100%
Indian Lakes CrossingRetailVirginia Beach, Virginia100%
Lexington SquareRetailLexington, South Carolina100%
Market at Mill Creek (2)
RetailMount Pleasant, South Carolina70%
Marketplace at HilltopRetailVirginia Beach, Virginia100%
North Hampton MarketRetailTaylors, South Carolina100%

PropertySegmentLocationOwnership Interest
North Point CenterRetailDurham, North Carolina100%
Oakland MarketplaceRetailOakland, Tennessee100%
Parkway CentreRetailMoultrie, Georgia100%
Parkway MarketplaceRetailVirginia Beach, Virginia100%
Patterson PlaceRetailDurham, North Carolina100%
Perry Hall MarketplaceRetailPerry Hall, Maryland100%
Providence PlazaRetailCharlotte, North Carolina100%
Red Mill CommonsRetailVirginia Beach, Virginia100%
Renaissance SquareRetailDavidson, North Carolina100%
Sandbridge CommonsRetailVirginia Beach, Virginia100%
Socastee CommonsRetailMyrtle Beach, South Carolina100%
South RetailRetailVirginia Beach, Virginia*100%
South SquareRetailDurham, North Carolina100%
Southgate SquareRetailColonial Heights, Virginia100%
Southshore ShopsRetailChesterfield, Virginia100%
Stone House SquareRetailHagerstown, Maryland100%
Studio 56 RetailRetailVirginia Beach, Virginia*100%
Tyre Neck Harris TeeterRetailPortsmouth, Virginia100%
Wendover VillageRetailGreensboro, North Carolina100%
1405 PointMultifamilyBaltimore, Maryland79%
Encore ApartmentsMultifamilyVirginia Beach, Virginia*100%
Greenside ApartmentsMultifamilyCharlotte, North Carolina100%
Hoffler PlaceMultifamilyCharleston, South Carolina93%
Johns Hopkins VillageMultifamilyBaltimore, Maryland100%
Liberty ApartmentsMultifamilyNewport News, Virginia100%
Premier ApartmentsMultifamilyVirginia Beach, Virginia*100%
Smith’s LandingMultifamilyBlacksburg, Virginia100%
________________________________________
* Located in the Town Center of Virginia Beach
(1) TheDick's Sporting Goods, one of the anchor tenants at the property previously known as "Dick’s at Town Center," notified the Company during 2019 that it would not renew its lease beyond January 31, 2020, the end of the current term. In October 2019, the Company signed a lease with a replacement tenant, Apex Entertainment, which will take the entire space currently occupied by Dick's Sporting Goods after the redevelopment and buildout of the facility is entitledcompleted, which is expected to a preferred returnoccur by the end of 9% on its investment in Lightfoot Marketplace.

As of December 31, 2018, the following properties were either under development or not yet stabilized:
Property    Segment    Location Ownership Interest 
Premier Apartments (Town Center Phase VI) Multifamily Virginia Beach, Virginia* 100% 
Premier Retail (Town Center Phase VI) Retail Virginia Beach, Virginia* 100% 
Greenside (Harding Place) Multifamily Charlotte, North Carolina 80%(1)
Hoffler Place (King Street) Multifamily Charleston, South Carolina 93% 
Summit Place (Meeting Street) Multifamily Charleston, South Carolina 90% 
Brooks Crossing Retail Retail Newport News, Virginia 65%(2)
Brooks Crossing Office Office Newport News, Virginia 65%(2)
Lightfoot outparcel Retail Williamsburg, Virginia 70%(3)
Market at Mill Creek Retail Mount Pleasant, South Carolina 70%(4)
Wills Wharf Mixed-use Baltimore, Maryland 100% 

*Located in the Town Center of Virginia Beach
(1) The Company is entitled to a preferred return of 9% on a portion of its investment in Greenside.2020.
(2) The Company is entitled to a preferred return of 8% on its investment in Brooks Crossing.this property.
(3) The Company is entitled to a preferred return
As of 9% on its investmentDecember 31, 2019, the following properties were under development, redevelopment or not yet stabilized:
PropertySegmentLocationOwnership Interest
Wills WharfOfficeBaltimore, Maryland100%
Premier RetailRetailVirginia Beach, Virginia*100%
Summit PlaceMultifamilyCharleston, South Carolina90%
The CosmopolitanMultifamilyVirginia Beach, Virginia*100%

* Located in Lightfoot.the Town Center of Virginia Beach
(4) The Company is entitled to a preferred return of 10% on its investment in Market at Mill Creek.

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”("GAAP").
 
The consolidated financial statements include the financial position and results of operations of the Company, the Operating Partnership, its wholly owned subsidiaries, and any interests in variable interest entities ("VIEs") where the Company has been determined to be the primary beneficiary. All significant intercompany transactions and balances have been eliminated in consolidation.
 
Use of Estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed. Such estimates are based on management’s historical experience and best judgment after considering past, current, and expected events and economic conditions. Actual results could differ from management’s estimates.
 
Segments
 
Segment information is prepared on the same basis that management reviews information for operational decision-making purposes. Management evaluates the performance of each of the Company’s properties individually and aggregates such properties into segments based on their economic characteristics and classes of tenants. The Company operates in four4 business segments: (i) office real estate, (ii) retail real estate, (iii) multifamily residential real estate, and (iv) general contracting and real estate services. 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.


Reclassifications


Certain amounts previously reported in the consolidated financial statements have been reclassified in the accompanying consolidated financial statements to conform to the current period's presentation.



The Company has included gain on real estate dispositionsrevised the presentation of its consolidated Balance Sheet for all reporting periods by reclassifying
"Acquired intangible lease assets" as a component of operating income to present gain on real estate dispositions in accordance with ASC 360-10-45-5. The change was made for the prior periods as the Securities and Exchange Commission has eliminated Rule 3-15(a) of Regulation S-X, which had required REIT's to present gains and losses on sale of properties outside of continuing operations in the income statement. The rule change is effective for all filings made on or after November 5, 2018.

During the second quarter of 2018,separate line item. As a result, the Company identified certain immaterial classification errors onno longer includes acquired intangible lease assets as part of "Other assets". The Company also revised the Company's Consolidated Statements of Cash Flows and determined that,presentation in the Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 and future periodic reports, the Company would correct these classification errors. One classification error was corrected by including within the changes in operating assets and liabilities in the operating activities section a new line item for "Interest receivable." A corresponding adjustment was recorded to reduce the amount of "Notes receivable issuances" within investing activities on theits consolidated statement of cash flows. These reclassifications totaled $7.1 millionflows for all reporting periods by reclassifying offering cost charges on its common stock issuance and $3.2 million duringincluding the years ended December 31, 2017 and 2016, respectively. These reclassifications decreased "Net cash provided by operating activities" and "Net cash used for investing activities" by an equal and offsetting amount. These reclassifications did not have anycharges with "Proceeds from issuance of common stock, net" line item. This presentation change had no other impact on the Consolidated Balance Sheets, Consolidated Statements of Comprehensive Income, Consolidated Statement of Equity,Company's consolidated financial statements or any other operating measure for the periods affected.

These amounts were previously presented as "Notes receivable issuances," a component of net cash used for investing activities on the Consolidated Statements of Cash Flows, resulting in overstatements in cash provided by operating activities and overstatements of cash used in investing activities. These amounts represent interest earned on mezzanine loans that were funded by additional borrowings as provided for in the mezzanine loan agreements. These amounts are now classified as changes in interest receivable, a non-cash adjustment to calculate net cash provided by operating activities.

The second classification error was corrected by including within financing activities on the Consolidated Statements of Cash Flows a new line item for “Common shares tendered for tax withholding.” A corresponding adjustment was recorded to the "Changes in operating assets and liabilities: Property liabilities" within operating activities on the Consolidated Statements of Cash Flows. This reclassification totaled $0.3 million and $0.2 million during the years ended December 31, 2017 and 2016, respectively. These reclassifications increased “Net cash provided by operating activities” and decreased “Net cash provided by financing activities” by an equal and offsetting amount.


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 $3.4 million, $2.7 million $1.2 million and $1.1$1.2 million of straight-line rent adjustments for the years ended December 31, 2019, 2018, 2017, and 2016,2017, 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. Contingent rents included in rental revenues were $0.3 million, $0.4$0.3 million, and $0.4 million for the years ended December 31, 2019, 2018, 2017, and 2016,2017, respectively. The Company recognizes leasing incentives as reductions to rental revenue on a straight-line basis over the lease term. Leasing incentive amortization was $0.7 million, $0.8$0.7 million, and $0.8 million for the years ended December 31, 2019, 2018, 2017, and 2016,2017, respectively. 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. 
 

General Contracting and Real Estate Services Revenues

On May 28, 2014, the Financial Accounting Standards Board ("FASB") issued a new standard that provides a single, comprehensive model for recognizing revenue from contracts with customers. While the new standard does not supersede the guidance on accounting for leases, it changes the way the Company recognizes revenue from construction and development contracts with third party customers. The Company adopted this standard on January 1, 2018 using the modified retrospective method, applying this standard to all contracts not yet completed as of that date. In applying the standard to the Company’s future construction contracts, certain pre-contract costs incurred by the Company are now deferred and amortized over the period during which construction obligations are fulfilled. Previously, these costs were immediately recorded as general contracting expenses upon commencement of construction, with the corresponding general contracting revenue also recorded. Applying the standard to the Company’s uncompleted contracts as of January 1, 2018 did not result in material differences to these contracts in aggregate, and no cumulative adjustment to distributions in excess of earnings was recorded as of January 1, 2018.


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 precontract 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.
 
Real Estate Investments
 
Income producing property primarily includes land, buildings, and tenant improvements and is stated at cost. Real estate investments held for development include land and capitalized development costs. 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 preacquisition, development, and preconstruction costs including overhead, salaries, and related costs of personnel directly involved, real estate taxes, insurance, utilities, ground rent, and interest. Interest capitalized during the years ended December 31, 2019, 2018, and 2017 and 2016 was $5.9 million, $5.0 million $1.3 million and $1.0$1.3 million, respectively. Overhead, salaries and related personnel costs capitalized during the years ended December 31, 2019, 2018, 2017, and 20162017 were $3.1 million, $2.4$3.1 million and $1.7$2.4 million, respectively.
 
The Company capitalizes preacquisition development costs directly identifiable with specific properties when the acquisition of such properties is probable. Capitalized preacquisition development costs are presented within other

assets in the consolidated balance sheets. Capitalized preacquisition development costs as of December 31, 2019 and 2018 and 2017 were $1.2$6.5 million and $1.4$1.2 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:

Buildings39 years
Capital improvements5—20 years
Equipment3—7 years
Tenant improvementsTerm 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 operating propertysuch acquisitions, the Company identifies and recognizes all assets acquired and liabilities assumed at their estimated fair values or relative fair values subsequent to the adoption of the new accounting guidance discussed below, 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 intangiblesintangible assets are presented within otheras a separate component of assets andon the consolidated balance sheets. Acquired lease intangible liabilities are presented within other liabilities in the consolidated balance sheets and amortized over their respective lease terms.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 rental expenses on a straight-line basis over the remaining term of the related leases. Prior to October 1, 2016, the Company expensed all costs incurred related to operating property acquisitions. On October 1, 2016, the Company adopted newly issued accounting guidance that allows capitalization of costs related to operating property acquisitions that do not meet the definition of a business under the new guidance discussed below under "Recent Accounting Pronouncements".
 
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 market comparables. 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 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, 2019, a land parcel adjacent to the Market at Mill Creek shopping center was classified as held for sale. As of December 31, 2018, the Waynesboro Commons shopping center was classified as held for sale. No properties were held for sale as of December 31, 2017.


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 years ended December 31, 2019 and 2017 represent unamortized leasing or acquired intangible assets related to vacated tenants.  The impairment charges recognized during the year ended December 31, 2018 primarily relate to the $1.5 million impairment of Waynesboro Commons, which was classified as of held for sale as of December 31, 2018. Impairment charges recognized during the years ended December 31, 2017 and 2016 represent unamortized leasing or acquired intangible assets related to vacated tenants. 
 
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 isand 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.


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, 20182019 and 2017,2018, accrued straight-line rental revenue presented within accounts receivable in the consolidated balance sheets was $15.2$17.9 million and $12.8$15.2 million, respectively.
 
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 receivables, current economic conditions, historical experience, and other relevant factors. The Company establishes reservesa reserve for the receivables associated with a tenant receivables outstanding over 90 days. Forwhen collection of substantially all such tenants, the Company also reserves any related accrued straight-line rental revenue. Additional reserves are recordedoperating lease payments for more current amounts, as applicable, when the Company has determined collectability to be doubtful.a tenant is not probable. As of December 31, 20182019 and 2017,2018, the allowance for doubtful accounts was $0.6$0.3 million and $0.5$0.6 million, respectively. The Company presents bad debt expense withinreflects these amounts as a component of rental expenses inincome 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 mortgage or mezzanine loans for the development of new real estate. The Company's mezzanine loans are typically made to borrowers who have little or no equity in the underlying development projects. Mezzanine loans 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 evaluates the collectability of both the interest on and principal of each of its notes receivable based primarily upon the financial conditionvalue of the individual borrowers.underlying development project. The Company considers factors such as the progress of development activities, including leasing activities, projected development costs, and current and projected loan balances.balances, and the estimated realizable value of the loan. The calculation of the estimated realizable value includes an estimation of the projected sales proceeds from the sale of the underlying development property, which is largely dependent on the estimated fair value of the underlying development property and is 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. A loan is determined to be impaired when, based upon then-current information, it is no longer probable that the Company will be able to collect all contractual amounts then due from the borrower. The amount of impairment loss recognized is measured as the difference between the carrying amount of the loan and its estimated realizable value.


The allowance for loan losses reflects management's estimate of loan losses inherent in the loan portfolio as of the balance sheet date.

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 mezzanine loan 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 guarantee.loan. On a quarterly basis, the Company assesses the likelihood of a contingent liability in 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.
 
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 resulting from changes in the fair value of derivatives that are neither designated nor qualify as hedging instruments are recognized within the change in fair value of interest rate derivatives 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.    
 

Stock-Based Compensation
 
The Company measures the compensation cost of restricted stock awards based on the grant date fair value. The Company recognizes compensation cost for the vesting of restricted stock awards using the accelerated attribution method. Compensation cost associated with the vesting of restricted stock awards is presented within either general and administrative expenses or general contracting and real estate services expenses in the consolidated statements of comprehensive income. Total stock-based compensation expense recognized during the years ended December 31, 2018, 2017, and 2016 was $1.3 million, $1.3 million and $1.1 million, respectively. Stock-based compensation for personnel directly involved in the construction and development of a property is capitalized. During the years ended December 31, 2018, 2017, and 2016, the Company capitalized $0.7 million, $0.4 million, and $0.3 million, respectively, of stock-based compensation. The effect of forfeitures of awards is recorded as they occur. 
 
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”("TRS") subject to both federal and state income taxes. The Operating Partnership conducts its development and construction businesses through the TRS. The related income tax provision or benefit attributable to the profits or losses of the TRS and any taxable income of the Company is reflected in the consolidated 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 and Unit
 
The Company calculates net income per share and unit based upon the weighted average shares and units outstanding. Diluted net income per share and unit is calculated after giving effect to all significant potential dilutive shares outstanding during the period. Potential dilutive shares outstanding during the period include nonvested restricted stock awards. However, there were no0 significant potential dilutive shares or units outstanding for each of the three years ended December 31, 2018.2019, 2018, and 2017. As a result, basic and diluted outstanding shares and units were the same for all periodseach period presented. See Note 11 for the changes in the Company’s nonvested restricted awards during the year ended December 31, 2018.    

Recent Accounting Pronouncements

Recently Issued Accounting Standards Adopted:

On February 25, 2016, the FASBFinancial Accounting Standards Board ("FASB") issued a new lease standardan Accounting Standards Update ("ASU") that requires lessees to recognize most leases inon their balance sheets as lease liabilities with corresponding right-of-use assets.assets (ASU 2016-02—Leases (Topic 842)). The new standard also makes targeted changes to lessor accounting. The Company adopted the new standard will be effective for the Company on January 1, 2019, and requires ausing the modified retrospective transition approach for all leases existing at, or entered into after, the beginning of the earliest comparative period presented with an optionas permitted in Accounting Standards Codification ("ASC") Topic 842.

In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed the Company to use certain transition relief. Management is currently evaluatingnot reassess whether any expired or existing contracts are or contain leases, not reassess the potential impactlease classification for any expired or existing leases, and not reassess initial direct costs for existing leases. As of January 1, 2019, the Company did not have any leases classified as finance leases. The Company also elected a practical expedient that allowed it to not separate non-lease components from lease components and instead to account for each lease and non-lease component as a single lease component. The adoption of the new standard as of January 1, 2019 did not impact the Company's consolidated results of operations and had no impact on cash flows.

As a lessee, the Company’s consolidated financial statements.Company had 6 ground leases on 5 properties as of January 1, 2019 with initial terms that ranged from 20 to 65 years and options to extend up to an additional 70 years in certain cases. 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. The Company isrecognizes lease expense for operating leases on a straight-line basis over the lessee on certainlease term. The Company's lease agreements do not contain any residual value guarantees or material restrictive covenants.

The long-term ground leases which representsrepresent a majority of the Company's current operating lease payments, and expects to record lease liabilities and correspondingpayments. The Company recorded right-of-use assets totaling between $30.0$32.2 million and $45.0lease liabilities totaling $41.4 million upon adopting this standard on January 1, 2019. The Company utilized a weighted average discount rate of 5.4% to measure its lease liabilities upon adoption.

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 thesecertain 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 1 or more options to renew, with renewal terms that can extend the lease term from one to 15 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.

The new standard includes new considerations regarding the recognition of rental revenue when collection is not probable. The Company changed its presentation and measurement of charges for uncollectable lease revenue associated with its office, retail, and residential leasing activity, reflecting those amounts as a component of rental income on the accompanying Consolidated Statement of Comprehensive Income for the year ended December 31, 2019. However, in accordance with its prospective adoption of the standard, the Company did not adjust the prior year period presentation of charges for uncollectable lease revenue associated with its office, retail, and residential leasing activity as a component of operating expenses, excluding property taxes, on the accompanying Consolidated Statement of Comprehensive Income for the years ended December 31, 2018 and 2017. The Company recorded a combined adjustment of $0.2 million to the opening balances for distributions in excess of earnings and noncontrolling interest relating to receivables where collection of substantially all operating lease payments was not probable as of January 1, 2019.


