| | | | | | | | | | | Exhibit
| | Description | 10.50 | | Purchase and Sale Agreement, dated as of December 3, 2015, by and between DDR-SAU South Square, L.L.C., DDR-SAU Durham Patterson, L.L.C., DDR-SAU Wendover Phase II, L.L.C., DDR-SAU Salisbury Alexander, L.L.C., DDR-SAU Winston-Salem Harper Hill, L.L.C., DDR-SAU Greer North Hampton Market, L.L.C., DDR-SAU Nashville Willowbrook, L.L.C., DDR-SAU South Bend Broadmoor, L.L.C., DDR-SAU Oakland, L.L.C., DDR-SAU Waynesboro, L.L.C., DDR-SAU Pasadena Red Bluff Limited Partnership and AHP Acquisitions, LLC (Incorporated by reference to Exhibit 10.55 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed on March 2, 2016) | | | | 10.51 | | First Amendment to Purchase and Sale Agreement, dated as of December 14, 2015, by and between DDR-SAU South Square, L.L.C., DDR-SAU Durham Patterson, L.L.C., DDR-SAU Wendover Phase II, L.L.C., DDR-SAU Salisbury Alexander, L.L.C., DDR-SAU Winston-Salem Harper Hill, L.L.C., DDR-SAU Greer North Hampton Market, L.L.C., DDR-SAU Nashville Willowbrook, L.L.C., DDR-SAU South Bend Broadmoor, L.L.C., DDR-SAU Oakland, L.L.C., DDR-SAU Waynesboro, L.L.C., DDR-SAU Pasadena Red Bluff Limited Partnership and AHP Acquisitions, LLC (Incorporated by reference to Exhibit 10.56 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed on March 2, 2016) | | | | 10.52 | | Form of Performance Unit Award Agreement (Incorporated by reference to Exhibit 10.57 to the Company's Annual Report on Form 10-K, filed March 1, 2017) | | | | 10.53 | | Second Amended and Restated Credit Agreement, dated as of October 26, 2017,3, 2019, among Armada Hoffler, L.P., as Borrower, Armada Hoffler Properties, Inc., as Parent, Bank of America, N.A., as Administrative Agent, and the other agents and Lenders party thereto (Incorporated by reference to Exhibit 10.1 to the Company's QuarterlyCurrent Report on Form 10-Q,8-K, filed November 1, 2017)on October 9, 2019) | | | | 10.54 | | Second Amended and Restated Guaranty Agreement, dated as of October 26, 2017,3, 2019, among certain subsidiaries of Armada Hoffler, L.P. named therein for the benefit of the Administrative Agent and the Lenders named in the Second Amended and Restated Credit Agreement (Incorporated by reference to Exhibit 10.2 to the Company's QuarterlyCurrent Report on Form 10-Q,8-K, filed November 1, 2017)on October 9, 2019) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 101.INS*101* | | The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, were formatted in Inline XBRL Instance Document(Extensible Business Reporting Language): (i) Consolidated Balance Sheet, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | | | | 101.SCH*104* | | Cover page Interactive Data File - the cover page XBRL Taxonomy Extension Schema Documenttags are embedded within the Inline XBRL. | | | | 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 Taxonomy Extension Presentation Linkbase Document | | | | * | | Filed herewith | | | | ** | | Furnished herewith | | | | † | | Management contract or compensatory plan or arrangement |
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 23, 20182021 | | | | | | ARMADA HOFFLER PROPERTIES, INC. | | | By: | /s/ Louis S. Haddad | | Louis S. Haddad | | President and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. | | | | | | | | | | | | | | | Signature | | Title | | Date | | | | | | Signature | | Title | | Date | | | | | | /s/ Daniel A. Hoffler | | Executive Chairman and Director | | February 23, 20182021 | Daniel A. Hoffler | | | | | | | | | | /s/ A. Russell Kirk | | Vice Chairman and Director | | February 23, 2018 | A. Russell Kirk | | | | | | | | | | /s/ Louis S. Haddad | | Vice Chairman, President, Chief Executive Officer and Director | | February 23, 20182021 | Louis S. Haddad | | (principal executive officer) | | | | | | | | /s/ Michael P. O’Hara | | Chief Financial Officer, Treasurer, and TreasurerSecretary | | February 23, 20182021 | Michael P. O’Hara | | (principal financial officer and principal accounting officer) | | | | | | | | /s/ George F. Allen | | Director | | February 23, 20182021 | George F. Allen | | | | | | | | | | /s/ James A. Carroll | | Director | | February 23, 20182021 | James A. Carroll | | | | | | | | | | /s/ James C. Cherry | | Director | | February 23, 20182021 | James C. Cherry | | | | | | | | | | /s/ Eva S. Hardy | | Director | | February 23, 20182021 | Eva S. Hardy | | | | | | | | | | /s/ A. Russell Kirk | | Director | | February 23, 2021 | A. Russell Kirk | | | | | | | | | | /s/ Dorothy S. McAuliffe | | Director | | February 23, 2021 | Dorothy S. McAuliffe | | | | | | | | | | /s/ John W. Snow | | Director | | February 23, 20182021 | John W. Snow | | | | |
Armada Hoffler Properties, Inc. Form 10-K For the Fiscal Year Ended December 31, 20172020 Item 8, Item 15(a)(1) and (2) Index to Financial Statements and Schedule
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Armada Hoffler Properties, Inc.
Opinion on theInternal Control over Financial Statements Reporting
We have audited Armada Hoffler Properties, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the accompanying consolidated balance sheetsCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Armada Hoffler Properties, Inc. (the Company), maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017 and 2016, and2020, based on the related consolidated statements of comprehensive income, equity and cash flows for eachCOSO criteria. We also have audited, in accordance with the standards of the three years inPublic Company Accounting Oversight Board (United States) (PCAOB), the period ended December 31, 2017, and the related notes and the financial statement schedule listed in the Index at Item 15(2) (collectively referred to as the "consolidated financial statements"). In our opinion, the2020 consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles. our report dated February 23, 2021 expressed an unqualified opinion thereon.
Basis for Opinion TheseThe Company’s management is responsible for maintaining effective internal control over financial statements are the responsibilityreporting and for its assessment of the Company's management.effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial statementsreporting based on our audits.audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Tysons, Virginia
February 23, 2021
Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Armada Hoffler Properties, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Armada Hoffler Properties, Inc. (the Company) as of December 31, 2020 and 2019, the related consolidated statements of comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and Financial Statement Schedule listed in the Index at Item 15(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 23, 2021 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| | | | | | | Allowance for Loan Losses - Notes Receivable | Description of the Matter | /s/ Ernst & Young LLPAt December 31, 2020, the Company’s notes receivable portfolio totaled $135.4 million, net of allowances of $2.6 million. As discussed in Notes 2 and 6 to the consolidated financial statements, management estimates the allowance for loan losses on outstanding notes receivable based primarily upon relevant historical loan loss data sets, the forecast for macroeconomic conditions, loan-to-value of the underlying project, remaining contractual loan term, and other relevant loan-specific factors. For loans experiencing financial difficulty as of the measurement date, the Company recognizes expected credit losses calculated as the difference between the amortized cost basis of the financial asset and the estimated fair value of the collateral, which includes an estimation of the projected sales proceeds from the sale of the underlying property.
Auditing management’s estimate of the allowance for loan losses was complex and highly judgmental due to the significant estimation required to determine the estimated fair value of the collateral. In particular, the estimated fair value of the collateral was highly sensitive to significant assumptions based on management’s expectations about future real estate market or economic conditions and the projected operating results of the property. | | | How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the allowance for loan losses process. For example, we tested controls over management’s review of the estimated allowance, the significant assumptions, and the data used to calculate the estimated fair value of the collateral.
To test the allowance for loan losses, we performed audit procedures that included, among others, assessing methodologies used and testing the significant assumptions and underlying data used by the Company in calculating the estimated fair value of the collateral. We compared the significant assumptions used by management to external evidence, including comparable market capitalization rates and recent market activity of similar property transactions. We tested the projected operating results of properties by comparing inputs and assumptions to executed or draft lease agreements and operating expenses incurred at similar operating properties owned by the Company. We performed sensitivity analyses of significant assumptions to evaluate the changes to the estimated fair value of the collateral that would result from changes in the assumptions. We also assessed the historical accuracy of management’s estimates. | | | | General contracting revenue recognition | | | Description of the Matter | For the year ended December 31, 2020, the Company’s general contracting revenues totaled approximately $217.1 million. As described in Notes 2 and 7 to the consolidated financial statements, for each construction contract, the Company estimates its progress in satisfying performance obligations based on the proportion of incurred costs to total estimated costs at completion. The Company also estimates the total transaction price, including variable components, for each construction contract.
Auditing the Company’s measurement of general contracting revenue was challenging due to the significant estimation required to determine the estimated total costs at completion and variable consideration. Estimated costs at completion are affected by management’s forecasts of anticipated costs to be incurred and contingency reserves for exposures related to unknown costs, such as design deficiencies and subcontractor defaults. Estimated variable consideration is affected by claims and unapproved change orders, which may result from changes in the scope of the contract. | | |
| | | | | | How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over the measurement of general contracting revenue. For example, we tested controls over management’s review and monitoring of the variable consideration calculation and the underlying assumptions related to estimates of costs at completion.
To test general contracting revenue recognition, our audit procedures included, among others, evaluating the estimates discussed above and testing the completeness and accuracy of the underlying data used by the Company to calculate variable consideration and total estimated costs at completion. For example, we tested variable consideration by inspecting subsequently executed change orders, reviewing legally enforceable terms of the contracts or confirming the value of executed change orders directly with the customers. We also confirmed directly with customers specific contract details, including the current and original contract value as well as the estimated percentage of completion. We tested the estimated costs at completion by comparing management’s cost estimates of materials, labor, and subcontractors to third-party evidence, such as subcontractor bids. In addition, we visited property sites, conducted interviews with the Company’s project management personnel, and involved our engineering specialists to assist in testing the Company’s estimated costs at completion. We also assessed the historical accuracy of management’s estimates of variable consideration and estimated costs at completion through retrospective review of actual gross-margins of completed projects compared to the anticipated gross margins during the projects. | | | | Accounting for Acquisition of Operating Properties | | | Description of the Matter | During 2020, the Company completed three operating property acquisitions for a total purchase price of $188.8 million as described in Notes 2 and 5 to the consolidated financial statements. These transactions were accounted for as asset acquisitions.
Auditing the Company's accounting for these acquisitions was challenging due to the significant estimation required by management to determine the fair values of the acquired assets used to allocate costs of the acquisitions on a relative fair value basis. The significant estimation was primarily due to the sensitivity of the respective fair values to underlying assumptions. The significant assumptions used to estimate the values of the tangible and intangible assets included the replacement cost of the properties, total lease-up time and lost rental revenues during such time, market rents, estimated future cash flows and other valuation assumptions. | | | How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s acquisition and purchase price allocation process, including controls over management’s review of the significant assumptions described above. For example, we tested controls over management’s review of the valuation methodology, the purchase price allocation, and the significant assumptions used.
To test the costs allocated to the tangible and intangible assets, we involved our valuation specialists and performed audit procedures that included, among others, evaluating the Company’s valuation methodologies, testing the significant assumptions described above and testing the completeness and accuracy of the underlying data. For example, we compared the significant assumptions to observable market data, including other properties within the same submarkets and to historical costs incurred by the Company in developing and constructing similar assets. We also performed sensitivity analyses of the significant assumptions to evaluate the change in fair values resulting from the changes in assumptions. In addition, we compared the Company’s estimated fair values of acquired assets to independent estimates developed by our valuation specialist. |
/s/ Ernst & Young LLP
We have served as the Company'sCompany’s auditor since 2012.
