FORM 10-Q |
Maryland | 46-1214914 |
(State of Organization) | (IRS Employer Identification No.) |
222 Central Park Avenue, Suite 2100 Virginia Beach, Virginia | 23462 |
(Address of Principal Executive Offices) | (Zip Code) |
Large Accelerated Filer | ◻ | Accelerated Filer | x |
Non-Accelerated Filer | ◻ (Do not check if a smaller reporting company) | Smaller Reporting Company | ◻ |
Emerging Growth Company | x |
Page | |||
March 31, 2018 | December 31, 2017 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Real estate investments: | ||||||||
Income producing property | $ | 936,579 | $ | 910,686 | ||||
Held for development | 1,473 | 680 | ||||||
Construction in progress | 120,850 | 83,071 | ||||||
1,058,902 | 994,437 | |||||||
Accumulated depreciation | (171,205 | ) | (164,521 | ) | ||||
Net real estate investments | 887,697 | 829,916 | ||||||
Cash and cash equivalents | 15,804 | 19,959 | ||||||
Restricted cash | 3,502 | 2,957 | ||||||
Accounts receivable, net | 16,125 | 15,691 | ||||||
Notes receivable | 88,973 | 83,058 | ||||||
Construction receivables, including retentions | 21,336 | 23,933 | ||||||
Construction contract costs and estimated earnings in excess of billings | 315 | 245 | ||||||
Equity method investments | 12,821 | 11,411 | ||||||
Other assets | 55,216 | 55,953 | ||||||
Total Assets | $ | 1,101,789 | $ | 1,043,123 | ||||
LIABILITIES AND EQUITY | ||||||||
Indebtedness, net | $ | 589,634 | $ | 517,272 | ||||
Accounts payable and accrued liabilities | 11,333 | 15,180 | ||||||
Construction payables, including retentions | 41,516 | 47,445 | ||||||
Billings in excess of construction contract costs and estimated earnings | 2,235 | 3,591 | ||||||
Other liabilities | 40,170 | 39,352 | ||||||
Total Liabilities | 684,888 | 622,840 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued and outstanding as of March 31, 2018 and December 31, 2017 | — | — | ||||||
Common stock, $0.01 par value, 500,000,000 shares authorized, 45,205,575 and 44,937,763 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively | 452 | 449 | ||||||
Additional paid-in capital | 289,699 | 287,407 | ||||||
Distributions in excess of earnings | (65,190 | ) | (61,166 | ) | ||||
Total stockholders’ equity | 224,961 | 226,690 | ||||||
Noncontrolling interests | 191,940 | 193,593 | ||||||
Total Equity | 416,901 | 420,283 | ||||||
Total Liabilities and Equity | $ | 1,101,789 | $ | 1,043,123 |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
Revenues | ||||||||
Rental revenues | $ | 28,699 | $ | 27,232 | ||||
General contracting and real estate services revenues | 23,050 | 63,519 | ||||||
Total revenues | 51,749 | 90,751 | ||||||
Expenses | ||||||||
Rental expenses | 6,424 | 6,068 | ||||||
Real estate taxes | 2,813 | 2,509 | ||||||
General contracting and real estate services expenses | 22,414 | 61,196 | ||||||
Depreciation and amortization | 9,278 | 9,475 | ||||||
General and administrative expenses | 2,961 | 2,986 | ||||||
Acquisition, development and other pursuit costs | 84 | 47 | ||||||
Impairment charges | — | 4 | ||||||
Total expenses | 43,974 | 82,285 | ||||||
Operating income | 7,775 | 8,466 | ||||||
Interest income | 2,232 | 1,398 | ||||||
Interest expense | (4,373 | ) | (4,535 | ) | ||||
Gain on real estate dispositions | — | 3,395 | ||||||
Change in fair value of interest rate derivatives | 969 | 294 | ||||||
Other income | 114 | 37 | ||||||
Income before taxes | 6,717 | 9,055 | ||||||
Income tax benefit (provision) | 266 | (302 | ) | |||||
Net income | 6,983 | 8,753 | ||||||
Net income attributable to noncontrolling interests | (1,943 | ) | (2,817 | ) | ||||
Net income attributable to stockholders | $ | 5,040 | $ | 5,936 | ||||
Net income attributable to stockholders per share (basic and diluted) | $ | 0.11 | $ | 0.16 | ||||
Weighted-average common shares outstanding (basic and diluted) | 45,132 | 37,622 | ||||||
Dividends and distributions declared per common share and unit | $ | 0.20 | $ | 0.19 |
Shares of common stock | Common Stock | Additional paid-in capital | Distributions in excess of earnings | Total stockholders' equity | Noncontrolling interests | Total Equity | |||||||||||||||||||||
Balance, January 1, 2018 | 44,937,763 | $ | 449 | $ | 287,407 | $ | (61,166 | ) | $ | 226,690 | $ | 193,593 | $ | 420,283 | |||||||||||||
Net income | — | — | — | 5,040 | 5,040 | 1,943 | 6,983 | ||||||||||||||||||||
Restricted stock awards | 105,362 | 1 | 499 | — | 500 | — | 500 | ||||||||||||||||||||
Restricted stock award forfeitures | (550 | ) | — | (4 | ) | — | (4 | ) | — | (4 | ) | ||||||||||||||||
Issuance of operating partnership units for acquisitions | — | — | — | — | — | 1,696 | 1,696 | ||||||||||||||||||||
Redemption of operating partnership units | 163,000 | 2 | 1,797 | — | 1,799 | (1,804 | ) | (5 | ) | ||||||||||||||||||
Dividends and distributions declared | — | — | — | (9,064 | ) | (9,064 | ) | (3,488 | ) | (12,552 | ) | ||||||||||||||||
Balance, March 31, 2018 | 45,205,575 | $ | 452 | $ | 289,699 | $ | (65,190 | ) | $ | 224,961 | $ | 191,940 | $ | 416,901 |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 6,983 | $ | 8,753 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation of buildings and tenant improvements | 6,773 | 6,473 | ||||||
Amortization of leasing costs and in-place lease intangibles | 2,505 | 3,002 | ||||||
Accrued straight-line rental revenue | (562 | ) | (383 | ) | ||||
Amortization of leasing incentives and above or below-market rents | (56 | ) | (47 | ) | ||||
Accrued straight-line ground rent expense | 84 | 138 | ||||||
Bad debt expense | 52 | 68 | ||||||
Noncash stock compensation | 549 | 411 | ||||||
Impairment charges | — | 4 | ||||||
Noncash interest expense | 326 | 277 | ||||||
Gain on real estate dispositions | — | (3,395 | ) | |||||
Change in the fair value of interest rate derivatives | (969 | ) | (294 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Property assets | 1,771 | 1,391 | ||||||
Property liabilities | (3,827 | ) | (875 | ) | ||||
Construction assets | 3,482 | (13,137 | ) | |||||
Construction liabilities | (11,183 | ) | 5,888 | |||||
Net cash provided by operating activities | 5,928 | 8,274 | ||||||
INVESTING ACTIVITIES | ||||||||
Development of real estate investments | (26,438 | ) | (6,456 | ) | ||||
Tenant and building improvements | (2,246 | ) | (2,069 | ) | ||||
Acquisitions of real estate investments, net of cash received | (33,368 | ) | (6,767 | ) | ||||
Dispositions of real estate investments | — | 4,441 | ||||||
Notes receivable issuances | (5,607 | ) | (1,413 | ) | ||||
Leasing costs | (680 | ) | (493 | ) | ||||
Contributions to equity method investments | (1,410 | ) | (559 | ) | ||||
Net cash used for investing activities | (69,749 | ) | (13,316 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Proceeds from sales of common stock | — | 3,523 | ||||||
Offering costs | — | (161 | ) | |||||
Debt issuances, credit facility and construction loan borrowings | 111,498 | 44,952 | ||||||
Debt and credit facility repayments, including principal amortization | (39,273 | ) | (44,530 | ) | ||||
Debt issuance costs | (201 | ) | (471 | ) | ||||
Redemption of operating partnership units | (5 | ) | (50 | ) | ||||
Dividends and distributions | (11,808 | ) | (9,726 | ) | ||||
Net cash provided by (used for) financing activities | 60,211 | (6,463 | ) | |||||
Net decrease in cash and cash equivalents | (3,610 | ) | (11,505 | ) | ||||
Cash, cash equivalents, and restricted cash, beginning of period | 22,916 | 25,193 | ||||||
Cash, cash equivalents, and restricted cash, end of period | $ | 19,306 | $ | 13,688 | ||||
Supplemental Disclosures: | ||||||||
Noncash transactions: | ||||||||
Increase in dividends payable | $ | 744 | $ | 644 | ||||
(Decrease) increase in accounts payable and accrued liabilities for capital expenditures | $ | (4,434 | ) | $ | 742 | |||
Issuance of operating partnership units for acquisitions | $ | 1,702 | $ | — | ||||
Redeemable noncontrolling interest from development | $ | — | $ | 2,000 | ||||
Deferred payment for land acquisition | $ | — | $ | 600 |
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 | % | |||
Brooks Crossing(1) | Retail | Newport News, Virginia | 65 | % | |||
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 | % | |||
Lightfoot Marketplace(2) | Retail | Williamsburg, Virginia | 70 | % | |||
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 | % |
Property | Segment | Location | Ownership Interest | ||||
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 | % | |||
Waynesboro Commons | Retail | Waynesboro, 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 | % | |||
(1) | The Company is entitled to a preferred return of 8% on its investment in Brooks Crossing. |
(2) | The Company is entitled to a preferred return of 9% on its investment in Lightfoot Marketplace. |
Property | Segment | Location | Ownership Interest | |||||
Premier (Town Center Phase VI) | Mixed-use | Virginia Beach, Virginia* | 100 | % | ||||
Greenside (Harding Place)(1) | Multifamily | Charlotte, North Carolina | 80 | % | ||||
Hoffler Place (King Street) | Multifamily | Charleston, South Carolina | 92.5 | % | ||||
Summit Place (Meeting Street) | Multifamily | Charleston, South Carolina | 90 | % | ||||
Brooks Crossing office tower (2) | Office | Newport News, Virginia | 65 | % | ||||
Lightfoot Outparcel (3) | Retail | Williamsburg, Virginia | 70 | % | ||||
Market at Mill Creek (4) | Retail | Mount Pleasant, South Carolina | 70 | % | ||||
River City | Industrial | Chesterfield, Virginia | 100 | % | ||||
Balance as of | |||||||||||||||
March 31, 2018 | December 31, 2017 | March 31, 2017 | December 31, 2016 | ||||||||||||
Cash and cash equivalents | $ | 15,804 | $ | 19,959 | $ | 10,039 | $ | 21,942 | |||||||
Restricted cash | 3,502 | 2,957 | 3,649 | 3,251 | |||||||||||
Cash, cash equivalents, and restricted cash | $ | 19,306 | $ | 22,916 | $ | 13,688 | $ | 25,193 |
Three months ended | |||
March 31, 2017 | |||
Operating activities as originally presented | $ | 7,907 | |
Adjustments | 367 | ||
Operating activities after adjustments | $ | 8,274 | |
Investing activities as originally presented | $ | (13,347 | ) |
Adjustments | $ | 31 | |
Investing activities after adjustments | $ | (13,316 | ) |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
(Unaudited) | ||||||||
Office real estate | ||||||||