Lease-related receivables, which include contractual amounts accrued and unpaid from tenants and accrued straight-line rents receivable, are reduced for credit losses. Such amounts are recognized as a reduction to real estate rental revenues. The Company evaluates the collectability of lease receivables using several factors, including a lessee’s creditworthiness. The Company recognizes a credit loss on lease-related receivables when, in the opinion of management, collection of substantially all lease payments is not probable. When collectability is determined not probable, any lease income subsequent to recognizing the credit loss is limited to the lesser of the lease income reflected on a straight-line basis or cash collected.
Recently Issued Accounting Standards Not Yet Adopted:

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and in November 2018 issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. The guidance significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance will replace the "incurred loss" approach under existing guidance with an "expected loss" model for instruments measured at amortized cost, such as our notes receivable. The guidance is effective for fiscal years beginning after December 15, 2019 and is to be adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company continues to evaluate the impact of adopting this new standard.accounting standard on the Company’s consolidated financial statements accounting policy and operational implementation issues. The Company expects that the adoption will result in earlier recognition of a provision for loan losses on its notes receivable and an insignificant increase in allowance for bad debt relating to construction receivables as a result of new forward-looking estimation requirements. The Company anticipates utilizing certain transition relief underrecording a reserve for expected credit losses for its notes receivable in an amount between $2.3 million and $3.3 million and an immaterial reserve on its construction receivables as a result of adopting the new standard that will allow the Company not to reassess the classification of any expired or existing leases, the treatment of initial direct costs relating to these leases, and any lease components of existing service contracts. Additionally, the Company, as lessor, anticipates utilizing a practical expedient allowing the Company to not allocate the consideration in a lease to a separate lease component and a nonlease component (relating to certain common area maintenance activities).on January 1, 2020.


On January 5, 2017,In August 2018, the FASB issued new guidance thatASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"). ASU 2018-13 eliminates, adds and modifies the definitioncertain disclosure requirements for fair value measurements as part of a business. Under this new guidance, many real estate acquisitions will now be considered asset acquisitions, allowing costs associated with these acquisitionsits disclosure framework project. The standard is effective for all entities for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. ASU 2018-13 is not expected to be capitalized. The Company adopted this guidance on October 1, 2016, resulting in the capitalization of approximately $0.7 million of acquisition costs related to two acquisitions in the fourth quarter of 2016. If the Company had adopted this guidance on January 1, 2016, approximately $1.4 million in acquisition costs would have been capitalized.

On February 22, 2017, the FASB issued new guidance that clarifies the scope and application of guidance on sales or transfers of nonfinancial assets and in substance nonfinancial assets to customers, including partial sales. The new guidance applies to all nonfinancial assets, including real estate, and defines an in substance nonfinancial asset. The Company adopted the new guidance on January 1, 2018, and it did not have a material impact on the Company's consolidated financial statements.

On August 28, 2017, the FASB issued new guidance that simplifies some of the requirements relating to accounting for derivatives and hedging. The new guidance eliminates the requirement to separately measure and report hedge ineffectiveness for a highly effective hedge and also simplifies certain documentation and assessment requirements relating to the determination of hedge effectiveness. The Company adopted this guidance effective July 1, 2018. The application of this guidance to hedging relationships generally eliminates the gains and losses that would otherwise be recorded for these derivative instruments.statements or disclosures.
 
3.Segments
 
Net operating income (segment revenues minus segment expenses) is the measure used by the Company’s chief operating decision-maker to assess segment performance. Net operating income is not a measure of operating income or cash flows from operating activities as measured by GAAP and is not indicative of cash available to fund cash needs. As a result, net operating income should not be considered as an alternative to cash flows as a measure of liquidity. Not all companies calculate net operating income in the same manner. The Company considers net operating income to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the core operations of the Company’s real estate and construction businesses. 
 

Net operating income of the Company’s reportable segments for the years ended December 31, 2019, 2018, 2017, and 20162017 was as follows (in thousands):
 Years Ended December 31, 
 2019 2018 2017
Office real estate              
Rental revenues$33,269
 $20,701
 $19,207
Rental expenses8,722
 5,858
 5,483
Real estate taxes3,471
 2,034
 1,859
Segment net operating income21,076
 12,809
 11,865
Retail real estate     
Rental revenues77,593
 67,959
 63,109
Rental expenses11,656
 10,903
 10,234
Real estate taxes7,916
 6,801
 6,175
Segment net operating income58,021
 50,255
 46,700
Multifamily residential real estate     
Rental revenues40,477
 28,298
 26,421
Rental expenses13,954
 10,461
 9,705
Real estate taxes3,574
 2,548
 2,494
Segment net operating income22,949
 15,289
 14,222
General contracting and real estate services     
Segment revenues105,859
 76,359
 194,034
Segment expenses101,538
 73,628
 186,590
Segment gross profit4,321
 2,731
 7,444
Net operating income$106,367
 $81,084
 $80,231
 Years Ended December 31, 
 2018 2017 2016
Office real estate              
Rental revenues$20,701
 $19,207
 $20,929
Rental expenses5,858
 5,483
 5,560
Real estate taxes2,034
 1,859
 2,000
Segment net operating income12,809
 11,865
 13,369
Retail real estate     
Rental revenues67,959
 63,109
 56,511
Rental expenses10,903
 10,234
 9,116
Real estate taxes6,801
 6,175
 5,395
Segment net operating income50,255
 46,700
 42,000
Multifamily residential real estate     
Rental revenues28,298
 26,421
 21,915
Rental expenses10,461
 9,705
 7,228
Real estate taxes2,548
 2,494
 2,234
Segment net operating income15,289
 14,222
 12,453
General contracting and real estate services     
Segment revenues76,359
 194,034
 159,030
Segment expenses73,628
 186,590
 153,375
Segment gross profit2,731
 7,444
 5,655
Net operating income$81,084
 $80,231
 $73,477

 
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.
 
General contracting and real estate services revenues for the years ended December 31, 2019, 2018, 2017, and 20162017 exclude revenue related to intercompany construction contracts of $99.9 million, $134.4 million $51.5 million and $43.3$51.5 million, respectively, as it is eliminated in consolidation. General contracting and real estate services expenses for the years ended December 31, 2019, 2018, 2017, and 20162017 exclude expenses related to intercompany construction contracts of $99.0 million, $133.4 million $51.0 million and $42.7$51.0 million, respectively, as it is eliminated in consolidation. General contracting and real estate services expenses for the years ended December 31, 2018, 2017, and 2016 include noncash stock compensation expense of $0.2 million, $0.3 million, and $0.2 million, respectively.


The following table reconciles net operating income to net income for the years ended December 31, 2019, 2018, 2017, and 20162017 (in thousands):
 
 Years Ended December 31, 
 2019 2018 2017
Net operating income$106,367
 $81,084
 $80,231
Depreciation and amortization(54,564) (39,913) (37,321)
Amortization of right-of-use assets - finance leases(377) —
 —
General and administrative expenses(12,392) (11,431) (10,435)
Acquisition, development and other pursuit costs(844) (352) (648)
Impairment charges(252) (1,619) (110)
Gain on real estate dispositions4,699
 4,254
 8,087
Interest income23,215
 10,729
 7,077
Interest expense on indebtedness(30,776) (19,087) (17,439)
Interest expense on finance leases(568) —
 —
Equity in income of unconsolidated real estate entities273
 372
 —
Loss on extinguishment of debt—
 (11) (50)
Change in fair value of interest rate derivatives(3,599) (951) 1,127
Other income (expense), net585
 388
 131
Income tax benefit (provision)491
 29
 (725)
Net income$32,258
 $23,492
 $29,925
 Years Ended December 31, 
 2018 2017 2016
Net operating income$81,084
 $80,231
 $73,477
Depreciation and amortization(39,913) (37,321) (35,328)
General and administrative expenses(11,431) (10,435) (9,552)
Acquisition, development and other pursuit costs(352) (648) (1,563)
Impairment charges(1,619) (110) (355)
Interest income10,729
 7,077
 3,228
Interest expense(19,087) (17,439) (16,466)
Equity in income of unconsolidated real estate entities372
 —
 —
Loss on extinguishment of debt(11) (50) (82)
Gain on real estate dispositions4,254
 8,087
 30,533
Change in fair value of interest rate derivatives(951) 1,127
 (941)
Other income388
 131
 147
Income tax benefit (provision)29
 (725) (343)
Net income$23,492
 $29,925
 $42,755

 
General and administrative expenses represent costs not directly associated with the operation and management of the Company’s real estate properties and general contracting and real estate services businesses. General and administrative expenses include corporate office personnel salaries and benefits, bank fees, accounting fees, legal fees, and other corporate office expenses. General and administrative expenses for the years ended December 31, 2018, 2017, and 2016 include noncash stock compensation expense of $1.1 million, $0.9 million and $0.7 million, respectively.
  
4.Operating Leases

Lessee Disclosures

The Company’s commercial tenantcomponents of lease cost for the years ended December 31, 2019, 2018, and 2017 were as follows (in thousands):
  Years Ended December 31, 
  2019 
2018 (b)
 
2017 (b)
Operating lease cost $2,700
 $2,962
 $2,686
Finance lease cost:      
Amortization of right-of-use assets (a)
 369
 —
 —
Interest on lease liabilities 568
 —
 —
(a) Includes amortization of below-market ground lease intangible assets.
(b) All of the Company's leases generally range fromwere classified as operating leases prior to 2019.

The table below presents supplemental cash flow information related to leases during the years ended December 31, 2019, 2018, and 2017 (in thousands):
  Years Ended December 31, 
  2019 
2018 (a)
 
2017 (a)
Cash paid for amounts included in the measurement of lease liabilities      
Operating cash flows from operating leases $1,969
 $2,354
 $2,103
Operating cash flows from finance leases 533
 —
 —
(a) All of the Company's leases were classified as operating leases prior to 2019.


Additional information related to leases as of December 31, 2019 and 2018 were as follows:

  December 31, 
  2019 
2018 (a)
Weighted Average Remaining Lease Term (years)    
Operating leases 45.4
 46.2
Finance leases 41.2
 0.0
     
Weighted Average Discount Rate (b)
    
Operating leases 5.4% —%
Finance leases 5.2% —%
(a) All of the Company's leases were classified as operating leases prior to 2019.
(b) Prior to the adoption of ASC 842 on January 1, 2019, the use of a discount rate to calculate lease liability as the net present value of the minimum lease payments was not required.

The undiscounted cash flows to be paid on an annual basis for the next five years and thereafter are presented below. The total amount of lease payments, on an undiscounted basis, are reconciled to 20the lease liability, on the consolidated balance sheet by considering the present value discount.
Year Ending December 31, Operating Leases Finance Leases
  (in thousands)
2020 $2,080
 $864
2021 2,137
 864
2022 2,361
 868
2023 2,400
 873
2024 2,436
 888
Thereafter 103,524
 43,014
Total undiscounted cash flows 114,938
 47,371
Present value discount (73,464) (29,468)
Discounted cash flows $41,474
 $17,903


Lessor Disclosures

Rental revenue for the years but certain leases with anchor tenants may be longer. ended December 31, 2019, 2018, and 2017 comprised the following (in thousands):
  Years Ended December 31, 
  2019 2018 2017
Base rent and tenant charges $147,309
 $114,012
 $107,320
Accrued straight-line rental adjustment 3,402
 2,731
 1,222
Lease incentive amortization (739) (732) (785)
Above/below market lease amortization 1,367
 947
 980
Total rental revenue $151,339
 $116,958
 $108,737



The Company’sCompany'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
2020 $96,374
2021 90,165
2022 82,862
2023 72,673
2024 61,926
Thereafter 266,467
Total $670,467


2019$71,838
202063,981
202157,295
202251,271
202343,338
Thereafter180,729
Total$468,452
Lease terms on multifamily apartment units generally range from seven to 15 months, with a majority having 12-month lease terms. Apartment leases are not included in the preceding table as the remaining terms as of December 31, 2018 are generally less than one year. 

5.Real Estate Investments and Equity Method Investments
 
The Company’s real estate investments comprised the following as of December 31, 20182019 and 20172018 (in thousands):
 
December 31, 2018December 31, 2019
Income
producing
property
 
Held
for
development
 
Construction
in
progress
 TotalIncome producing property Held for development Construction in progress Total
Land$192,677
 $2,994
 $17,961
 $213,632
$263,258
 $5,000
 $7,265
 $275,523
Land improvements53,521
 —
 —
 53,521
58,636
 —
 —
 58,636
Buildings and improvements791,719
 —
 —
 791,719
1,138,829
 —
 —
 1,138,829
Development and construction costs—
 —
 117,714
 117,714
—
 —
 133,336
 133,336
Real estate investments$1,037,917
 $2,994
 $135,675
 $1,176,586
$1,460,723
 $5,000
 $140,601
 $1,606,324
 
 December 31, 2018
 Income producing property Held for development Construction in progress Total
Land$192,677
 $2,994
 $17,961
 $213,632
Land improvements53,521
 —
 —
 53,521
Buildings and improvements791,719
 —
 —
 791,719
Development and construction costs—
 —
 117,714
 117,714
Real estate investments$1,037,917
 $2,994
 $135,675
 $1,176,586

2019 Operating Property Acquisitions

On February 6, 2019, the Company acquired an additional outparcel phase of Wendover Village in Greensboro, North Carolina for a contract price of $2.7 million plus capitalized acquisition costs of $0.1 million. This phase is leased by a single tenant.

On March 14, 2019, the Company acquired the office and retail portions of the One City Center project in Durham, North Carolina in exchange for a redemption of its 37% equity ownership in the joint venture with Austin Lawrence Partners, which totaled $23.0 million as of the acquisition date, and a cash payment of $23.2 million. The Company also incurred capitalized acquisition costs of $0.1 million.

On April 24, 2019, the Company exercised its option to purchase 79% of the interests in the partnership that owns 1405 Point in exchange for extinguishing the Company's $31.3 million note receivable on the project, making a cash payment of $0.3 million, and assuming a loan payable of $64.9 million, which was recorded at its fair value of $65.8 million. The Company also incurred capitalized acquisition costs of $0.1 million.

On May 23, 2019, the Company acquired Red Mill Commons and Marketplace at Hilltop from Venture Realty Group for consideration comprised of 4.1 million Class A units of limited partnership interest in the Operating Partnership

("Class A Units" or "OP Units"), the assumption of $35.7 million of mortgage debt principal, and $4.5 million in cash. The negotiated price was $105.0 million, which contemplated the price of the Company's common stock of $15.55 per share when the purchase and sale agreement was executed. The aggregate acquisition cost was $109.3 million, which consisted of 4.1 million Class A Units valued at $68.1 million (using the price of the Company's common stock of $16.50 on the date of the acquisition), mortgage debt valued at $35.6 million, cash consideration of $4.5 million, and capitalized acquisition costs of $1.1 million. In connection with the acquisition, the Company and the Operating Partnership entered into a tax protection agreement with the contributors pursuant to which the Company and the Operating Partnership agreed, subject to certain exceptions, to indemnify the contributors for up to 10 years against certain tax liabilities incurred by them, if such liabilities result from a transaction involving a direct or indirect taxable disposition of either or both of these properties or if the Operating Partnership fails to maintain and allocate to the contributors for taxation purposes minimum levels of Operating Partnership liabilities.

On June 26, 2019, the Company acquired Thames Street Wharf, a Class A office building located in the Harbor Point development of Baltimore, Maryland, for $101.0 million in cash and $0.3 million of capitalized acquisition costs.

The following table summarizes the purchase price allocation (including acquisition costs) based on the relative fair value of the assets acquired and intangible liabilities assumed for the 6 operating properties acquired during the year ended December 31, 2019 (in thousands):

 December 31, 2017
 Income
producing
property		 Held
for
development		 Construction
in
progress		 Total
Land$175,885
 $680
 $21,212
 $197,777
Land improvements44,681
 —
 —
 44,681
Buildings and improvements690,120
 —
 —
 690,120
Development and construction costs—
 —
 61,859
 61,859
Real estate investments$910,686
 $680
 $83,071
 $994,437
  Wendover Village additional outparcel One City Center 1405 Point Red Mill Commons Marketplace at Hilltop Thames Street Wharf
Land $1,633
 $2,678
 $—
(a) 
$44,252
 $2,023
(b) 
$15,861
Site improvements 50
 163
 298
 2,558
 691
 150
Building and improvements 888
 28,039
 92,866
 27,790
 19,195
 64,539
Furniture and fixtures —
 —
 2,302
 —
 —
 —
In-place leases 101
 15,140
 3,371
 9,973
 4,565
 24,385
Above-market leases 111
 —
 —
 1,463
 599
 —
Below-market leases —
 —
 —
 (6,221) (1,136) (3,636)
Finance lease liabilities —
 —
 (8,671) —
 (9,200) —
Finance lease right-of-use assets —
 —
 11,730
(a) 
—
 12,770
(b) 
—
Net assets acquired $2,783
 $46,020
 $101,896
 $79,815
 $29,507
 $101,299

(a) Land is subject to a ground lease.
(b) Portion of land is subject to a ground lease.

2018 Operating Property Acquisitions


On January 9, 2018, the Company acquired Indian Lakes Crossing, a Harris Teeter-anchored shopping center in Virginia Beach, Virginia, for a contract price of $14.7 million plus capitalized acquisition costs of $0.2 million.


On January 29, 2018, the Company acquired Parkway Centre, a newly developed Publix-anchored shopping center in Moultrie, Georgia, for total consideration of $11.3 million (comprised of $9.6 million in cash and $1.7 million in the form of Class A units of limited partnership interest in the Operating Partnership ("Class A Units"))Units) plus capitalized acquisition costs of $0.3 million.


On August 28, 2018, the Company acquired Lexington Square, a newly developed Lowes Foods-anchored shopping center in Lexington, South Carolina, for a purchase price of $26.8$27.0 million, consisting of cash consideration of $24.2 million and $2.6$2.8 million of additional consideration in the form of Class A Units issuable in increments to the seller upon the fulfillment of certain occupancy thresholds within the first 18 months of the Company's ownership. No Class A Units have been issued as of December 31, 2018 for this acquisition.during 2019. As part of this transaction, the Company also capitalized acquisition costs of $0.4 million.