Tysons, Virginia February 23, 2018 2021
ARMADA HOFFLER PROPERTIES, INC. Consolidated Balance Sheets (In thousands, except par value and share data) | | | | | | | | | | | | | DECEMBER 31, | | 2020 | | 2019 | ASSETS | | | | Real estate investments: | | | | Income producing property | $ | 1,680,943 | | | $ | 1,460,723 | | Held for development | 13,607 | | | 5,000 | | Construction in progress | 63,367 | | | 140,601 | | | 1,757,917 | | | 1,606,324 | | Accumulated depreciation | (253,965) | | | (224,738) | | Net real estate investments | 1,503,952 | | | 1,381,586 | | Real estate investments held for sale | 1,165 | | | 1,460 | | Cash and cash equivalents | 40,998 | | | 39,232 | | Restricted cash | 9,432 | | | 4,347 | | Accounts receivable, net | 28,259 | | | 23,470 | | Notes receivable, net | 135,432 | | | 159,371 | | Construction receivables, including retentions, net | 38,735 | | | 36,361 | | Construction contract costs and estimated earnings in excess of billings | 138 | | | 249 | | Equity method investment | 1,078 | | | 0 | | Operating lease right-of-use assets | 32,760 | | | 33,088 | | Finance lease right-of-use assets | 23,544 | | | 24,130 | | Acquired lease intangible assets | 58,154 | | | 68,702 | | Other assets | 43,324 | | | 32,901 | | Total Assets | $ | 1,916,971 | | | $ | 1,804,897 | | LIABILITIES AND EQUITY | | | | Indebtedness, net | $ | 963,845 | | | $ | 950,537 | | Accounts payable and accrued liabilities | 23,900 | | | 17,803 | | Construction payables, including retentions | 49,821 | | | 53,382 | | Billings in excess of construction contract costs and estimated earnings | 6,088 | | | 5,306 | | Operating lease liabilities | 41,659 | | | 41,474 | | Finance lease liabilities | 17,954 | | | 17,903 | | Other liabilities | 56,902 | | | 63,045 | | Total Liabilities | 1,160,169 | | | 1,149,450 | | Stockholders’ equity: | | | | Preferred stock, $0.01 par value, 100,000,000 shares authorized: 6.75% Series A Cumulative Redeemable Perpetual Preferred Stock, 9,980,000 and 2,930,000 shares authorized as of December 31, 2020 and 2019, respectively, 6,843,418 and 2,530,000 shares issued and outstanding as of December 31, 2020 and 2019, respectively | 171,085 | | | 63,250 | | Common stock, $0.01 par value, 500,000,000 shares authorized; 59,073,220 and 56,277,971 shares issued and outstanding as of December 31, 2020 and 2019, respectively | 591 | | | 563 | | Additional paid-in capital | 472,747 | | | 455,680 | | Distributions in excess of earnings | (112,356) | | | (106,676) | | Accumulated other comprehensive loss | (8,868) | | | (4,240) | | Total stockholders’ equity | 523,199 | | | 408,577 | | Noncontrolling interests in investment entities | 488 | | | 4,462 | | Noncontrolling interests in Operating Partnership | 233,115 | | | 242,408 | | Total Equity | 756,802 | | | 655,447 | | Total Liabilities and Equity | $ | 1,916,971 | | | $ | 1,804,897 | |
| | | | | | | | | | DECEMBER 31, | | 2017 | | 2016 | ASSETS | | | | Real estate investments: | | | | Income producing property | $ | 910,686 |
| | $ | 894,078 |
| Held for development | 680 |
| | 680 |
| Construction in progress | 83,071 |
| | 13,529 |
| | 994,437 |
| | 908,287 |
| Accumulated depreciation | (164,521 | ) | | (139,553 | ) | Net real estate investments | 829,916 |
| | 768,734 |
| Cash and cash equivalents | 19,959 |
| | 21,942 |
| Restricted cash | 2,957 |
| | 3,251 |
| Accounts receivable, net | 15,691 |
| | 15,052 |
| Notes receivable | 83,058 |
| | 59,546 |
| Construction receivables, including retentions | 23,933 |
| | 39,433 |
| Construction contract costs and estimated earnings in excess of billings | 245 |
| | 110 |
| Equity method investments | 11,411 |
| | 10,235 |
| Other assets | 55,953 |
| | 64,165 |
| Total Assets | $ | 1,043,123 |
| | $ | 982,468 |
| LIABILITIES AND EQUITY | | | | Indebtedness, net | $ | 517,272 |
| | $ | 522,180 |
| Accounts payable and accrued liabilities | 15,180 |
| | 10,804 |
| Construction payables, including retentions | 47,445 |
| | 51,130 |
| Billings in excess of construction contract costs and estimated earnings | 3,591 |
| | 10,167 |
| Other liabilities | 39,352 |
| | 39,209 |
| Total Liabilities | 622,840 |
| | 633,490 |
| Stockholders’ equity: | | | | Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued and outstanding as of December 31, 2017 and 2016, respectively | — |
| | — |
| Common stock, $0.01 par value, 500,000,000 shares authorized, 44,937,763 and 37,490,361 shares issued and outstanding as of December 31, 2017 and 2016, respectively | 449 |
| | 374 |
| Additional paid-in capital | 287,407 |
| | 197,114 |
| Distributions in excess of earnings | (61,166 | ) | | (49,345 | ) | Total stockholders’ equity | 226,690 |
| | 148,143 |
| Noncontrolling interests | 193,593 |
| | 200,835 |
| Total Equity | 420,283 |
| | 348,978 |
| Total Liabilities and Equity | $ | 1,043,123 |
| | $ | 982,468 |
|
See Notes to Consolidated Financial Statements.
ARMADA HOFFLER PROPERTIES, INC. Consolidated Statements ofComprehensiveIncome (In thousands, except per shareand unitdata) | | | | | | | | | | | | | | | | | | | YEARS ENDED DECEMBER 31, | | 2020 | | 2019 | | 2018 | Revenues | | | | | | Rental revenues | $ | 166,488 | | | $ | 151,339 | | | $ | 116,958 | | General contracting and real estate services revenues | 217,146 | | | 105,859 | | | 76,359 | | Total revenues | 383,634 | | | 257,198 | | | 193,317 | | Expenses | | | | | | Rental expenses | 38,960 | | | 34,332 | | | 27,222 | | Real estate taxes | 18,136 | | | 14,961 | | | 11,383 | | General contracting and real estate services expenses | 209,472 | | | 101,538 | | | 73,628 | | Depreciation and amortization | 59,972 | | | 54,564 | | | 39,913 | | Amortization of right-of-use assets - finance leases | 586 | | | 377 | | | 0 | | General and administrative expenses | 12,905 | | | 12,392 | | | 11,431 | | Acquisition, development and other pursuit costs | 584 | | | 844 | | | 352 | | Impairment charges | 666 | | | 252 | | | 1,619 | | Total expenses | 341,281 | | | 219,260 | | | 165,548 | | Gain on real estate dispositions | 6,388 | | | 4,699 | | | 4,254 | | Operating income | 48,741 | | | 42,637 | | | 32,023 | | Interest income | 19,841 | | | 23,215 | | | 10,729 | | Interest expense on indebtedness | (30,120) | | | (30,776) | | | (19,087) | | Interest expense on finance leases | (915) | | | (568) | | | 0 | | Equity in income of unconsolidated real estate entities | 0 | | | 273 | | | 372 | | | | | | | | Change in fair value of derivatives and other | (1,130) | | | (3,599) | | | (951) | | Provision for unrealized credit losses | (256) | | | 0 | | | 0 | | Other income (expense), net | 515 | | | 585 | | | 377 | | Income before taxes | 36,676 | | | 31,767 | | | 23,463 | | Income tax benefit | 283 | | | 491 | | | 29 | | Net income | 36,959 | | | 32,258 | | | 23,492 | | Net (income) loss attributable to noncontrolling interests: | | | | | | Investment entities | 230 | | | (213) | | | 0 | | Operating Partnership | (8,037) | | | (7,992) | | | (6,289) | | Net income attributable to Armada Hoffler Properties, Inc. | 29,152 | | | 24,053 | | | 17,203 | | Preferred stock dividends | (7,349) | | | (2,455) | | | 0 | | Net income attributable to common stockholders | $ | 21,803 | | | $ | 21,598 | | | $ | 17,203 | | Net income attributable to common stockholders per share (basic and diluted) | $ | 0.38 | | | $ | 0.41 | | | $ | 0.36 | | Weighted-average common shares outstanding (basic and diluted) | 57,328 | | | 53,119 | | | 47,512 | | | | | | | | Comprehensive income: | | | | | | Net income | $ | 36,959 | | | $ | 32,258 | | | $ | 23,492 | | Unrealized cash flow hedge losses | (9,751) | | | (4,504) | | | (1,894) | | Realized cash flow hedge losses reclassified to net income | 3,345 | | | 501 | | | 169 | | Comprehensive income | 30,553 | | | 28,255 | | | 21,767 | | Comprehensive (income) loss attributable to noncontrolling interests: | | | | | | Investment entities | 230 | | | (213) | | | 0 | | Operating Partnership | (6,259) | | | (6,946) | | | (5,847) | | Comprehensive income attributable to Armada Hoffler Properties, Inc. | $ | 24,524 | | | $ | 21,096 | | | $ | 15,920 | |
| | | | | | | | | | | | | | YEARS ENDED DECEMBER 31, | | 2017 | | 2016 | | 2015 | Revenues | | | | | | Rental revenues | $ | 108,737 |
| | $ | 99,355 |
| | $ | 81,172 |
| General contracting and real estate services revenues | 194,034 |
| | 159,030 |
| | 171,268 |
| Total revenues | 302,771 |
| | 258,385 |
| | 252,440 |
| Expenses | | | | | | Rental expenses | 25,422 |
| | 21,904 |
| | 19,204 |
| Real estate taxes | 10,528 |
| | 9,629 |
| | 7,782 |
| General contracting and real estate services expenses | 186,590 |
| | 153,375 |
| | 165,344 |
| Depreciation and amortization | 37,321 |
| | 35,328 |
| | 23,153 |
| General and administrative expenses | 10,435 |
| | 9,552 |
| | 8,397 |
| Acquisition, development and other pursuit costs | 648 |
| | 1,563 |
| | 1,935 |
| Impairment charges | 110 |
| | 355 |
| | 41 |
| Total expenses | 271,054 |
| | 231,706 |
| | 225,856 |
| Operating income | 31,717 |
| | 26,679 |
| | 26,584 |
| Interest income | 7,077 |
| | 3,228 |
| | 126 |
| Interest expense | (17,439 | ) | | (16,466 | ) | | (13,333 | ) | Loss on extinguishment of debt | (50 | ) | | (82 | ) | | (512 | ) | Gain on real estate dispositions | 8,087 |
| | 30,533 |
| | 18,394 |
| Change in fair value of interest rate derivatives | 1,127 |
| | (941 | ) | | (229 | ) | Other income | 131 |
| | 147 |
| | 119 |
| Income before taxes | 30,650 |
| | 43,098 |
| | 31,149 |
| Income tax benefit (provision) | (725 | ) | | (343 | ) | | 34 |
| Net income | 29,925 |
| | 42,755 |
| | 31,183 |
| Net income attributable to noncontrolling interests | (8,878 | ) | | (14,681 | ) | | (11,541 | ) | Net income attributable to stockholders | $ | 21,047 |
| | $ | 28,074 |
| | $ | 19,642 |
| Net income per share and unit: | | | | | | Basic and diluted | $ | 0.50 |
| | $ | 0.85 |
| | $ | 0.75 |
| Weighted-average outstanding: | | | | | | Common shares | 42,423 |
| | 33,057 |
| | 26,006 |
| Common units | 17,758 |
| | 17,167 |
| | 15,377 |
| Basic and diluted | 60,181 |
| | 50,224 |
| | 41,383 |
| Comprehensive income: | |
| | |
| | |
| Net income | $ | 29,925 |
| | $ | 42,755 |
| | $ | 31,183 |
| Unrealized cash flow hedge losses | — |
| | — |
| | (1,075 | ) | Realized cash flow hedge losses reclassified to net income | — |
| | — |
| | 27 |
| Comprehensive income | 29,925 |
| | 42,755 |
| | 30,135 |
| Comprehensive income attributable to noncontrolling interests | (8,878 | ) | | (14,681 | ) | | (11,141 | ) | Comprehensive income attributable to stockholders | $ | 21,047 |
| | $ | 28,074 |
| | $ | 18,994 |
|
See Notes to Consolidated Financial Statements.