Rental revenues | $ | 5,100 | $ | 4,906 | ||||
Rental expenses | 1,446 | 1,325 | ||||||
Real estate taxes | 502 | 450 | ||||||
Segment net operating income | 3,152 | 3,131 | ||||||
Retail real estate | ||||||||
Rental revenues | 16,711 | 15,631 | ||||||
Rental expenses | 2,657 | 2,520 | ||||||
Real estate taxes | 1,683 | 1,450 | ||||||
Segment net operating income | 12,371 | 11,661 | ||||||
Multifamily residential real estate | ||||||||
Rental revenues | 6,888 | 6,695 | ||||||
Rental expenses | 2,321 | 2,223 | ||||||
Real estate taxes | 628 | 609 | ||||||
Segment net operating income | 3,939 | 3,863 | ||||||
General contracting and real estate services | ||||||||
Segment revenues | 23,050 | 63,519 | ||||||
Segment expenses | 22,414 | 61,196 | ||||||
Segment gross profit | 636 | 2,323 | ||||||
Net operating income | $ | 20,098 | $ | 20,978 |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
(Unaudited) | ||||||||
Net operating income | $ | 20,098 | $ | 20,978 | ||||
Depreciation and amortization | (9,278 | ) | (9,475 | ) | ||||
General and administrative expenses | (2,961 | ) | (2,986 | ) | ||||
Acquisition, development and other pursuit costs | (84 | ) | (47 | ) | ||||
Impairment charges | — | (4 | ) | |||||
Interest income | 2,232 | 1,398 | ||||||
Interest expense | (4,373 | ) | (4,535 | ) | ||||
Gain on real estate dispositions | — | 3,395 | ||||||
Change in fair value of interest rate derivatives | 969 | 294 | ||||||
Other income | 114 | 37 | ||||||
Income tax (provision) benefit | 266 | (302 | ) | |||||
Net income | $ | 6,983 | $ | 8,753 |
Indian Lakes Crossing | Parkway Centre | |||||||
Land | $ | 10,926 | $ | 1,372 | ||||
Site improvements | 531 | 696 | ||||||
Building and improvements | 1,913 | 7,168 | ||||||
In-place leases | 1,648 | 2,346 | ||||||
Above-market leases | 11 | — | ||||||
Below-market leases | (175 | ) | (10 | ) | ||||
Net assets acquired | $ | 14,854 | $ | 11,572 |
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 | — | 2,313 | ||||||
Transferred to receivables | (245 | ) | — | |||||
Construction contract costs and estimated earnings not billed during the period | 315 | — | ||||||
Changes due to cumulative catch-up adjustment arising from changes in the estimate of the stage of completion | — | (78 | ) | |||||
Balance as of March 31, 2018 | $ | 315 | $ | 2,235 |
March 31, 2018 | December 31, 2017 | ||||||
Costs incurred on uncompleted construction contracts | $ | 542,790 | $ | 520,368 | |||
Estimated earnings | 18,673 | 18,070 | |||||
Billings | (563,383 | ) | (541,784 | ) | |||
Net position | $ | (1,920 | ) | $ | (3,346 | ) |
March 31, 2018 | December 31, 2017 | ||||||
Construction contract costs and estimated earnings in excess of billings | $ | 315 | $ | 245 | |||
Billings in excess of construction contract costs and estimated earnings | (2,235 | ) | (3,591 | ) | |||
Net position | $ | (1,920 | ) | $ | (3,346 | ) |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
Beginning backlog | $ | 49,167 | $ | 217,718 | ||||
New contracts/change orders | 4,569 | 3,441 | ||||||
Work performed | (23,003 | ) | (63,437 | ) | ||||
Ending backlog | $ | 30,733 | $ | 157,722 |
March 31, 2018 | December 31, 2017 | |||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
Notional Amount | Fair Value | Notional Amount | Fair Value | |||||||||||||||||||||
Asset | Liability | Asset | Liability | |||||||||||||||||||||
Interest rate swaps | $ | 56,033 | $ | 289 | $ | — | $ | 56,079 | $ | 10 | $ | (69 | ) | |||||||||||
Interest rate caps | 320,000 | 2,446 | — | 345,000 | 1,515 | — | ||||||||||||||||||
Total | $ | 376,033 | $ | 2,735 | $ | — | $ | 401,079 | $ | 1,525 | $ | (69 | ) |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
Interest rate swaps | $ | 348 | $ | 261 | ||||
Interest rate caps | 621 | 33 | ||||||
Total change in fair value of interest rate derivatives | $ | 969 | $ | 294 |
March 31, 2018 | December 31, 2017 | |||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
(Unaudited) | ||||||||||||||||
Indebtedness | $ | 589,634 | $ | 586,717 | $ | 517,272 | $ | 518,417 | ||||||||
Interest rate swap liabilities | — | — | 69 | 69 | ||||||||||||
Interest rate swap and cap assets | 2,735 | 2,735 | 1,525 | 1,525 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | 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 timeline, 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; |
• | 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; |
• | conflicts of interests with our officers and directors; |
• | lack or insufficient amounts of insurance; |
• | environmental uncertainties and risks related to adverse weather conditions and natural disasters; |
• | other factors affecting the real estate industry generally; |
• | our failure to maintain our qualification as a real estate investment trust (“REIT”) for U.S. federal income tax purposes; |
• | limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our qualification as a REIT for U.S. federal income tax purposes; |
• | changes in governmental regulations or interpretations thereof, such as real estate and zoning laws and increases in real property tax rates and taxation of REITs; and |
• | potential negative impacts from the recent changes to the U.S. tax laws. |
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 | % | |||
Brooks Crossing(1) | Retail | Newport News, Virginia | 65 | % | |||
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 | % |
Property | Segment | Location | Ownership Interest | ||||
Lightfoot Marketplace(2) | Retail | Williamsburg, Virginia | 70 | % | |||
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 | % | |||
Waynesboro Commons | Retail | Waynesboro, 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 | % | |||
(1) | We are entitled to a preferred return of 8% on our investment in Brooks Crossing. |
(2) | We are entitled to a preferred return of 9% on our investment in Lightfoot Marketplace. |
Property | Segment | Location | Ownership Interest | ||||
Premier (Town Center Phase VI) | Mixed-use | Virginia Beach, Virginia* | 100 | % | |||
Greenside (Harding Place)(1) | Multifamily | Charlotte, North Carolina | 80 | % | |||
Hoffler Place (King Street) | Multifamily | Charleston, South Carolina | 92.5 | % | |||
Summit Place (Meeting Street) | Multifamily | Charleston, South Carolina | 90 | % | |||
Brooks Crossing office tower (2) | Office | Newport News, Virginia | 65 | % | |||
Lightfoot Outparcel (3) | Retail | Williamsburg, Virginia | 70 | % | |||
Market at Mill Creek (4) | Retail | Mount Pleasant, South Carolina | 70 | % | |||
River City | Industrial | Chesterfield, Virginia | 100 | % | |||
Three Months Ended March 31, | ||||||||||||
2018 | 2017 | Change | ||||||||||
Rental revenues | $ | 5,100 | $ | 4,906 | $ | 194 | ||||||
Property expenses | 1,948 | 1,775 | 173 | |||||||||
Segment NOI | $ | 3,152 | $ | 3,131 | $ | 21 |
Three Months Ended March 31, | ||||||||||||
2018 | 2017 | Change | ||||||||||
Rental revenues | $ | 3,454 | $ | 3,514 | $ | (60 | ) | |||||
Property expenses | 1,345 | 1,232 | 113 | |||||||||
Same Store NOI | $ | 2,109 | $ | 2,282 | $ | (173 | ) | |||||
Non-Same Store NOI | 1,043 | 849 | 194 | |||||||||
Segment NOI | $ | 3,152 | $ | 3,131 | $ | 21 |
Three Months Ended March 31, | ||||||||||||
2018 | 2017 | Change | ||||||||||
Rental revenues | $ | 16,711 | $ | 15,631 | $ | 1,080 | ||||||
Property expenses | 4,340 | 3,970 | 370 | |||||||||
Segment NOI | $ | 12,371 | $ | 11,661 | $ | 710 |
Three Months Ended March 31, | ||||||||||||
2018 | 2017 | Change | ||||||||||
Rental revenues | $ | 15,424 | $ | 15,222 | $ | 202 | ||||||
Property expenses | 3,807 | 3,579 | 228 | |||||||||
Same Store NOI | $ | 11,617 | $ | 11,643 | $ | (26 | ) | |||||
Non-Same Store NOI | 754 | 18 | 736 | |||||||||
Segment NOI | $ | 12,371 | $ | 11,661 | $ | 710 |
Three Months Ended March 31, | ||||||||||||
2018 | 2017 | Change | ||||||||||
Rental revenues | $ | 6,888 | $ | 6,695 | $ | 193 | ||||||
Property expenses | 2,949 | 2,832 | 117 | |||||||||
Segment NOI | $ | 3,939 | $ | 3,863 | $ | 76 |
Three Months Ended March 31, | ||||||||||||
2018 | 2017 | Change | ||||||||||
Rental revenues | $ | 2,854 | $ | 2,837 | $ | 17 | ||||||
Property expenses | 1,157 | 1,151 | 6 | |||||||||
Same Store NOI | $ | 1,697 | $ | 1,686 | $ | 11 | ||||||
Non-Same Store NOI | 2,242 | 2,177 | 65 | |||||||||
Segment NOI | $ | 3,939 | $ | 3,863 | $ | 76 |
Three Months Ended March 31, | ||||||||||||
2018 | 2017 | Change | ||||||||||
Segment revenues | $ | 23,050 | $ | 63,519 | $ | (40,469 | ) | |||||
Segment expenses | 22,414 | 61,196 | (38,782 | ) | ||||||||
Segment gross profit | $ | 636 | $ | 2,323 | $ | (1,687 | ) | |||||
Operating margin | 2.8 | % | 3.7 | % | (0.8 | )% |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Beginning backlog | $ | 49,167 | $ | 217,718 | |||
New contracts/change orders | 4,569 | 3,441 | |||||
Work performed | (23,003 | ) | (63,437 | ) | |||
Ending backlog | $ | 30,733 | $ | 157,722 |
Three Months Ended March 31, | ||||||||||||
2018 | 2017 | Change | ||||||||||
Revenues | ||||||||||||
Rental revenues | $ | 28,699 | $ | 27,232 | $ | 1,467 | ||||||
General contracting and real estate services revenues | 23,050 | 63,519 | (40,469 | ) | ||||||||
Total revenues | 51,749 | 90,751 | (39,002 | ) | ||||||||
Expenses | ||||||||||||
Rental expenses | 6,424 | 6,068 | 356 | |||||||||
Real estate taxes | 2,813 | 2,509 | 304 | |||||||||
General contracting and real estate services expenses | 22,414 | 61,196 | (38,782 | ) | ||||||||
Depreciation and amortization | 9,278 | 9,475 | (197 | ) | ||||||||
General and administrative expenses | 2,961 | 2,986 | (25 | ) | ||||||||
Acquisition, development and other pursuit costs | 84 | 47 | 37 | |||||||||
Impairment charges | — | 4 | (4 | ) | ||||||||
Total expenses | 43,974 | 82,285 | (38,311 | ) | ||||||||
Operating income | 7,775 | 8,466 | (691 | ) | ||||||||
Interest income | 2,232 | 1,398 | 834 | |||||||||
Interest expense | (4,373 | ) | (4,535 | ) | 162 | |||||||
(Loss) gain on real estate dispositions | — | 3,395 | (3,395 | ) | ||||||||
Change in fair value of interest rate derivatives | 969 | 294 | 675 | |||||||||
Other income | 114 | 37 | 77 | |||||||||
Income before taxes | 6,717 | 9,055 | (2,338 | ) | ||||||||
Income tax benefit (provision) | 266 | (302 | ) | 568 | ||||||||
Net income | $ | 6,983 | $ | 8,753 | $ | (1,770 | ) |
Three Months Ended March 31, | ||||||||||||
