Real Estate Investments and Equity Method Investments

The Company’s real estate investments comprised the following as of December 31, 2017 and 2016 (in thousands):



	December 31, 2017
	Income producing property		Held for development		Construction in progress		Total
Land	$	175,885	$	680	$	21,212	$	197,777
Land improvements	44,681		—		—		44,681
Buildings and improvements	690,120		—		—		690,120
Development and construction costs	—		—		61,859		61,859
Real estate investments	$	910,686	$	680	$	83,071	$	994,437



	December 31, 2016
	Income producing property		Held for development		Construction in progress		Total
Land	$	171,733	$	680	$	6,880	$	179,293
Land improvements	45,052		—		—		45,052
Buildings and improvements	677,293		—		—		677,293
Development and construction costs	—		—		6,649		6,649
Real estate investments	$	894,078	$	680	$	13,529	$	908,287

2017 Operating Property Acquisition

On July 25, 2017, the Company acquired the 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 improvements	232
Building and improvements	6,977
In-place leases	1,382
Above-market leases	327
Below-market leases	(50		)
Net assets acquired	$	14,418

Rental revenues and net income from the ourparcel phase of Wendover Village for the period from the acquisition date to December 31, 2017 included in the consolidated statement of comprehensive income were $0.6 million and $0.2 million, respectively.

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, the Company completed 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 of limited partnership interest in the Operating Partnership ("Class A Units").

As part of the Southgate Square purchase agreement, the Company acquired an option to purchase an adjacent undeveloped land parcel from the seller. The option for the land parcel is valid for an initial period of two years, and its value would be determined by applying a mutually agreed upon capitalization rate to the base rent of tenants provided by the seller and approved by the Company. If, at the end of the two-year period, no suitable tenants have been found, the Company has the option of either paying $3.0 million to the seller for the land parcel or extending the period for an additional year. If, at the end of the additional year, no suitable tenants have been found, the Company can either pay $1.25 million to the seller for the land parcel or let the option expire. Management has evaluated the option and determined that its value is immaterial to the consolidated financial statements.

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 million in cash and 189,160 Class A Units.

On October 13, 2016, the Company completed the acquisition of Columbus Village II, a 92,000 square foot retail and entertainment center located 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.

On November 17, 2016, the Company completed the acquisition of Renaissance Square, a 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 improvements	3,870			2,140			490			939			303			7,742
Building and improvements	88,820			23,810			6,019			9,983			8,137			136,769
In-place leases	20,630			5,990			1,140			2,225			2,008			31,993
Above-market leases	1,960			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

Rental revenues and net income from the 2016 acquired properties for the period from the respective acquisition dates to December 31, 2016 included in the consolidated statement of comprehensive income was $18.7 million and $2.9 million, respectively.

2015 Operating Property Acquisitions

On April 8, 2015, the Company completed the acquisitions of Stone House Square in Hagerstown, Maryland and Perry Hall Marketplace in Perry Hall, Maryland. In exchange for both properties, the Company paid $35.4 million of cash and issued 415,500 shares of common stock. The acquisition date fair value of the total consideration transferred in exchange for Stone House Square and Perry Hall Marketplace was $39.8 million.

On July 1, 2015, the Company completed the acquisition of Socastee Commons, a 57,000 square foot retail center in Myrtle Beach, South Carolina. The total consideration for Socastee Commons was $8.7 million, which was comprised of $3.7 million of cash and the assumption of debt with an outstanding principal balance of $5.0 million. The fair value adjustment to the assumed debt of Socastee Commons was a $0.1 million premium.

On July 10, 2015, the Company acquired Columbus Village, a 65,000 square foot retail center in Virginia Beach, Virginia. In exchange for Columbus Village, the Company assumed debt with an aggregate outstanding principal balance and fair value of $8.8 million, issued 1,000,000 Class B units of limited partnership interest in the Operating Partnership (“Class B Units”) and agreed to issue 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 converted to Class A Units on January 10, 2018. The acquisition date fair value of the total consideration transferred in exchange for Columbus Village was $19.2 million.

On September 1, 2015, the Company acquired Providence Plaza in Charlotte, North Carolina for $26.2 million of cash. Providence Plaza is a mixed-use property comprised of three buildings totaling 103,000 square feet, a two-level parking garage and approximately one acre of land zoned for multifamily development.