The following table summarizes the purchase price allocation (including acquisition costs) based on relative fair value of the assets acquired and liabilities assumed for the three3 operating properties purchased during the year ended December 31, 2018 (in thousands):

  Indian Lakes Crossing Parkway Centre Lexington Square
Land $10,926
 $1,372
 $3,036
Site improvements 531
 696
 7,396
Building and improvements 1,913
 7,168
 10,387
In-place leases 1,648
 2,346
 4,113
Above-market leases 11
 —
 89
Below-market leases (175) (10) (447)
Net assets acquired $14,854
 $11,572
 $24,574



2017 Operating Property Acquisitions


On July 25, 2017, the Company acquired an outparcel phase of Wendover Village in Greensboro, North Carolina for a contract price of $14.3 million plus capitalized acquisition costs of $0.1 million. The following table summarizes the purchase price allocation, including acquisition costs, for this property (in thousands):


Land$5,550
Site improvements232
Building and improvements6,977
In-place leases1,382
Above-market leases327
Below-market leases(50)
Net assets acquired$14,418

Land$5,550
Site improvements232
Building and improvements6,977
In-place leases1,382
Above-market leases327
Below-market leases(50)
Net assets acquired$14,418


Other 2019 Real Estate Transactions
2016 Operating Property Acquisitions
On January 14, 2016, the Company completed the acquisition of an 11-property retail portfolio totaling 1.1 million square feet for $170.5 million.


On April 29, 2016,1, 2019, the Company completedsold Waynesboro Commons for a sale price of $1.1 million. There was no gain or loss recognized on the acquisition of Southgate Square, a 220,000 square foot retail center located in Colonial Heights, Virginia, for aggregate consideration of $39.5 million, comprised of the assumption of $21.1 million in debt (which approximated fair value as of the closing date) and 1,575,185 Class A Units.disposition.


As part of the Southgate Square purchase agreement,On August 15, 2019, the Company acquired an option to purchase an adjacent undeveloped land parcel fromsold Lightfoot Marketplace for a sale price of $30.3 million. The gain on disposition was $4.5 million. In conjunction with this sale, the seller.Company paid off the $17.9 million note payable secured by this property. The option forCompany retained the land parcel was valid for an initial period of two years and was extended for one additional year. The purchase price would be determined by applying a mutually agreed upon capitalizationinterest rate toswap associated with the base rent of tenants provided by the seller and approved by the Company. note payable.

On October 12, 2018,15, 2019, the Company entered into a developmentan operating agreement with a partner to develop a mixed-use project in Roswell, Georgia. The Company has an 80% interest in the seller to purchasepartnership. On October 25, 2019, the adjacent parcel and develop the parcelpartnership, 1023 Roswell, LLC, purchased land for a build-to-suite retail tenant for considerationpurchase price of $5.3 million.

On August 4, 2016, the Company completed the acquisition of Southshore Shops, a 40,000 square foot retail center located in Midlothian, Virginia, for aggregate consideration of $9.3 million, comprised of $6.7$5.0 million in cash for this project. The Company is responsible for funding the equity requirements of this development, including the $5.0 million purchase of the land. Management has concluded that this entity is a VIE as it lacks sufficient equity to fund its operations without additional financial support. The Company is the developer of the project and 189,160 Class A Units.

On October 13, 2016,has the power to direct the activities of the project that most significantly impact its performance and is the party most closely associated with the project. Therefore, the Company completedis the acquisition of Columbus Village II, a 92,000 square foot retailproject's primary beneficiary and entertainment center locatedconsolidates the project in Virginia Beach, Virginia for aggregate consideration of 2,000,000 shares of the Company's common stock, which, based on the closing stock price on the date of the acquisition, led to an acquisition price of $26.2 million, excluding capitalized acquisition costs.its consolidated financial statements.



On November 17, 2016, the Company completed the acquisition of Renaissance Square, an 80,000 square foot retail center located in Davidson, North Carolina, for $17.1 million, excluding capitalized acquisition costs.

The following table summarizes the purchase price allocation (including acquisition costs for Columbus Village II and Renaissance Square) of the assets acquired and liabilities assumed during the year ended December 31, 2016 (in thousands):

 
Retail
Portfolio
 Southgate Square Southshore Shops Columbus Village II Renaissance Square Total
Land$66,260
 $8,890
 $1,770
 $14,536
 $6,730
 $98,186
Site improvements3,870
 2,140
 490
 939
 303
 7,742
Building and improvements88,820
 23,810
 6,019
 9,983
 8,137
 136,769
In-place leases20,630
 5,990
 1,140
 2,225
 2,008
 31,993
Above-market leases1,960
 100
 120
 —
 70
 2,250
Below-market leases(11,040) (1,400) (190) (939) (10) (13,579)
Net assets acquired$170,500
 $39,530
 $9,349
 $26,744
 $17,238
 $263,361

Subsequent to December 31, 20182019


On February 6, 2019,January 10, 2020, the Company acquired an additional outparcel phase of Wendover Villagepurchased land in Greensboro,Charlotte, North Carolina for a contractpurchase price of $2.7 million.$6.3 million for the development of a mixed-use property.


Other 2018 Real Estate Transactions


On November 30, 2017, the Company entered into a lease agreement with Bottling Group, LLC for a new distribution facility that the Company developed and constructed. On January 29, 2018, the Company acquired undeveloped land in Chesterfield, Virginia, a portion of which serves as the site for this facility, for a contract price of $2.4 million plus capitalized acquisition costs of $0.1 million. On December 20, 2018, the Company sold the completed facility for $25.9 million, resulting in a gain of $3.4 million.


On January 18, 2018, the Company entered into an operating agreement with a partner to develop a Lowes Foods-anchored shopping center in Mount Pleasant, South Carolina. The Company has a 70% ownership interest in the partnership. The partnership, Market at Mill Creek Partners, LLC, acquired undeveloped land on February 16, 2018 for a contract price of $2.9 million plus capitalized acquisition costs of $0.1 million. The Company is responsible for funding the equity requirements of this development. As of December 31, 2018, the book value of the Company's investment in the project totaled $21.1 million. Management has concluded that this entity is a VIE as it lacks sufficient equity to fund its operations without additional financial support. The Company iswas the developer of the shopping center and has the power to direct the activities of the project that most significantly impact its performance and is the party most closely associated with the project. Therefore, the Company is the project's primary beneficiary and consolidates the project in its consolidated financial statements.


On April 2, 2018, the Company acquired undeveloped land in Newport News, Virginia for less than $0.1 million. This land parcel is beingwas used in the development of the Brooks Crossing Office property.


On May 24, 2018, the Company completed the sale of the Wawa outparcel at Indian Lakes Crossing for a contract price of $4.4 million. There was no0 gain or loss on the disposition.


On July 2, 2018, the Company executed a ground lease for the site of a new mixed-use development project at Wills Wharf, a site in the Harbor Point area of Baltimore, Maryland. The lease has an initial term of five years and includes ten10 extension options of seven years each.


On December 31, 2018, the Company sold the leasehold interest in the building previously leased by Home Depot at Broad Creek Shopping Center for $2.4 million, resulting in a gain on sale of $0.8 million.




Other 2017 Real Estate Transactions


On January 4, 2017, the Company acquired undeveloped land in Charleston, South Carolina for a contract price of $7.1 million plus capitalized acquisition costs of $0.2 million. The Company is usingused the land for the development of the Hoffler Place property.


On January 20, 2017, the Company completed the sale of the Wawa outparcel at Greentree Shopping Center. Net proceeds after transaction costs were $4.4 million. The gain on the disposition was $3.4 million.


On July 11, 2017, the Company acquired undeveloped land in Charleston, South Carolina for a contract price of $7.2 million plus capitalized acquisition costs of $0.1 million. The Company is using the land for the development of the Summit Place property.


On July 13, 2017, the Company completed the sale of two2 office properties leased by the Commonwealth of Virginia in Chesapeake, Virginia and Virginia Beach, Virginia. Aggregate net proceeds from the dispositions of the properties after transaction costs and repayment of the loan associated with the Chesapeake, Virginia property were $7.9 million, and the aggregate gain on the dispositions was $4.2 million.


On August 10, 2017, the Company completed the sale of a land outparcel at Sandbridge Commons. Net proceeds after transaction costs and a partial loan paydown were $0.3 million. The gain on the disposition was $0.5 million.
 
Other 2016 Real Estate Transactions

On January 7, 2016, the Company completed the sale of a building constructed for the Economic Development Authority of Newport News, Virginia. Net proceeds after transaction costs were $6.6 million. The gain on the disposition was $0.4 million.

On January 8, 2016, the Company completed the sale of the Richmond Tower office building for $78.0 million. Net proceeds after transaction costs were $77.0 million. The gain on the disposition of Richmond Tower was $26.2 million.

On June 20, 2016, the Company completed the sale of the Willowbrook Commons property located in Nashville, Tennessee for $9.2 million. The gain on the sale of the Willowbrook Commons property was less than $0.1 million.
On July 29, 2016, the Company completed the sale of the Kroger Junction property located in Pasadena, Texas for $3.7 million. The loss on the sale of the Kroger Junction property was less than $0.1 million.

On August 30, 2016, the Company entered into an operating agreement with Southern Apartment Group-Harding, LLC to jointly develop an apartment development project in Charlotte, North Carolina (Greenside). During the year ended December 31, 2016, the Company purchased $5.7 million of land in conjunction with the project.

On September 15, 2016, the Company completed the sale of the Oyster Point office property for $6.4 million. Net proceeds after transaction costs and settlement of liabilities were not significant. The gain on the disposition of Oyster Point was $3.8 million.

On December 22, 2016, the Company completed the sale of land adjacent to the Brooks Crossing development for $0.4 million. The gain on the disposition of the land was less than $0.1 million.
Equity Method Investments


One City Center


On February 25, 2016, the Company acquired a 37% interest in DurhamOne City Center, II, LLC (“City Center”)a joint venture with Austin Lawrence Partners, for purposes of developing a 22-story mixed-use tower in Durham, North Carolina. The Company iswas a minority partner in the joint venture and servesserved as the project's general contractor, with full ownership of the office and retail portions of the project.contractor. During the years ended

December 31, 2019, 2018 and 2017, the Company invested $0.5 million, $7.3 million and $11.2 million, respectively, in One City Center.

For the period from January 1, 2019 to March 13, 2019, One City Center project. Ashad operating income of December 31, 2018 and 2017, the Company had invested $21.3$0.3 million and $10.9 million, respectively, in City Center, and the carrying value of the Company's investment was $22.2 million and $11.4 million, respectively. The Company has agreed to guarantee the commercial component of the

construction loan for City Center; however, the loan is collateralized by 100% of the assets of City Center. As of December 31, 2018 and 2017, $48.9 million and $29.2 million, respectively, had been drawn against the construction loan, of which $18.5 million and $11.2 million, respectively, was attributableallocated to the Company's portion of the loan.

Company. For the year ended December 31, 2018, One City Center had operating income of $0.4 million allocated to the Company. For the yearsyear ended December 31, 2017, and 2016,One City Center had no0 operating activity, and therefore the Company received no0 allocated income. 
 
Based on the terms of City Center’s operating agreement,On March 14, 2019, the Company has concluded that City Center is a VIE,acquired the office and that the Company holds a variable interest. The Company does not have the power to direct the activitiesretail portions of the project that most significantly impact its performance. Accordingly, the Company is not the project’s primary beneficiary and, therefore, does not consolidateOne City Center in exchange for its consolidated financial statements.37% equity ownership in the joint venture and a cash payment of $23.2 million.


6.Notes Receivable
 
The Company had the following loans receivable outstanding as of December 31, 20182019 and December 31, 20172018 ($ in thousands):
    
 Outstanding loan amount Maximum loan commitment Interest rate Interest compounding Outstanding loan amount Maximum loan commitment Interest rate Interest compounding
Development Project December 31, 2018 December 31, 2017  December 31, 2019 December 31, 2018 
1405 Point $30,238
 $22,444
 $31,032
 8.0% Monthly $—
 $30,238
 $31,032
 8.0% Monthly
The Residences at Annapolis Junction 36,361
 43,021
 48,105
 10.0% Monthly 40,049
 36,361
 48,105
 10.0% Monthly
North Decatur Square 18,521
 11,790
 29,673
 15.0% Annually —
 18,521
 29,673
 15.0% Annually
Delray Plaza 7,032
 5,379
 15,000
 15.0% Annually 12,995
 7,032
 15,000
 15.0% Annually
Nexton Square 14,855
 —
 21,000
 15.0% Monthly 15,097
 14,855
 17,000
 10.0%
(b) 
Monthly
Interlock Commercial 18,269
 —
 95,000
 15.0% None 59,224
 18,269
 95,000
 15.0% None
Solis Apartments at Interlock 13,821
 —
 41,100
 13.0% Annually 25,588
 13,821
 41,100
 13.0% Annually
Total mezzanine 139,097
 82,634
 $280,910
    152,953
 139,097
 $276,910
   
Other notes receivable 1,275
 424
      1,147
 1,275
     
Notes receivable guarantee premium 2,800
 —
      5,271
 2,800
     
Notes receivable discount, net (a) (4,489) —
      —
 (4,489)     
Total notes receivable $138,683
 $83,058
      $159,371
 $138,683
     

(a) Represents the remaining unamortized portion of the $5.0 million option purchaseloan modification fee for The Residences at Annapolis Junction paid by the borrower in November 2018.
(b) The interest rate was 15% until October 1, 2019.


Interest on the mezzanine loans 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, 2019, 2018, 2017, and 20162017 as follows (in thousands):
 Years Ended December 31,  Years Ended December 31, 
Development Project 2018 2017 2016 2019 2018 2017
1405 Point $2,080
 $1,741
 $1,204
 $783
 $2,080
 $1,741
The Residences at Annapolis Junction 4,939
(a)4,132
 2,018
 8,776
(a) 
4,939
(a) 
4,132
North Decatur Square 2,212
 1,035
 —
 1,509
 2,212
 1,035
Delray Plaza 928
 163
 —
 1,622
 928
 163
Nexton Square 235
 —
 —
 1,962
 235
 —
Interlock Commercial 202
 —
 —
 6,142
(b) 
202
 —
Solis Apartments at Interlock 55
 —
 —
 2,333
 55
 —
Total mezzanine 10,651
 7,071
 3,222
 23,127
 10,651
 7,071
Other interest income 78
 6
 6
 88
 78
 6
Total interest income $10,729
 $7,077
 $3,228
 $23,215
 $10,729
 $7,077

(a) Includes amortization of the $5.0 million option purchaseloan modification fee paid by the borrower in November 2018. Additionally, the 2019 amount includes $0.5 million of interest income recognition relating to an exit fee that is due upon repayment of the loan.

(b) Includes $0.6 million of interest income recognition relating to an exit fee that is due upon repayment of the loan.

Based upon current information, there are no loans for which it is no longer probable that the Company will be able to collect all contractual amounts then due from the borrower. As of December 31, 20182019 and 2017,2018, there was no0 allowance for loan losses. During the years ended December 31, 2019, 2018, 2017, and 2016,2017, there was no0 provision for loan losses recorded for any of the Company's notes receivable.


1405 Point


On October 15, 2015, the Company entered into a note receivable with a maximum principal balance of $28.2 million for the 1405 Point project in the Harbor Point area of Baltimore, Maryland (also known as Point Street Apartments).

On November 11, 2018, this loan was modifiedApril 24, 2019, the Company exercised its option to increase the maximum amountpurchase 79% of the loan to $31.0 million.
interest in the partnership that owns 1405 Point is a 17-story building comprising 289 residential units and 18,000 square feet of street-level retail space. Beatty Development Group (“BDG”) is the developer ofin exchange for extinguishing its note receivable on the project and has engaged the Company to serve as construction general contractor. 1405 Point opened during the first quartera cash payment of 2018 and is subject to a ground lease from an affiliate of BDG.
BDG secured a senior construction loan of up to $67.0 million to fund the development and construction of 1405 Point on November 10, 2016.$0.3 million. The Company agreed to guarantee $25.0 million of the senior construction loan in exchange for the option to purchase up to an 88% controlling interest in 1405 Point upon completion of the project as follows: (i) an option to purchase a 79% indirect interest in 1405 Point for $27.6 million, exercisable within one year from the project’s completion (the “First Option”) and (ii) provided that the Company has exercised the First Option, an option to purchase an additional 9% indirect interest in 1405 Point for $3.1 million, exercisable within 27 months from the project’s completion (the “Second Option”). On December 31, 2018, the Second Option was modified to allow the Company to purchase the remaining 21% of the project prior to July 31, 2020 in exchange for increased payments under the ground lease.

The Company currently has a $2.1 million letter of credit for the guarantee of the senior construction loan.
Interest on the BDG mezzanine loan accrues at 8.0% per annum. The BDG mezzanine loan matures on the earliest of: (i) November 1, 2020, (ii) the maturity date or earlier termination of the senior construction loan, or (iii) the date the Company exercises the First Option as described above.
In the event the Company exercises the First Option, BDG is required to pay down the outstanding BDG mezzanine loan in full, with the difference between the BDG loan and $28.2 million applied to the senior construction loan. In the event the Company does not exercise either the First Option or the Second Option, the interest rate on the BDG loan will automatically be reduced to the interest rate on the senior construction loan for the remaining term of the BDG loan.


Management has concluded that this entity is a VIE. Because BDG is the developer and operator of 1405 Point, the Company does not have the power to direct the activities of the project that most significantly impact its performance. Therefore, the Company is not the project's primary beneficiary and does not consolidateconsolidated the project in its consolidated financial statements.statements for the year ended December 31, 2019. The project was acquired subject to a loan payable of $64.9 million.


The Residences at Annapolis Junction


On April 21, 2016, the Company entered into a note receivable with a maximum principal balance of $48.1 million in the Annapolis Junction residential component of the Annapolis Junction Town Center project in Maryland (“("Annapolis Junction”Junction"). Annapolis Junction is an apartment development project with 416 residential units. It is part of a mixed-use development project that is also planned to have 17,000 square feet of retail space and a 150-room hotel. Annapolis Junction Apartments Owner, LLC (“AJAO”("AJAO") is the developer of the residential component and engaged the Company to serve as construction general contractor for the residential component. Annapolis Junction opened during 2017 and 2018 and is currently in lease-up.
 