2018 | 2017 | Change | ||||||||||
Office | $ | 5,100 | $ | 4,906 | $ | 194 | ||||||
Retail | 16,711 | 15,631 | 1,080 | |||||||||
Multifamily | 6,888 | 6,695 | 193 | |||||||||
$ | 28,699 | $ | 27,232 | $ | 1,467 |
Three Months Ended March 31, | ||||||||||||
2018 | 2017 | Change | ||||||||||
Office | $ | 1,446 | $ | 1,325 | $ | 121 | ||||||
Retail | 2,657 | 2,520 | 137 | |||||||||
Multifamily | 2,321 | 2,223 | 98 | |||||||||
$ | 6,424 | $ | 6,068 | $ | 356 |
Three Months Ended March 31, | ||||||||||||
2018 | 2017 | Change | ||||||||||
Office | $ | 502 | $ | 450 | $ | 52 | ||||||
Retail | 1,683 | 1,450 | 233 | |||||||||
Multifamily | 628 | 609 | 19 | |||||||||
$ | 2,813 | $ | 2,509 | $ | 304 |
• | Total leverage ratio of not more than 60% (or 65% for the two consecutive quarters following any acquisition that is equal to or greater than 10% of our total asset value (as defined in the credit agreement), 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 and 75% of the net equity proceeds received after June 30, 2017; |
• | 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 equal to or greater than 10% of our total asset value, 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. |
Amount Outstanding | Interest Rate(a) | Effective Rate for Variable Debt | Maturity Date | Balance at Maturity | ||||||||||||
Secured Debt | ||||||||||||||||
Johns Hopkins Village | $ | 46,698 | LIBOR+1.90% | 3.78 | % | July 30, 2018 | $ | 46,698 | ||||||||
Lightfoot Marketplace | 10,500 | LIBOR+1.75% | 3.63 | % | November 14, 2018 | 10,500 | ||||||||||
North Point Note 1 | 9,517 | 6.45 | % | February 5, 2019 | 9,333 | |||||||||||
Harding Place | 8,251 | LIBOR+2.95% | 4.83 | % | February 24, 2020 | 8,251 | ||||||||||
Town Center Phase VI | 6,626 | LIBOR+3.50% | 5.38 | % | June 29, 2020 | 6,626 | ||||||||||
Southgate Square | 20,559 | LIBOR+2.00% | 3.88 | % | April 29, 2021 | 18,857 | ||||||||||
249 Central Park Retail | 16,793 | (b) | LIBOR+1.95% | 3.83 | % | August 10, 2021 | 15,909 | |||||||||
South Retail | 7,368 | (b) | LIBOR+1.95% | 3.83 | % | August 10, 2021 | 6,980 | |||||||||
Fountain Plaza Retail | 10,110 | (b) | LIBOR+1.95% | 3.83 | % | August 10, 2021 | 9,578 | |||||||||
4525 Main Street | 32,034 | (c) | 3.25 | % | September 10, 2021 | 30,774 | ||||||||||
Encore Apartments | 24,966 | (c) | 3.25 | % | September 10, 2021 | 24,006 | ||||||||||
Hanbury Village | 19,381 | 3.78 | % | August 15, 2022 | 17,109 | |||||||||||
Socastee Commons | 4,746 | (d) | 4.57 | % | January 6, 2023 | 4,223 | ||||||||||
Sandbridge Commons | 8,429 | LIBOR+1.75% | 3.63 | % | January 17, 2023 | 7,247 | ||||||||||
North Point Note 2 | 2,432 | 7.25 | % | September 15, 2025 | 1,344 | |||||||||||
Smith's Landing | 19,570 | 4.05 | % | June 1, 2035 | — | |||||||||||
Liberty Apartments | 14,631 | (d) | 5.66 | % | November 1, 2043 | — | ||||||||||
The Cosmopolitan | 45,026 | 3.35 | % | July 1, 2051 | — | |||||||||||
Total secured debt | $ | 307,637 | $ | 217,435 | ||||||||||||
Unsecured Debt | ||||||||||||||||
Senior unsecured revolving credit facility | 108,000 | LIBOR+1.40% to 2.00% | 3.43 | % | October 26, 2021 | 108,000 | ||||||||||
Senior unsecured term loan | 130,000 | LIBOR+1.35% to 1.95% | 3.38 | % | October 26, 2022 | 130,000 | ||||||||||
Senior unsecured term loan | 50,000 | LIBOR+1.35% to 1.95% | 3.50 | % | (e) | October 26, 2022 | 50,000 | |||||||||
Total unsecured debt | $ | 288,000 | $ | 288,000 | ||||||||||||
Total principal balances | 595,637 | 505,435 | ||||||||||||||
Unamortized GAAP adjustments | (6,003 | ) | — | |||||||||||||
Indebtedness, net | $ | 589,634 | $ | 505,435 | ||||||||||||
Year(1) | Amount Due | Percentage of Total | ||||||
2018 | $ | 60,161 | 10 | % | ||||
2019 | 13,526 | 2 | % | |||||
2020 | 20,085 | 3 | % | |||||
2021 | 218,495 | 37 | % | |||||
2022 | 200,060 | 34 | % | |||||
Thereafter | 83,310 | 14 | % | |||||
$ | 595,637 | 100 | % | |||||
Effective Date | Maturity Date | Strike Rate | Notional Amount | ||||||
June 17, 2016 | June 17, 2018 | 1.00 | % | 70,000 | |||||
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 | |||||
Total | $ | 320,000 |
Three Months Ended March 31, | ||||||||||||
2018 | 2017 | Change | ||||||||||
($ in thousands) | ||||||||||||
Operating Activities | $ | 5,928 | $ | 8,274 | $ | (2,346 | ) | |||||
Investing Activities | (69,749 | ) | (13,316 | ) | (56,433 | ) | ||||||
Financing Activities | 60,211 | (6,463 | ) | 66,674 | ||||||||
Net Increase (Decrease) | $ | (3,610 | ) | $ | (11,505 | ) | $ | 7,895 | ||||
Cash, Cash Equivalents, and Restricted Cash, Beginning of Period | $ | 22,916 | $ | 25,193 | ||||||||
Cash, Cash Equivalents, and Restricted Cash, End of Period | $ | 19,306 | $ | 13,688 |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
(in thousands, except per share and unit amounts) | ||||||||
Net income | $ | 6,983 | $ | 8,753 | ||||
Depreciation and amortization | 9,278 | 9,475 | ||||||
(Gain) loss on operating real estate dispositions | — | (3,395 | ) | |||||
Funds from operations | $ | 16,261 | $ | 14,833 | ||||
Acquisition, development and other pursuit costs | 84 | 47 | ||||||
Impairment charges | — | 4 | ||||||
Change in fair value of interest rate derivatives | (969 | ) | (294 | ) | ||||
Normalized funds from operations | $ | 15,376 | $ | 14,590 | ||||
Net income per diluted share and unit | $ | 0.11 | $ | 0.16 | ||||
FFO per diluted share and unit | $ | 0.26 | $ | 0.27 | ||||
Normalized FFO per diluted share and unit | $ | 0.25 | $ | 0.26 | ||||
Weighted average common shares and units - diluted | 62,538 | 55,475 |
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 | |||||||
January 1, 2018 through January 31, 2018 | — | $ | — | N/A | N/A | ||||||
February 1, 2018 through February 28, 2018 | — | — | N/A | N/A | |||||||
March 1, 2018 through March 31, 2018 | 25,703 | 13.35 | N/A | N/A | |||||||
Total | 25,703 | 13.35 |
(1) | The number of shares purchased represents shares of common stock surrendered by certain of our employees to satisfy their 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. |
Exhibit Number | Description | |
3.1 | ||
4.1 | ||
10.1 | ||
10.2† | ||
10.3† | ||
10.4 | ||
10.5 | ||
10.6† | ||
10.7 | ||
10.8 | ||
10.9 | ||
10.10 | ||
10.11 | ||
10.12 | ||
10.13 |
Exhibit Number | Description | |
10.14 | ||
10.15 | ||
10.16 | ||
10.17 | ||
10.18 | ||
10.19 | ||
10.20 | ||
10.21 | ||
10.22 | ||
10.23 | ||
10.24 | ||
10.25 | ||
10.26 | ||
10.27 | ||
10.28 | ||
10.29 | ||
10.30 |
Exhibit Number | Description | |
10.31 | ||
10.32 | ||
10.33 | ||
10.34 | ||
10.35 | ||
10.36 | ||
10.37 | ||
10.38 | ||
10.39 | ||
10.40 | ||
10.41† | ||
10.42 | ||
10.43 | ||
10.44 | ||
10.45† | ||
Exhibit Number | Description | |
10.46 | ||
10.47 | ||
10.48 | ||
10.49 | ||
10.50 | ||
10.51 | ||
10.52 | ||
10.53 | ||
10.54 | ||
10.55 | ||
10.56 | ||
10.57 |
Exhibit No. | Description | |
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | XBRL Instance Document | |
101.SCH | 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 Definition Linkbase | |
† | Management contract or compensatory plan or arrangement |
ARMADA HOFFLER PROPERTIES, INC. | |
Date: May 2, 2018 | /s/ LOUIS S. HADDAD |
Louis S. Haddad | |
President and Chief Executive Officer | |
(Principal Executive Officer) | |
Date: May 2, 2018 | /s/ MICHAEL P. O’HARA |
Michael P. O’Hara | |
Chief Financial Officer and Treasurer | |
(Principal Accounting and Financial Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Armada Hoffler Properties, Inc. |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 2, 2018 | /s/ LOUIS S. HADDAD | |
Louis S. Haddad | ||
President and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Armada Hoffler Properties, Inc. |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 2, 2018 | /s/ MICHAEL P. O’HARA | |
Michael P. O’Hara | ||
Chief Financial Officer and Treasurer |
1. | the Quarterly Report for the period ended March 31, 2018 of the Company (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: May 2, 2018 | /s/ LOUIS S. HADDAD | |
Louis S. Haddad | ||
President and Chief Executive Officer |
1. | the Quarterly Report for the period ended March 31, 2018 of the Company (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: May 2, 2018 | /s/ MICHAEL P. O’HARA | |
Michael P. O’Hara | ||
Chief Financial Officer and Treasurer |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
May 02, 2018 |
|
Document And Entity Information [Abstract] | ||
Entity Registrant Name | Armada Hoffler Properties, Inc. | |
Entity Central Index Key | 0001569187 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q1 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 45,237,043 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, shares issued (in shares) | 45,205,575 | 44,937,763 |
Common stock, shares outstanding (in shares) | 45,205,575 | 44,937,763 |
Business of Organization |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business of Organization | Business of Organization Armada Hoffler Properties, Inc. (the “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 the sole general partner of Armada Hoffler, L.P. (the “Operating Partnership”), and as of March 31, 2018 owned 72.2% 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. As of March 31, 2018, the Company's operating property portfolio consisted of the following properties:
*Located in the Town Center of Virginia Beach As of March 31, 2018, the following properties that the Company consolidates for financial statement purposes were under development or construction:
(1) The Company is entitled to a preferred return of 9% on a portion of its investment in Harding Place. (2) The Company is entitled to a preferred return of 8% on its investment in Brooks Crossing. (3) The Company is entitled to a preferred return of 9% on its investment in Lightfoot Outparcel. (4) The Company is entitled to a preferred return of 10% on its investment in Market at Mill Creek. *Located in the Town Center of Virginia Beach Please see Note 5 for information related to the Company’s investment in Durham City Center II, LLC, which is an unconsolidated subsidiary that the Company accounts for using the equity method of accounting. |
Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The condensed consolidated financial statements include the financial position and results of operations of the Company and its consolidated subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for the fair presentation of the financial condition and results of operations for the interim periods presented. The accompanying condensed consolidated financial statements were prepared in accordance with the requirements for interim financial information. Accordingly, these interim financial statements have not been audited and exclude certain disclosures required for annual financial statements. Also, the operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These interim financial statements should be read in conjunction with the audited consolidated financial statements of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed. Such estimates are based on management’s historical experience and best judgment after considering past, current and expected events and economic conditions. Actual results could differ significantly from management’s estimates. Significant Accounting Policies General Contracting and Real Estate Services Revenues On January 1, 2018, the Company adopted the new accounting standard codified in Accounting Standards Codification 606 - Revenue from Contracts with Customers (see also "Recent Accounting Pronouncements" below). 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, and the Company estimates its progress in satisfying performance obligations for each contract using the percentage-of-completion method, based on the proportion of incurred costs 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. Provisions for estimated losses on uncompleted contracts are recognized immediately in the period in which such losses are determined. The Company defers pre-contract costs when such costs are directly associated with specific anticipated contracts and their recovery is probable. The Company recognizes real estate services revenues from property development and management services as it satisfies its performance obligations under these service arrangements. The Company assesses whether multiple contracts with a single counterparty should be combined into a single contract for 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. See the Company's Annual Report on Form 10-K for the year ended December 31, 2017 for a description of other accounting principles upon which basis the accompanying consolidated financial statements were prepared. Recent Accounting Pronouncements 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. On February 25, 2016, the FASB issued a new lease standard that requires lessees to recognize most leases in their balance sheets as lease liabilities with corresponding right-of-use assets. The new standard also makes targeted changes to lessor accounting. The new standard will be effective for the Company on January 1, 2019 and requires a modified retrospective transition approach for all leases existing at, or entered into after, the beginning of the earliest comparative period presented, with an option to use certain transition relief. Management is currently evaluating the potential impact of the new standard on the Company’s consolidated financial statements. The Company is the lessee on certain ground leases and equipment leases, which represents a majority of the Company's current operating lease payments, and expects to record right-of-use assets and lease liabilities for these leases under the new standard. In 2016, the FASB issued new guidance that addresses eight classification issues related to the statement of cash flows and requires the presentation of total changes in cash, cash equivalents, restricted cash, and restricted cash equivalents in the statement of cash flows. The Company adopted this new guidance effective December 31, 2017, applying it retrospectively to each period presented. The new guidance requires that the statement of cash flows show changes in restricted cash in addition to changes in cash and cash equivalents. No additional changes were required to be made to the Company's consolidated statements of cash flows. 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 (in thousands):
The following table summarizes the changes made to net cash provided by operating activities and net cash used in investing activities in the consolidated statement of cash flows for the three months ended March 31, 2017 on a retrospective basis (in thousands, no changes were made to net cash provided by (used in) financing activities):
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 new guidance will be effective for the Company on January 1, 2019, with early adoption permitted. The Company does not currently have any derivatives designated as hedging instruments for accounting purposes but may designate new derivative contracts as hedging instruments in the future. The application of this guidance to future hedging relationships could reduce or eliminate the gains and losses that would otherwise be recorded for these derivative instruments. |
Segments |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segments | 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 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 three months ended March 31, 2018 and 2017 was as follows (in thousands):
General contracting and real estate services revenues for the three months ended March 31, 2018 and 2017 exclude revenue related to intercompany construction contracts of $25.9 million and $5.9 million, respectively. General contracting and real estate services expenses for the three months ended March 31, 2018 and 2017 exclude expenses related to intercompany construction contracts of $25.6 million and $5.7 million, respectively. General contracting and real estate services expenses for the three months ended March 31, 2018 and 2017 include noncash stock compensation expense of $0.3 million and $0.2 million, respectively. The following table reconciles net operating income to net income, the most directly comparable GAAP measure, for the three months ended March 31, 2018 and 2017 (in thousands):
General and administrative expenses for the three months ended March 31, 2018 and 2017 include noncash stock compensation expense of $0.8 million and $0.4 million, respectively. |
Real Estate Investment |
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Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate Investment | Real Estate Investment 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")) plus capitalized acquisition costs of $0.3 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 two operating properties purchased during the three months ended March 31, 2018 (in thousands):
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 the fourth quarter of 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 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. Management has concluded that this entity is a variable interest entity ("VIE") as it lacks sufficient equity to fund its operations without additional financial support. The Company is 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. |
Equity Method Investment |
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Equity Method Investments and Joint Ventures [Abstract] | |
Equity Method Investment | Equity Method Investment 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. During the three months ended March 31, 2018, the Company invested an additional $1.3 million in City Center. As of March 31, 2018 and December 31, 2017, the Company had invested $12.2 million and $10.9 million, respectively, in City Center, and the carrying value of the Company's investment was $12.8 million and $11.4 million, respectively. 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 March 31, 2018 and December 31, 2017, $33.0 million and $29.2 million, respectively, had been drawn against the construction loan, of which $12.3 million and $11.2 million, respectively, was attributable to the Company's portion of the loan. For the three months ended March 31, 2018 and 2017, City Center did not have any operating activity, and therefore the Company did not receive any distributions 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. |
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Receivables [Abstract] | |
Notes Receivable | Notes Receivable Point Street Apartments On October 15, 2015, the Company agreed to invest up to $28.2 million in the Point Street Apartments project in the Harbor Point area of Baltimore, Maryland. Point Street Apartments is an estimated $98.0 million development project with plans 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 the Company to serve as construction general contractor. Portions of Point Street Apartments opened during the first quarter of 2018, and the remaining portions are scheduled to open during the second quarter of 2018; however, management can provide no assurances that the remaining portions of Point Street Apartments will open on the anticipated timeline or be completed at the anticipated cost. BDG secured a senior construction loan of up to $67.0 million to fund the development and construction of Point Street Apartments on November 10, 2016. The Company has 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 Point Street Apartments upon completion of the project as follows: (i) an option to purchase a 79% indirect interest in Point Street Apartments for $27.3 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 Point Street Apartments for $3.1 million, exercisable within 27 months from the project’s completion (the “Second Option”). The Company currently has a $2.1 million letter of credit for the guarantee of the senior construction loan. The Company’s investment in the Point Street Apartments project is in the form of a loan pursuant to which BDG may borrow up to $28.2 million (the “BDG loan”). Interest on the BDG loan accrues at 8.0% per annum and matures on the earliest of: (i) November 1, 2018, which may be extended by BDG under two one-year extension options, (ii) the maturity date or earlier termination of the senior construction loan, or (iii) the date the Company exercises the Second Option as described further below. In the event the Company exercises the First Option, BDG is required to pay down the outstanding BDG 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 exercises the Second Option, BDG