Indebtedness

12 Months Ended

Dec. 31, 2014

Debt Disclosure [Abstract]

Indebtedness

7. Indebtedness

The Company’s indebtedness comprised the following as of December 31, 2014 and 2013 (dollars in thousands):

	Principal Balance					Stated Interest Rate	Stated Maturity Date
	December 31,					December 31,
Secured Debt	2014			2013		2014	2014
Credit facility	$	59,000		$	70,000	LIBOR + 1.60% - 2.20%	May 13, 2016
Oyster Point		6,274			6,466	5.41%	December 1, 2015
249 Central Park Retail(1)		15,566			15,834	5.99%	September 8, 2016
South Retail		6,867			6,985	5.99%	September 8, 2016
Studio 56 Retail		2,618			2,690	3.75%	May 7, 2015
Commerce Street Retail		5,549			5,613	LIBOR + 2.25%	October 31, 2018
Fountain Plaza Retail(1)		7,783			7,917	5.99%	September 8, 2016
Dick’s at Town Center		8,216			8,318	LIBOR + 2.75%	October 31, 2017
Broad Creek Shopping Center
Note 1(2)		4,452			4,503	LIBOR + 2.25%	October 31, 2018
Note 2(2)		8,173			8,267	LIBOR + 2.25%	October 31, 2018
Note 3(2)		3,422			3,461	LIBOR + 2.25%	October 31, 2018
North Point Center
Note 1		10,149			10,319	6.45%	February 5, 2019
Note 2		2,753			2,830	7.25%	September 15, 2025
Note 4		—			1,030	—	—
Note 5(3)		685			705	LIBOR + 2.00%	February 1, 2017
Hanbury Village
Note 1		21,218			21,449	6.67%	October 11, 2017
Note 2		4,090			4,159	LIBOR + 2.25%	October 31, 2018
Harrisonburg Regal		3,659			3,842	6.06%	June 8, 2017
Tyre Neck Harris Teeter		2,437			2,482	LIBOR + 2.25%	October 31, 2018
The Cosmopolitan		47,132			47,723	3.75%	July 1, 2051
Smith’s Landing(4)		24,470			24,795	LIBOR + 2.15%	January 31, 2017
Liberty Apartments(4)		20,603			—	5.66%	November 1, 2043
4525 Main Street		30,870			11,313	LIBOR + 1.95%	January 30, 2017
Encore Apartments		22,215			3,585	LIBOR + 1.95%	January 30, 2017
Whetstone Apartments		16,019			284	LIBOR + 1.90%	October 8, 2016
Sandbridge Commons		5,892			3,172	LIBOR + 1.85%	January 17, 2018
Oceaneering		13,490			—	LIBOR + 1.75%	February 28, 2018
Commonwealth of Virginia – Chesapeake		3,585			—	LIBOR + 1.90%	August 28, 2017
Lightfoot Marketplace		3,484			—	LIBOR + 1.90%	November 14, 2017
Total principal balance	$	360,671		$	277,742
Unamortized fair value adjustments		(1,442	)		3
Indebtedness	$	359,229		$	277,745

(1) Cross collateralized.

(2) Cross collateralized.

(3) Subject to an interest rate swap lock at a rate of 3.57%.

(4) Principal balance excluding fair value adjustments.

The Company’s indebtedness comprised the following fixed and variable-rate debt as of December 31, 2014 and 2013 (in thousands):

	December 31,
	2014		2013
Fixed-rate secured debt	$	144,622	$	127,085
Variable-rate secured debt		216,049		150,657
Total principal balance	$	360,671	$	277,742

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, 2014, the Company was in compliance with all loan covenants.