AJAO secured a senior construction loan of up to $60.0 million to fund the development and construction of Annapolis Junction's residential component on September 30, 2016. The Company agreed to guarantee up to $25.0 million of the senior construction loan in exchange for the option to purchase up to an 88% controlling interest in Annapolis Junction upon completion of the project as follows: (i) an option to purchase an 80% indirect interest in Annapolis Junction's residential component for 91% of the lesser of the seller’s budgeted or actual cost, exercisable within one year from the project’s completion (the “First Option”"First Option") and (ii) provided that the Company exercised the First Option, an option to purchase an additional 8% indirect interest in Annapolis Junction for 9% of the lesser of the seller’s actual or budgeted cost, exercisable within 27 months from the project’s completion (the “Second Option”"Second Option").
Interest on the AJAO loan accrues at 10.0% per annum.

On November 16, 2018, AJAO refinanced the senior construction loan with a one year senior loan of $83.0 million. This senior loan may be extended for one additional year if certainincludes two six-month extension options subject to minimum debt yields and minimum debt service coverage ratios are met by AJAO. ratios. Concurrent with the refinancing of the senior construction loan, the Company agreed to modify the mezzanine loan receivable with AJAO as follows:

•The Company has agreed to guarantee $8.3 million of the new senior loan;
•The Company agreed to extend the maturity of the mezzanine loan, and the AJAO loanwhich will mature concurrentconcurrently with the new senior loan. In conjunction with this refinancing,loan;
•The Company terminated its rights under the Company sold the First Option and Second Option to purchase options;
•AJAO forpaid a pricemodification fee of $5.0 million. Additionally, million;
•AJAO repaidwill pay an exit fee of $3.0 million upon full repayment of the loan; and
•AJAO paid down $11.1 million of the outstanding mezzanine loan balance, which compriseswas comprised of a $9.9 million payment of accrued interest and a $1.2 million payment of principal.

The Option sale proceedsfee of $5.0 million is beingpaid by AJAO was accounted for as a loan discount that will bewas recognized as interest income over the one year loan term from November 2018 to November 2019 using the effective interest method. On December 1, 2019, the first six-month extension option for the senior loan was exercised, and the Company's mezzanine loan was extended in tandem. AJAO will pay an exit fee of $3.0 million upon full repayment of the loan, which is being recognized through the current remaining term of the loan as interest income using the effective interest method.


Management has concluded that this entity is a VIE. Because AJAO is the developer of Annapolis Junction, the Company does not have the power to direct the activities of the project that most significantly impact its performance. Therefore, the Company is not the project's primary beneficiary and does not consolidate the project in its consolidated financial statements.


North Decatur Square


On May 15, 2017, the Company invested in the development of an estimated $34.0 million Whole Foods-anchored center located in Decatur, Georgia. The Company's investment iswas in the form of a mezzanine loan of up to $21.8 million to the developer, North Decatur Square Holdings, LLC ("NDSH"). Interest on the loan bears interesthad accumulated at a rate of 15.0% per annum. The note matures on the earliest of (i) May 15, 2022, (ii) the maturity of the senior construction loan, (iii) the sale of NDSH, or (iv) the sale of the center. NDSH is current on this loan. During 2018, this loan was modified to increase the maximum amount of the loan to $29.7 million due to an increase in the square footage of the Whole Foods store.


Management has concluded that this entity is a VIE. Because NDSH isOn July 22, 2019, the developer ofborrower paid off the North Decatur Square note receivable in full. The Company received the Company does not haveoutstanding principal and interest in the power to direct the activitiesamount of the project that most significantly impact its performance. Therefore, the Company is not the project's primary beneficiary and does not consolidate the project in its consolidated financial statements.$20.0 million.



Delray Plaza


On October 27, 2017, the Company invested in the development of an estimated $20.0 million Whole Foods-anchored center located in Delray Beach, Florida. The Company's investment was in the form of a mezzanine loan of up to $13.1 million to the developer, Delray Plaza Holdings, LLC ("DPH"). The Company has agreed to guarantee payment of up to $4.8 million of the senior construction loan. On January 8, 2019, this loan was modified to increase the maximum amount of the loan to $15.0 million and the payment guarantee amount increased to $5.2 million. The mezzanine loan bears interest at a rate of 15.0% per annum. The note matures on the earliest of (i) October 27, 2020, (ii) the date of any sale or refinance of the development project, or (iii) the disposition or change in control of the development project.


Management has concluded that this entity is a VIE. Because DPH is the developer of Delray Plaza, the Company does not have the power to direct the activities of the project that most significantly impact its performance. Therefore, the Company is not the project's primary beneficiary and does not consolidate the project in its consolidated financial statements.

Nexton Square


On August 31, 2018, the Company financed a $2.2 million bridge loan to SC Summerville Brighton, LLC ("Brighton"), the developer of Nexton Square, a shopping center development project located in Summerville, South Carolina. The shopping center may comprise as many as 16 buildings. On November 7, 2018, the Company increased the maximum loan amount to $4.9 million. This loan was subsequently modified as described below.


On December 4, 2018, the Company entered into a mezzanine loan agreement with Brighton, which provides for a maximum capacity of $21.0$17.0 million. The previous loan was repaid from proceeds of the mezzanine loan. This note bearsoriginally bore interest at a rate of 15.0%15% per annum (which will decreasewhich decreased to 10.0% upon completion of certain portions of the project).project. The modified note matures on the earliest of (i) December 4, 2020, (ii) the maturity date of the senior construction loan, including any extension options available and exercised under that loan, or (iii) the date of any sale, transfer, or refinancing of the project.


The Company agreed to guarantee 50% of the senior construction loan in exchange for the option to purchase the property upon completion according to a predetermined formula, which is primarily dependent upon Brighton's leasing activities and the extent to which Brighton elects to complete all or a portion of the total planned space, if applicable, in response to leasing activities.


On February 8, 2019, Brighton closed on a senior construction loan with a maximum borrowing capacity of $25.2 million. Brighton used proceeds from its original draw in part to repay $2.1 million of the mezzanine loan. Upon the closing of this senior construction loan, the Company entered into a payment guarantee for $12.6 million of the senior loan.


Management has concluded that this entity is a VIE. Because Brighton is the developer of Nexton Square, the Company does not have the power to direct the activities of the project that most significantly impact its performance. Therefore, the Company is not the project's primary beneficiary and does not consolidate the project in its consolidated financial statements.


Interlock Commercial


In October 2018, the Company financed a bridge loan with a maximum commitment of $4.0 million to The Interlock, LLC ("Interlock"), the developer of the office and retail components of The Interlock, a new mixed-use public-private partnership with Georgia Tech in West Midtown Atlanta. This loan was subsequently modified as described below.


On December 21, 2018, the Company entered into a mezzanine loan agreement with Interlock for a maximum principal amount of $67.0 million and a total maximum commitment, including accrued interest reserves, of $95.0 million. The previous loan was repaid from proceeds of the mezzanine loan. The mezzanine loan bears interest at a rate of 15.0% per annum and matures at the earlier of (i) 24 months after the original maturity date or earlier termination date of the senior construction loan or (ii) any sale, transfer, or refinancing of the project. In the event that the maturity date is established as being 24 months after the original maturity date or earlier termination date of the senior construction loan, Interlock will have the right to extend the maturity date for 5 years.


The Company has agreed to guarantee payment of 35% ofOn April 19, 2019, the senior construction loan. Interlock had not yet obtained aborrower executed its senior construction loan, asand the Company's payment guarantee of December 31, 2018.up to $30.7 million became effective. See Note 15 for additional information. See Note 18 for additional discussion.


Management has concluded that this entity is a VIE. Because Interlock is the developer of The Interlock, the Company does not have the power to direct the activities of the project that most significantly impact its performance. Therefore, the Company is not the project's primary beneficiary and does not consolidate the project in its consolidated financial statements.


Solis Apartments at Interlock


On December 21, 2018, the Company entered into a mezzanine loan agreement with Interlock Mezz Borrower, LLC ("Solis Interlock"), the developer of Solis Apartments at Interlock, which is the apartment component of The Interlock. The mezzanine loan has a maximum principal commitment of $25.2 million and a total maximum commitment, including accrued interest reserves, of $41.1 million. The mezzanine loan bears interest at a rate of 13.0% per annum and matures on the earlier of (a) the later of (i) December 21, 2021 or (ii) the maturity date or earlier termination date of the senior construction loan, including any extensions of the senior construction loan, or (b) the date of any sale of the project or refinance of the loan.


Management has concluded that this entity is a VIE. Because Solis Interlock is the developer of Solis Apartments at Interlock, the Company does not have the power to direct the activities of the project that most significantly impact its performance. Therefore, the Company is not the project's primary beneficiary and does not consolidate the project in its consolidated financial statements.


Guarantee liabilities


As of December 31, 2018,2019, the Company had outstanding payment guarantees for the senior loans on Residences at Annapolis Junction, Delray Plaza, Nexton Square, and 1405 Point,Interlock Commercial as described above. As of December 31, 2019 and 2018, the Company has recorded a guarantee liability of $5.3 million and $2.8 million, respectively, representing their unamortized fair value. These guarantees are classified as other liabilities on the Company's consolidated balance sheets, with a corresponding adjustment to the notes receivable balance on the consolidated balance sheets. See Note 18 for additional information on the Company's outstanding guarantees.


7.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 Company expects to bill and collect substantially all construction contract costs and estimated earnings in excess of billings as of December 31, 20182019 during the year ending December 31, 2019.2020.  


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 year ended December 31, 2019 and 2018 (in thousands):


  Year ended December 31, 2019 Year ended December 31, 2018
  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 $1,358
 $3,037
 $245
 $3,591
Revenue recognized that was included in the balance at the beginning of the period —
 (3,037) —
 (3,591)
Increases due to new billings, excluding amounts recognized as revenue during the period —
 6,283
 —
 4,243
Transferred to receivables (2,557) —
 (245) —
Construction contract costs and estimated earnings not billed during the period 249
 —
 352
 —
Changes due to cumulative catch-up adjustment arising from changes in the estimate of the stage of completion 1,199
 (977) 1,006
 (1,206)
Ending balance $249
��$5,306
 $1,358
 $3,037

  Construction contract costs and estimated earnings in excess of billings Billings in excess of construction contract costs and estimated earnings
Balance as of January 1, 2018 $245
 $3,591
Revenue recognized that was included in the balance at the beginning of the period —
 (3,591)
Increases due to new billings, excluding amounts recognized as revenue during the period —
 4,243
Transferred to receivables (245) —
Construction contract costs and estimated earnings not billed during the period 352
 —
Changes due to cumulative catch-up adjustment arising from changes in the estimate of the stage of completion 1,006
 (1,206)
Balance as of December 31, 2018 $1,358
 $3,037


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 $1.4$0.9 million and $0.6$1.4 million were deferred as of December 31, 20182019 and 2017,2018, respectively. Amortization of pre-contract costs for the yearyears ended December 31, 2019 and 2018 totaledwas $0.6 million and less than $0.1 million.million, respectively.
 
Construction receivables and payables include retentions—amounts that are generally withheld until the completion of the contract or the satisfaction of certain restrictive conditions such as fulfillment guarantees. As of December 31, 20182019 and 2017,2018, construction receivables included retentions of $8.5$9.0 million and $9.9$8.5 million, respectively. The Company expects to collect substantially all construction receivables as of December 31, 20182019 during the year ending December 31, 2019.2020. As of December 31, 20182019 and 2017,2018, construction payables included retentions of $21.6$18.0 million and $17.4$21.6 million, respectively. The Company expects to pay substantially all construction payables as of December 31, 20182019 during the year ending December 31, 2019.2020.


The Company’s net position on uncompleted construction contracts comprised the following as of December 31, 20182019 and 20172018 (in thousands):
 
December 31, December 31, 
2018 20172019 2018
Costs incurred on uncompleted construction contracts$594,006
 $520,368
$695,564
 $594,006
Estimated earnings20,375
 18,070
24,553
 20,375
Billings(616,060) (541,784)(725,174) (616,060)
Net position$(1,679) $(3,346)$(5,057) $(1,679)
   
Construction contract costs and estimated earnings in excess of billings$249
 $1,358
Billings in excess of construction contract costs and estimated earnings(5,306) (3,037)
Net position$(5,057) $(1,679)
 
 December 31,
 2018 2017
Construction contract costs and estimated earnings in excess of billings$1,358
 $245
Billings in excess of construction contract costs and estimated earnings(3,037) (3,591)
Net position$(1,679) $(3,346)

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, 2019, 2018 and 2017 were as follows (in thousands):

 Years Ended December 31, 
 2019 2018 2017
Beginning backlog$165,863
 $49,167
 $217,718
New contracts/change orders182,495
 192,852
 25,224
Work performed(105,736) (76,156) (193,775)
Ending backlog$242,622
 $165,863
 $49,167

 Years Ended December 31, 
 2018 2017 2016
Beginning backlog$49,167
 $217,718
 $83,433
New contracts/change orders192,852
 25,224
 293,115
Work performed(76,156) (193,775) (158,830)
Ending backlog$165,863
 $49,167
 $217,718


The Company expects to complete a majority of the uncompleted contracts as of December 31, 20182019 during the next 12 to 18 months.  



8.Indebtedness

The Company’s indebtedness comprised the following as of December 31, 20182019 and 20172018 (dollars in thousands):  
Principal Balance Interest Rate Maturity DatePrincipal Balance 
Interest Rate (a)
 Maturity Date
December 31,  December 31, December 31,  December 31, 
2018 2017 20182019 2018 2019
Secured Debt              
Columbus Village Note 1$—
 $6,080
 LIBOR + 2.00%
(a)April 5, 2018
Columbus Village Note 2—
 2,218
 LIBOR + 2.00%
 April 5, 2018
North Point Center Note 1 (b)9,352
 9,571
 6.45% February 5, 2019$—
 $9,352
 6.45% February 5, 2019
Greenside (Harding Place)25,902
 3,874
 LIBOR + 2.95%
 February 24, 2020
Premier (Town Center Phase VI)19,214
 1,505
 LIBOR + 3.50%
 June 29, 2020
Hoffler Place (King Street)11,445
 —
 LIBOR + 3.24%
 January 1, 2021
Summit Place (Meeting Street)11,057
 —
 LIBOR + 3.24%
 January 1, 2021
Lightfoot Marketplace (c)
—
 10,500
 LIBOR + 1.75%
 October 12, 2023
Hoffler Place (d)
29,059
 11,445
 LIBOR + 3.24%
 January 1, 2021
Summit Place (d)
28,824
 11,057
 LIBOR + 3.24%
 January 1, 2021
Southgate Square21,442
 20,708
 LIBOR + 1.60%
 April 29, 202120,562
 21,442
 LIBOR + 1.60%
 April 29, 2021
4525 Main Street (c)32,034
 32,034
 3.25% September 10, 2021
Encore Apartments (c)24,966
 24,966
 3.25% September 10, 2021
Encore Apartments (e)
24,842
 24,966
 3.25% September 10, 2021
4525 Main Street (e)
31,876
 32,034
 3.25% September 10, 2021
Red Mill West11,296
 —
 4.23% June 1, 2022
Thames Street Wharf70,000
 —
 LIBOR + 1.30%
 June 26, 2022
Hanbury Village19,019
 19,503
 3.78% August 15, 202218,515
 19,019
 3.78% August 15, 2022
Marketplace at Hilltop10,517
 —
 4.42% October 1, 2022
1405 Point53,000
 —
 LIBOR + 2.25%
 January 1, 2023
Socastee Commons4,671
 4,771
 4.57% January 6, 20234,567
 4,671
 4.57% January 6, 2023
Sandbridge Commons8,258
 8,468
 LIBOR + 1.75%
 January 17, 20238,020
 8,258
 LIBOR + 1.75%
 January 17, 2023
249 Central Park Retail (d)17,045
 16,851
 LIBOR + 1.60%
 August 10, 2023
South Retail (d)7,483
 7,394
 LIBOR + 1.60%
 August 10, 2023
Fountain Plaza Retail (d)10,257
 10,145
 LIBOR + 1.60%
 August 10, 2023
Lightfoot Marketplace10,500
 10,500
 LIBOR + 1.75%
(a)October 12, 2023
Wills Wharf29,154
 —
 LIBOR + 2.25%
 June 26, 2023
249 Central Park Retail (f)
16,828
 17,045
 LIBOR + 1.60%
(g) 
August 10, 2023
Fountain Plaza Retail (f)
10,127
 10,257
 LIBOR + 1.60%
(g) 
August 10, 2023
South Retail (f)
7,388
 7,483
 LIBOR + 1.60%
(g) 
August 10, 2023
One City Center25,286
 —
 LIBOR + 1.85%
 April 1, 2024
Red Mill Central2,538
 —
 4.80% June 17, 2024
Premier Apartments (h)
16,750
 12,873
 LIBOR + 1.55%
 October 31, 2024
Premier Retail (h)
8,250
 6,341
 LIBOR + 1.55%
 October 31, 2024
Red Mill South6,137
 —
 3.57% May 1, 2025
Brooks Crossing Office6,910
 —
 LIBOR + 1.60%
 July 1, 202514,411
 6,910
 LIBOR + 1.60%
 July 1, 2025
Market at Mill Creek7,283
 —
 LIBOR + 1.55%
 July 12, 202514,727
 7,283
 LIBOR + 1.55%
 July 12, 2025
Johns Hopkins Village52,708
 46,698
 LIBOR + 1.25%
(a)August 7, 202551,800
 52,708
 LIBOR + 1.25%
(g) 
August 7, 2025
North Point Center Note 22,346
 2,459
 7.25% September 15, 20252,214
 2,346
 7.25% September 15, 2025
Lexington Square14,940
 —
 4.50% September 1, 202814,696
 14,940
 4.50% September 1, 2028
Red Mill North4,394
 —
 4.73% December 31, 2028
Greenside Apartments34,000
 25,902
 3.17% December 15, 2029
Smith's Landing18,985
 19,764
 4.05% June 1, 203518,174
 18,985
 4.05% June 1, 2035
Liberty Apartments14,437
 14,694
 5.66% November 1, 204314,165
 14,437
 5.66% November 1, 2043
The Cosmopolitan44,468
 45,209
 3.35% July 1, 205143,702
 44,468
 3.35% July 1, 2051
Total secured debt$394,722
 $307,412
   $645,819
 $394,722
   
Unsecured Debt            
Senior unsecured revolving credit facility126,000
 66,000
 LIBOR+1.40%-2.00%
 October 26, 2021110,000
 126,000
 LIBOR+1.30%-1.85%
 January 24, 2024
Senior unsecured term loan80,000
 50,000
 LIBOR+1.35%-1.95%
 October 26, 202244,500
 80,000
 LIBOR+1.25%-1.80%
 January 24, 2025
Senior unsecured term loan50,000
 50,000
 LIBOR+1.35%-1.95%
(a)October 26, 2022160,500
 100,000
 LIBOR+1.25%-1.80%
(g) 
January 24, 2025
Senior unsecured term loan50,000
 50,000
 LIBOR+1.35%-1.95%
(a)October 26, 2022
Total unsecured debt$306,000
 $216,000
   $315,000
 $306,000
   
Total principal balances$700,722
 $523,412
    $960,819
 $700,722
    
Unamortized fair value adjustments(1,173) (1,211)    (878) (1,173)    
Unamortized debt issuance costs(5,310) (4,929)    (9,404) (5,310)    
Indebtedness, net$694,239
 $517,272
    $950,537
 $694,239
    

________________________________________
(a) Subject to an interestLIBOR rate swap agreement.is determined by individual lenders.
(b) On January 31, 2019, North Point Note 1 was paid off.
(c) Cross collateralized.On August 15, 2019, Lightfoot Note was paid off upon the sale of the property.
(d) Cross collateralized.