is required to simultaneously repay any remaining amounts outstanding under the BDG loan, with any excess proceeds received from the exercise of the Second Option applied against 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. As of March 31, 2018 and December 31, 2017, the Company had funded $23.2 million and $22.4 million, respectively, under the BDG loan. During the three months ended March 31, 2018 and 2017, the Company recognized $0.5 million and $0.4 million, respectively, of interest income on the BDG loan. No portion of the note receivable balance is past due, and the Company has not recorded an impairment balance on the note. Management has concluded that this entity is a VIE. Because BDG is the developer of Point Street Apartments, the Company does not have the power to direct the activities of the project that most significantly impact its performance, nor is the Company the party most closely associated with the project. Therefore, the Company is not the project's primary beneficiary and does not consolidate the project in its consolidated financial statements. Annapolis Junction On April 21, 2016, the Company entered into a note receivable with a maximum balance of $48.1 million in connection with the Annapolis Junction Apartments project in Maryland ("Annapolis Junction"). Annapolis Junction Apartments is an estimated $106.0 million development project with plans for 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”) is the developer of the residential component and has engaged the Company to serve as construction general contractor for the residential component. The final portions of Annapolis Junction opened during the first quarter of 2018. 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 has 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 as follows: (i) an option to purchase an 80% indirect interest in Annapolis Junction's residential component for the lesser of the seller’s budgeted or actual cost, exercisable until December 19, 2018 (the “First Option”) and (ii) provided that the Company has exercised the First Option, an option to purchase an additional 8% indirect interest in Annapolis Junction for the lesser of the seller’s actual or budgeted cost, exercisable within until March 2019 (the “Second Option”). The Company’s investment in the Annapolis Junction project is in the form of a loan under which AJAO may borrow up to $48.1 million, including a $6.0 million interest reserve (the “AJAO loan”). Interest on the AJAO loan accrues at 10.0% per annum and matures on the earliest of: (i) December 21, 2020, which may be extended by AJAO under two one-year extension options, (ii) the maturity date or earlier termination of the senior construction loan, or (iii) the date the Company exercises the Second Option as described further below. In the event that the Company exercises the First Option, AJAO is required to simultaneously pay down both the senior construction loan and the AJAO loan by 80%, at which time the interest rate on the AJAO loan will automatically be reduced to the interest rate on the senior construction loan. In the event the Company exercises the Second Option, AJAO is required to simultaneously repay any remaining amounts outstanding under the AJAO loan, with any excess proceeds received from the exercise of the Second Option applied against the remaining balance of the senior construction loan. In the event that the Company does not exercise either the First Option or the Second Option, the interest rate on the AJAO loan will automatically be reduced to the interest rate on the senior construction loan for the remaining term of the AJAO loan. The balance on the Annapolis Junction note was $44.1 million and $43.0 million as of March 31, 2018 and December 31, 2017, respectively. During the three months ended March 31, 2018 and 2017, the Company recognized $1.1 million and $1.0 million, respectively, of interest income on the note. 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, nor is the Company the party most closely associated with the project. 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 entered into a note receivable with a maximum principal balance of $21.8 million for the development of an estimated $37.0 million Whole Foods-anchored center located in Decatur, Georgia. On January 31, 2018, the note was amended to increase the maximum amount of the note to $25.7 million. The borrower of the note and developer of the shopping center is North Decatur Square Holdings, LLC ("NDSH"). The mezzanine loan bears interest at an annual rate of 15%. 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. As of March 31, 2018 and December 31, 2017, the Company had funded $14.6 million and $11.8 million, respectively, on this note. During the three months ended March 31, 2018, the Company recognized $0.5 million of interest income on this note. No portion of the note receivable balance is past due, and the Company has not recorded an impairment balance on the note. Management has concluded that this entity is a VIE. Because NDSH is the developer of North Decatur 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. Delray Plaza On October 27, 2017, the Company entered into a note receivable with a maximum principal balance of $13.1 million for the development of a $20.0 million Whole Foods-anchored center located in Delray Beach, Florida. The borrower of the note and developer of the shopping center is Delray Plaza Holdings, LLC ("DPH"). The mezzanine loan bears interest at an annual rate of 15%. 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. As of March 31, 2018 and December 31, 2017, the Company had funded $6.3 million and $5.4 million, respectively, on this note. During the three months ended March 31, 2018, the Company recognized $0.2 million of interest income on this note. No portion of the note receivable balance is past due, and the Company has not recorded an impairment balance on the note. 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. |
Construction Contracts |
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Contractors [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Construction Contracts | 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 March 31, 2018 during the next twelve months. Billings in excess of construction contract costs and estimated earnings represent billings or collections on contracts made in advance of revenue recognized. The following table summarizes the changes to the balances in the Company’s construction contract costs and estimated earnings in excess of billings account and the billings in excess of construction contract costs and estimated earnings account for the three months ended March 31, 2018 (in thousands):
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 $0.5 million and $0.3 million were deferred as of March 31, 2018 and December 31, 2017, 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 March 31, 2018 and December 31, 2017, construction receivables included retentions of $9.4 million and $12.9 million, respectively. The Company expects to collect substantially all construction receivables as of March 31, 2018 during the next twelve months. As of March 31, 2018 and December 31, 2017, construction payables included retentions of $16.8 million and $16.3 million, respectively. The Company expects to pay substantially all construction payables as of March 31, 2018 during the next twelve months. The Company’s net position on uncompleted construction contracts comprised the following as of March 31, 2018 and December 31, 2017 (in thousands):
The Company’s balances and changes in construction contract price allocated to unsatisfied performance obligations (backlog) as of March 31, 2018 and December 31, 2017 were as follows (in thousands):
The Company expects to complete a majority of the uncompleted contracts as of March 31, 2018 during the next 12 to 18 months. |
Indebtedness |
3 Months Ended |
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Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Indebtedness | Indebtedness Credit Facility On October 26, 2017, the Operating Partnership entered into an amended and restated credit agreement (the “credit agreement”), which provides for a $300.0 million senior credit facility comprised of a $150.0 million senior unsecured revolving credit facility (the "revolving credit facility") and a $150.0 million senior unsecured term loan facility (the "term loan facility" and, together with the revolving credit facility, the "credit facility"), with a syndicate of banks. The credit facility includes an accordion feature that allows the total commitments to be increased to $450.0 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, 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. 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 plus a margin ranging from 1.40% to 2.00% and the term loan facility bears interest at LIBOR plus a margin ranging from 1.35% to 1.95%, 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 March 31, 2018 and December 31, 2017, the outstanding balance on the revolving credit facility was $108.0 million and $66.0 million, respectively, and the outstanding balance on the term loan facility was $180.0 million and $150.0 million, respectively. As of March 31, 2018, the effective interest rates on the revolving credit facility and the term loan facility were 3.43% and 3.38%, respectively. 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 agreement. Subsequent to March 31, 2018 In April 2018, the Company increased its borrowings under the revolving credit facility by $19.0 million. Other Financing Activity On January 22, 2018, the Company extended 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. During the three months ended March 31, 2018, the Company borrowed $9.5 million under its construction loans to fund new development and construction. |