ARMADA HOFFLER PROPERTIES, INC. Consolidated Statements of Equity (In thousands, except share data) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Preferred stock | | | | Common stock | | Additional paid-in capital | | Distributions in excess of earnings | | Accumulated other comprehensive loss | | Total stockholders' equity | | Noncontrolling interests in investment entities | | Noncontrolling interests in Operating Partnership | | Total equity | Balance, January 1, 2018 | $ | 0 | | | | | $ | 449 | | | $ | 287,407 | | | $ | (61,166) | | | $ | 0 | | | $ | 226,690 | | | $ | 0 | | | $ | 193,593 | | | $ | 420,283 | | Net income | — | | | | | — | | | — | | | 17,203 | | | — | | | 17,203 | | | — | | | 6,289 | | | 23,492 | | Unrealized cash flow hedge losses | — | | | | | — | | | — | | | — | | | (1,410) | | | (1,410) | | | — | | | (484) | | | (1,894) | | Realized cash flow hedge losses reclassified to net income | — | | | | | — | | | — | | | — | | | 127 | | | 127 | | | — | | | 42 | | | 169 | | Net proceeds from issuance of common stock | — | | | | | 46 | | | 65,198 | | | — | | | — | | | 65,244 | | | — | | | — | | | 65,244 | | Restricted stock awards, net of tax withholding | — | | | | | 2 | | | 1,562 | | | — | | | — | | | 1,564 | | | — | | | — | | | 1,564 | | Restricted stock award forfeitures | — | | | | | — | | | (32) | | | — | | | — | | | (32) | | | — | | | — | | | (32) | | Issuance of operating partnership units for acquisitions | — | | | | | — | | | (5) | | | — | | | — | | | (5) | | | — | | | 2,201 | | | 2,196 | | Redemption of operating partnership units | — | | | | | 3 | | | 3,223 | | | — | | | — | | | 3,226 | | | — | | | (5,821) | | | (2,595) | | Dividends and distributions declared | — | | | | | — | | | — | | | (38,736) | | | — | | | (38,736) | | | — | | | (13,801) | | | (52,537) | | Balance, December 31, 2018 | 0 | | | | | 500 | | | 357,353 | | | (82,699) | | | (1,283) | | | 273,871 | | | 0 | | | 182,019 | | | 455,890 | | Cumulative effect of accounting change (1) | — | | | | | — | | | — | | | (125) | | | — | | | (125) | | | — | | | (42) | | | (167) | | Net income | — | | | | | — | | | — | | | 24,053 | | | — | | | 24,053 | | | 213 | | | 7,992 | | | 32,258 | | Unrealized cash flow hedge losses | — | | | | | — | | | — | | | — | | | (3,321) | | | (3,321) | | | — | | | (1,183) | | | (4,504) | | Realized cash flow hedge losses reclassified to net income | — | | | | | — | | | — | | | — | | | 364 | | | 364 | | | — | | | 137 | | | 501 | | Net proceeds from issuance of cumulative redeemable perpetual preferred stock | 63,250 | | | | | — | | | (2,249) | | | — | | | — | | | 61,001 | | | — | | | — | | | 61,001 | | Net proceeds from issuance of common stock | — | | | | | 59 | | | 96,786 | | | — | | | — | | | 96,845 | | | — | | | — | | | 96,845 | | Restricted stock awards, net of tax withholding | — | | | | | 2 | | | 2,029 | | | — | | | — | | | 2,031 | | | — | | | — | | | 2,031 | | Noncontrolling interest in acquired real estate entity | — | | | | | — | | | — | | | — | | | — | | | — | | | 4,870 | | | — | | | 4,870 | | Restricted stock award forfeitures | — | | | | | — | | | (7) | | | — | | | — | | | (7) | | | — | | | — | | | (7) | | Issuance of operating partnership units for acquisitions | — | | | | | — | | | (986) | | | — | | | — | | | (986) | | | — | | | 73,169 | | | 72,183 | | Redemption of operating partnership units | — | | | | | 2 | | | 2,754 | | | — | | | — | | | 2,756 | | | — | | | (2,756) | | | 0 | | Distributions to Joint Venture Partners | — | | | | | — | | | — | | | — | | | — | | | — | | | (621) | | | — | | | (621) | | Dividends declared on preferred stock | — | | | | | — | | | — | | | (2,455) | | | — | | | (2,455) | | | — | | | — | | | (2,455) | | Dividends and distributions declared on common shares and units | — | | | | | — | | | — | | | (45,450) | | | — | | | (45,450) | | | — | | | (16,928) | | | (62,378) | | Balance, December 31, 2019 | 63,250 | | | | | 563 | | | 455,680 | | | (106,676) | | | (4,240) | | | 408,577 | | | 4,462 | | | 242,408 | | | 655,447 | | Cumulative effect of accounting change (2) | — | | | | | — | | | — | | | (2,185) | | | — | | | (2,185) | | | — | | | (824) | | | (3,009) | | Net income (loss) | — | | | | | — | | | — | | | 29,152 | | | — | | | 29,152 | | | (230) | | | 8,037 | | | 36,959 | | Unrealized cash flow hedge losses | — | | | | | — | | | — | | | — | | | (7,082) | | | (7,082) | | | — | | | (2,669) | | | (9,751) | | Realized cash flow hedge losses reclassified to net income | — | | | | | — | | | — | | | — | | | 2,454 | | | 2,454 | | | — | | | 891 | | | 3,345 | | Net proceeds from issuance of cumulative redeemable perpetual preferred stock | 107,835 | | | | | — | | | (6,375) | | | — | | | — | | | 101,460 | | | — | | | — | | | 101,460 | | Net proceeds from issuance of common stock | — | | | | | 19 | | | 19,631 | | | — | | | — | | | 19,650 | | | — | | | — | | | 19,650 | | Restricted stock awards, net of tax withholding | — | | | | | 2 | | | 2,351 | | | — | | | — | | | 2,353 | | | — | | | — | | | 2,353 | | | | | | | | | | | | | | | | | | | | | | Restricted stock award forfeitures | — | | | | | — | | | (11) | | | — | | | — | | | (11) | | | — | | | — | | | (11) | | Acquisitions of noncontrolling interests | — | | | | | — | | | (7,388) | | | — | | | — | | | (7,388) | | | (3,744) | | | 6,099 | | | (5,033) | | | | | | | | | | | | | | | | | | | | | | Redemption of operating partnership units | — | | | | | 7 | | | 8,859 | | | — | | | — | | | 8,866 | | | — | | | (11,595) | | | (2,729) | | | | | | | | | | | | | | | | | | | | | | Dividends declared on preferred stock | — | | | | | — | | | — | | | (7,349) | | | — | | | (7,349) | | | — | | | — | | | (7,349) | | Dividends and distributions declared on common shares and units | — | | | | | — | | | — | | | (25,298) | | | — | | | (25,298) | | | — | | | (9,232) | | | (34,530) | | Balance, December 31, 2020 | $ | 171,085 | | | | | $ | 591 | | | $ | 472,747 | | | $ | (112,356) | | | $ | (8,868) | | | $ | 523,199 | | | $ | 488 | | | $ | 233,115 | | | $ | 756,802 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Shares of common stock | | Common stock | | Additional paid- in capital | | Distributions in excess of earnings | | Accumulated other comprehensive loss | | Total stockholders’ equity (deficit) | | Noncontrolling interests | | Total Equity | Balance, January 1, 2015 | 25,022,701 |
| | $ | 250 |
| | $ | 51,472 |
| | $ | (54,413 | ) | | $ | — |
| | $ | (2,691 | ) | | $ | 164,597 |
| | $ | 161,906 |
| Net income | — |
| | — |
| | — |
| | 19,642 |
| | — |
| | 19,642 |
| | 11,541 |
| | 31,183 |
| Unrealized cash flow hedge losses | — |
| | — |
| | — |
| | — |
| | (665 | ) | | (665 | ) | | (410 | ) | | (1,075 | ) | Realized cash flow hedge losses reclassified to net income | — |
| | — |
| | — |
| | — |
| | 17 |
| | 17 |
| | 10 |
| | 27 |
| Net proceeds from sale of common stock | 4,560,049 |
| | 45 |
| | 45,990 |
| | — |
| | — |
| | 46,035 |
| | — |
| | 46,035 |
| Restricted stock awards | 78,109 |
| | 1 |
| | 992 |
| | — |
| | — |
| | 993 |
| | — |
| | 993 |
| Acquisitions of real estate investments | 415,500 |
| | 4 |
| | 4,429 |
| | — |
| | — |
| | 4,433 |
| | 10,736 |
| | 15,169 |
| Exchange of owners’ equity for common units | — |
| | — |
| | 23 |
| | — |
| | — |
| | 23 |
| | (264 | ) | | (241 | ) | Dividends and distributions declared | — |
| | — |
| | — |
| | (18,239 | ) | | — |
| | (18,239 | ) | | (10,038 | ) | | (28,277 | ) | Balance, December 31, 2015 | 30,076,359 |
| | $ | 300 |
| | $ | 102,906 |
| | $ | (53,010 | ) | | $ | (648 | ) | | $ | 49,548 |
| | $ | 176,172 |
| | $ | 225,720 |
| Net income | — |
| | — |
| | — |
| | 28,074 |
| | — |
| | 28,074 |
| | 14,681 |
| | 42,755 |
| Dedesignation of cash flow hedge | — |
| | — |
| | — |
| | — |
| | 648 |
| | 648 |
| | 400 |
| | 1,048 |
| Net proceeds from sale of common stock | 5,312,855 |
| | 53 |
| | 66,969 |
| | — |
| | — |
| | 67,022 |
| | — |
| | 67,022 |
| Restricted stock awards | 101,147 |
| | 1 |
| | 1,161 |
| | — |
| | — |
| | 1,162 |
| | — |
| | 1,162 |
| Acquisitions of real estate investments | 2,000,000 |
| | 20 |
| | 26,080 |
| | — |
| | — |
| | 26,100 |
| | 21,178 |
| | 47,278 |
| Redemption of operating partnership units | — |
| | — |
| | (2 | ) | | — |
| | — |
| | (2 | ) | | (56 | ) | | (58 | ) | Dividends and distributions declared | — |
| | — |
| | — |
| | (24,409 | ) | | — |
| | (24,409 | ) | | (11,540 | ) | | (35,949 | ) | Balance, December 31, 2016 | 37,490,361 |
| | $ | 374 |
| | $ | 197,114 |
| | $ | (49,345 | ) | | $ | — |
| | $ | 148,143 |
| | $ | 200,835 |
| | $ | 348,978 |
| Net income | — |
| | — |
| | — |
| | 21,047 |
| | — |
| | 21,047 |
| | 8,878 |
| | 29,925 |
| Net proceeds from sales of common stock | 7,350,690 |
| | 74 |
| | 91,307 |
| | — |
| | — |
| | 91,381 |
| | — |
| | 91,381 |
| Restricted stock awards | 97,173 |
| | 1 |
| | 1,442 |
| | — |
| | — |
| | 1,443 |
| | — |
| | 1,443 |
| Restricted stock award forfeitures | (461 | ) | | — |
| | (2 | ) | | — |
| | — |
| | (2 | ) | | — |
| | (2 | ) | Acquisitions of noncontrolling interests in real estate investments | — |
| | — |
| | (1,493 | ) | | — |
| | — |
| | (1,493 | ) | | 982 |
| | (511 | ) | Redemption of operating partnership units | — |
| | — |
| | (961 | ) | | — |
| | — |
| | (961 | ) | | (4,194 | ) | | (5,155 | ) | Dividends and distributions declared | — |
| | — |
| | — |
| | (32,868 | ) | | — |
| | (32,868 | ) | | (12,908 | ) | | (45,776 | ) | Balance, December 31, 2017 | 44,937,763 |
| | $ | 449 |
| | $ | 287,407 |
| | $ | (61,166 | ) | | $ | — |
| | $ | 226,690 |
| | $ | 193,593 |
| | $ | 420,283 |
|
(1) The Company recorded cumulative effect adjustments related to the new lease standard in the first quarter of 2019. See "Financial Statements — Note 2 — Significant Accounting Policies — Recent Accounting Pronouncements" for additional information. (2) The Company recorded cumulative effect adjustments related to the new Current Expected Credit Losses ("CECL") standard in the first quarter of 2020. See "Financial Statements — Note 2 — Significant Accounting Policies — Recent Accounting Pronouncements" for additional information.
See Notes to Consolidated Financial Statements.