(e) Cross collateralized.
(f) Cross collateralized.
(g) Includes debt subject to interest rate swap agreements.
(h) Cross collateralized.

The Company’s indebtedness was comprised of the following fixed and variable-rate debt as of December 31, 20182019 and 20172018 (in thousands):
 December 31, 
 2019 2018
Fixed-rate debt$488,276
 $348,426
Variable-rate debt472,543
 352,296
Total principal balance$960,819
 $700,722
 December 31, 
 2018 2017
Fixed-rate debt$348,426
 $229,051
Variable-rate debt352,296
 294,361
Total principal balance$700,722
 $523,412

 
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, 2018,2019, 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 Ending December 31, Scheduled Principal Payments Maturities Total Payments
2020 $10,191
 $—
 $10,191
2021 10,914
 132,124
 143,038
2022 9,683
 106,691
 116,374
2023 7,752
 124,677
 132,429
2024 6,982
 157,978
 164,960
Thereafter 72,749
 321,078
 393,827
Total $118,271
 $842,548
 $960,819

Year Scheduled Principal Payments Maturities Total Payments 
2019 $5,593
 $9,333
 $14,926
(1) 
2020 6,626
 45,116
 51,742
 
2021 5,821
 222,744
 228,565
 
2022 4,803
 197,109
 201,912
 
2023 11,264
 47,244
 58,508
 
Thereafter 71,475
 73,594
 145,069
 
Total $105,582
 $595,140
 $700,722
 

(1) On January 31, 2019, North Point Note 1 was paid off; this is the only debt maturity in 2019. 


Credit Facility
 
On October 26, 2017,3, 2019, the Operating Partnership entered into an amended and restated credit agreement (the ���credit agreement”"credit agreement"), which provides for a $300.0$355.0 million credit facility comprised of a $150.0 million senior unsecured revolving credit facility (the "revolving credit facility") and a $150.0$205.0 million senior unsecured term loan facility (the “term"term loan facility”facility" and, together with the revolving credit facility, the “credit facility”"credit facility"), with a syndicate of banks. The amended credit facility replaces the prior $150.0 million revolving credit facility, which was scheduled to mature on February 20, 2019,October 26, 2021, and the prior $125.0$205.0 million term loan facility, which was scheduled to mature on February 20, 2021.October 26, 2022.


The credit facility includes an accordion feature that allows the total commitments to be increased to $450.0$700.0 million, subject to certain conditions, including obtaining commitments from any one or more lenders. The revolving credit facility has a scheduled maturity date of October 26, 2021,January 24, 2024, with two2 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 October 26, 2022.January 24, 2025.

On March 28, 2018, the Operating Partnership increased the maximum commitments under the credit facility to $330.0 million using the accordion feature, with an increase of the term loan facility to $180.0 million.


The revolving credit facility bears interest at LIBOR (the London Inter-Bank Offered Rate) plus a margin ranging from 1.40%1.30% to 2.00%1.85%, and the term loan facility bears interest at LIBOR plus a margin ranging from 1.35%1.25% to 1.95%1.80%, 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 credit facility. As of December 31, 2018,2019, the interest rates on the revolving credit facility and the term loan facility were 4.05%3.26% and 4.00%3.21%, respectively. If the Company attains investment grade credit ratings from S&P and Moody’s, 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 any loan under the credit facility in whole or in part without premium or penalty.


The Operating Partnership is the borrower under the credit facility, 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.


The Company is currently in compliance with all covenants under the credit facility.agreement.

Other 2019 Financing Activity

On January 31, 2019, the Company paid off North Point Center Note 1.

On March 11, 2019, the Company received $7.4 million of additional funding on the loan secured by Lightfoot Marketplace. On August 15, 2019, the Company sold the property and paid off the outstanding balance of $17.9 million. The Company retained the interest rate swap associated with the loan.

On March 14, 2019, the Company obtained a loan secured by One City Center in the amount of $25.6 million in conjunction with the acquisition of this property. This loan may be increased to $27.6 million subject to certain conditions. The loan bears interest at a rate of LIBOR plus a spread of 1.85% and will mature on April 1, 2024.

On April 24, 2019, the Company exercised its option to purchase 79% of the partnership that owns 1405 Point in exchange for extinguishing its note receivable on the project and a cash payment of $0.3 million. The project was acquired subject to a loan payable of $64.9 million, which was recorded at its fair value of $65.8 million. On December 27, 2019, the Company extended and modified the 1405 Point loan. The Company decreased the balance on the loan to $53.0 million by paying the balance of $12.3 million. The loan matures on January 1, 2023 and bears interest at a rate of LIBOR plus a spread of 2.25%; this spread will decrease to 2.00% upon achieving Debt Yield of 8.5% and further to 1.75% upon achieving Debt Yield of 9.5% (as defined in the loan agreement).

On May 23, 2019, the Company assumed notes payable in connection with the acquisition of Red Mill Commons and Marketplace at Hilltop with outstanding principal balances of $24.9 million and $10.8 million, respectively. The following table summarizes the note balance at assumption, fair value at assumption, maturity date, and interest rate for each loan ($ in thousands):
Loan name Note balance at assumption Fair value of loan at assumption Loan maturity date Loan interest rate
Red Mill North $4,451
 $4,520
 12/31/2028 4.73%
Red Mill South 6,310
 6,090
 5/1/2025 3.57%
Red Mill Central 2,640
 2,690
 6/17/2024 4.80%
Red Mill West 11,548
 11,540
 6/1/2022 4.23%
Marketplace at Hilltop 10,740
 10,790
 10/1/2022 4.42%
  $35,689
 $35,630
    


On June 26, 2019, the Company obtained a loan secured by Thames Street Wharf in the amount of $70.0 million in conjunction with the acquisition of this property. The loan bears interest at a rate of LIBOR plus a spread of 1.30% and will mature on June 26, 2022.

On June 26, 2019, the Company entered into a $76.0 million syndicated construction loan facility for the Wills Wharf development project in Baltimore, Maryland. The facility bears interest at a rate of LIBOR plus a spread of 2.25% during construction activities and will mature on June 26, 2023.

On October 29, 2019, the Company extended and modified the Premier loan. The Company increased the balance on the loan to $25.0 million by receiving additional proceeds of $2.7 million. The loan bears interest at a rate of LIBOR plus a spread of 1.55% and will mature on October 31, 2024.


On December 12, 2019, the Company refinanced the Greenside loan. The Company increased the balance to $34.0 million by receiving additional proceeds of $5.1 million. The loan bears interest at a rate of 3.17% and will mature on December 15, 2029.

During the year ended December 31, 2019, the Company borrowed $96.3 million under its construction loans to fund development and construction.

Subsequent to December 31, 2019

Borrowings under the revolving credit facility were $130.0 million on February 20, 2020.
 
Other 2018 Financing Activity


On January 22, 2018, the Company extended and modified the Sandbridge Commons note. The note bears interest at a rate of LIBOR plus a spread of 1.75% and will mature on January 17, 2023.


On March 27, 2018, the Company paid off Columbus Village Note 1 and Columbus Village Note 2 in full for an aggregate amount of $8.3 million.


On May 31, 2018, the Company modified the Southgate Square note. The principal amount of the note was increased to $22.0 million, and the note now bears interest at a rate of LIBOR plus a spread of 1.60%. This note will still mature on April 29, 2021.


On June 1, 2018, the Company entered into a $16.3 million construction loan for the River City industrial facility in Chesterfield, Virginia. The loan bore interest at a rate of LIBOR plus a spread of 1.50%. On December 20, 2018, the Company sold the completed facility and paid the loan in full.


On June 14, 2018, the Company extended and modified the note secured by 249 Central Park Retail, Fountain Plaza Retail, and South Retail. The principal amount of the note was increased to $35.0 million. The note bears interest at a rate of LIBOR plus a spread of 1.60% and will mature on August 10, 2023.


On June 29, 2018, the Company entered into a $15.6 million construction loan for the Brooks Crossing Office development project. The loan bears interest at a rate of LIBOR plus a spread of 1.60% and will mature on July 1, 2025.


On July 12, 2018, the Company entered into a $16.2 million construction loan for the Market at Mill Creek development project in Mt. Pleasant, South Carolina. The loan bears interest at a rate of LIBOR plus a spread of 1.55% and will mature on July 12, 2025.


On July 27, 2018, the Company paid off the Johns Hopkins Village note and entered into a new loan. The principal amount of the new loan is $53.0 million. The loan bears interest at a rate of LIBOR plus a spread of 1.25% and will mature on August 7, 2025. The Company simultaneously entered into an interest rate swap agreement that effectively fixes the interest rate at 4.19% for the term of the loan.


On August 28, 2018, the Company entered into a $15.0 million note secured by the newly acquired Lexington Square shopping center. The note bears interest at a rate of 4.50% and will mature on September 1, 2028.


On October 12, 2018, the Company extended and modified the note secured by Lightfoot Marketplace. Under the modified note, the Company may borrow up to $17.9 million. The Company has borrowed an initial tranche of $10.5 million on this note, which bearsbore interest at a rate of LIBOR plus a spread of 1.75% until stabilization of the property, whereupon the spread will be reduced to 1.60%. The note matures on October 12, 2023. The Company simultaneously entered into an interest rate swap agreement that effectively fixesfixed the interest rate of thisthe initial tranche at 4.77% per annum until stabilization and 4.62% per annum thereafter.annum. On March 11, 2019, the Company received $7.4 million of additional funding under this note. On August 15, 2019, the Company paid off the $17.9 million outstanding balance of the note in conjunction with the sale of the property.


During the year ended December 31, 2018, the Company borrowed $86.9 million under its existing construction loans to fund new development and construction and repaid $10.5 million in conjunction with the sale of the River City industrial facility.

Subsequent to December 31, 2018

On January 31, 2019, the Company increased the maximum commitments under the credit facility to $355.0 million using the accordion feature, with an increase of the term loan facility to $205.0 million.

On January 31, 2019, the Company paid off North Point Center Note 1.

Borrowings under the revolving credit facility were $123.0 million on February 26, 2019.

Other 2017 Financing Activity


On February 1, 2017, the Company paid off the North Point Center Note 5 in full for $0.6 million.


On February 24, 2017, the Company secured a $29.8 million construction loan for the Harding PlaceGreenside project in Charlotte, North Carolina.


On April 7, 2017, the Company paid off the Harrisonburg Regal note in full for $3.2 million.


On April 19, 2017, the Company entered into a second amendment to the credit agreement for the Lightfoot Marketplace loan, which amended certain definitions and covenant requirements.


On June 29, 2017, the Company secured a $27.9 million construction loan for the Town Center Phase VIPremier Apartments project in Virginia Beach, Virginia.


On July 13, 2017, the Company paid off the remaining balance of $4.9 million for the note secured by the Commonwealth of Virginia building in Chesapeake, Virginia in conjunction with the sale of this property.


On August 9, 2017, the Company refinanced the Hanbury Village note. The new note matures in August 2022 and has a fixed annual interest rate of 3.78%.


On August 10, 2017, the Company paid off $0.7 million of the Sandbridge Commons note in conjunction with the sale of a land outparcel at this property.


On September 1, 2017, the Company entered into a modification of The Cosmopolitan note, which reduced the interest rate from 3.75% to 3.35%.


On October 13, 2017, the Company paid down $5.0 million of the Liberty Apartments note.


On November 1, 2017, the Company extended the Lightfoot construction loan after paying the balance down to $10.5 million and paying an extension fee.


On December 28, 2017, the Company secured a $66.5 million construction loan for the 595 King Street and 530 Meeting Street development projects.


During the year ended December 31, 2017, the Company borrowed $8.9 million under its construction loans to fund new development and construction.

Other 2016 Financing Activity

On August 8, 2016, the Company repaid the existing $15.1 million mortgage loan secured by 249 Central Park Retail, the $6.7 million mortgage loan on South Retail, and the $7.6 million mortgage loan on Fountain Plaza and refinanced them with a $35.0 million five-year term mortgage loan that bears interest at LIBOR plus 1.95% and matures on August 8, 2021. The new mortgage loan is collateralized by all three properties. The loss on extinguishment of debt recognized on the refinancing was less than $0.1 million.

On August 30, 2016, the Company repaid the existing $31.6 million construction loan secured by 4525 Main Street and the $25.2 million construction loan on Encore Apartments and refinanced them with a $57.0 million five-year term mortgage loan that bears interest at 3.25% and matures on September 10, 2021. The new mortgage is

collateralized by both properties. The loss on extinguishment of debt recognized on the refinancing was less than $0.1 million for the year ended December 31, 2016.

During the year ended December 31, 2016, the Company borrowed $44.4 million under its construction loans to fund new development and construction.
9.Derivative Financial Instruments
 
During the three years ended December 31, 2018,2019, the Company had the following LIBOR interest rate caps, which are not designated as cash flow hedges for accounting purposes ($ in thousands):
Origination Date Expiration Date Notional Amount  Strike Rate Premium Paid
10/26/2015 10/15/2017 $75,000
 1.25% $137
2/25/2016 3/1/2018 75,000
 1.50% 57
6/17/2016 6/17/2018 70,000
 1.00% 150
2/7/2017 3/1/2019 50,000
 1.50% 187
6/23/2017 7/1/2019 50,000
 1.50% 154
9/18/2017 10/1/2019 50,000
 1.50% 199
11/28/2017 12/1/2019 50,000
 1.50% 359
3/7/2018 4/1/2020 50,000
 2.25% 310
7/16/2018 8/1/2020 50,000
 2.50% 319
12/11/2018 1/1/2021 50,000
 2.75% 210
5/15/2019 6/1/2022 100,000
 2.50% 288
        $2,370


As of December 31, 2019, the Company held the following floating-to-fixed interest rate swaps ($ in thousands):
Origination Date Expiration Date Notional Amount  Strike Rate Premium Paid
10/26/2015 10/15/2017 $75,000
 1.25% $137
2/25/2016 3/1/2018 75,000
 1.50% 57
6/17/2016 6/17/2018 70,000
 1.00% 150
2/7/2017 3/1/2019 50,000
 1.50% 187
6/23/2017 7/1/2019 50,000
 1.50% 154
9/18/2017 10/1/2019 50,000
 1.50% 199
7/28/2017 12/1/2019 50,000
 1.50% 359
3/7/2018 4/1/2020 50,000
 2.25% 310
7/16/2018 8/1/2020 50,000
 2.50% 319
12/11/2018 1/1/2021 50,000
 2.75% 210
Related Debt Notional Amount  Index Swap Fixed Rate Debt effective rate Effective Date Expiration Date
Senior unsecured term loan $50,000
  1-month LIBOR 2.00% 3.45% 3/1/2016 2/20/2020
Senior unsecured term loan 50,000
  1-month LIBOR 2.78% 4.23% 5/1/2018 5/1/2023
John Hopkins Village 51,800
(a) 
 1-month LIBOR 2.94% 4.19% 8/7/2018 8/7/2025
Senior unsecured term loan 10,500
(a)(b) 
 1-month LIBOR 3.02% 4.47% 10/12/2018 10/12/2023
249 Central Park Retail, South Retail, and Fountain Plaza Retail 34,342
(a) 
 1-month LIBOR 2.25% 3.85% 4/1/2019 8/10/2023
Senior unsecured term loan 50,000
(a) 
 1-month LIBOR 2.26% 3.71% 4/1/2019 10/26/2022
Total $246,642
           

(a) Designated as a cash flow hedge.
(b) Prior to August 15, 2019, this swap was used as a hedge for the cash flows for the loan secured by Lightfoot Marketplace.



On February 20, 2015, the Operating Partnership entered into a $50.0 million floating-to-fixed interest rate swap attributable to one-month LIBOR indexed interest payments. The $50.0 million interest rate swap has a fixed rate of 2.00%, an effective date of March 1, 2016 and a maturity date of February 20, 2020. The Operating Partnership entered into this interest rate swap agreement in connection with a $50.0 million term loan under the senior unsecured term loan facility that bears interest at LIBOR plus 1.35% to 1.95%, depending on the Operating Partnership’s total leverage. The Company designated this interest rate swap as a cash flow hedge of variable interest payments based on one-month LIBOR.

On July 13, 2015, the Operating Partnership entered into a $6.5 million floating-to-fixed interest rate swap attributable to one-month LIBOR indexed interest payments. The $6.5 million interest rate swap had a fixed rate of 3.05%, an effective date of July 13, 2015 and a maturity date of April 5, 2018. The Company designated this interest rate swap as a cash flow hedge of variable interest payments based on one-month LIBOR.
On April 23, 2018, the Operating Partnership entered into a floating-to-fixed interest rate swap attributable to one-month LIBOR indexed interest payments with a notional amount of $50.0 million. The interest rate swap has a fixed rate of 2.783%, an effective date of May 1, 2018, and a maturity date of May 1, 2023.
On July 27, 2018, the Company entered into a LIBOR interest rate swap agreement that effectively fixesFor the interest rate of the new Johns Hopkins Village note payable at 4.19% per annum with a maturity date of August 7, 2025. The Company hasswaps designated the interest rate swap as a cash flow hedge for accounting purposes.