Derivative Financial Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | Derivative Financial Instruments The Company may enter into interest rate derivative contracts to manage exposure to interest rate risks. The Company does not use derivative financial instruments for trading or speculative purposes. Derivative financial instruments are recognized at fair value and presented within other assets and liabilities in the condensed consolidated balance sheets. Gains and losses resulting from changes in the fair value of derivatives that are neither designated nor qualify as hedging instruments are recognized within the change in fair value of interest rate derivatives in the condensed consolidated statements of income. For derivatives that qualify as cash flow hedges, the effective portion of the gain or loss is reported as a component of other comprehensive loss and reclassified into earnings in the periods during which the hedged forecasted transaction affects earnings. On March 7, 2018, the Operating Partnership entered into a LIBOR interest rate cap agreement on a notional amount of $50.0 million at a strike rate of 2.25% for a premium of $0.3 million. The interest rate cap expires on April 1, 2020. The Company’s derivatives were comprised of the following as of March 31, 2018 and December 31, 2017 (in thousands):
The changes in the fair value of the Company’s derivatives during the three months ended March 31, 2018 and 2017 were comprised of the following (in thousands):
The Company has not designated any of its current derivatives as hedging instruments under GAAP. Subsequent to March 31, 2018 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. |
Equity |
3 Months Ended |
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Mar. 31, 2018 | |
Equity [Abstract] | |
Equity | Equity Stockholders’ Equity On February 26, 2018, the Company commenced an at-the-market continuous equity offering program (the “ATM Program”) through which the Company may, from time to time, issue and sell shares of its common stock having an aggregate offering price of up to $125.0 million. During the three months ended March 31, 2018, the Company did not issue any shares of common stock under the ATM Program. As of March 31, 2018 and December 31, 2017, the Company’s authorized capital was 500 million shares of common stock and 100 million shares of preferred stock. The Company had 45,205,575 and 44,937,763 shares of common stock issued and outstanding as of March 31, 2018 and December 31, 2017, respectively. No shares of preferred stock were issued and outstanding as of March 31, 2018 or December 31, 2017. Noncontrolling Interests As of March 31, 2018 and December 31, 2017, the Company held a 72.2% and 72.0% interest, respectively, in the Operating Partnership. 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 72.2% 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 March 31, 2018, there were 17,440,861 Class A Units not held by the Company. The Company's financial position and results of operations are the same as those of the Operating Partnership. The noncontrolling interest for the consolidated entities under development or construction (see Note 1) was zero as of March 31, 2018 and December 31, 2017. 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 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 into Class A Units on January 10, 2018. As partial consideration for the acquisition of Parkway Centre, the Operating Partnership issued 117,228 Class A Units on January 29, 2018. Common Stock Dividends and Class A Unit Distributions On January 4, 2018, the Company paid cash dividends of $8.5 million to common stockholders and the Operating Partnership paid cash distributions of $3.3 million to holders of Class A Units. On February 22, 2018, the Board of Directors declared a cash dividend and distribution of $0.20 per share and unit payable on April 5, 2018 to stockholders and unitholders of record on March 28, 2018. Subsequent to March 31, 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 5, 2018, the Company paid cash dividends of $9.0 million to common stockholders and the Operating Partnership paid cash distributions of $3.5 million to holders of Class A Units. 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. During April 2018, the Company issued and sold an aggregate of 31,468 shares of common stock at a weighted average price of $13.79 per share under the ATM Program, receiving net proceeds, after offering costs and commissions, of $0.4 million. |
Stock-Based Compensation |
3 Months Ended |
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Mar. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation On June 14, 2017, the Company's stockholders approved the Company's Amended and Restated 2013 Equity Incentive Plan (the "Amended Plan"), which, among other things, increased the number of shares of the Company's common stock reserved for issuance under the Amended Plan by 1,000,000 shares, from 700,000 shares to 1,700,000 shares. As of March 31, 2018, there were 1,050,269 shares available for issuance under the Amended Plan. During the three months ended March 31, 2018, the Company granted an aggregate of 131,065 shares of restricted stock to employees and non-employee directors with a weighted average grant date fair value of $13.35 per share. 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. Non-employee director restricted stock awards vest either immediately upon grant or over a period of one year, subject to continued service to the Company. During the three months ended March 31, 2018, the Company issued performance-based awards in the form of restricted stock units to certain employees. The performance period for these awards is three years, with a required two-year service period immediately following the expiration of the performance period in order to fully vest. The compensation expense and the effect on the Company’s weighted average diluted shares calculation were immaterial. During the three months ended March 31, 2018 and 2017, the Company recognized $0.8 million and $0.7 million, respectively, of stock-based compensation expense. As of March 31, 2018, there were 135,484 nonvested restricted shares outstanding; the total unrecognized compensation expense related to nonvested restricted shares was $1.3 million, which the Company expects to recognize over the next 24 months. |
Fair Value of Financial Instruments |
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Fair Value of Financial Instruments | 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—quoted prices in active markets for identical assets or liabilities Level 2—observable inputs other than quoted prices in active markets for identical assets and liabilities Level 3—unobservable inputs The carrying amounts and fair values of the Company’s financial instruments, all of which are based on Level 2 inputs, as of March 31, 2018 and December 31, 2017, were as follows (in thousands):
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Related Party Transactions |
3 Months Ended |
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Mar. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions The Company provides general contracting and real estate services to certain related party entities that are not included in these condensed consolidated financial statements. Revenue from construction contracts with related party entities of the Company for the three months ended March 31, 2018 and 2017 was $1.2 million and $6.6 million, respectively, and gross profit from such contracts for the three months ended March 31, 2018 and 2017 was $0.2 million for each period. Real estate services fees from affiliated entities of the Company were not significant for the three months ended March 31, 2018 or 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 significant for the three months ended March 31, 2018 and 2017. The Operating Partnership entered into tax protection agreements that indemnify certain directors and executive officers of the Company from their tax liabilities resulting from the potential future sale of certain of the Company’s properties within seven (or, in a limited number of cases, ten) years of the completion of the Company’s initial public offering and formation transactions completed on May 13, 2013. In addition, the tax protection agreements provide that the Operating Partnership will offer certain of the original contributors, including certain of the Company’s directors and executive officers, the opportunity to guarantee debt, or, alternatively, to enter into a deficit restoration obligation, for ten years from the closing of the Company’s initial public offering in a manner intended to provide an allocation of Operating Partnership liabilities to the partner for U.S. federal income tax purposes. Pursuant to these tax protection agreements, certain of the Company’s executive officers have guaranteed approximately $0.3 million of the Operating Partnership’s outstanding debt as of March 31, 2018. |
Commitments and Contingencies |
3 Months Ended |
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Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 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 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. 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 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. 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 $43.8 million and $44.9 million as of March 31, 2018 and December 31, 2017, respectively. The Operating Partnership has entered into standby letters of credit using the available capacity under the credit facility. Letters of credit generally are available for draw down in the event the Company does not perform. As of both March 31, 2018 and December 31, 2017, the Operating Partnership had total outstanding letters of credit of $2.1 million. The amounts outstanding at March 31, 2018 and December 31, 2017 were comprised of a $2.1 million letter of credit related to the guarantee on the Point Street Apartments senior construction loan. |
Summary of Significant Accounting Policies (Policies) |
3 Months Ended |