ARMADA HOFFLER PROPERTIES, INC. Consolidated Statements of Cash Flows (In thousands) | | | | | | | | | | | | | | | | | | | YEARS ENDED DECEMBER 31, | | 2020 | | 2019 | | 2018 | OPERATING ACTIVITIES | | | | | | Net income | $ | 36,959 | | | $ | 32,258 | | | $ | 23,492 | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | Depreciation of buildings and tenant improvements | 43,671 | | | 37,839 | | | 30,395 | | Amortization of leasing costs, in-place lease intangibles and below market ground rents - operating leases | 16,301 | | | 16,725 | | | 9,518 | | Accrued straight-line rental revenue | (5,927) | | | (3,402) | | | (2,731) | | Amortization of leasing incentives and above or below-market rents | (814) | | | (629) | | | (266) | | Amortization of right-of-use assets - finance leases | 586 | | | 377 | | | 0 | | Accrued straight-line ground rent expense | 100 | | | (16) | | | 214 | | Provision for unrealized credit losses | 256 | | | 0 | | | 0 | | Adjustment for uncollectable accounts | 3,842 | | | 511 | | | 419 | | Noncash stock compensation | 2,378 | | | 1,613 | | | 1,281 | | Impairment charges | 666 | | | 252 | | | 1,619 | | Noncash interest expense | 2,204 | | | 1,258 | | | 1,116 | | Interest expense on finance leases | 915 | | | 568 | | | 0 | | | | | | | | Gain on real estate dispositions | (6,388) | | | (4,699) | | | (4,254) | | Adjustment for Annapolis Junction modification fee (1) | 0 | | | (4,489) | | | 4,489 | | Change in the fair value of interest rate derivatives | 1,130 | | | 3,599 | | | 951 | | Equity in income of unconsolidated real estate entities | 0 | | | (273) | | | (372) | | Changes in operating assets and liabilities: | | | | | | Property assets | (5,960) | | | (2,499) | | | (3,539) | | Property liabilities | 5,762 | | | 3,368 | | | 1,720 | | Construction assets | (2,302) | | | (20,356) | | | 7,554 | | Construction liabilities | 13,708 | | | 18,671 | | | (15,248) | | Interest receivable | (15,908) | | | (12,947) | | | (271) | | Net cash provided by operating activities | 91,179 | | | 67,729 | | | 56,087 | | INVESTING ACTIVITIES | | | | | | Development of real estate investments | (63,485) | | | (133,445) | | | (133,791) | | Tenant and building improvements | (10,077) | | | (19,721) | | | (11,723) | | Acquisitions of real estate investments, net of cash received | (35,151) | | | (138,380) | | | (57,544) | | Dispositions of real estate investments, net of selling costs | 96,459 | | | 32,944 | | | 34,673 | | Notes receivable issuances | (24,484) | | | (54,555) | | | (58,208) | | Notes receivable paydowns | 16,340 | | | 22,522 | | | 1,165 | | Leasing costs | (3,425) | | | (3,893) | | | (4,607) | | Leasing incentives | (1,326) | | | 0 | | | (108) | | Contributions to equity method investments | (1,078) | | | (535) | | | (10,420) | | | | | | | | Net cash used for investing activities | (26,227) | | | (295,063) | | | (240,563) | | FINANCING ACTIVITIES | | | | | | Proceeds from issuance of cumulative redeemable perpetual preferred stock, net | 101,460 | | | 61,001 | | | 0 | | Proceeds from issuance of common stock, net | 19,650 | | | 96,845 | | | 65,244 | | Common shares tendered for tax withholding | (569) | | | (369) | | | (409) | | Debt issuances, credit facility and construction loan borrowings | 176,619 | | | 427,286 | | | 349,580 | | Debt and credit facility repayments, including principal amortization | (299,318) | | | (270,851) | | | (173,855) | | Debt issuance costs | (609) | | | (5,546) | | | (1,457) | | Acquisition of NCI in consolidated RE investments | (5,002) | | | 0 | | | 0 | | Redemption of operating partnership units | (2,729) | | | 0 | | | (2,595) | | | | | | | | Dividends and distributions | (47,603) | | | (61,504) | | | (50,897) | | Net cash provided by (used for) financing activities | (58,101) | | | 246,862 | | | 185,611 | | Net increase in cash, cash equivalents, and restricted cash | 6,851 | | | 19,528 | | | 1,135 | | Cash, cash equivalents, and restricted cash, beginning of period (2) | 43,579 | | | 24,051 | | | 22,916 | | Cash, cash equivalents, and restricted cash, end of period (2) | $ | 50,430 | | | $ | 43,579 | | | $ | 24,051 | |
See Notes to Consolidated Financial Statements. ARMADA HOFFLER PROPERTIES, INC. Consolidated Statements of Cash Flows (Continued) (In thousands) | | | | | | | | | | | | | | | | | | | YEARS ENDED DECEMBER 31, | | 2020 | | 2019 | | 2018 | Supplemental cash flow information: | | | | | | Cash paid for interest | $ | 28,554 | | | $ | 28,878 | | | $ | 17,319 | | Cash refunded for income taxes | 167 | | | 247 | | | 31 | | Increase (decrease) in dividends payable | (5,724) | | | 3,950 | | | 1,640 | | | | | | | | Common shares and OP units issued for acquisitions | 6,099 | | | 73,169 | | | 1,702 | | (Decrease) increase in accrued capital improvements and development costs | (14,324) | | | (12,666) | | | 18,310 | | Operating Partnership units redeemed for common shares | 8,866 | | | 2,756 | | | 3,715 | | | | | | | | Note payable recorded for mandatorily redeemable partnership interest | 3,829 | | | 0 | | | 0 | | Debt assumed at fair value in conjunction with real estate purchases | 122,300 | | | 101,390 | | | 0 | | | | | | | | | | | | | | Note receivable extinguished in conjunction with real estate purchase | 42,270 | | | 31,252 | | | 0 | | Equity method investment redeemed for real estate acquisition | 0 | | | 23,011 | | | 0 | | Noncontrolling interest in acquired real estate entity | 0 | | | 4,870 | | | 0 | | Note payable issued in acquisition of noncontrolling interest in real estate investment | 6,130 | | | 0 | | | 0 | | Recognition of operating lease right-of-use assets (3) | 0 | | | 33,965 | | | 0 | | Recognition of operating lease liabilities (3) | 0 | | | 41,631 | | | 0 | | Recognition of finance lease right-of-use assets | 0 | | | 24,500 | | | 0 | | Recognition of finance lease liabilities | 0 | | | 17,871 | | | 0 | | De-recognition of operating lease ROU assets - lease termination | 0 | | | 440 | | | 0 | | De-recognition of operating lease liabilities - lease termination | 0 | | | 440 | | | 0 | |
| | | | | | | | | | | | | | YEARS ENDED DECEMBER 31, | | 2017 | | 2016 | | 2015 | OPERATING ACTIVITIES | | | | | | Net income | $ | 29,925 |
| | $ | 42,755 |
| | $ | 31,183 |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | Depreciation of buildings and tenant improvements | 25,974 |
| | 23,453 |
| | 18,678 |
| Amortization of leasing costs and in-place lease intangibles | 11,347 |
| | 11,875 |
| | 4,475 |
| Accrued straight-line rental revenue | (1,222 | ) | | (1,091 | ) | | (1,924 | ) | Amortization of leasing incentives and above or below-market rents | (195 | ) | | (85 | ) | | 738 |
| Accrued straight-line ground rent expense | 530 |
| | 371 |
| | 290 |
| Bad debt expense | 564 |
| | 203 |
| | 131 |
| Noncash stock compensation | 1,323 |
| | 1,082 |
| | 931 |
| Impairment charges | 110 |
| | 355 |
| | 41 |
| Noncash interest expense | 1,274 |
| | 980 |
| | 1,006 |
| Noncash loss on extinguishment of debt | 50 |
| | 82 |
| | 512 |
| Gain on real estate dispositions | (8,087 | ) | | (30,533 | ) | | (18,394 | ) | Change in the fair value of interest rate derivatives | (1,127 | ) | | 941 |
| | 229 |
| Changes in operating assets and liabilities: | | | | | | Property assets | (2,415 | ) | | (2,964 | ) | | (2,283 | ) | Property liabilities | 2,504 |
| | 3,761 |
| | 2,326 |
| Construction assets | 17,573 |
| | (6,385 | ) | | (17,337 | ) | Construction liabilities | (20,110 | ) | | 15,189 |
| | 12,664 |
| Net cash provided by operating activities | 58,018 |
| | 59,989 |
| | 33,266 |
| INVESTING ACTIVITIES | | | | | | Development of real estate investments | (45,730 | ) | | (57,425 | ) | | (52,719 | ) | Tenant and building improvements | (12,252 | ) | | (6,698 | ) | | (5,157 | ) | Acquisitions of real estate investments, net of cash received | (30,026 | ) | | (195,645 | ) | | (68,445 | ) | Dispositions of real estate investments | 12,557 |
| | 96,670 |
| | 79,566 |
| Notes receivable issuances | (23,290 | ) | | (51,721 | ) | | (7,825 | ) | Government development grants | — |
| | — |
| | 300 |
| Leasing costs | (2,235 | ) | | (2,374 | ) | | (2,118 | ) | Leasing incentives | (274 | ) | | (236 | ) | | (1,563 | ) | Contributions to equity method investments | (1,176 | ) | | (8,824 | ) | | — |
| Net cash used for investing activities | (102,426 | ) | | (226,253 | ) | | (57,961 | ) | FINANCING ACTIVITIES | | | | | | Proceeds from sales of common stock | 96,044 |
| | 68,475 |
| | 46,462 |
| Offering costs | (4,663 | ) | | (1,453 | ) | | (427 | ) | Debt issuances, credit facility and construction loan borrowings | 162,585 |
| | 316,852 |
| | 214,407 |
| Debt and credit facility repayments, including principal amortization | (160,661 | ) | | (186,533 | ) | | (206,889 | ) | Debt issuance costs | (2,403 | ) | | (1,796 | ) | | (1,887 | ) | Redemption of operating partnership units | (5,155 | ) | | (58 | ) | | (241 | ) | Dividends and distributions | (43,616 | ) | | (33,843 | ) | | (27,024 | ) | Net cash provided by financing activities | 42,131 |
| | 161,644 |
| | 24,401 |
| Net decrease in cash, cash equivalents, and restricted cash | (2,277 | ) | | (4,620 | ) | | (294 | ) | Cash, cash equivalents, and restricted cash, beginning of period | 25,193 |
| | 29,813 |
| | 30,107 |
| Cash, cash equivalents, and restricted cash, end of period | $ | 22,916 |
| | $ | 25,193 |
| | $ | 29,813 |
| Supplemental cash flow information: | | | | | | Cash paid for interest | $ | (16,318 | ) | | $ | (15,326 | ) | | $ | (12,993 | ) | Cash refunded (paid) for income taxes | $ | (371 | ) | | $ | (121 | ) | | $ | 276 |
| Common shares and OP Units issued for acquisitions (1) | $ | 506 |
| | $ | 47,278 |
| | $ | 15,169 |
| Change in accrued capital improvements and development costs | $ | (10,899 | ) | | $ | 8,183 |
| | $ | 1,825 |
| Debt principal extinguished in conjunction with real estate sales | $ | 5,594 |
| | $ | 6,400 |
| | $ | — |
| Debt principal assumed in conjunction with real estate acquisitions | $ | — |
| | $ | 21,150 |
| | $ | 13,824 |
|
(1) 2017 issuance consistsBorrower paid $5.0 million in 2018 in exchange for the Company's purchase option. This was accounted for as a loan modification fee; interest income was recognized as additional interest income on the note receivable over the one-year remaining term.
(2) 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 OP Units contingently issuable upon the satisfactioncash flows: | | | | | | | | | | | | | | | As of December 31, | | | | 2020 | | 2019 | | | Cash and cash equivalents | $ | 40,998 | | | $ | 39,232 | | | | Restricted cash (a) | 9,432 | | | 4,347 | | | | Cash, cash equivalents, and restricted cash | $ | 50,430 | | | $ | 43,579 | | | |
(a) Restricted cash represents amounts held by lenders for real estate taxes, insurance, and reserves for capital improvements.
(3) Amounts attributable to 2019 are net of certain conditions relating$0.4 million related to the Johns Hopkins VillageCompany's preexisting lease at the Thames Street Wharf property, which was acquired on June 26, 2019.
See Notes to Consolidated Financial Statements.
ARMADA HOFFLER PROPERTIES, INC. Notes to Consolidated Financial Statements | | 1. | Business and Organization |
1. Business and Organization Armada Hoffler Properties, Inc. (the “Company”"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 a real estate investment trust ("REIT"), and is the sole general partner of Armada Hoffler, L.P. (the “Operating Partnership”"Operating Partnership"), and as of December 31, 2017,2020, owned 72.0%73.9% 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. Both the Company and the Operating Partnership were formed on October 12, 2012 and commenced operations upon completion of the underwritten initial public offering of shares of the Company’s common stock (the “IPO”"IPO") and certain related formation transactions on May 13, 2013.