The following table summarizes the acquisition date fair values of the assets acquired and liabilities assumed during the year ended December 31, 2015 (in thousands):



Land	$	29,500
Site improvements	3,290
Building and improvements	49,260
In-place leases	14,160
Above-market leases	2,260
Below-market leases	(4,420		)
Indebtedness	(13,935		)
Net assets acquired	$	80,115

Rental revenues and net income from the 2015 acquired properties for the period from the respective acquisition dates to December 31, 2015 included in the consolidated statement of comprehensive income was $4.8 million and $0.8 million, respectively.

Pro Forma Financial Information (Unaudited)

The following table summarizes the consolidated results of operations of the Company on a pro forma basis, as if the 2017 acquisition had been acquired on January 1, 2016, each of the 2016 acquisitions had been acquired on January 1, 2015, and each of the 2015 acquisitions had been acquired on January 1, 2014 (in thousands):



	Years Ended December 31,
	2017		2016		2015
Rental revenues	$	109,472	$	102,579	$	105,479
Net income	30,354		14,060		18,492

The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if these acquisitions had taken place on January 1, 2016, 2015, and 2014. The pro forma financial information includes adjustments to rental revenue and rental expenses for above and below-market leases, adjustments to depreciation and amortization expense for acquired property and in-place lease assets and adjustments to interest expense for fair value adjustments to assumed debt.

Subsequent to December 31, 2017

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 ($9.6 million in cash and $1.7 million in the form of Class A Units) plus estimated capitalized acquisition costs of $0.3 million.

On November 30, 2017, the Company entered into a lease agreement with Bottling Group, LLC for a new distribution facility that the Company will develop and construct for expected delivery in 2018. On January 29, 2018, the Company acquired undeveloped land in Chesterfield, Virginia, a portion of which will serve as the site for this facility, for a contract price of $2.4 million plus capitalized acquisition costs of $0.1 million.

On February 16, 2018, through a consolidated joint venture, the Company acquired undeveloped land in Mount Pleasant, South Carolina for a contract price of $2.9 million plus capitalized acquisition costs of $0.1 million. The Company plans to use the land for the development of an estimated $23.0 million Lowes Foods-anchored shopping center.

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 using the land for the development of the 595 King Street 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 530 Meeting Street property.

On July 13, 2017, the Company completed the sale of two 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 ("SAGH") to jointly develop an apartment development project in Charlotte, North Carolina. 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.

Other 2015 Real Estate Transactions

On January 5, 2015, the Company completed the sale of the Sentara Williamsburg office property for $15.4 million. Net proceeds to the Company after transaction costs were $15.2 million. The Company recognized a gain on the disposition of the Sentara Williamsburg office property of $6.2 million.

On March 31, 2015, the Company purchased land held for development in the Town Center of Virginia Beach, Virginia for $1.2 million.

On May 20, 2015, the Company completed the sale of Whetstone Apartments for $35.6 million. Net proceeds to the Company after transaction costs were $35.5 million. The Company recognized a gain on the disposition of Whetstone Apartments of $7.2 million.

On October 5, 2015, the Company purchased 3.24 acres of land in Newport News, Virginia for $0.1 million for the development of Brooks Crossing, a new urban, mixed-use and low-rise development project, in partnership with the City of Newport News.

On October 30, 2015, the Company completed the sale of the Oceaneering International facility for $30.0 million. Net proceeds to the Company after transaction costs were $29.0 million. The Company recognized a gain on the disposition of Oceaneering of $5.0 million.

Equity Method Investments

City Center

On February 25, 2016, the Company acquired a 37% interest in Durham City Center II, LLC (“City Center”) for purposes of developing a 22-story mixed-use tower in Durham, North Carolina. The Company is a minority partner in the joint venture and will serve as the project's general contractor, with full ownership of the office and retail portions of the project. As of December 31, 2017 and 2016, the Company has invested $11.4 million and $10.3 million, respectively, in City Center. The Company has agreed to guarantee 37% of the construction loan for City Center; however, the loan is collateralized by 100% of the assets of City Center. As of December 31, 2017, $29.2 million has been drawn against the construction loan, of which $11.2 million is attributable to the Company's portion of the loan. As of December 31, 2016, the construction loan had not been drawn against.

As of December 31, 2017, the difference between the carrying value of the Company’s initial investment in City Center and the amount of underlying equity was immaterial. For the years ended December 31, 2017 and 2016, City Center did not have any operating activity, and therefore the Company did not receive any dividends or allocated income.

Based on the terms of City Center’s operating agreement, the Company has concluded that City Center is a VIE, and that the Company holds a variable interest. The Company does not have the power to direct the activities of the project that most significantly impact its performance. Accordingly, the Company is not the project’s primary beneficiary and, therefore, does not consolidate City Center in its consolidated financial statements.