Commitments and Contingencies

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Legal Proceedings

The Company is from time to time involved in various disputes, lawsuits, warranty claims, environmental and other matters arising in the ordinary course of its business. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters.

The Company currently is a party to various legal proceedings, none of which management expects will have a material adverse effect on the Company’s financial position, results of operations, or liquidity. Management accrues a liability for litigation if an unfavorable outcome is determined to be probable and the amount of loss can be reasonably estimated. If an unfavorable outcome is determined by management to be probable and a range of loss can be reasonably estimated, management accrues the best estimate within the range; however, if no amount within the range is a better estimate than any other, the minimum amount within the range is accrued. Legal fees related to litigation are expensed as incurred. Management does not believe that the ultimate outcome of these matters, either individually or in the aggregate, could have a material adverse effect on the Company’s financial position or results of operations; however, litigation is subject to inherent uncertainties.

Under the Company’s leases, tenants are typically obligated to indemnify the Company from and against all liabilities, costs, and expenses imposed upon or asserted against it as owner of the properties due to certain matters relating to the operation of the properties by the tenant.

Guarantees

In connection with the Company's mezzanine lending activities, the Company has made guarantees to pay portions of certain senior loans of third parties associated with the development projects. The following table summarizes the payment guarantees made by the Company as of December 31, 2019 (in thousands):



	Payment guarantee amount
The Residences at Annapolis Junction	$	8,300
Delray Plaza	5,180
Nexton Square	12,600
Interlock Commercial	30,654
Total	$	56,734

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

The Operating Partnership has entered into standby letters of credit related to the guarantee of future performance on certain of the Company’s construction contracts. Letters of credit generally are available for draw down in the event the Company does not perform. As of December 31, 2019, the Operating Partnership had an outstanding letter of credit of $9.5 million, as noted above. As of December 31, 2018, the Operating Partnership had an outstanding letter of credit of $2.1 million related to the guarantee on the Point Street Apartments senior construction loan.

Concentrations of Credit Risk

The majority of the Company’s properties are located in Hampton Roads, Virginia. For the years ended December 31, 2019, 2018, and 2017, rental revenues from Hampton Roads properties represented 48%, 53% and 53%, respectively, of the Company’s rental revenues. Many of the Company’s Hampton Roads properties are located in the Town Center of Virginia Beach. For the years ended December 31, 2019, 2018, and 2017, rental revenues from Town Center properties represented 31%, 38% and 38%, respectively, of the Company’s rental revenues.

A group of three construction customers comprised 67%, 55%, and 41% of the Company’s general contracting and real estate services revenues for the years ended December 31, 2019, 2018, and 2017, respectively. The same customers represented 66%, 28%, and 20% of the Company’s general contracting and real estate services segment gross profit for the years ended December 31, 2019, 2018, and 2017, respectively.