As of December 31, 2017,2020, the Company's operating portfolio consisted of the following properties: | | | | | | | | | | | | | | | | | | | | | Property | | Segment | | Location | | Ownership Interest | 4525 Main Street | | Office | | Virginia Beach, Virginia* | | 100% | Armada Hoffler Tower | | Office | | Virginia Beach, Virginia* | | 100% | Brooks Crossing Office | | Office | | Newport News, Virginia | | 100% | One City Center | | Office | | Durham, North Carolina | | 100% | One Columbus | | Office | | Virginia Beach, Virginia* | | 100% | Thames Street Wharf | | Office | | Baltimore, Maryland | | 100% | Two Columbus | | Office | | Virginia Beach, Virginia* | | 100% | 249 Central Park Retail | | Retail | | Virginia Beach, Virginia* | | 100% | Apex Entertainment | | Retail | | Virginia Beach, Virginia* | | 100% | Broad Creek Shopping Center | | Retail | | Norfolk, Virginia | | 100% | Broadmoor Plaza | | Retail | | South Bend, Indiana | | 100% | Brooks Crossing Retail (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% | Dimmock Square | | Retail | | Colonial Heights, Virginia | | 100% | Fountain Plaza Retail | | Retail | | Virginia Beach, Virginia* | | 100% | Greentree Shopping Center | | Retail | | Chesapeake, Virginia | | 100% | Hanbury Village | | Retail | | Chesapeake, Virginia | | 100% | Harrisonburg Regal | | Retail | | Harrisonburg, Virginia | | 100% | Lexington Square | | Retail | | Lexington, South Carolina | | 100% | Market at Mill Creek (1) | | Retail | | Mount Pleasant, South Carolina | | 70% | Marketplace at Hilltop | | Retail | | Virginia Beach, Virginia | | 100% | Nexton Square | | Retail | | Summerville, South Carolina | | 100% | 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% |
| | | | | | | | | 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 | | Retail | | Newport News, Virginia | | 65% | (1) | 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% | | Lightfoot Marketplace | | Retail | | Williamsburg, Virginia | | 70% | (2) | North Hampton Market | | Retail | | Taylors, South Carolina | | 100% | | North Point Center | | Retail | | Durham, North Carolina | | 100% | | Oakland Marketplace | | Retail | | Oakland, Tennessee | | 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% | |
| | | | | | | | | | | | | | | | | | | | | Property | | Segment | | Location | | Ownership Interest | Patterson Place | | Retail | | Durham, North Carolina | | 100% | Perry Hall Marketplace | | Retail | | Perry Hall, Maryland | | 100% | Providence Plaza | | Retail | | Charlotte, North Carolina | | 100% | Red Mill Commons | | Retail | | Virginia Beach, Virginia | | 100% | Sandbridge Commons | | Retail | | Virginia Beach, Virginia | | 100% | Socastee Commons | | Retail | | Myrtle Beach, South Carolina | | 100% | South Retail | | Retail | | Virginia Beach, Virginia* | | 100% | South Square | | Retail | | Durham, North Carolina | | 100% | Southgate Square | | Retail | | Colonial Heights, Virginia | | 100% | Southshore Shops | | Retail | | Chesterfield, Virginia | | 100% | Studio 56 Retail | | Retail | | Virginia Beach, Virginia* | | 100% | Tyre Neck Harris Teeter | | Retail | | Portsmouth, Virginia | | 100% | Wendover Village | | Retail | | Greensboro, North Carolina | | 100% | 1405 Point | | Multifamily | | Baltimore, Maryland | | 100% | Edison Apartments | | Multifamily | | Richmond, VA | | 100% | Encore Apartments | | Multifamily | | Virginia Beach, Virginia* | | 100% | Greenside Apartments | | Multifamily | | Charlotte, North Carolina | | 100% | Hoffler Place | | Multifamily | | Charleston, South Carolina | | 93% | Johns Hopkins Village | | Multifamily | | Baltimore, Maryland | | 100% | Liberty Apartments | | Multifamily | | Newport News, Virginia | | 100% | Premier Apartments | | Multifamily | | Virginia Beach, Virginia* | | 100% | Smith’s Landing | | Multifamily | | Blacksburg, Virginia | | 100% | Summit Place | | Multifamily | | Charleston, South Carolina | | 90% | The Cosmopolitan | | Multifamily | | Virginia Beach, Virginia* | | 100% | The Residences at Annapolis Junction (1) | | Multifamily | | Annapolis Junction, MD | | 79% |
* Located in the Town Center of Virginia Beach (1) The Company is entitled to a preferred return of 8% on its investment in Brooks Crossing.this property. (2) The Company is entitled to a preferred return
As of 9% on its investment in Lightfoot Marketplace.December 31, 2020, the following properties were under development, redevelopment or not yet stabilized: | | | | | | | | | | | | | | | | | | | | | Property | | Segment | | Location | | Ownership Interest | Wills Wharf | | Office | | Baltimore, Maryland | | 100% | Premier Retail | | Retail | | Virginia Beach, Virginia* | | 100% | Solis Gainesville | | Multifamily | | Gainesville, Georgia | | 95% | | | | | | | |
* Located in the Town Center of Virginia Beach
As of December 31, 2017, the following properties were under development or construction:2. Significant Accounting Policies
| | | | | | | | | | Property | | Segment | | Location | | Ownership Interest | | Town Center Phase VI | | Mixed-use | | Virginia Beach, Virginia* | | 100 | % | | Harding Place | | Multifamily | | Charlotte, North Carolina | | 80 | % | (1) | 595 King Street | | Multifamily | | Charleston, South Carolina | | 92.5 | % | | 530 Meeting Street | | Multifamily | | Charleston, South Carolina | | 90 | % | | Brooks Crossing | | Office | | Newport News, Virginia | | 65 | % | (2) |
*Located in the Town Center of Virginia Beach
(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.
| | 2. | Significant Accounting Policies |
Basis of Presentation The accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”("GAAP"). The consolidated financial statements include the financial position and results of operations of the Company, the Operating Partnership, its wholly owned subsidiaries, and any interests in variable interest entities ("VIEs") where the Company has been determined to be the primary beneficiary. All significant intercompany transactions and balances have been eliminated in consolidation.
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 from management’s estimates. Segments Segment information is prepared on the same basis that management reviews information for operational decision-making purposes. Management evaluates the performance of each of the Company’s properties individually and aggregates such properties into segments based on their economic characteristics and classes of tenants. The Company operates in four4 business segments: (i) office real estate, (ii) retail real estate, (iii) multifamily residential real estate, and (iv) general contracting and real estate services. The Company’s general contracting and real estate services business develops and builds properties for its own account and also provides construction and development services to both related and third parties.
Reclassifications
Certain amounts previously reported in the consolidated financial statements have been reclassified in the accompanying consolidated financial statements to conform to the current period's presentation.
Revenue Recognition Rental Revenues The Company leases its properties under operating leases and recognizes base rents when earned on a straight-line basis over the lease term. Rental revenues include $1.2$5.9 million, $1.1$3.4 million and $1.9$2.7 million of straight-line rent adjustments for the years ended December 31, 2017, 2016,2020, 2019, and 2015,2018, respectively. The Company begins recognizing rental revenue when the tenant has the right to take possession of or controls the physical use of the property under lease. The extended collection period for accrued straight-line rental revenue along with the Company’s evaluation of tenant credit risk may result in the nonrecognition of all or a portion of straight-line rental revenue until the collection of substantially all such revenue for a tenant is reasonably assured.probable. The Company recognizes contingent rental revenue (e.g., percentage rents based on tenant sales thresholds) when the sales thresholds are met. Contingent rents included in rental revenues were $0.4 million, $0.4 million, and $0.5 million for the years ended December 31, 2017, 2016, and 2015, respectively. The Company recognizes leasing incentives as reductions to rental revenue on a straight-line basis over the lease term. Leasing incentive amortization was $0.8$0.7 million for each of the years ended December 31, 2017, 2016,2020, 2019, and
2015. 2018. The Company recognizes fair value adjustments recorded at the time of lease assumption in rental income on a straight line basis as a reduction to revenue over the remaining life of the lease or any renewal periods for which the Company determines have value at the time of acquisition. The Company recognizes cost reimbursement revenue for real estate taxes, operating expenses, and common area maintenance costs on an accrual basis during the periods in which the expenses are incurred. The Company recognizes lease termination fees either upon termination or amortizes them over any remaining lease term.
General Contracting and Real Estate Services Revenues
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 on construction contractswill not occur. The Company recognizes the estimated transaction price as revenue as it satisfies its performance obligations; the Company estimates its progress in satisfying performance obligations for each contract using the percentage-of-completion method. Under thisinput method, the Company recognizes revenue and an estimated profit as construction contract costs are incurred based on the proportion of incurred costs relative to total estimated construction contract costs at completion. Construction contract costs include all direct material, direct labor, and subcontract costs, as well as any indirectand overhead costs directly related to contract performance. Provisions for estimated losses on uncompleted contracts are recognized immediately in the period in which such losses are determined. 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. Profit incentivesAdditionally, the estimated costs at completion are includedaffected by management’s forecasts of anticipated costs to be
incurred and contingency reserves for exposures related to unknown costs, such as design deficiencies and subcontractor defaults. The estimated variable consideration is also affected by claims and unapproved change orders, which may result from changes in revenuesthe scope of the contract. Provisions for estimated losses on uncompleted contracts are recognized immediately in the period in which such losses are determined. The Company defers precontract costs when such costs are directly associated with specific anticipated contracts and their realizationrecovery is probable and when they can be reasonably estimated. probable.
The Company recognizes real estate services revenues from property development and management when realized and earned, generally as such services are provided. Multipleit satisfies its performance obligations under these service arrangements.
The Company assesses whether multiple contracts with a single counterparty are notmay be combined into a single contract for the revenue recognition purposes.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. Real Estate Investments Income producing property primarily includes land, buildings, and tenant improvements and is stated at cost. Real estate investments held for development include land and capitalized development costs.land. The Company reclassifies real estate investments held for development to construction in progress upon commencement of construction. Construction in progress is stated at cost. Direct and certain indirect costs clearly associated with the development, redevelopment, construction, leasing, or expansion of real estate assets are capitalized as a cost of the property. Repairs and maintenance costs are expensed as incurred. The Company capitalizes direct and indirect project costs associated with the initial development of a property until the property is substantially complete and ready for its intended use. Capitalized project costs include preacquisition, development, and preconstruction costs including overhead, salaries, and related costs of personnel directly involved, real estate taxes, insurance, utilities, ground rent, and interest. Interest capitalized during the years ended December 31, 2017, 2016,2020, 2019, and 20152018 was $1.3$3.6 million, $1.0$5.9 million and $1.0$5.0 million, respectively. Overhead, salaries and related personnel costs capitalized during the years ended December 31, 2017, 2016,2020, 2019, and 20152018 were $2.4$2.6 million, $1.7$3.1 million and $2.1$3.1 million, respectively. The Company capitalizes preacquisition developmentpredevelopment costs directly identifiable with specific properties when the acquisitiondevelopment of such properties is probable. Capitalized preacquisition developmentpredevelopment costs are presented within other assets in the consolidated balance sheets. Land for which development activities have not yet commenced are presented separately as land held for development in the consolidated balance sheets. Capitalized preacquisition developmentpredevelopment costs as of December 31, 20172020 and 20162019 were $1.4$15.4 million and $1.1$6.5 million, respectively. Costs attributable to unsuccessful projects are expensed. The Company recognizes real estate development grants from state and local governments as reductions to the carrying amounts of the related real estate investments when any attached conditions are satisfied and when there is reasonable assurance that the grant will be received.
Income producing property is depreciated on a straight-line basis over the following estimated useful lives: | | | | | | Buildings | 39 years | Capital improvements | 15—5—20 years | Equipment | 5—153—7 years | Tenant improvements | Term of the related lease | | (or estimated useful life, if shorter) |
Operating Property Acquisitions Acquisitions of operating properties have been and will generally be accounted for as acquisitions of a group of assets, with costs incurred to effect an acquisition, including title, legal, accounting, brokerage commissions, and other related costs, being capitalized as part of the cost of the assets acquired. In connection with operating propertysuch acquisitions, the Company identifies and recognizes all assets acquired and liabilities assumed at their estimated fair values or relative fair values subsequent to the adoption of the new accounting guidance discussed below, as of the acquisition date. The purchase price allocations to tangible assets, such as land, site improvements, and buildings and improvements are presented within income producing property in the consolidated balance sheets and depreciated over their estimated useful lives. Acquired lease intangiblesintangible assets are presented within otheras a separate component of assets andon the consolidated balance sheets. Acquired lease intangible liabilities are presented within other liabilities in the consolidated balance sheets and amortized over their respective lease terms.sheets. The Company amortizes in-place lease assets as depreciation and amortization expense on a straight-line basis over the remaining term of the related leases. The Company amortizes above-market lease assets as reductions to rental revenues on a straight-line basis over the remaining term of the related leases. The Company amortizes below-market lease liabilities as increases to rental revenues on a straight-line basis over the remaining term
of the related leases. The Company amortizes below-market ground lease assets as increases to rental expenses on a straight-line basis over the remaining term of the related leases. Prior to October 1, 2016, the Company expensed all costs incurred related to operating property acquisitions. On October 1, 2016, the Company adopted newly issued accounting guidance that allows capitalization of costs related to operating property acquisitions that do not meet the definition of a business under the new guidance discussed below under "Recent Accounting Pronouncements". The Company values land based on a market approach, looking to recent sales of similar properties, adjusting for differences due to location, the state of entitlement, as well as the shape and size of the parcel. Improvements to land are valued using a replacement cost approach. The approach applies industry standard replacement costs adjusted for geographic specific considerations and reduced by estimated depreciation. The value of buildings acquired is estimated using the replacement cost approach, assuming the buildings were vacant at acquisition. The replacement cost approach considers the composition of the structures acquired, adjusted for an estimate of depreciation. The estimate of depreciation is made considering industry standard information and depreciation curves for the identified asset classes. The value of acquired lease intangibles considers the estimated cost of leasing the properties as if the acquired buildings were vacant, as well as the value of the current leases relative to market-rate leases. The in-place lease value is determined using an estimated total lease-up time and lost rental revenues during such time. The value of current leases relative to market-rate leases is based on market rents obtained for market comparables. Given the significance of unobservable inputs used in the valuation of acquired real estate assets, the Company classifies them as Level 3 inputs in the fair value hierarchy. The Company values debt assumed in connection with operating property acquisitions based on a discounted cash flow analysis of the expected cash flows of the debt. Such analysis considers the contractual terms of the debt, including the period to maturity, credit characteristics, and uses observable market-based inputs, including interest rate information asother terms of the acquisition date. The Company also considers credit valuation adjustments for potential nonperformance risk. The Company classifies the inputs used to value debt assumed in connection with operating property acquisitions asarrangements, which are Level 23 inputs in the fair value hierarchy as they are predominantly observablehierarchy.
