Investments in Real Estate Joint Ventures (Predecessor)

3 Months Ended

Mar. 31, 2013

Predecessor

Investments in Real Estate Joint Ventures

9. Investments in Real Estate Joint Ventures

As of March 31, 2013 and December 31, 2012, Armada Hoffler held indirect non-controlling investments in real estate joint ventures that own the following properties:

Property	Type	Location	Ownership %
Bermuda Crossroads	Retail	Chester, VA	50.0%
Smith’s Landing	Multifamily	Blacksburg, VA	40.0%

Armada Hoffler’s indirect ownership interests in both Bermuda Crossroads and Smith’s Landing do not provide control over these entities. However, they do provide significant influence. As a result, Armada Hoffler accounts for these investments under the equity method of accounting.

As of March 31, 2013 and December 31, 2012, the carrying amount of Armada Hoffler’s investment in Bermuda Crossroads was not significant. Income from Bermuda Crossroads for the three months ended March 31, 2013 and 2012 was not significant. Income from Bermuda Crossroads represents distributions received in excess of the carrying amount of Armada Hoffler’s investment.

Liabilities for cumulative distributions in excess of cumulative investments in and earnings from equity method investees are only recognized to the extent that Armada Hoffler has guaranteed obligations of the investee. Armada Hoffler has guaranteed certain obligations of Smith’s Landing and, as a result, the carrying amount of Armada Hoffler’s investment in Smith’s Landing was $(0.7) million as of both March 31, 2013 and December 31, 2012. These amounts are presented within other liabilities in the combined balance sheets. Equity in the earnings (losses) of Smith’s Landing was $0.1 million for both the three months ended March 31, 2013 and 2012.

As discussed in Note 1, the Company completed the IPO and Formation transactions in May 2013, pursuant to which it acquired 100% of the interests in Bermuda Crossroads and Smith’s Landing. The fair value of the net assets acquired in Bermuda Crossroads was approximately $6.1 million, including $11.1 million of assumed debt. The consideration paid for the 50% interest in Bermuda Crossroads was approximately $3.0 million. The fair value of the net assets acquired in Smith’s Landing was approximately $12.5 million, including $25.0 million of assumed debt. The consideration paid for the 60.0% interest in Smith’s Landing was approximately $7.4 million.

Prior to the acquisition date, the Predecessor accounted for its 50% interest in Bermuda Crossroads and 40% interest in Smith’s Landing as equity method investments. The acquisition-date fair value of the previous equity interests in Bermuda Crossroads and Smith’s Landing was approximately $3.0 million and $5.0 million, respectively. The Company recognized a gain of $8.7 million as a result of remeasuring the Predecessor’s prior equity interests in Bermuda Crossroads and Smith’s Landing held before the business combination. The gain will be presented within other income (expense) in the Company’s consolidated statement of income.