On October 12, 2018, the Company entered into a LIBOR interest rate swap agreement that effectively fixes the interest rate of the initial $10.5 million tranche of the new Lightfoot Marketplace note payable at 4.77% per annum until stabilization and 4.62% per annum thereafter. The swap matures on October 12, 2023. The Company has designated the interest rate swap as a cash flow hedge for accounting purposes.

During the year ended December 31, 2018, unrealized losses of $1.9 million were recorded to other comprehensive loss, and $0.2 million ofhedges, realized losses wereare reclassified out of accumulated other comprehensive loss to interest expense in the Consolidated Statements of Comprehensive Income due to payments made to the swap counterparties during the year ended December 31, 2018 for interest rate swaps designated as cash flow hedges.counterparty. During the next 12 months, the Company anticipates reclassifying

approximately $0.3$1.4 million of net hedging losses from accumulated other comprehensive loss into earnings to offset the variability of the hedged items during this period.


The Company’s derivatives comprised the following as of December 31, 20182019 and 20172018 (in thousands):
  December 31, 2019 December 31, 2018
    Fair Value   Fair Value
  Notional Amount Asset Liability Notional Amount Asset Liability
Derivatives not designated as accounting hedges            
Interest rate swaps $100,000
 $—
 $(1,992) $100,000
 $303
 $(749)
Interest rate caps 250,000
 25
 —
 350,000
 1,790
 —
Total derivatives not designated as accounting hedges 350,000
 25
 (1,992) 450,000
 2,093
 (749)
Derivatives designated as accounting hedges            
Interest rate swaps 146,642
 —
 (5,728) 63,208
 —
 (1,725)
Total derivatives $496,642
 $25
 $(7,720) $513,208
 $2,093
 $(2,474)
  December 31, 
  2018 2017
    Fair Value   Fair Value
Derivatives not designated as accounting hedges Notional Amount Asset Liability Notional Amount Asset Liability
Interest rate swaps $100,000
 $303
 $(749) $56,079
 $10
 $(69)
Interest rate caps 350,000
 1,790
 —
 345,000
 1,515
 —
Total derivatives not designated as accounting hedges 450,000
 2,093
 (749) 401,079
 1,525
 (69)
Interest rate swaps designated as accounting hedge 63,208
 —
 (1,725) —
 —
 —
Total derivatives $513,208
 $2,093
 $(2,474) $401,079
 $1,525
 $(69)

 
The changes in the fair value of the Company’s derivatives during the years ended December 31, 2019, 2018, 2017, and 20162017 was as follows (in thousands):
 Years Ended December 31, 
 2019 2018 2017
Interest rate swaps$(6,050) $(2,281) $770
Interest rate caps(2,053) (564) 357
Total change in fair value of interest rate derivatives$(8,103) $(2,845) $1,127
Comprehensive income statement presentation: 
  
  
Change in fair value of interest rate derivatives$(3,599) $(951) $1,127
Unrealized cash flow hedge losses(4,504) (1,894) —
Total change in fair value of interest rate derivatives$(8,103) $(2,845) $1,127

 Years Ended December 31, 
 2018 2017 2016
Interest rate swaps$(2,281) $770
 $(795)
Interest rate caps(564) 357
 (146)
Total change in fair value of interest rate derivatives$(2,845) $1,127
 $(941)
Comprehensive income statement presentation: 
  
  
Change in fair value of interest rate derivatives$(951) $1,127
 $(941)
Unrealized cash flow hedge losses(1,894) —
 —
Total$(2,845) $1,127
 $(941)

Effective March 31, 2016, the Company determined that the short-cut method of hedge accounting was not appropriate for two of its interest-rate swaps and, for accounting purposes, the hedge relationship was terminated. The swaps were entered into in February and July 2015. Accordingly, changes in fair value of the swap should have been recorded in income rather than other comprehensive income. The Company determined that the errors were immaterial to all previously issued financial statements. The Company recognized $0.7 million of accumulated other comprehensive income and $0.4 million, which was previously allocated to noncontrolling interest as of December 31, 2015, in earnings during the first quarter of 2016. Subsequent changes in the value of the interest rate swap for the period from January 1, 2016 to December 31, 2018 were also recognized in earnings during2019

On January 10, 2020, the years ended December 31, 2018 and 2017.

The Company has not designated any of itsentered into a LIBOR interest rate caps as hedging instrumentscap agreement on a notional amount of $50.0 million at a strike rate of 1.75% for accounting purposes.a premium of $0.1 million. The interest rate cap agreement will expire on February 1, 2022.


On January 28, 2020, the Company entered into an additional LIBOR interest rate cap agreement on a notional amount of $50.0 million at a strike rate of 1.75% for a premium of $0.1 million. The interest rate cap agreement will expire on February 1, 2022.
10.Equity
 
Stockholders’ Equity
 
As of December 31, 20182019 and 2017,2018, the Company’s authorized capital was 500 million shares of common stock and 100 million shares of preferred stock. The Company had 50.056.3 million and 44.950.0 million shares of common stock issued and outstanding as of December 31, 2019 and 2018, respectively. The Company had 2.5 million shares of its Series A Preferred Stock (as defined below) issued and 2017, respectively. Nooutstanding as of December 31, 2019. NaN shares of preferred stock were issued and outstanding as of December 31, 2018 and 2017.2018.

On May 5, 2015, the Company commenced an at-the-market continuous equity program through which the Company was able to, from time to time, issue and sell shares of its common stock having an aggregate offering price of up to $50.0 million (the "2015 ATM Program"). During the year ended December 31, 2016, the Company issued and sold

1,152,919 shares of common stock at a weighted average price of $10.87 per share, resulting in net proceeds to the Company after offering costs and commissions of $12.2 million.


On May 4, 2016, the Company commenced a newan at-the-market continuous equity offering program (the “2016"2016 ATM Program”Program") through which the Company was able to, from time to time, issue and sell shares of its common stock having an aggregate offering price of up to $75.0 million. Upon commencing the 2016 ATM Program, the Company simultaneously terminated the 2015 ATM Program. During the yearsyear ended December 31, 2017, and 2016, the Company issued and sold 450,890 and 4,159,936 shares of common stock at a weighted average price of $14.08 and $13.45 per share under the 2016 ATM Program, receiving net proceeds after offering costs and commissions of $6.2 million and $54.8 million, respectively.

On February 26, 2018, the Company commenced a new at-the-market continuous equity offering program (the "2018 ATM Program") through which the Company is able to, from time to time, issue and sell shares of its common stock having an aggregate offering price of up to $125.0 million. Upon commencing the 2018 ATM Program, the Company simultaneously terminated the 2016 ATM Program. During the year ended December 31, 2018, the Company issued and sold 4,617,409 shares of common stock at a weighted average price of $14.39 per share under the 2018 ATM Program, receiving net proceeds after offering costs and commissions of $65.2 million.

On October 13, 2016, the Company completed the acquisition of Columbus Village II, a stabilized retail asset for aggregate consideration of 2,000,000 shares of common stock, which based on the closing stock price on the date of the acquisition, resulting in an acquisition price of $26.2 million. On October 19, 2016, the Company filed a registration statement covering resales of the shares pursuant to a registration rights agreement with the sellers.

On May 12, 2017, the Company completed an underwritten public offering of 6,900,000 shares of common stock at a public offering price of $13.00 per share, which resulted in net proceeds after offering costs and commissions of $85.3 million.

On February 26, 2018, the Company commenced an at-the-market continuous equity offering program (the "2018 ATM Program") through which the Company may, from time to time, issue and sell shares of its common stock. Upon commencing the 2018 ATM Program, the Company simultaneously terminated the 2016 ATM Program. On August 6, 2019, the Company entered into amendments (the "Amendments") to the separate sales agreements related to the 2018 ATM Program, which, among other things, increased the aggregate offering price of shares of the Company’s common stock under the ATM Program from $125.0 million to $180.7 million. During the years ended December 31, 2019 and 2018, the Company issued and sold 5,871,519 and 4,617,409 shares of common stock at a weighted average price of $16.76 and $14.39 per share under the 2018 ATM Program, receiving net proceeds after offering costs and commissions of $97.0 million and $65.2 million, respectively.

On June 18, 2019, the Company issued 2,530,000 shares of its 6.75% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share ("Series A Preferred Stock"), with a liquidation preference of $25.00 per share, which included 330,000 shares issued upon the underwriters’ full exercise of their option to purchase additional shares. Net proceeds from the offering, after the underwriting discount but before offering expenses payable by the Company, were approximately $61.3 million. The Company used the net proceeds to fund a portion of the purchase price of Thames Street Wharf, a 263,426 square foot office building located in the Harbor Point neighborhood of Baltimore, Maryland. The balance of the net proceeds was used to repay a portion of the outstanding borrowings under the Company’s unsecured revolving credit facility and for general corporate purposes.

In connection with the issuance of the Series A Preferred Stock, on June 18, 2019, the Operating Partnership issued to the Company 2,530,000 6.75% Series A Cumulative Redeemable Perpetual Preferred Units (the "Series A Preferred Units"), which have economic terms that are identical to the Company’s Series A Preferred Stock. The Series A Preferred Units were issued in exchange for the Company’s contribution of the net proceeds from the offering of the Series A Preferred Stock to the Operating Partnership.

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 is 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:

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;

subject, in each case, 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.

Redeemable Noncontrolling Interests


The former noncontrolling interest holder of Johns Hopkins Village had an option to redeem the 20% noncontrolling interest in that entity. The noncontrolling interest of $2.0 million was included in temporary equity. On December 21, 2017, the Company redeemed the noncontrolling interest for a cash payment of $2.0 million and contingent future consideration of $0.5 million to be paid in Class A Units of the Operating Partnership upon the satisfaction of certain conditions. On April 17, 2018, the Operating Partnership issued 36,684 Class A Units valued at $13.77 per unit due to the satisfaction of these conditions.
 
Noncontrolling Interests
 
As of December 31, 20182019 and 2017,2018, the Company held a 72.6% and 74.5% and 72.0%common interest in the Operating Partnership, respectively. As of December 31, 2019, the Company also held a preferred interest in the Operating Partnership in the form of preferred units with a liquidation preference of $63.3 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 74.5%72.6% 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 Company represent units of limited partnership interest in the Operating Partnership not held by the Company. As of December 31, 2018,2019, there were 17,110,40421,272,962 Class A Units of limited partnership interest 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.


Additionally, the Operating Partnership owns a majority interest in certain non-wholly-owned operating and development properties. The noncontrolling interest for investment entities of $4.5 million relates to the minority partners' interest in certain joint venture entities as of December 31, 2019, including 1405 Point and Hoffler Place. The noncontrolling interest for the consolidated entities under development or construction (see Note 1) was zero as of December 31, 2018 and 2017.2018.


As partial consideration for Columbus Village, the Operating Partnership issued 1,000,000 class B units of limited partnership interest in the Operating Partnership ("Class B Units") on July 10, 2015 and issued 275,000 class C units of limited partnership interest in the Operating Partnership ("Class C Units") on January 10, 2017. The Class B Units were automatically converted to Class A Units on July 10, 2017. The Class C Units were automatically converted to Class A Units on January 10, 2018.

On January 10, 2017, the Operating Partnership issued 68,691 Class A Units to acquire the remaining 20% interest in the Town Center Phase VI project.


On October 2, 2017, due to the request of holders of Class A Units to tender an aggregate 358,879 Class A Units for redemption by the Operating Partnership, the Company elected to satisfy the redemption requests with an aggregate cash payment of $4.9 million.

On January 2, 2018, due to the holders of Class A Units tendering an aggregate of 163,000 Class A 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.


As partial consideration for the acquisition of Parkway Centre, the Operating Partnership issued 117,228 Class A Units on January 29, 2018.

On April 2, 2018, due to the holders of Class A Units tendering an aggregate of 187,142 Class A Units for redemption by the Operating Partnership, the Company elected to satisfy the redemption request with an aggregate cash payment of $2.5 million.


On April 17, 2018, the Operating Partnership issued 36,684 Class A Units to the former noncontrolling interest holder of John Hopkins Village due to the satisfaction of a contingent event that was part of the redemption of its redeemable noncontrolling interest in Johns Hopkins Village in December 2017.


On JulyJanuary 2, 2018,2019, due to the holders of Class A Units tendering an aggregate of 123,504118,471 Class A 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 May 23, 2019, the Operating Partnership issued 4,125,759 Class A Units valued at $68.1 million in connection with the acquisitions of Red Mill Commons and Marketplace at Hilltop.

On May 30, 2019, the Operating Partnership issued 60,000 Class A Units valued at $1.0 million in exchange for the remaining 35% ownership interest in Brooks Crossing Office, which was previously owned by Tidewater Partners.


On OctoberJuly 1, 2018,2019, due to the holders of Class A Units tendering an aggregate of 56,495125,118 Class A Units for redemption by the Operating Partnership, the Company elected to satisfy the redemption requests through the issuance of 52,200an equal number of shares of common stockstock.

On August 20, 2019, the Operating Partnership issued 40,864 Class A Units valued at $0.7 million due to the satisfaction of certain leasing requirements associated with the 2018 acquisition of Lexington Square.

On September 20, 2019, the Operating Partnership issued 73,666 Class A Units valued at $1.3 million upon the satisfaction of certain leasing and development requirements associated with the 2016 acquisition of Southgate Square.

On October 1, 2019, due to a cash paymentholder of $0.1 million.Class A Units tendering 4,896 Class A 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 December 16, 2019, the Operating Partnership issued additional 110,754 Class A Units valued at $2.1 million due to the satisfaction of certain leasing requirements associated with the 2018 acquisition of Lexington Square.

Holders of 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 Class A 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 unregistered or registered shares of common stock on a one-for-one1-for-one basis. Accordingly, the Company presents OP Units of the Operating Partnership not held by the Company as noncontrolling interests within equity in the consolidated balance sheets. 


Common Stock Dividends andClass AUnit Distributions
 
During the years ended December 31, 2019, 2018, 2017, and 2016,2017, the Company declared dividends per common share and distributions per unit of $0.84, $0.80, $0.76, and $0.72,$0.76, respectively. During the years ended December 31, 2019, 2018, and 2017, and 2016, the Company paid cashthese common stock dividends totalingtotaled $45.4 million, $38.7 million, and $31.1 million, respectively, and $22.7 million, respectively, to common stockholders, and thethese Operating Partnership paid cash distributions totalingtotaled $16.9 million, $13.8 million, and $12.6 million, and $11.1 million, respectively to holders of Class A Units.respectively.


The tax treatment of dividends paid to common stockholders during the years ended December 31, 2019, 2018, 2017, and 20162017 was as follows (unaudited):
 Years ended December 31,
 2019 2018 2017
Capital gains10.62% 9.49% 9.06%
Ordinary income68.83% 63.40% 71.59%
Return of capital20.55% 27.11% 19.35%
Total100.00% 100.0% 100.0%


 Years ended December 31,
 2018 2017 2016
Capital gains9.49% 9.06% —%
Ordinary income63.40% 71.59% 78%
Return of capital27.11% 19.35% 22%
Total100.00% 100.00% 100%
During the year ended December 31, 2019 the Company declared dividends of $0.970315 per share to holders of Series A Preferred Stock totaling $2.5 million. The Company did not have dividends for preferred shares during the years ended December 31, 2018 and 2017.


Subsequent to December 31, 20182019
 
On January 2, 2019, due to the holders of Class A Units tendering an aggregate of 118,471 Class A 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 January 3, 2019,2020, the Company paid cash dividends of $10.0$11.8 million to common stockholders and the Operating Partnership paid cash distributions of $3.4$4.5 million to holders of Class A Units. These dividends and distributions were declared and accrued as of December 31, 2018.2019.

On January 15, 2020, the Company paid cash dividends of $1.1 million to the holders of the Series A Preferred Stock. These dividends were declared and accrued as of December 31, 2019.


On February 20, 2020, the Company announced that its Board of Directors declared a cash dividend of $0.22 per common share for the first quarter of 2020. This represents a 4.8% increase over the prior quarter's cash dividend. The first quarter dividend will be payable in cash on April 2, 2020 to stockholders of record on March 25, 2020.

On February 20, 2020, the Company announced that its Board of Directors declared a cash dividend of $0.421875 per share of Series A Preferred Stock for the first quarter of 2020. The dividend will be payable in cash on April 15, 2020 to stockholders of record on April 1, 2020.

11.Stock-Based Compensation
 
The Company’s Amended and Restated 2013 Equity Incentive Plan (the "Equity Plan") permits the grant of restricted stock awards, stock options, stock appreciation rights, performance units, and other equity-based awards up to an aggregate of 1,700,000 shares of common stock. As of December 31, 2018,2019, the Company had 963,983890,990 shares of common stock reserved for issuance under the Equity Plan.
 
During the years ended December 31, 2019, 2018, 2017, and 2016,2017, the Company granted an aggregate of 154,030, 164,241 118,361 and 121,243118,361 shares of restricted stock to employees and nonemployee directors, respectively. The grant date fair value of the restricted stock awards granted during the years ended December 31, 2019, 2018, and 2017 and 2016 was $2.4 million, $2.2 million $1.7 million and $1.4$1.7 million, respectively. 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. Nonemployee director restricted stock awards 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 dividends from their grant date.
 
During the years ended December 31, 2019, 2018, 2017, and 2016,2017, the Company recognized $2.4 million, $2.0 million $1.5 million and $1.2$1.5 million of stock-based compensation, respectively. As of December 31, 2018,2019, the total unrecognized compensation cost related to nonvested restricted shares was $0.6$0.1 million, substantially all of which the Company expects to recognize over the next 15 months.