Real Estate Sales
The Company accounts for the sale of real estate assets and market-based.any related gain in accordance with the accounting guidance applicable to sales of real estate, which establishes standards for recognition of profit on all real estate sales transactions other than retail land sales. The Company recognizes the sale and associated gain or loss once it transfers control of the real estate asset and the Company does not have significant continuing involvement.
Real Estate Investments Held for Sale Real estate assets classified as held for sale are reported at the lower of their carrying value or their fair value, less estimated costs to sell. Once a property is classified as held for sale, it is no longer depreciated. A property is classified as held for sale when: (i) senior management commits to a plan to sell the property, (ii) the property is available for immediate sale in its present condition, subject only to conditions usual and customary for such sales, (iii) an active program to locate a buyer and other actions required to complete the plan to sell have been initiated, (iv) the sale is expected to be completed within one year, (v) the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
No properties were held for sale asAs of December 31, 2017 or 2016.2020, the 7-Eleven outparcel at Hanbury Village and a land parcel adjacent to Nexton Square were classified as held for sale. As of December 31, 2019, a land parcel adjacent to the Market at Mill Creek shopping center was classified as held for sale.
Impairment of Long Lived Assets The Company evaluates its real estate assets for impairment on a property by propertyproperty-by-property basis whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If such an evaluation is necessary, the Company compares the carrying amount of any such real estate asset with the undiscounted expected future cash flows that are directly associated with, and that are expected to arise as a direct result of, its use and eventual disposition. If the carrying amount of a real estate asset exceeds the associated estimate of undiscounted expected future cash flows, an impairment loss is recognized to reduce the real estate asset’s carrying value to its fair value. ImpairmentThe impairment charges recognized during the years ended December 31, 2017, 2016,2019 and 20152018 represent unamortized leasing or acquired intangible assets related to vacated tenants. The impairment charges recognized during the year ended December 31, 2018 primarily relate to the $1.5 million impairment of Waynesboro Commons. Interest Income Interest income on notes receivable is accrued based on the contractual terms of the loans and when it is deemed
collectible. Many loans provide for accrual of interest and fees that will not be paid until maturity of the loan. Interest is recognized on these loans at the accrual rate subject to the determination that accrued interest and fees are ultimately collectible, based on the underlying collateral and the status of development activities, as applicable. If this determination cannot be made, recognition of interest income may be fully or partially deferred until it is ultimately paid.
Cash and Cash Equivalents Cash and cash equivalents include demand deposits, investments in money market funds, and investments with an original maturity of three months or less.
Restricted Cash Restricted cash represents amounts held by lenders for real estate taxes, insurance, and reserves for capital improvements. The Company presents changes in cash restricted for real estate taxes and insurance as operating activities in the consolidated statements of cash flows. The Company presents changes in cash restricted for capital improvements as investing activities in the consolidated statements of cash flows. Accounts Receivable, net Accounts receivable include amounts from tenants for base rents, contingent rents, and cost reimbursements as well as accrued straight-line rental revenue. As of December 31, 20172020 and 2016,2019, accrued straight-line rental revenue presented within accounts receivable in the consolidated balance sheets was $12.8$21.3 million and $12.3$17.9 million, respectively. The Company’s evaluation of the collectability of accounts receivable and the adequacy of the allowance for doubtful accounts is based primarily upon evaluations of individual receivables, current economic conditions, historical experience, and other relevant factors. The Company establishes reservesa reserve for the receivables associated with a tenant receivables outstanding over 90 days. Forwhen collection of substantially all such tenants, the Company also reserves any related accrued straight-line rental revenue. Additional reserves are recordedoperating lease payments for more current amounts, as applicable, when the Company has determined collectability to be doubtful.a tenant is not probable. As of December 31, 20172020 and 2016,2019, the allowance for doubtful accounts was $0.5$1.7 million and $0.4$0.3 million, respectively. The Company presents bad debt expense withinreflects these amounts as a component of rental expenses inincome on the consolidated statements of comprehensive income. Notes Receivable and Allowance for Loan Losses Notes receivable primarily represent financing to third parties in the form of mortgage or mezzanine loans for the development of new real estate. The Company's mezzanine loans are typically made to borrowers who have little or no equity in the underlying development projects. Mezzanine loans are secured, in part, by pledges of ownership interests of the entities that own the underlying real estate. The loans generally have junior liens on the respective real estate projects.
The Company’s allowance for loan losses on notes receivable is evaluated using risk ratings that correspond to probabilities of default and loss given default. Risk ratings are determined for each loan after consideration of progress of development activities, including leasing activities, projected development costs, and current and projected mezzanine and senior loan balances. The Company's risk ratings are as follows:
•Pass: loans in this category are adequately collateralized by a development project with conditions materially consistent with the Company's underwriting assumptions. •Special Mention: loans in this category show signs that the economic performance of the project may suffer as a result of slower-than-expected leasing activity or an extended development or marketing timeline. Loans in this category warrant increased monitoring by management. •Substandard: loans in this category may not be fully collected by the Company evaluatesunless remediation actions are taken. Remediation actions may include obtaining additional collateral or assisting the collectability of bothborrower with asset management activities to prepare the project for sale. The Company will also consider placing the loan on nonaccrual status if it does not believe that additional interest on and principalaccruals will ultimately be collected.
At the end of each reporting period, the Company measures expected credit losses to be incurred over the remaining contractual term based on the risk rating of its notes receivable based primarily upon the financial condition of the individual borrowers. Aeach loan. If a loan is determined to be impaired when, based upon current information, it is no longer probable thatrated as Substandard, the Company will be able to collect all contractual amounts due from the borrower. The amount of impairment loss recognized is measuredthen estimates expected credit losses as the difference between the carrying amountamortized cost basis of the outstanding loan and the estimated projected sales proceeds of the underlying collateral. Changes to the allowance for loan losses resulting from quarterly evaluations are recorded through provision for unrealized credit losses on the Consolidated Statements of Comprehensive Income.
Guarantees The Company measures and records a liability for the fair value of its guarantees on a nonrecurring basis upon issuance using Level 3 internally-developed inputs. These guarantees typically relate to payments that could be required of the Company to senior lenders on its mezzanine loan investments. The Company bases its estimated realizable value.fair value on the market approach, which compares the guarantee terms and credit characteristics of the underlying development project to other projects for which guarantee pricing terms are available. The offsetting entry for the guarantee liability is a premium on the related loan receivable. The liability is amortized on a straight-line basis over the remaining term of the loan. On a quarterly basis, the Company assesses the likelihood of a contingent liability in connection with these guarantees and will record an additional guarantee liability if the unamortized guarantee liability is insufficient. Leasing Costs Commissions paid by the Company to third parties to originate a lease are deferred and amortized as depreciation and amortization expense on a straight-line basis over the term of the related lease. Leasing costs are presented within other assets in the consolidated balance sheets.
Leasing Incentives Incentives paid by the Company to tenants are deferred and amortized as reductions to rental revenues on a straight-line basis over the term of the related lease. Leasing incentives are presented within other assets in the consolidated balance sheets. Debt Issuance Costs Financing costs are deferred and amortized as interest expense using the effective interest method over the term of the related debt. Debt issuance costs are presented as a direct deduction from the carrying value of the associated debt liability in the consolidated balance sheets. Derivative Financial Instruments The Company may enter into interest rate derivatives to manage exposure to interest rate risks. The Company does not use derivative financial instruments for trading or speculative purposes. The Company recognizes derivative financial instruments at fair value and presents them within other assets and liabilities in the 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 caption in the consolidated statements of comprehensive 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 income (loss) and reclassified into earnings in the periods during which the hedged forecasted transaction affects earnings. Stock-Based Compensation The Company measures the compensation cost of restricted stock awards based on the grant date fair value. The Company recognizes compensation cost for the vesting of restricted stock awards using the accelerated attribution method. Compensation cost associated with the vesting of restricted stock awards is presented within either general and administrative expenses or general contracting and real estate services expenses in the consolidated statements of comprehensive income. Total stock-based compensation expense recognized during the years ended December 31, 2017, 2016, and 2015 was $1.3 million, $1.1 million and $0.9 million, respectively. Stock-based compensation for personnel directly involved in the construction and development of a property is capitalized. During the years ended December 31, 2017, 2016, and 2015, the Company capitalized $0.4 million, 0.3 million, and $0.4 million, respectively, of stock-based compensation. The effect of forfeitures of awards is recorded as they occur. Income Taxes The Company has elected to be taxed as a REIT for U.S. federal income tax purposes. For continued qualification as a REIT for federal income tax purposes, the Company must meet certain organizational and operational requirements, including a requirement to pay distributions to stockholders of at least 90% of annual taxable income, excluding net capital gains. As a REIT, the Company generally is not subject to income tax on net income distributed as dividends to stockholders. The Company is subject to state and local income taxes in some jurisdictions and, in certain circumstances, may also be subject to federal excise taxes on undistributed income. In addition, certain of the Company’s activities must be conducted by subsidiaries that have elected to be treated as a taxable REIT subsidiary (“TRS”
("TRS") subject to both federal and state income taxes. The Operating Partnership conducts its development and construction businesses through the TRS. The related income tax provision or benefit attributable to the profits or losses of the TRS and any taxable income of the Company is reflected in the consolidated financial statements. The Company uses the liability method of accounting for deferred income tax in accordance with GAAP. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the carrying value of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the statutory rates expected to be applied in the periods in which those temporary differences are settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period of the change. A valuation allowance is recorded on the Company’s deferred tax assets when it is more likely than not that such assets will not be realized. When evaluating the realizability of the Company’s deferred tax assets, all evidence, both positive and negative, is evaluated. Items considered in this analysis include the ability to carrybackcarry back losses, the reversal of temporary differences, tax planning strategies, and expectations of future earnings.
Under GAAP, the amount of tax benefit to be recognized is the amount of benefit that is more likely than not to be sustained upon examination. Management analyzes its tax filing positions in the U.S. federal, state and local jurisdictions where it is required to file income tax returns for all open tax years. If, based on this analysis, management determines that uncertainties in tax positions exist, a liability is established. The Company recognizes accrued interest and penalties related to unrecognized tax positions in the provision for income taxes. If recognized, the entire amount of unrecognized tax positions would be recorded as a reduction to the provision for income taxes. Discontinued Operations Disposals representing a strategic shift that has or will have a major effect on the Company’s operations and financial results are reported as discontinued operations. Net Income Per Share and Unit The Company calculates net income per share and unit based upon the weighted average shares and units outstanding. Diluted net income per share and unit is calculated after giving effect to all significant potential dilutive shares outstanding during the period. Potential dilutive shares outstanding during the period include nonvested restricted stock awards. However, there were no0 significant potential dilutive shares or units outstanding for each of the three years ended December 31, 2017.2020, 2019, and 2018. As a result, basic and diluted outstanding shares and units were the same for all periodseach period presented. See Note 11 for the changes in the Company’s nonvested restricted awards during each of the three years ended December 31, 2017.
Emerging Growth Company StatusRecent Accounting Pronouncements
The Company currently qualifies as an emerging growth company (“EGC”) pursuant to the Jumpstart Our Business Startups Act and will lose this qualification on December 31, 2018, which is the last day of the fiscal year after the fifth anniversary of the Company's IPO. An EGC may choose to take advantage of the extended private company transition period provided for complying with new or revised accounting standards that may be issued byRecently Issued Accounting Standards Adopted:
Credit losses
In June 2016, the Financial Accounting Standards Board (the “FASB”("FASB") orissued ASU No. 2016-13, Financial Instruments-Credit Losses - Measurement of Credit Losses on Financial Instruments (Topic 326). ASU 2016-13 significantly changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance replaces the U.S. Securities"incurred loss" approach under previous guidance with an "expected loss" model for instruments measured at amortized cost, such as the Company's notes receivable, construction receivables, and Exchange Commission (the “SEC”). off-balance sheet credit exposures. The amendment requires entities to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses.
The Company has elected to opt out of such extended transition period. This election is irrevocable. Recent Accounting Pronouncements
On May 28, 2014,adopted the 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 will change the way the Company recognizes revenue from construction and development contracts with third party customers. The Company will adopt this standard on January 1, 20182020, using the modified retrospective transition method applying this standardand recorded a noncash cumulative effect adjustment to all contracts not yet completed asrecord a reduction to retained earnings of that date. In applying the standard$3.0 million, $2.8 million of which relates to the Company's future construction contracts, certain pre-contract costs incurred by the Company will be deferredmezzanine loans and amortized over the period during$0.2 million of 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 standardrelates to the Company's uncompleted contracts asconstruction accounts receivable. See Note 6—Notes Receivable and Current Expected Credit Losses, for more information.
Fair Value Measurements
In August 2018, will not result in a material adjustment to the Company's financial position as of January 1, 2018. Any required adjustment will be recorded as a cumulative catch-up adjustment to stockholders' equity.