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Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The condensed consolidated financial statements include the financial position and results of operations of the Company and its consolidated subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for the fair presentation of the financial condition and results of operations for the interim periods presented. The accompanying condensed consolidated financial statements were prepared in accordance with the requirements for interim financial information. Accordingly, these interim financial statements have not been audited and exclude certain disclosures required for annual financial statements. Also, the operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These interim financial statements should be read in conjunction with the audited consolidated financial statements of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed. Such estimates are based on management’s historical experience and best judgment after considering past, current and expected events and economic conditions. Actual results could differ significantly from management’s estimates. |
General Contracting and Real Estate Services Revenues | General Contracting and Real Estate Services Revenues On January 1, 2018, the Company adopted the new accounting standard codified in Accounting Standards Codification 606 - Revenue from Contracts with Customers (see also "Recent Accounting Pronouncements" below). 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, and the Company estimates its progress in satisfying performance obligations for each contract using the percentage-of-completion method, based on the proportion of incurred costs 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. Provisions for estimated losses on uncompleted contracts are recognized immediately in the period in which such losses are determined. The Company defers pre-contract costs when such costs are directly associated with specific anticipated contracts and their recovery is probable. The Company recognizes real estate services revenues from property development and management services as it satisfies its performance obligations under these service arrangements. The Company assesses whether multiple contracts with a single counterparty should be combined into a single contract for 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. 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 March 31, 2018 during the next twelve months. Billings in excess of construction contract costs and estimated earnings represent billings or collections on contracts made in advance of revenue recognized. The Company defers pre-contract costs when such costs are directly associated with specific anticipated contracts and their recovery is probable. |
Recent Accounting Pronouncements | 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 new guidance will be effective for the Company on January 1, 2019, with early adoption permitted. The Company does not currently have any derivatives designated as hedging instruments for accounting purposes but may designate new derivative contracts as hedging instruments in the future. The application of this guidance to future hedging relationships could reduce or eliminate the gains and losses that would otherwise be recorded for these derivative instruments. Recent Accounting Pronouncements 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. On February 25, 2016, the FASB issued a new lease standard that requires lessees to recognize most leases in their balance sheets as lease liabilities with corresponding right-of-use assets. The new standard also makes targeted changes to lessor accounting. The new standard will be effective for the Company on January 1, 2019 and requires a modified retrospective transition approach for all leases existing at, or entered into after, the beginning of the earliest comparative period presented, with an option to use certain transition relief. Management is currently evaluating the potential impact of the new standard on the Company’s consolidated financial statements. The Company is the lessee on certain ground leases and equipment leases, which represents a majority of the Company's current operating lease payments, and expects to record right-of-use assets and lease liabilities for these leases under the new standard. In 2016, the FASB issued new guidance that addresses eight classification issues related to the statement of cash flows and requires the presentation of total changes in cash, cash equivalents, restricted cash, and restricted cash equivalents in the statement of cash flows. The Company adopted this new guidance effective December 31, 2017, applying it retrospectively to each period presented. The new guidance requires that the statement of cash flows show changes in restricted cash in addition to changes in cash and cash equivalents. No additional changes were required to be made to the Company's consolidated statements of cash flows. |
Segments | 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 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. |
Derivative Financial Instruments | Derivative Financial Instruments The Company may enter into interest rate derivative contracts to manage exposure to interest rate risks. The Company does not use derivative financial instruments for trading or speculative purposes. Derivative financial instruments are recognized at fair value and presented within other assets and liabilities in the condensed consolidated balance sheets. Gains and losses resulting from changes in the fair value of derivatives that are neither designated nor qualify as hedging instruments are recognized within the change in fair value of interest rate derivatives in the condensed consolidated statements of income. For derivatives that qualify as cash flow hedges, the effective portion of the gain or loss is reported as a component of other comprehensive loss and reclassified into earnings in the periods during which the hedged forecasted transaction affects earnings. |
Fair Value of Financial Instruments | 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—quoted prices in active markets for identical assets or liabilities Level 2—observable inputs other than quoted prices in active markets for identical assets and liabilities Level 3—unobservable inputs |
Legal Proceedings | 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 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. 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 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. |
Business of Organization (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of owned properties | As of March 31, 2018, the Company's operating property portfolio consisted of the following properties:
*Located in the Town Center of Virginia Beach |
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Schedule of properties under development or construction | As of March 31, 2018, the following properties that the Company consolidates for financial statement purposes were under development or construction:
(1) The Company is entitled to a preferred return of 9% on a portion of its investment in Harding Place. (2) The Company is entitled to a preferred return of 8% on its investment in Brooks Crossing. (3) The Company is entitled to a preferred return of 9% on its investment in Lightfoot Outparcel. (4) The Company is entitled to a preferred return of 10% on its investment in Market at Mill Creek. *Located in the Town Center of Virginia Beach |
Summary of Significant Accounting Policies (Tables) |
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of restricted cash | 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 (in thousands):
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Summary of changes due to new accounting principle | The following table summarizes the changes made to net cash provided by operating activities and net cash used in investing activities in the consolidated statement of cash flows for the three months ended March 31, 2017 on a retrospective basis (in thousands, no changes were made to net cash provided by (used in) financing activities):
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Segments (Tables) |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net operating income of reportable segments | Net operating income of the Company’s reportable segments for the three months ended March 31, 2018 and 2017 was as follows (in thousands):
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Reconciliation of net operating income to net income | The following table reconciles net operating income to net income, the most directly comparable GAAP measure, for the three months ended March 31, 2018 and 2017 (in thousands):
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Real Estate Investment (Tables) |
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the purchase price allocation | 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 two operating properties purchased during the three months ended March 31, 2018 (in thousands):
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Construction Contracts (Tables) |
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Contractors [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net position of uncompleted construction contracts | The Company’s net position on uncompleted construction contracts comprised the following as of March 31, 2018 and December 31, 2017 (in thousands):
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Summary of balances and changes of construction contracts | 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 three months ended March 31, 2018 (in thousands):
The Company’s balances and changes in construction contract price allocated to unsatisfied performance obligations (backlog) as of March 31, 2018 and December 31, 2017 were as follows (in thousands):
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Derivative Financial Instruments (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of derivatives | The Company’s derivatives were comprised of the following as of March 31, 2018 and December 31, 2017 (in thousands):
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Schedule of changes in fair value of derivatives | The changes in the fair value of the Company’s derivatives during the three months ended March 31, 2018 and 2017 were comprised of the following (in thousands):
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Fair Value of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying amounts and fair values of financial instruments measured based on level two inputs | The carrying amounts and fair values of the Company’s financial instruments, all of which are based on Level 2 inputs, as of March 31, 2018 and December 31, 2017, were as follows (in thousands):