Compensation cost relating to stock-based compensation for the years ended December 31, 2019, 2018, and 2017 was recorded as follows (in thousands):
 Years Ended December 31, 
 2019 2018 2017
General and administrative expense$1,211
 $1,073
 $977
General contracting and real estate services expenses402
 213
 335
Capitalized in conjunction with development projects746
 661
 408
Total stock-based compensation cost$2,359
 $1,947
 $1,720



The following table summarizes the changes in the Company’s nonvested restricted stock awards during the year ended December 31, 2018:
2019:
 
Restricted Stock
Awards
 Weighted Average Grant Date Fair Value Per Share
Nonvested as of January 1, 2019125,229
 $13.68
Granted154,030
 15.43
Vested(134,346) 14.39
Forfeited(961) 14.24
Nonvested as of  December 31, 2019143,952
 $14.88
 
Restricted Stock
Awards
 Weighted Average Grant Date Fair Value Per Share
Nonvested as of January 1, 2018112,789
 $13.14
Granted164,241
 13.66
Vested(137,431) 13.22
Forfeited(14,370) 13.55
Nonvested as of  December 31, 2018125,229
 $13.68

 
Restricted stock awards granted and vested during the year ended December 31, 20182019 include 30,01619,245 shares tendered by employees to satisfy minimum statutory tax withholding obligations.



12.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—Inputs — quoted prices in active markets for identical assets or liabilities
 
Level 2 Inputs—Inputs — observable inputs other than quoted prices in active markets for identical assets and liabilities
 
Level 3 Inputs—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.
 
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, 20182019 and 20172018 were as follows (in thousands):
 December 31, 
 2019 2018
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
Indebtedness, net$950,537
 $958,421
 $694,239
 $688,437
Notes receivable159,371
 159,371
 138,683
 138,683
Interest rate swap liabilities7,720
 7,720
 2,474
 2,474
Interest rate swap and cap assets25
 25
 2,093
 2,093
 December 31, 
 2018 2017
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
Indebtedness, net$694,239
 $688,437
 $517,272
 $518,417
Notes receivable138,683
 138,683
 83,058
 83,058
Interest rate swap liabilities2,474
 2,474
 69
 69
Interest rate swap and cap assets2,093
 2,093
 1,525
 1,525

 

13.Income Taxes
 
The income tax benefit (provision) for the years ended December 31, 2019, 2018, 2017, and 20162017 comprised the following (in thousands):

 Years Ended December 31, 
 2019 2018 2017
Federal income taxes:           
Current$430
 $(14) $(516)
Deferred(20) 37
 (131)
State income taxes:     
Current85
 (1) (62)
Deferred(4) 7
 (16)
Income tax benefit (provision)$491
 $29
 $(725)
 Years Ended December 31, 
 2018 2017 2016
Federal income taxes:           
Current$(14) $(516) $(197)
Deferred37
 (131) (109)
State income taxes:     
Current(1) (62) (24)
Deferred7
 (16) (13)
Income tax benefit (provision)$29
 $(725) $(343)

 
The legislation commonly known as the Tax Cuts and Jobs Act (the "Tax Act") was enacted on December 22, 2017. The Tax Act reduced the U.S. federal corporate tax rate from 35% to 21% (including with respect to taxable REIT subsidiaries), resulting in the Company's remeasuring its existing deferred tax balances. In addition, generally beginning in 2018, the Tax Act alters the deductibility of certain items (e.g., interest expense) and allows the cost of certain qualifying capital asset investments to be deducted fully in the year they were purchased, subject to a phase-down of the deduction percentage over time. The provisional amounts recorded in the year ended December 31, 2017 related to the remeasurement of the deferred tax balance was approximately $0.2 million of tax expense. The

Company's accounting for the income tax effects of the Tax Act has been completed, and no further changes to the accounting were made.


As of December 31, 20182019 and 2017,2018, the Company had $0.4$0.9 million and $0.3$0.4 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 and stock-based compensation attributable toTRS. The deferred tax assets are presented within other assets in the TRS.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, 20182019 and 2017.2018. The Company is generally subject to examination by the applicable taxing authorities for the tax years 20152016 through 2018.2019. The Company does not currently have any ongoing tax examinations by taxing authorities.


14.Other Assets
 
Other assets were comprised of the following as of December 31, 20182019 and 20172018 (in thousands):
 
 December 31, 
 2019 2018
Leasing costs, net$11,357
 $10,881
Leasing incentives, net2,855
 3,592
Interest rate swaps and caps25
 2,093
Prepaid expenses and other12,192
 9,836
Preacquisition and predevelopment costs6,472
 1,214
Other assets$32,901
 $27,616
 December 31, 
 2018 2017
Acquired lease intangibles, net$29,182
 $29,881
Leasing costs, net10,881
 9,651
Leasing incentives, net3,592
 4,217
Interest rate swaps and caps2,093
 1,515
Prepaid expenses and other8,165
 8,937
Advance deposits on property acquisitions50
 400
Preacquisition development costs1,214
 1,352
Other assets$55,177
 $55,953

 

15.Other Liabilities
 
Other liabilities were comprised of the following as of December 31, 20182019 and 20172018 (in thousands):
 
 December 31, 
 2019 2018
Dividends and distributions payable$17,477
 $13,527
Deferred ground rent payable (a)
—
 9,287
Acquired lease intangibles, net21,300
 12,678
Prepaid rent and other8,604
 3,509
Security deposits2,673
 1,927
Interest rate swaps7,720
 2,475
Guarantee Liability5,271
 2,800
Other liabilities$63,045
 $46,203

 December 31, 
 2018 2017
Dividends and distributions payable$13,527
 $11,887
Deferred ground rent payable9,287
 8,732
Acquired lease intangibles, net12,678
 13,829
Prepaid rent and other6,309
 3,171
Security deposits1,927
 1,674
Interest rate swaps2,475
 59
Other liabilities$46,203
 $39,352
(a) Effective with the adoption of ASC 842 on January 1, 2019, deferred ground rent payable is included in operating lease right-of-use assets on the consolidated balance sheets.
 
16.Acquired Lease Intangibles
 
The following table summarizes the Company’s acquired lease intangibles as of December 31, 20182019 (in thousands):
 
December 31, 2018December 31, 2019
Gross Carrying Accumulated Net CarryingGross Carrying Accumulated Net Carrying
Amount Amortization  AmountAmount Amortization  Amount
In-place lease assets$57,689
 $32,370
 $25,319
$112,555
 $47,341
 $65,214
Above-market lease assets4,917
 2,676
 2,241
7,039
 3,551
 3,488
Below-market ground lease assets     
Below-market operating ground lease assets1,920
 352
 1,568
Below-market finance ground lease assets6,629
 102
 6,527
Below-market lease liabilities18,692
 6,014
 12,678
29,575
 8,275
 21,300
Below-market ground lease assets1,920
 299
 1,621
 
The following table summarizes the Company’s acquired lease intangibles as of December 31, 20172018 (in thousands):
 
 December 31, 2018
 Gross Carrying Accumulated Net Carrying
 Amount Amortization Amount
In-place lease assets$57,689
 $32,370
 $25,319
Above-market lease assets4,917
 2,676
 2,241
Below-market ground lease assets     
Below-market operating ground lease assets1,920
 299
 1,621
Below-market finance ground lease assets (a)
—
 —
 —
Below-market lease liabilities18,692
 6,014
 12,678

 December 31, 2017
 Gross Carrying Accumulated Net Carrying
 Amount Amortization Amount
In-place lease assets$50,506
 $25,193
 $25,313
Above-market lease assets4,817
 1,923
 2,894
Below-market lease liabilities18,089
 4,260
 13,829
Below-market ground lease assets1,920
 246
 1,674
(a) All of the Company's leases were classified as Operating Leases prior to 2019.
 
Amortization of in-place lease assets for
During the years ended December 31, 2019, 2018, and 2017, the Company recognized the following amortization of intangible lease assets and 2016 was $7.7 million, $9.7 million, and $10.2 million, respectively.liabilities (in thousands):

 Years Ended December 31, 
 2019 2018 2017
Intangible lease assets     
In-place lease assets$14,971
 $7,676
 $9,732
Above-market lease assets875
 753
 783
Below-market ground lease assets     
Amortization of below-market operating ground lease assets (a)
53
 53
 53
Amortization of below-market finance ground lease assets (a)(b)
102
 —
 —
Intangible lease liabilities     
Below-market lease liabilities2,261
 1,754
 1,762

(a) Prior to 2019, Amortization of above-market lease assets forBelow Market Ground Leases was included in Rental Expenses. With the years ended December 31, 2018, 2017, and 2016 was $0.8 million, $0.8 million, and $0.9 million, respectively.

adoption of ASC 842 on 1/1/2019, Amortization of below-market lease liabilities forbelow market ground rents became a component of the years ended December 31, 2018, 2017,amortization of the right-of-use assets of Operating and 2016 was $1.8 million, $1.8 million, and $1.8 million,Finance Leases, respectively.

(b) All of the Company's leases were classified as Operating Leases prior to 2019.
Amortization of below-market ground lease assets for the years ended December 31, 2018, 2017, and 2016 was $0.1 million, $0.1 million, and $0.1 million, respectively.


As of December 31, 2018,2019, the weighted-average remaining lives of in-place lease assets, above-market lease assets, below-market lease liabilities, below-market ground lease assets - operating and below-market ground lease assets - finance were 6.37.8 years, 5.65.2 years, 4.511.5 years, 29.5 years, and 30.541.2 years, respectively. As of December 31, 2018,2019, the weighted-average remaining life of below-market lease renewal options was 13.612.2 years.
 
Estimated amortization of acquired lease intangibles for each of the five succeeding years is as follows (in thousands):
 
   Depreciation and
 Rental Revenues Amortization
Year ending December 31,    
2020$1,522
 $12,360
20211,545
 9,858
20221,552
 8,312
20231,413
 6,823
20241,411
 5,609
     Depreciation and
 Rental Revenues Rental Expenses Amortization
Year ending December 31,      
2019$859
 $53
 $5,967
2020730
 53
 4,314
2021742
 53
 2,846
2022725
 53
 2,218
2023703
 53
 1,969

 
17.Related Party Transactions
 
The Companyprovides general contracting and real estate services to certain related party entities that are included in these consolidated financial statements. Revenue from construction contracts with related party entities of the Company was $5.7 million, $1.5 million $7.6 million and $26.7$7.6 million for the years ended December 31, 2019, 2018, 2017, and 2016,2017, respectively. Gross profits from such contracts were $0.2 million, $0.3 million $0.4 million and $1.0$0.4 million for the years ended December 31, 2019, 2018, and 2017, respectively. As of December 31, 2019 and 2016, respectively. There were no amounts2018, there was $1.9 million and $0.2 million, respectively, outstanding from related parties of the Company included in construction receivables as of December 31, 2018. As of December 31, 2017, there was $0.2 million outstanding from related parties of the Company included innet construction receivables. Real estate services fees from affiliated entities of the Company were not material for any of the years ended December 31, 2019, 2018, 2017, and 2016.2017. 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, 2019, 2018, 2017, and 2016.2017.

The general contracting services described above include contracts with an aggregate price of $79.3 million with the developer of a mixed-use project, including an apartment building, retail space, and a parking garage to be located in Virginia Beach, Virginia. The developer is owned in part by executives of the Company, not including the Chief Executive Officer and Chief Financial Officer. These contracts were executed in October and December 2019 and are projected to result in aggregate gross profit of $3.0 million to the Company, representing a gross profit margin of 4.0%. As part of these contracts and per the requirements of the lender for this project, the Company issued a letter of

credit for $9.5 million to secure certain performances of the Company's subsidiary construction company under the contracts, which remains outstanding as of December 31, 2019.
  

18.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 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 mezzanine lending activities, the Company has made guarantees to pay portions of certain senior loans of third parties associated with the development projects. The following table summarizes the payment guarantees made by the Company as of December 31, 20182019 (in thousands):
Development project Payment guarantee amount 
1405 Point $25,000
 
The Residences at Annapolis Junction 8,300
 
Delray Plaza 4,750
(a)
Nexton Square —
(b)
Interlock Commercial —
(c)
Solis Apartments at Interlock —
(d)
City Center 18,457
(e)
Total $56,507
 
    

(a) On January 8, 2019, the mezzanine loan and senior construction loan were modified, and the payment guarantee amount increased to $5.2 million.

 Payment guarantee amount
The Residences at Annapolis Junction $8,300
Delray Plaza 5,180
Nexton Square 12,600
Interlock Commercial 30,654
Total $56,734
(b) As of December 31, 2018, this payment guarantee was not yet effective because the senior construction loan had not yet been executed. On February 8, 2019, the senior construction loan was executed and the $12.6 million payment guarantee became effective. The Company has also guaranteed completion of the development project to the senior construction lender.
(c) As of December 31, 2018, this $30.7 million payment guarantee was not yet effective because the senior construction loan had not yet been executed. Once the senior construction loan is executed, the Company will also guarantee completion of the development project to the senior lender. The Company has also guaranteed completion of the development project to Georgia Tech, the ground lessor.
(d) There is no payment guarantee for the senior construction loan on this project. The Company has guaranteed completion of the development project to the senior lender.
(e) Durham City Center is accounted for as an equity method investment.


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 $34.8$4.3 million and $44.9$34.8 million as of December 31, 2019 and 2018, and 2017, respectively. In addition, as of December 31, 2019, the Company has issued a letter of credit for $9.5 million to secure certain performances of the Company's subsidiary construction company under a related party project.
 

The Operating Partnership has entered into standby letters of credit using the available capacity under the credit facility. The letters of credit relaterelated to the guarantee of future performance on certain of the Company’s construction contracts. Letters of credit generally are available for draw down in the event the Company does not perform. As of December 31, 2018 and 2017,2019, the Operating Partnership had totalan outstanding lettersletter of credit of $9.5 million, as noted above. As of December 31, 2018, the Operating Partnership had an outstanding letter of credit of $2.1 million and $2.1 million, respectively. The amounts outstanding at December 31, 2018 and 2017 include a $2.1 million letter of credit related to the guarantee on the Point Street Apartments senior construction loan.
 
The Company has six ground leases on five properties with initial terms that range from 20 to 65 years and options to extend up to an additional 70 years in certain cases. The Company also leases automobiles and equipment.
Future minimum rental payments for all operating leases during each of the next five years and thereafter are as follows (in thousands):
2019$2,127
20202,291
20212,368
20222,364
20232,403
Thereafter105,961
Total$117,514
Ground rent expense for the years ended December 31, 2018, 2017, and 2016 was $2.4 million, $2.5 million and $2.0 million, respectively.

Concentrations of Credit Risk
 
The majority of the Company’s properties are located in Hampton Roads, Virginia. For the years ended December 31, 2019, 2018, 2017, and 2016,2017, rental revenues from Hampton Roads properties represented 53%48%, 53% and 58%53%,  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, 2019, 2018, 2017, and 2016,2017, rental revenues from Town Center properties represented 42%31%, 38% and 41%38%, respectively, of the Company’s rental revenues.
 
A group of three construction customers comprised 55%67%, 41%55%, and 22%41% of the Company’s general contracting and real estate services revenues for the years ended December 31, 2019, 2018, 2017, and 2016,2017, respectively. The same customers represented 28%66%, 20%28%, and 19%20% of the Company’s general contracting and real estate services segment gross profit for the years ended December 31, 2019, 2018, 2017, and 2016,2017, respectively.



19.Selected Quarterly Financial Data (Unaudited)
 
The following tables summarize certain selected quarterly financial data for 20182019 and 20172018 (in thousands, except per share data):
 
2018 Quarters2019 Quarters
First Second Third FourthFirst Second Third Fourth
Rental revenues$28,699
 $28,598
 $28,930
 $30,731
$30,909
 $36,378
 $42,220
 $41,832
General contracting and real estate services revenues23,050
 20,654
 19,950
 12,705
17,036
 21,444
 27,638
 39,741
Net operating income20,098
 19,908
 19,964
 21,114
21,806
 26,333
 29,359
 28,869
Net income6,983
 5,945
 5,669
 4,895
6,514
 5,826
 12,063
 7,855
Net income attributable to stockholders5,040
 4,319
 4,202
 3,642
Net income per share: basic and diluted$0.11
 $0.09
 $0.09
 $0.07
Net income attributable to common stockholders4,884
 4,412
 7,079
 5,223
Net income attributable to common stockholders per share (basic and diluted)$0.10
 $0.08
 $0.13
 $0.09
 
 2018 Quarters
 First Second Third Fourth
Rental revenues$28,699
 $28,598
 $28,930
 $30,731
General contracting and real estate services revenues23,050
 20,654
 19,950
 12,705
Net operating income20,098
 19,908
 19,964
 21,114
Net income6,983
 5,945
 5,669
 4,895
Net income attributable to common stockholders5,040
 4,319
 4,202
 3,642
Net income attributable to common stockholders per share (basic and diluted)$0.11
 $0.09
 $0.09
 $0.07

 2017 Quarters
 First Second Third Fourth
Rental revenues$27,232
 $26,755
 $27,096
 $27,654
General contracting and real estate services revenues63,519
 56,671
 41,201
 32,643
Net operating income20,978
 20,645
 19,397
 19,211
Net income8,753
 4,943
 10,461
 5,768
Net income attributable to stockholders5,936
 3,471
 7,488
 4,152
Net income per share: basic and diluted$0.16
 $0.08
 $0.17
 $0.09







SCHEDULE III—Consolidated Real Estate Investments and Accumulated Depreciation
December 31, 20182019
 
  
Initial Cost Cost Capitalized Gross Carrying Amount  
  
  Year of
  
 
  
Initial Cost Cost Capitalized Gross Carrying Amount  
  
  Year of
  
 
  
  Building and Subsequent to   Building and   Accumulated
  
Net Carrying Construction/
  
 
  
  Building and Subsequent to   Building and   Accumulated
  
Net Carrying Construction/
  
Encumbrances
  
Land Improvements Acquisition Land Improvements Total Depreciation
  
Amount(1)
 Acquisition
  
Encumbrances
  
Land Improvements Acquisition Land Improvements Total Depreciation
  
Amount (1)
 Acquisition
  
Office 
     
             
     
   
  
 
     
             
     
   
  
4525 Main Street$32,034
  
$982
 $—
 $45,835
 $982
 $45,835
 $46,817
 $6,237
  
$40,580
 2014
  
$31,876
  
$982
 $—
 $46,282
 $982
 $46,282
 $47,264
 $8,097
  
$39,167
 2014
  
Armada Hoffler Tower—
(2) 
1,976
 —
 60,677
 1,976
 60,677
 62,653
 31,816
  
30,837
 2002
  
—
(2) 
1,976
 —
 63,304
 1,976
 63,304
 65,280
 34,237
  
31,043
 2002
  
Brooks Crossing Office6,910
 475
 —
 14,078
 475
 14,078
 14,553
 —
 14,553
 2016
 14,411
 295
 —
 19,709
 295
 19,709
 20,004
 462
 19,542
 2016
 