On February 25, 2016, the FASB issued a new lease standard that requires lesseesASU 2018-13, Fair Value Measurement - Disclosure Framework—Changes to recognize most leases in their balance sheets as lease liabilities with corresponding right-of-use assets.the Disclosure Requirements for Fair Value Measurement (Topic 820). 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 beginningASU is part of the earliest comparative period presented, with an optionFASB's disclosure framework project to use certain transition relief. Management is currently evaluatingimprove the potential impacteffectiveness of disclosures in the notes to financial statements by facilitating clear communication of the information required by generally accepted accounting principles. The ASU modifies disclosure requirements on fair value measurements in Topic 820. The Company adopted the new standard on the Company’s consolidated financial statements.
On March 30, 2016, the FASB issued new guidance that changed the accounting for certain aspects of share-based payments to employees. Entities are required to recognize the income tax effects of awards in the income statement when the awards vest or are settled, and the Company is allowed to account for forfeitures as they occur. The Company adopted the guidance on January 1, 2017 and it2020. The adoption of the ASU did not have a material impact on disclosures in the Company’sCompany's consolidated financial statements.
Lease Modification Accounting Q&A
In 2016,April 2020, the FASB staff issued newa question and answer document (the "Lease Modification Q&A") focused on the application of lease accounting guidance that addresses eight classification issues related to lease concessions provided as a result of the statement of cash flows and requiresCOVID-19 pandemic. Under existing lease guidance, 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 retrospectivelywould have 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: | | | | | | | | | | | | | | As of December 31 | | 2017 | | 2016 | | 2015 | Cash and cash equivalents | $ | 19,959 |
| | $ | 21,942 |
| | $ | 26,989 |
| Restricted cash | 2,957 |
| | 3,251 |
| | 2,824 |
| Cash, cash equivalents, and restricted cash | $ | 22,916 |
| | $ | 25,193 |
| | $ | 29,813 |
|
The following table summarizes the changes made to net cash provided by operating activities and net cash used in investing activities in consolidated statements of cash flows for the years ended December 31, 2016 and 2015determine, on a retrospectivelease by lease basis, (no changes were made to net cash provided by financing activities):
| | | | | | | | | | Years ended December 31, | | 2016 | | 2015 | Operating activities as originally presented | $ | 59,770 |
| | $ | 33,086 |
| Adjustments | 219 |
| | 180 |
| Operating activities after adjustments | $ | 59,989 |
| | $ | 33,266 |
| | | | | Investing activities as originally presented | $ | (226,461 | ) | | $ | (56,381 | ) | Adjustments | $ | 208 |
| | $ | (1,580 | ) | Investing activities after adjustments | $ | (226,253 | ) | | $ | (57,961 | ) |
On January 5, 2017,if a lease concession was the FASB issued new guidance that modifies the definitionresult of a business. Under this new guidance, many real estate acquisitions will now be considered asset acquisitions, allowing costs associatedarrangement reached with these acquisitionsthe tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A allows lessors, if certain criteria have been met, to be capitalized.bypass the lease by lease analysis, and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. The Company adopted this guidance on October 1, 2016, resulting induring the capitalization of approximately $0.7 million of acquisition costs related to two acquisitions in the fourthsecond quarter of 2016. If2020 and elected to not apply the Company had adopted this guidance on January 1, 2016, approximately $1.4 millionexisting lease modification accounting framework in acquisition costs would have been capitalized.instances where the total payments under a modified lease are substantially the same as or less than the total payments under the existing lease.
On February 22, 2017,Recently Issued Accounting Standards Not Yet Adopted:
Reference Rate Reform
In March 2020, 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 new guidance is effective for the Company on January 1, 2018. Management does not expect the adoptionASU 2020-04, Reference Rate Reform - Facilitation of the newEffects of Reference Rate Reform on Financial Reporting (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance toin ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company is currently evaluating the effect that adopting this standard may have a material effect on the Company's financial position or results of operations.its Consolidated Financial Statements.
OnEarnings Per Share
In August 28, 2017,2020, the FASB issued new guidance thatASU 2020-06, an update to ASC Topic 470 and ASC Topic 815. ASU 2020-06 simplifies some of the requirements relating to accounting for derivativesconvertible instruments and hedging. The new guidance eliminatesremoves certain settlement conditions that are required for equity contracts to qualify for the requirement to separately measure and report hedge ineffectiveness for a highly effective hedge andderivative scope exception. This ASU also simplifies diluted earnings per share calculation in certain documentationareas 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.provides updated disclosure requirements. The Company does notis currently have any derivatives designated as hedging instruments for accounting purposes. The applicationevaluating the impact of this guidance to future hedging relationships could reduce or eliminate the gains and losses that would otherwise be recorded for these derivative instruments.ASU 2020-06 on its consolidated financial statements.
3. 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 as 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 years ended December 31, 2017, 2016,2020, 2019, and 20152018 was as follows (in thousands): | | | Years Ended December 31, | | Years Ended December 31, | | 2017 | | 2016 | | 2015 | | 2020 | | 2019 | | 2018 | Office real estate | | | | | | Office real estate | | | | | | Rental revenues | $ | 19,207 |
| | $ | 20,929 |
| | $ | 31,534 |
| Rental revenues | $ | 43,494 | | | $ | 33,269 | | | $ | 20,701 | | Rental expenses | 5,483 |
| | 5,560 |
| | 6,938 |
| Rental expenses | 10,799 | | | 8,722 | | | 5,858 | | Real estate taxes | 1,859 |
| | 2,000 |
| | 2,950 |
| Real estate taxes | 5,111 | | | 3,471 | | | 2,034 | | Segment net operating income | 11,865 |
| | 13,369 |
| | 21,646 |
| Segment net operating income | 27,584 | | | 21,076 | | | 12,809 | | Retail real estate | | | | | | Retail real estate | | | | | | Rental revenues | 63,109 |
| | 56,511 |
| | 32,064 |
| Rental revenues | 73,032 | | | 77,593 | | | 67,959 | | Rental expenses | 10,233 |
| | 9,116 |
| | 5,915 |
| Rental expenses | 11,029 | | | 11,656 | | | 10,903 | | Real estate taxes | 6,176 |
| | 5,395 |
| | 2,928 |
| Real estate taxes | 7,784 | | | 7,916 | | | 6,801 | | Segment net operating income | 46,700 |
| | 42,000 |
| | 23,221 |
| Segment net operating income | 54,219 | | | 58,021 | | | 50,255 | | Multifamily residential real estate | | | | | | Multifamily residential real estate | | | | | | Rental revenues | 26,421 |
| | 21,915 |
| | 17,574 |
| Rental revenues | 49,962 | | | 40,477 | | | 28,298 | | Rental expenses | 9,705 |
| | 7,228 |
| | 6,351 |
| Rental expenses | 17,132 | | | 13,954 | | | 10,461 | | Real estate taxes | 2,494 |
| | 2,234 |
| | 1,904 |
| Real estate taxes | 5,241 | | | 3,574 | | | 2,548 | | Segment net operating income | 14,222 |
| | 12,453 |
| | 9,319 |
| Segment net operating income | 27,589 | | | 22,949 | | | 15,289 | | General contracting and real estate services | | | | | | General contracting and real estate services | | | | | | Segment revenues | 194,034 |
| | 159,030 |
| | 171,268 |
| Segment revenues | 217,146 | | | 105,859 | | | 76,359 | | Segment expenses | 186,590 |
| | 153,375 |
| | 165,344 |
| Segment expenses | 209,472 | | | 101,538 | | | 73,628 | | Segment gross profit | 7,444 |
| | 5,655 |
| | 5,924 |
| Segment gross profit | 7,674 | | | 4,321 | | | 2,731 | | Net operating income | $ | 80,231 |
| | $ | 73,477 |
| | $ | 60,110 |
| Net operating income | $ | 117,066 | | | $ | 106,367 | | | $ | 81,084 | |
Rental expenses represent costs directly associated with the operation and management of the Company’s real estate properties. Rental expenses include asset management fees, property management fees, repairs and maintenance, insurance, and utilities. General contracting and real estate services revenues for the years ended December 31, 2017, 2016,2020, 2019, and 20152018 exclude revenue related to intercompany construction contracts of $51.5$26.6 million, $43.3$99.9 million and $43.1$134.4 million, respectively, as it is eliminated in consolidation. General contracting and real estate services expenses for the years ended December 31, 2017, 2016,2020, 2019, and 20152018 exclude expenses related to intercompany construction contracts of $51.0$26.3 million, $42.7$99.0 million and $42.8$133.4 million, respectively, as it is eliminated in consolidation. General contracting and real estate services expenses for the years ended December 31, 2017, 2016, and 2015 include noncash stock compensation expense
The following table reconciles net operating income to net income for the years ended December 31, 2017, 2016,2020, 2019, and 20152018 (in thousands): | | | Years Ended December 31, | | Years Ended December 31, | | 2017 | | 2016 | | 2015 | | 2020 | | 2019 | | 2018 | Net operating income | $ | 80,231 |
| | $ | 73,477 |
| | $ | 60,110 |
| Net operating income | $ | 117,066 | | | $ | 106,367 | | | $ | 81,084 | | Depreciation and amortization | (37,321 | ) | | (35,328 | ) | | (23,153 | ) | Depreciation and amortization | (59,972) | | | (54,564) | | | (39,913) | | Amortization of right-of-use assets - finance leases | | Amortization of right-of-use assets - finance leases | (586) | | | (377) | | | 0 | | General and administrative expenses | (10,435 | ) | | (9,552 | ) | | (8,397 | ) | General and administrative expenses | (12,905) | | | (12,392) | | | (11,431) | | Acquisition, development and other pursuit costs | (648 | ) | | (1,563 | ) | | (1,935 | ) | Acquisition, development and other pursuit costs | (584) | | | (844) | | | (352) | | Impairment charges | (110 | ) | | (355 | ) | | (41 | ) | Impairment charges | (666) | | | (252) | | | (1,619) | | Gain on real estate dispositions | | Gain on real estate dispositions | 6,388 | | | 4,699 | | | 4,254 | | Interest income | 7,077 |
| | 3,228 |
| | 126 |
| Interest income | 19,841 | | | 23,215 | | | 10,729 | | Interest expense | (17,439 | ) | | (16,466 | ) | | (13,333 | ) | | Loss on extinguishment of debt | (50 | ) | | (82 | ) | | (512 | ) | | Gain on real estate dispositions | 8,087 |
| | 30,533 |
| | 18,394 |
| | Change in fair value of interest rate derivatives | 1,127 |
| | (941 | ) | | (229 | ) | | Other income | 131 |
| | 147 |
| | 119 |
| | Income tax benefit (provision) | (725 | ) | | (343 | ) | | 34 |
| | Interest expense on indebtedness | | Interest expense on indebtedness | (30,120) | | | (30,776) | | | (19,087) | | Interest expense on finance leases | | Interest expense on finance leases | (915) | | | (568) | | | 0 | | Equity in income of unconsolidated real estate entities | | Equity in income of unconsolidated real estate entities | 0 | | | 273 | | | 372 | | | Change in fair value of derivatives and other | | Change in fair value of derivatives and other | (1,130) | | | (3,599) | | | (951) | | Provision for unrealized credit losses | | Provision for unrealized credit losses | (256) | | | 0 | | | 0 | | Other income (expense), net | | Other income (expense), net | 515 | | | 585 | | | 377 | | Income tax benefit | | Income tax benefit | 283 | | | 491 | | | 29 | | Net income | $ | 29,925 |
| | $ | 42,755 |
| | $ | 31,183 |
| Net income | $ | 36,959 | | | $ | 32,258 | | | $ | 23,492 | |
General and administrative expenses represent costs not directly associated with the operation and management of the Company’s real estate properties and general contracting and real estate services businesses. General and administrative expenses include corporate office personnel salaries and benefits, bank fees, accounting fees, legal fees, and other corporate office expenses. General 4. Leases
Lessee Disclosures
As a lessee, the Company has 8 ground leases on 7 properties with initial terms that ranged from 5 to 61 years and administrative expensesoptions to extend up to an additional 70 years in certain cases. The exercise of lease renewal options is at the Company's sole discretion. The depreciable life of assets and leasehold improvements are limited by the expected lease term. NaN of these leases have been classified as operating leases and 2 of these leases have been classified as finance leases. The Company's lease agreements do not contain any residual value guarantees or material restrictive covenants.
The components of lease cost for the years ended December 31, 2017, 2016,2020, 2019, and 2015 include noncash stock compensation expense2018 were as follows (in thousands): | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | 2020 | | 2019 | | 2018 (b) | Operating lease cost | | $ | 1,660 | | | $ | 2,700 | | | $ | 2,962 | | Finance lease cost: | | | | | | | Amortization of right-of-use assets (a) | | 586 | | | 369 | | | 0 | | Interest on lease liabilities | | 915 | | | 568 | | | 0 | |
(a) Includes amortization of $0.9 million, $0.7 million and $0.7 million, respectively.below-market ground lease intangible assets. (b) All of the Company's leases were classified as operating leases prior to 2019.