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Business of Organization - Additional Information (Details) |
Mar. 31, 2018 |
Dec. 31, 2017 |
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Business And Organization [Line Items] | ||
Percentage of Operating Partnership held | 72.20% | 72.00% |
General Partner | ||
Business And Organization [Line Items] | ||
Percentage of Operating Partnership held | 0.10% |
Summary of Significant Accounting Policies - Schedule of Restricted Cash (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
Mar. 31, 2017 |
Dec. 31, 2016 |
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Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 15,804 | $ 19,959 | $ 10,039 | $ 21,942 |
Restricted cash | 3,502 | 2,957 | 3,649 | 3,251 |
Cash, cash equivalents, and restricted cash | $ 19,306 | $ 22,916 | $ 13,688 | $ 25,193 |
Summary of Significant Accounting Policies - Prior Period Adjustment (Details) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2018 |
Mar. 31, 2017 |
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Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Net cash provided by operating activities | $ 5,928 | $ 8,274 |
Net cash used for investing activities | $ (69,749) | (13,316) |
Accounting Standards Update 2016-15 | ||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Net cash provided by operating activities | 8,274 | |
Net cash used for investing activities | (13,316) | |
Accounting Standards Update 2016-15 | Activities as originally presented | ||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Net cash provided by operating activities | 7,907 | |
Net cash used for investing activities | (13,347) | |
Accounting Standards Update 2016-15 | Adjustments | ||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Net cash provided by operating activities | 367 | |
Net cash used for investing activities | $ 31 |
Segments - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2018 |
Mar. 31, 2017 |
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Segment Reporting Information | ||
General contracting and real estate services revenues | $ 23,050 | $ 63,519 |
General contracting and real estate services expenses | 22,414 | 61,196 |
Non-cash stock compensation | 549 | 411 |
General and Administrative Expense | ||
Segment Reporting Information | ||
Non-cash stock compensation | 800 | 400 |
General contracting and real estate services | ||
Segment Reporting Information | ||
Non-cash stock compensation | 300 | 200 |
General contracting and real estate services | Intercompany Eliminations | ||
Segment Reporting Information | ||
General contracting and real estate services revenues | 25,900 | 5,900 |
General contracting and real estate services expenses | $ 25,600 | $ 5,700 |
Real Estate Investment - Acquisitions (Details) $ in Millions |
3 Months Ended | ||||
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Feb. 16, 2018
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Jan. 29, 2018
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Jan. 09, 2018
USD ($)
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Mar. 31, 2018
property
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Jan. 18, 2018 |
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Chesterfield, Virginia | |||||
Real Estate Properties | |||||
Capitalized acquisition costs | $ 0.1 | ||||
Payments to acquire land | 2.4 | ||||
Indian Lakes Crossing | |||||
Real Estate Properties | |||||
Consideration transferred | $ 14.7 | ||||
Capitalized acquisition costs | $ 0.2 | ||||
Parkway Centre | |||||
Real Estate Properties | |||||
Consideration transferred | 11.3 | ||||
Capitalized acquisition costs | 0.3 | ||||
Acquisition, cash consideration | 9.6 | ||||
Acquisition, equity consideration | $ 1.7 | ||||
Indian Lakes Crossing And Parkway Centre | |||||
Real Estate Properties | |||||
Number of operating properties acquired | property | 2 | ||||
Market at Mill Creek Partners, LLC | |||||
Real Estate Properties | |||||
Capitalized acquisition costs | $ 0.1 | ||||
Payments to acquire land | $ 2.9 | ||||
Ownership interest in partnership | 70.00% |
Construction Contracts (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Dec. 31, 2017 |
|
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Deferred pre-contract costs | $ 0.5 | $ 0.3 |
Construction receivables retentions | 9.4 | 12.9 |
Retention payable | $ 16.8 | $ 16.3 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-04-01 | Minimum | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Expected completion of contracts | 12 months | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-04-01 | Maximum | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Expected completion of contracts | 18 months |
Construction Contracts - Summary of Costs in Excess of Billings and Billings in Excess of Costs (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
| |
Change In Contract With Customer, Asset [Roll Forward] | |
Balance as of January 1, 2018 | $ 245 |
Transferred to receivables | (245) |
Construction contract costs and estimated earnings not billed during the period | 315 |
Changes due to cumulative catch-up adjustment arising from changes in the estimate of the stage of completion | 0 |
Balance as of March 31, 2018 | 315 |
Change In Contract With Customer, Liability [Roll Forward] | |
Balance as of January 1, 2018 | 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 | 2,313 |
Changes due to cumulative catch-up adjustment arising from changes in the estimate of the stage of completion | (78) |
Balance as of March 31, 2018 | $ 2,235 |
Construction Contracts - Summary of Net Position (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Contractors [Abstract] | ||
Costs incurred on uncompleted construction contracts | $ 542,790 | $ 520,368 |
Estimated earnings | 18,673 | 18,070 |
Billings | (563,383) | (541,784) |
Net position | (1,920) | (3,346) |
Construction contract costs and estimated earnings in excess of billings | 315 | 245 |
Billings in excess of construction contract costs and estimated earnings | $ (2,235) | $ (3,591) |
Construction Contracts - Summary of Backlog (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Revenue, Remaining Performance Obligation [Roll Forward] | ||
Beginning backlog | $ 49,167 | $ 217,718 |
New contracts/change orders | 4,569 | 3,441 |
Work performed | (23,003) | (63,437) |
Ending backlog | $ 30,733 | $ 157,722 |
Derivative Financial Instruments - Additional Information (Details) - USD ($) |
Apr. 23, 2018 |
Mar. 31, 2018 |
Mar. 07, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Derivatives | ||||
Interest rate agreement, notional amount | $ 376,033,000 | $ 401,079,000 | ||
Interest Rate Swaps | ||||
Derivatives | ||||
Interest rate agreement, notional amount | 56,033,000 | 56,079,000 | ||
Interest Rate Caps | ||||
Derivatives | ||||
Interest rate agreement, notional amount | $ 320,000,000 | $ 50,000,000.0 | $ 345,000,000 | |
Strike rate | 2.25% | |||
Interest rate cap agreement, premium (less than) | $ 300,000 | |||
Operating Partnership | Subsequent Event | Interest Rate Swaps | ||||
Derivatives | ||||
Interest rate agreement, notional amount | $ 50,000,000 | |||
Fixed interest rate | 2.783% |
Derivative Financial Instruments - Schedule of Derivatives (Details) - USD ($) |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Mar. 07, 2018 |
Dec. 31, 2017 |
|
Derivatives | ||||
Notional Amount | $ 376,033,000 | $ 401,079,000 | ||
Asset, Fair Value | 2,735,000 | 1,525,000 | ||
Liability, Fair Value | 0 | (69,000) | ||
Total change in fair value of interest rate derivatives | 969,000 | $ 294,000 | ||
Interest rate swaps | ||||
Derivatives | ||||
Notional Amount | 56,033,000 | 56,079,000 | ||
Asset, Fair Value | 289,000 | 10,000 | ||
Liability, Fair Value | 0 | (69,000) | ||
Total change in fair value of interest rate derivatives | 348,000 | 261,000 | ||
Interest rate caps | ||||
Derivatives | ||||
Notional Amount | 320,000,000 | $ 50,000,000.0 | 345,000,000 | |
Asset, Fair Value | 2,446,000 | 1,515,000 | ||
Liability, Fair Value | 0 | $ 0 | ||
Total change in fair value of interest rate derivatives | $ 621,000 | $ 33,000 |
Fair Value of Financial Instruments - Carrying Amounts and Fair Values of Financial Instruments Measured based on Level Two Inputs (Detail) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Carrying Value | ||
Fair Value of Financial Instruments | ||
Indebtedness | $ 589,634 | $ 517,272 |
Interest rate liabilities | 0 | 69 |
Interest rate assets | 2,735 | 1,525 |
Fair Value | Level 2 | ||
Fair Value of Financial Instruments | ||
Indebtedness | 586,717 | 518,417 |
Interest rate liabilities | 0 | 69 |
Interest rate assets | $ 2,735 | $ 1,525 |
Related Party Transactions - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
May 13, 2013 |
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Construction Contracts | |||
Related Party Transactions | |||
Revenue from contracts with affiliated entities | $ 1.2 | $ 6.6 | |
Gross profit from related parties | 0.2 | 0.2 | |
Real Estate Service Fees | |||
Related Party Transactions | |||
Revenue from contracts with affiliated entities | 0.0 | 0.0 | |
Cost Reimbursements | |||
Related Party Transactions | |||
Revenue from contracts with affiliated entities | 0.0 | $ 0.0 | |
Tax Protection Agreements | Operating Partnership | |||
Related Party Transactions | |||
Future sale period for properties | 7 years | ||
Future sale period for properties in limited number of cases | 10 years | ||
Period of opportunity to guarantee debt | 10 years | ||
Tax Protection Agreements | Operating Partnership | Executive Officers | |||
Related Party Transactions | |||
Guarantee of debt | $ 0.3 |
Commitments and Contingencies - Additional Information (Details) - USD ($) $ in Millions |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Commitments and Contingencies | ||
Line of credit, performance and payment bonds | $ 43.8 | $ 44.9 |
Financial Guarantee | Letter of Credit | Point Street Apartments | ||
Commitments and Contingencies | ||
Credit facility, amount outstanding | 2.1 | |
Credit facility, amount outstanding | 2.1 | 2.1 |
Operating Partnership | ||
Commitments and Contingencies | ||
Credit facility, amount outstanding | $ 2.1 | $ 2.1 |
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