Scheduled principal repayments and term-loan maturities during each of the next five years and thereafter are as follows (in thousands):

Year	Scheduled Principal Payments		Term- Loan Maturities		Total Payments
2015	$	3,222	$	8,681	$	11,903
2016		3,499		104,300		107,799
2017		2,775		116,141		118,916
2018		1,808		44,674		46,482
2019		1,216		9,333		10,549
Thereafter		63,678		1,344		65,022
Total	$	76,198	$	284,473	$	360,671

Credit Facility

On May 13, 2013, the Operating Partnership, as borrower, and the Company, as parent guarantor, entered into a $100.0 million senior secured revolving credit facility. On October 10, 2013, the Operating Partnership increased the aggregate capacity under the credit facility to $155.0 million. As of December 31, 2013, the Operating Partnership had $70.0 million outstanding under the credit facility. During the year ended December 31, 2014, the Operating Partnership borrowed $38.0 million under the credit facility. On September 15, 2014, the Operating Partnership used the proceeds from the Company’s underwritten public offering of common stock to repay $49.0 million of the outstanding balance under the credit facility that had been used to fund the Company’s development activities. As of December 31, 2014, the Operating Partnership had $59.0 million outstanding on the credit facility.

As of December 31, 2014, the following properties served as the borrowing base collateral for the credit facility: (i) Armada Hoffler Tower, (ii) Richmond Tower, (iii) One Columbus, (iv) Two Columbus, (v) Sentara Williamsburg, (vi) Bermuda Crossroads, (vii) a portion of North Point Center, (viii) Gainsborough Square, (ix) Parkway Marketplace and (x) Courthouse 7-Eleven.

The credit facility required the Operating Partnership to comply with various financial covenants, including:

• Maximum leverage ratio (as amended on April 22, 2014) of 65% as of the last day of each fiscal quarter through maturity;

• Minimum fixed charge coverage ratio of 1.75 to 1.0;

• Minimum tangible net worth equal to at least the sum of 80% of tangible net worth on the closing date of the credit facility plus 75% of the net proceeds of any additional equity issuances;

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

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

The credit facility permitted investments in the following types of assets: (i) unimproved land holdings in an aggregate amount not exceeding 5% of total asset value, (ii) construction in progress in an aggregate amount not exceeding 25% of total asset value and (iii) unconsolidated affiliates in aggregate amount not exceeding 5% of total asset value. Investments in these types of assets collectively could not exceed 30% of total asset value. In addition to these financial covenants, the credit facility required the Operating Partnership to comply with various customary affirmative and negative covenants that restricted the ability to, among other things, incur debt and liens, make investments, dispose of properties and make distributions. As of December 31, 2014, the Operating Partnership was in compliance with all covenants under the credit facility.

The credit facility bore interest between LIBOR plus 1.60% and LIBOR plus 2.20%. The interest rate on the credit facility as of December 31, 2014 was 1.92%.

Subsequent to December 31, 2014

On January 23, 2015, the Operating Partnership borrowed an additional $5.0 million under the credit facility. The credit facility was scheduled to mature on May 13, 2016; however, the Operating Partnership repaid all amounts due under the credit facility with proceeds from a new credit facility and terminated the existing credit facility on February 20, 2015, as discussed below.

New Credit Facility

On February 20, 2015, the Operating Partnership, as borrower, and the Company as parent guarantor, agreed to a new $200.0 million senior unsecured credit facility that includes a $150.0 million senior unsecured revolving credit facility and a $50.0 million senior unsecured term loan facility. The new credit facility replaced the existing $155.0 million senior secured revolving credit facility that was scheduled to mature on May 13, 2016. On February 20, 2015, the Operating Partnership borrowed $54.0 million under the revolving credit facility and $50.0 million under the term loan facility to repay in full all outstanding amounts due under the prior credit facility and to repay approximately $39.0 million of other indebtedness secured by properties in the Company’s portfolio for the purpose of unencumbering those properties.

The new credit facility includes an accordion feature that allows the total commitments to be increased to $350.0 million, subject to certain conditions. The amount permitted to be borrowed under the new credit facility, together with all of the Operating Partnership’s other unsecured indebtedness is generally limited to the lesser of: (i) 60% of the value of the unencumbered borrowing base properties, (ii) the maximum amount of principal that would result in a debt service coverage ratio of 1.50 to 1.0, and (iii) the maximum aggregate loan commitment, which currently is $200.0 million.