One City Center25,286
 2,911
 28,202
 4,632
 2,911
 32,834
 35,745
 661
 35,084
 2018/2019
 
One Columbus—
(2) 
960
 10,269
 10,606
 960
 20,875
 21,835
 11,110
  
10,725
 1984
  
—
(2) 
960
 10,269
 12,009
 960
 22,278
 23,238
 11,958
  
11,280
 1984
  
Thames Street Wharf70,000
 15,861
 64,689
 63
 15,861
 64,752
 80,613
 858
 79,755
 2010/2019
 
Two Columbus—
(2) 
53
 —
 19,926
 53
 19,926
 19,979
 7,911
  
12,068
 2009
  
—
(2) 
53
 —
 20,704
 53
 20,704
 20,757
 8,747
  
12,010
 2009
  
Wills Wharf—
 —
 —
 18,665
 —
 18,665
 18,665
 —
 18,665
 2018
 29,154
 —
 —
 84,119
 —
 84,119
 84,119
 —
 84,119
 2019
(4) 
Total office$38,944
  
$4,446
 $10,269
 $169,787
 $4,446
 $180,056
 $184,502
 $57,074
  
$127,428
  
  
$170,727
 $23,038
 $103,160
 $250,822
 $23,038
 $353,982
 $377,020
 $65,020
  
$312,000
  
  
Retail 
  
             
  
   
  
               
  
   
  
249 Central Park Retail$17,045
  
$712
 $—
 $15,341
 $712
 $15,341
 $16,053
 $8,798
  
$7,255
 2004
  
$16,828
 $712
 $—
 $15,703
 $712
 $15,703
 $16,415
 $9,406
  
$7,009
 2004
  
Alexander Pointe—
(2) 
4,050
 4,880
 91
 4,050
 4,971
 9,021
 705
 8,316
 1997/2016
 —
(2) 
4,050
 4,880
 149
 4,050
 5,029
 9,079
 950
 8,129
 1997/2016
 
Apex Entertainment (Dick's)—
(2) 
67
 —
 10,596
 67
 10,596
 10,663
 4,778
  
5,885
 2002
 
Bermuda Crossroads—
(2) 
5,450
 10,641
 1,195
 5,450
 11,836
 17,286
 2,555
  
14,731
 2001/2013
  
—
(2) 
5,450
 10,641
 1,431
 5,450
 12,072
 17,522
 2,951
  
14,571
 2001/2013
  
Broad Creek Shopping Center—
(2) 
—
 —
 8,987
 —
 8,987
 8,987
 4,035
  
4,952
 1997-2001
  
—
(2) 
—
 —
 9,135
 —
 9,135
 9,135
 4,327
  
4,808
 1997-2001
  
Broadmoor Plaza—
(2) 
2,410
 9,010
 843
 2,410
 9,853
 12,263
 1,340
 10,923
 1980/2016
 —
(2) 
2,410
 9,010
 966
 2,410
 9,976
 12,386
 1,843
 10,543
 1980/2016
 
Brooks Crossing Retail—
 117
 —
 2,328
 117
 2,328
 2,445
 155
 2,290
 2016
 —
 359
 —
 2,334
 359
 2,334
 2,693
 229
 2,464
 2016
 
Columbus Village—
(2) 
7,631
 10,135
 877
 7,631
 11,012
 18,643
 2,091
  
16,552
 1980/2015
  
—
(2) 
7,631
 10,135
 7,028
 7,631
 17,163
 24,794
 2,512
  
22,282
 1980/2015
  
Columbus Village II—
(2) 
14,536
 10,922
 50
 14,536
 10,972
 25,508
 939
 24,569
 1995/2016
 —
(2) 
14,536
 10,922
 64
 14,536
 10,986
 25,522
 1,364
 24,158
 1995/2016
 
Commerce Street Retail—
(2) 
118
 —
 3,242
 118
 3,242
 3,360
 1,514
  
1,846
 2008
  
—
(2) 
118
 —
 3,307
 118
 3,307
 3,425
 1,697
  
1,728
 2008
  
Courthouse 7-Eleven—
(2) 
1,007
 —
 1,043
 1,007
 1,043
 2,050
 190
  
1,860
 2011
  
—
(2) 
1,007
 —
 1,044
 1,007
 1,044
 2,051
 217
  
1,834
 2011
  
Dick’s at Town Center—
(2) 
67
 —
 10,585
 67
 10,585
 10,652
 4,337
  
6,315
 2002
  
Dimmock Square—
(2) 
5,100
 13,126
 260
 5,100
 13,386
 18,486
 1,639
  
16,847
 1998/2014
  
—
(2) 
5,100
 13,126
 314
 5,100
 13,440
 18,540
 2,034
  
16,506
 1998/2014
  
Fountain Plaza Retail10,257
  
425
 —
 7,206
 425
 7,206
 7,631
 3,363
  
4,268
 2004
  
10,127
 425
 —
 7,251
 425
 7,251
 7,676
 3,585
  
4,091
 2004
  
Gainsborough Square—
(2) 
2,229
 —
 7,450
 2,229
 7,450
 9,679
 3,422
  
6,257
 1999
  
—
(2) 
2,229
 —
 7,590
 2,229
 7,590
 9,819
 3,662
  
6,157
 1999
  
Greentree Shopping Center—
(2) 
1,103
 —
 4,032
 1,103
 4,032
 5,135
 700
  
4,435
 2014
  
—
(2) 
1,103
 —
 4,036
 1,103
 4,036
 5,139
 888
  
4,251
 2014
  
Hanbury Village19,019
(2) 
3,793
 —
 19,464
 3,793
 19,464
 23,257
 6,920
  
16,337
 2006
  
18,515
(3) 
3,793
 —
 19,579
 3,793
 19,579
 23,372
 7,486
  
15,886
 2006
  
Harper Hill Commons—
(2) 
2,840
 8,510
 160
 2,840
 8,670
 11,510
 924
 10,586
 2004/2016
 —
(2) 
2,840
 8,510
 263
 2,840
 8,773
 11,613
 1,169
 10,444
 2004/2016
 
Harrisonburg Regal—
  
1,554
 —
 4,148
 1,554
 4,148
 5,702
 2,097
  
3,605
 1999
  
—
 1,554
 —
 4,148
 1,554
 4,148
 5,702
 2,203
  
3,499
 1999
  
Indian Lakes Crossing—
(2) 
7,009
 2,274
 7
 7,009
 2,281
 9,290
 84
 9,206
 2008/2018
 —
(2) 
7,009
 2,274
 30
 7,009
 2,304
 9,313
 171
 9,142
 2008/2018
 
Lexington Square14,696
 3,035
 20,581
 110
 3,035
 20,691
 23,726
 915
 22,811
 2017/2018
 
Market at Mill Creek7,283
 2,945
 —
 16,413
 2,945
 16,413
 19,358
 —
 19,358
 2018
 14,727
 2,243
 —
 20,386
 2,243
 20,386
 22,629
 415
 22,214
 2018
 
Lexington Square14,940
 3,035
 17,786
 —
 3,035
 17,786
 20,821
 265
 20,556
 2017/2018
 
Lightfoot Marketplace10,500
  
7,628
 —
 17,502
 7,628
 17,502
 25,130
 1,376
 23,754
 2016
 
North Hampton Market—
(2) 
7,250
 10,210
 442
 7,250
 10,652
 17,902
 1,461
 16,441
 2004/2016
 
North Point Center11,698
(2) 
1,936
 —
 25,553
 1,936
 25,553
 27,489
 13,527
  
13,962
 1998
  
Marketplace at Hilltop10,517
 2,023
 19,886
 35
 2,023
 19,921
 21,944
 388
 21,556
 2000/2019
 

North Hampton Market—
(2) 
7,250
 10,210
 602
 7,250
 10,812
 18,062
 1,811
 16,251
 2004/2016
 
North Point Center2,214
(3) 
1,936
 —
 25,716
 1,936
 25,716
 27,652
 14,353
  
13,299
 1998
  
Oakland Marketplace—
(2) 
1,850
 3,370
 617
 1,850
 3,987
 5,837
 744
 5,093
 2004/2016
 —
(2) 
1,850
 3,370
 690
 1,850
 4,060
 5,910
 932
 4,978
 2004/2016
 
Parkway Centre—
(2) 
1,372
 7,864
 105
 1,372
 7,969
 9,341
 470
 8,871
 2017/2018
 
Parkway Marketplace—
(2) 
1,150
 —
 3,767
 1,150
 3,767
 4,917
 1,888
  
3,029
 1998
  
—
(2) 
1,150
 —
 3,832
 1,150
 3,832
 4,982
 2,010
  
2,972
 1998
 
Parkway Centre—
(2) 
1,372
 7,864
 —
 1,372
 7,864
 9,236
 234
 9,002
 2017/2018
 
Patterson Place—
(2) 
15,059
 20,180
 411
 15,059
 20,591
 35,650
 2,065
 33,585
 2004/2016
 —
(2) 
15,059
 20,180
 631
 15,059
 20,811
 35,870
 2,638
 33,232
 2004/2016
 
Perry Hall Marketplace—
(2) 
3,240
 8,316
 415
 3,240
 8,731
 11,971
 1,212
  
10,759
 2001/2015
  
—
(2) 
3,240
 8,316
 424
 3,240
 8,740
 11,980
 1,555
  
10,425
 2001/2015
  
Premier Retail6,219
 965
 —
 10,877
 965
 10,877
 11,842
 132
 11,710
 2018
 8,250
 318
 —
 14,216
 318
 14,216
 14,534
 434
 14,100
 2018
 
Providence Plaza—
(2) 
9,950
 12,369
 1,072
 9,950
 13,441
 23,391
 1,397
  
21,994
 2007/2015
  
—
(2) 
9,950
 12,369
 1,454
 9,950
 13,823
 23,773
 1,904
  
21,869
 2007/2015
  
Red Mill Commons24,365
(3) 
44,252
 30,348
 98
 44,252
 30,446
 74,698
 921
 73,777
 2000/2019
 
Renaissance Square—
(2) 
6,730
 8,439
 155
 6,730
 8,594
 15,324
 625
 14,699
 2008/2016
 —
(2) 
6,730
 8,439
 186
 6,730
 8,625
 15,355
 927
 14,428
 2008/2016
 
Sandbridge Commons8,258
 4,825
 —
 7,294
 4,825
 7,294
 12,119
 1,168
  
10,951
 2015
  
8,020
 4,825
 —
 7,332
 4,825
 7,332
 12,157
 1,500
  
10,657
 2015
  
Socastee Commons4,671
 2,320
 5,380
 134
 2,320
 5,514
 7,834
 735
  
7,099
 2000/2015
  
4,567
 2,320
 5,380
 147
 2,320
 5,527
 7,847
 940
  
6,907
 2000/2015
  
South Retail7,483
 190
 —
 7,867
 190
 7,867
 8,057
 4,225
  
3,832
 2002
  
7,388
 190
 —
 8,123
 190
 8,123
 8,313
 4,527
  
3,786
 2002
  
South Square—
(2) 
14,130
 12,670
 391
 14,130
 13,061
 27,191
 1,450
 25,741
 1977/2016
 —
(2) 
14,130
 12,670
 757
 14,130
 13,427
 27,557
 1,966
 25,591
 1977/2016
 
Southgate Square21,442
 8,890
 25,950
 496
 8,890
 26,446
 35,336
 2,325
 33,011
 1991/2016
 20,562
 10,238
 25,950
 4,352
 10,238
 30,302
 40,540
 3,257
 37,283
 1991/2016
 
Southshore Shops—
(2) 
1,770
 6,509
 50
 1,770
 6,559
 8,329
 496
 7,833
 2006/2016
 —
(2) 
1,770
 6,509
 84
 1,770
 6,593
 8,363
 710
 7,653
 2006/2016
 
Stone House Square—
(2) 
6,360
 16,350
 319
 6,360
 16,669
 23,029
 2,131
  
20,898
 2008/2015
  
—
(2) 
6,360
 16,350
 561
 6,360
 16,911
 23,271
 2,735
  
20,536
 2008/2015
  
Studio 56 Retail—
(2) 
76
 —
 2,477
 76
 2,477
 2,553
 913
  
1,640
 2007
  
—
(2) 
76
 —
 2,532
 76
 2,532
 2,608
 994
  
1,614
 2007
  
Tyre Neck Harris Teeter—
(2) 
—
 —
 3,306
 —
 3,306
 3,306
 1,089
  
2,217
 2011
  
—
(2) 
—
 —
 3,306
 —
 3,306
 3,306
 1,255
  
2,051
 2011
  
Wendover Village—
(2) 
18,260
 21,700
 128
 18,260
 21,828
 40,088
 1,813
 38,275
 2004/2016-2017
 —
(2) 
19,893
 22,638
 429
 19,893
 23,067
 42,960
 2,451
 40,509
 2004/2016-2019
 
Total retail$138,815
 $180,082
 $246,591
 $186,995
 $180,082
 $433,586
 $613,668
 $87,079
  
$526,589
  
  
$160,776
 $220,603
 $300,558
 $191,076
 $220,603
 $491,634
 $712,237
 $101,480
  
$610,757
  
 
Multifamily                                                    
                                                     
 
1405 Point$53,000
 $—
 $95,466
 $2,106
 $—
 $97,572
 $97,572
 $2,109
 $95,463
 2018/2019
 
Encore Apartments$24,966
 $1,293
 $—
 $30,258
 $1,293
 $30,258
 $31,551
 $4,088
 $27,463
 2014
 24,842
 1,293
 —
 30,322
 1,293
 30,322
 31,615
 5,144
 26,471
 2014
 
Greenside (Harding Place)25,902
 5,711
 —
 43,782
 5,711
 43,782
 49,493
 388
 49,105
 2014
(3) 
Hoffler Place (King Street)11,445
 7,277
 —
 27,136
 7,277
 27,136
 34,413
 —
 34,413
 —
(3)
Greenside Apartments34,000
 5,711
 —
 45,012
 5,711
 45,012
 50,723
 1,822
 48,901
 2018
 
Hoffler Place29,059
 7,401
 —
 39,758
 7,401
 39,758
 47,159
 486
 46,673
 2019
 
Johns Hopkins Village52,708
 —
 —
 69,717
 —
 69,717
 69,717
 5,381

64,336
 2016
 51,800
 —
 —
 69,931
 —
 69,931
 69,931
 7,711

62,220
 2016
 
Liberty Apartments14,437
 3,580
 23,494
 1,581
 3,580
 25,075
 28,655
 4,361
 24,294
 2013/2014
 14,165
 3,580
 23,494
 1,883
 3,580
 25,377
 28,957
 5,146
 23,811
 2013/2014
 
Premier Apartments12,995
 —
 —
 29,189
 —
 29,189
 29,189
 292
 28,897
 2018
 16,750
 647
 —
 29,139
 647
 29,139
 29,786
 1,171
 28,615
 2018
 
Summit Place (Meeting Street)11,057
 7,265
 —
 27,722
 7,265
 27,722
 34,987
 —
 34,987
 —
(3) 
Smith’s Landing18,985
 —
 35,105
 1,962
 —
 37,067
 37,067
 6,851
 30,216
 2009/2013
 18,174
 —
 35,105
 2,418
 —
 37,523
 37,523
 8,002
 29,521
 2009/2013
 
Summit Place28,824
 7,265
 —
 43,674
 7,265
 43,674
 50,939
 —
 50,939
 —
(4) 
The Cosmopolitan44,468
 985
 —
 59,365
 985
 59,365
 60,350
 23,261
 37,089
 2006
 43,702
 985
 —
 66,877
 985
 66,877
 67,862
 26,647
 41,215
 2006
 
Total multifamily$216,963
 $26,111
 $58,599
 $290,712
 $26,111
 $349,311
 $375,422
 $44,622
 $330,800
  
 $314,316
 $26,882
 $154,065
 $331,120
 $26,882
 $485,185
 $512,067
 $58,238
 $453,829
  
 
Held for development$—
 $2,994
 $—
 $—
 $2,994
 $—
 $2,994
 $—
 $2,994
  
 $—
 $5,000
 $—
 $—
 $5,000
 $—
 $5,000
 $—
 $5,000
  
 
Real estate investments$394,722
 $213,633
 $315,459
 $647,494
 $213,633
 $962,953
 $1,176,586
 $188,775
 $987,811
  
 $645,819
 $275,523
 $557,783
 $773,018
 $275,523
 $1,330,801
 $1,606,324
 $224,738
 $1,381,586
  
 


(1)The net carrying amount of real estate for federal income tax purposes was $868.3$1,122.8 million as of December 31, 2018.2019.  
(2)Borrowing base collateral for the credit facility as of December 31, 2018.2019.  
(3)A portion of this property is borrowing base collateral for the credit facility as of December 31, 2019.
(4)
Construction in progress as of December 31, 2018.  2019.  

Income producing property is depreciated on a straight-line basis over the following estimated useful lives:
 
Buildings39 years
Capital improvements5—20 years
Equipment3—7 years
Tenant improvementsTerm of the related lease
 (or estimated useful life, if shorter)
 
 Real Estate Accumulated
 Investments Depreciation
 December 31, 
 2019 2018 2019 2018
Balance at beginning of the year$1,176,586
 $994,437
 $188,775
 $164,521
Construction costs and improvements143,700
 144,926
 —
 —
Acquisitions314,898
 51,613
 —
 —
Dispositions(28,117) (11,420) (1,818) (5,559)
Reclassifications(743) (2,970) (58) (582)
Depreciation—
 —
 37,839
 30,395
Balance at end of the year$1,606,324
 $1,176,586
 $224,738
 $188,775

 Real Estate Accumulated
 Investments Depreciation
 December 31, 
 2018 2017 2018 2017
Balance at beginning of the year$994,437
 $908,287
 $164,521
 $139,553
Construction costs and improvements144,926
 84,142
 —
 —
Acquisitions51,613
 12,760
 —
 —
Dispositions(11,420) (10,146) (5,559) (1,006)
Reclassifications(2,970) (606) (582) —
Depreciation—
 —
 30,395
 25,974
Balance at end of the year$1,176,586
 $994,437
 $188,775
 $164,521




F-48F-52