The new revolving credit facility has a scheduled maturity date of February 20, 2019, with a one-year extension option. The term loan facility has a scheduled maturity date of February 20, 2020. The Operating Partnership may, at any time, voluntarily prepay any loan under the new credit facility in whole or in part without premium or penalty.

The new revolving credit facility bears interest at LIBOR plus 1.40% to 2.00%, depending on the Operating Partnership’s total leverage. The term loan facility bears interest at LIBOR plus 1.35% to 1.95%, depending on the Operating Partnership’s total leverage. The Operating Partnership is also obligated to pay an unused commitment fee of 15 or 25 basis points on the unused portions of the commitments under the new credit facility, depending on the amount of borrowings under the new credit facility. 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 new credit facility requires the Operating Partnership to comply with various financial covenants, affirmative covenants and other restrictions, including the following:

• Total leverage ratio of the Company of not more than 60%;

• Ratio of adjusted EBITDA to fixed charges of the Company of not less than 1.50 to 1.0;

• Tangible net worth of not less than the sum of $220.0 million and 75% of the net equity proceeds received after December 31, 2014;

• Ratio of variable rate indebtedness to total asset value of not more than 30%;

• Ratio of secured indebtedness to total asset value of not more than 45%; and

• Ratio of secured recourse debt to total asset value of not more than 25%.

The new credit facility limits the Company’s ability to pay cash dividends. However, so long as no default or event of default exists, the credit agreement allows the Company 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 the Company (a) to maintain its status as a REIT and (b) to avoid income or excise tax. If certain defaults or events of default exist, the Company may pay cash dividends with respect to any 12-month period to the extent necessary to maintain its status as a REIT. The new credit facility also restricts the amount of capital that the Operating Partnership can invest in specific categories of assets, such as unimproved land holdings, development properties, notes receivable, mortgages, mezzanine loans and unconsolidated affiliates.

Other Financing Activity

On January 17, 2014, the Company assumed $17.0 million of debt at fair value in connection with the acquisition of Liberty Apartments. The fair value adjustment to the assumed debt of Liberty Apartments was a $1.5 million discount. The outstanding principal balance of the assumed debt of Liberty Apartments at the acquisition date was $18.5 million. On June 13, 2014, the Company borrowed the remaining $2.4 million available under the Liberty Apartments loan. The loan amortizes over 30 years, bears interest at 5.66% and matures on November 1, 2043.

On February 28, 2014, the Company closed on a $19.5 million loan to fund the development and construction of the Oceaneering International facility. The construction loan bears interest at LIBOR plus 1.75% and matures on February 28, 2018.

On August 15, 2014, the Company defeased the loan secured by Dimmock Square for $10.1 million.

On August 28, 2014, the Company closed on a $5.4 million loan to fund the development and construction of a new administrative building for the Commonwealth of Virginia. The construction loan bears interest at LIBOR plus 1.90% and matures on August 28, 2017.

On November 3, 2014, the Company repaid North Point Center Note 4 for $1.0 million.

On November 14, 2014, the Company closed on a $15.0 million loan to fund the development and construction of Lightfoot Marketplace. The construction loan bears interest at LIBOR plus 1.90% and matures on November 14, 2017.

Subsequent to December 31, 2014

On February 20, 2015, the Company repaid the following loans with borrowings under the Operating Partnership’s new credit facility: (i) Studio 56 Retail, (ii) Commerce Street Retail, (iii) Dick’s at Town Center, (iv) Broad Creek Shopping Center Note 1, (v) Broad Creek Shopping Center Note 2, (vi) Broad Creek Shopping Center Note 3, (vii) Hanbury Village Note 2 and (viii) Tyre Neck Harris Teeter.