The Company’s commercialtable below presents supplemental cash flow information related to leases during the years ended December 31, 2020, 2019, and 2018 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | 2020 | | 2019 | | 2018 (a) | Cash paid for amounts included in the measurement of lease liabilities | | | | | | | Operating cash flows from operating leases | | $ | 2,113 | | | $ | 1,969 | | | $ | 2,354 | | Operating cash flows from finance leases | | 864 | | | 533 | | | 0 | | | | | | | | |
(a) All of the Company's leases were classified as operating leases prior to 2019.
Additional information related to leases as of December 31, 2020 and 2019 were as follows: | | | | | | | | | | | | | | | | | December 31, | | | 2020 | | 2019 | Weighted Average Remaining Lease Term (years) | | | | | Operating leases | | 44.5 | | 45.4 | Finance leases | | 40.2 | | 41.2 | | | | | | Weighted Average Discount Rate | | | | | Operating leases | | 5.4 | % | | 5.4 | % | Finance leases | | 5.2 | % | | 5.2 | % |
The undiscounted cash flows to be paid on an annual basis for the next five years and thereafter are presented below. The total amount of lease payments, on an undiscounted basis, are reconciled to the lease liability, on the consolidated balance sheet by considering the present value discount. | | | | | | | | | | | | | | | Year Ending December 31, | | Operating Leases | | Finance Leases | | | (in thousands) | 2021 | | $ | 2,158 | | | $ | 864 | | 2022 | | 2,361 | | | 868 | | 2023 | | 2,400 | | | 873 | | 2024 | | 2,436 | | | 888 | | 2025 | | 2,452 | | | 925 | | Thereafter | | 101,072 | | | 42,089 | | Total undiscounted cash flows | | 112,879 | | | 46,507 | | Present value discount | | (71,220) | | | (28,553) | | Discounted cash flows | | $ | 41,659 | | | $ | 17,954 | |
Lessor Disclosures
As a lessor, the Company leases its properties under operating leases and recognizes base rents on a straight-line basis over the lease term. The Company also recognizes revenue from tenant recoveries, through which tenants reimburse the Company on an accrual basis for certain expenses such as utilities, janitorial services, repairs and maintenance, security and alarms, parking lot and ground maintenance, administrative services, management fees, insurance, and real estate taxes. Rental revenues are reduced by the amount of any leasing incentives amortized on a straight-line basis over the term of the applicable lease. In addition, the Company recognizes contingent rental revenue (e.g., percentage rents based on tenant sales thresholds) when the sales thresholds are met. Many tenant leases generally rangeinclude 1 or more options to renew, with renewal terms that can extend the lease term from fiveone to 2015 years but certain leases with anchor tenants may be longer.or more. The Company’sexercise of lease renewal options is at the tenant's sole discretion. The Company includes a renewal period in the lease term only if it appears at lease inception that the renewal is reasonably certain.
Rental revenue for the years ended December 31, 2020, 2019, and 2018 comprised the following (in thousands): | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | 2020 | | 2019 | | 2018 | Base rent and tenant charges | | $ | 159,747 | | | $ | 147,309 | | | $ | 114,012 | | Accrued straight-line rental adjustment | | 5,927 | | | 3,402 | | | 2,731 | | Lease incentive amortization | | (693) | | | (739) | | | (732) | | Below/(above) market lease amortization | | 1,507 | | | 1,367 | | | 947 | | Total rental revenue | | $ | 166,488 | | | $ | 151,339 | | | $ | 116,958 | |
The Company's commercial tenant leases provide for minimum rental payments during each of the next five years and thereafter as follows (in thousands): | | | | | | | | | | | Year Ending December 31, | | Operating Leases | | | 2021 | | $ | 90,693 | | | | 2022 | | 88,270 | | | | 2023 | | 81,767 | | | | 2024 | | 73,029 | | | | 2025 | | 60,588 | | | | Thereafter | | 307,377 | | | | Total | | $ | 701,724 | | | |
5. Real Estate Investments and Equity Method Investment | | | | | 2018 | $ | 71,439 |
| 2019 | 64,204 |
| 2020 | 54,582 |
| 2021 | 48,018 |
| 2022 | 41,441 |
| Thereafter | 184,844 |
| Total | $ | 464,528 |
|
Lease terms on multifamily apartment units generally range from seven to 15 months, with a majority having 12-month lease terms. Apartment leases are not included in the preceding table as the remaining terms as of December 31, 2017 are generally less than one year.
| | 5. | Real Estate Investments and Equity Method Investments |
The Company’s real estate investments comprised the following as of December 31, 20172020 and 20162019 (in thousands): | | | December 31, 2017 | | December 31, 2020 | | Income producing property | | Held for development | | Construction in progress | | Total | | Income producing property | | Held for development | | Construction in progress | | Total | Land | $ | 175,885 |
| | $ | 680 |
| | $ | 21,212 |
| | $ | 197,777 |
| Land | $ | 261,984 | | | $ | 13,607 | | | $ | 5,200 | | | $ | 280,791 | | Land improvements | 44,681 |
| | — |
| | — |
| | 44,681 |
| Land improvements | 61,275 | | | 0 | | | 0 | | | 61,275 | | Buildings and improvements | 690,120 |
| | — |
| | — |
| | 690,120 |
| Buildings and improvements | 1,357,684 | | | 0 | | | 0 | | | 1,357,684 | | Development and construction costs | — |
| | — |
| | 61,859 |
| | 61,859 |
| Development and construction costs | 0 | | | 0 | | | 58,167 | | | 58,167 | | Real estate investments | $ | 910,686 |
| | $ | 680 |
| | $ | 83,071 |
| | $ | 994,437 |
| Real estate investments | $ | 1,680,943 | | | $ | 13,607 | | | $ | 63,367 | | | $ | 1,757,917 | |
| | | December 31, 2016 | | December 31, 2019 | | Income producing property | | Held for development | | Construction in progress | | Total | | Income producing property | | Held for development | | Construction in progress | | Total | Land | $ | 171,733 |
| | $ | 680 |
| | $ | 6,880 |
| | $ | 179,293 |
| Land | $ | 263,258 | | | $ | 5,000 | | | $ | 7,265 | | | $ | 275,523 | | Land improvements | 45,052 |
| | — |
| | — |
| | 45,052 |
| Land improvements | 58,636 | | | 0 | | | 0 | | | 58,636 | | Buildings and improvements | 677,293 |
| | — |
| | — |
| | 677,293 |
| Buildings and improvements | 1,138,829 | | | 0 | | | 0 | | | 1,138,829 | | Development and construction costs | — |
| | — |
| | 6,649 |
| | 6,649 |
| Development and construction costs | 0 | | | 0 | | | 133,336 | | | 133,336 | | Real estate investments | $ | 894,078 |
| | $ | 680 |
| | $ | 13,529 |
| | $ | 908,287 |
| Real estate investments | $ | 1,460,723 | | | $ | 5,000 | | | $ | 140,601 | | | $ | 1,606,324 | |
20172020 Operating Property AcquisitionAcquisitions
In June 2020, the Company exercised its option to purchase the remaining 21.0% ownership interest in 1405 Point in exchange for increased ground lease payments to be made over the approximately 42-year remaining lease term. The Company recorded a note payable of $6.1 million, which represents the present value of these payments. The ground lessor is an affiliate of our former joint venture partner.
On July 25, 2017,September 22, 2020, the Company exercised its option to purchase Nexton Square for $17.9 million cash and the assumption of a note payable of $22.9 million. The Company also incurred capitalized acquisition costs of $0.2 million. The developer of this property repaid the Company's mezzanine note receivable of $16.4 million at the time of the acquisition.
On October 1, 2020, the Company acquired Edison Apartments, a multifamily property located in downtown Richmond, Virginia, for consideration comprised of 633,734 Class A Units (as defined below), the assumption of a $16.4 million loan payable, and the assumption of $1.1 million in other assets and liabilities. The seller of the property was a partnership that includes several members from the Company's management team and board of directors.
On October 30, 2020, the Company acquired 79.0% of the partnership that owns The Residences at Annapolis Junction. As part of this purchase, the Company extinguished its note receivable for this project and made a cash payment of $0.2 million. The Company assumed an $83.4 million senior loan as part of this acquisition, which was immediately refinanced with a new $84.4 million loan. This refinanced loan bears interest at a rate of the Secured Overnight Financing Rate ("SOFR") plus a margin of 2.66% and matures on November 1, 2030. As part of this financing transaction, the partnership also purchased an interest rate cap for $0.1 million with a SOFR strike rate of 1.84%, which expires on November 1, 2023. Due to a preferred return that we receive on this investment, no value was assigned to our partner's investment in this property at the time of the acquisition.
The following table summarizes the purchase price allocation (including acquisition costs) based on the relative fair value of the assets acquired and intangible liabilities assumed for the 3 operating properties acquired during the year ended December 31, 2020 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | Nexton Square | | Edison Apartments | | The Residences at Annapolis Junction | Land | | $ | 9,885 | | | $ | 3,428 | | | $ | 14,774 | | Site improvements | | 3,690 | | | 0 | | | 1,786 | | Building and improvements | | 24,070 | | | 18,227 | | | 101,219 | | Furniture and fixtures | | 0 | | 0 | 355 | | 0 | 1,796 | | In-place leases | | 5,239 | | | 1,882 | | | 4,079 | | | | | | | | | Below-market leases | | (1,877) | | | (140) | | | 0 | | | | | | | | | | | | | | | | Fair value adjustment on acquired debt | | 364 | | | (6) | | | 0 | | Net assets acquired | | $ | 41,371 | | | $ | 23,746 | | | $ | 123,654 | |
2019 Operating Property Acquisitions
On February 6, 2019, the Company acquired an additional outparcel phase of Wendover Village in Greensboro, North Carolina for a contract price of $14.3$2.7 million plus capitalized acquisition costs of $0.1 million. The following table summarizesThis outparcel is leased to a single tenant.
On March 14, 2019, the purchase price allocation, including acquisition costs,Company acquired the office and retail portions of the One City Center project in Durham, North Carolina in exchange for this property (in thousands):
| | | | | Land | $ | 5,550 |
| Site improvements | 232 |
| Building and improvements | 6,977 |
| In-place leases | 1,382 |
| Above-market leases | 327 |
| Below-market leases | (50 | ) | Net assets acquired | $ | 14,418 |
|
Rental revenues and net income froma redemption of its 37% equity ownership in the ourparcel phasejoint venture with Austin Lawrence Partners, which totaled $23.0 million as of Wendover Village for the period from the acquisition date, to December 31, 2017 included in the consolidated statementand a cash payment of comprehensive income were $0.6 million and $0.2 million, respectively.
2016 Operating Property Acquisitions
On January 14, 2016, the$23.2 million. The Company completed thealso incurred capitalized acquisition costs of an 11-property retail portfolio totaling 1.1 million square feet for $170.5$0.1 million.
On April 29, 2016,24, 2019, the Company completedexercised its option to purchase 79% of the interests in the partnership that owns 1405 Point in exchange for extinguishing the Company's $31.3 million note receivable on the project, making a cash payment of $0.3 million, and assuming a loan payable of $64.9 million, which was recorded at its fair value of $65.8 million. The Company also incurred capitalized acquisition costs of Southgate Square, a 220,000 square foot retail center located in Colonial Heights, Virginia,$0.1 million.
On May 23, 2019, the Company acquired Red Mill Commons and Marketplace at Hilltop from Venture Realty Group for aggregate consideration of $39.5 million, comprised of the assumption of $21.14.1 million in debt (which approximated fair value as of the closing date) and 1,575,185 Class A units of limited partnership interest in the Operating Partnership ("Class A Units" or "OP Units").
As part, the assumption of the Southgate Square purchase agreement, the Company acquired an option to purchase an adjacent undeveloped land parcel from the seller. The option for the land parcel is valid for an initial period$35.7 million of two years,mortgage debt principal, and its value would be determined by applying a mutually agreed upon capitalization rate to the base rent of tenants provided by the seller and approved by the Company. If, at the end of the two-year period, no suitable tenants have been found, the Company has the option of either paying $3.0 million to the seller for the land parcel or extending the period for an additional year. If, at the end of the additional year, no suitable tenants have been found, the Company can either pay $1.25 million to the seller for the land parcel or let the option expire. Management has evaluated the option and determined that its value is immaterial to the consolidated financial statements.
On August 4, 2016, the Company completed the acquisition of Southshore Shops, a 40,000 square foot retail center located in Midlothian, Virginia, for aggregate consideration of $9.3 million, comprised of $6.7$4.5 million in cash and 189,160 Class A Units.
On October 13, 2016,cash. The negotiated price was $105.0 million, which contemplated the Company completed the acquisition of Columbus Village II, a 92,000 square foot retail and entertainment center located in Virginia Beach, Virginia for aggregate consideration of 2,000,000 sharesprice of the Company's common stock of $15.55 per share when the purchase and sale agreement was executed. The aggregate acquisition cost was $109.3 million, which based onconsisted of 4.1 million Class A Units valued at $68.1 million (using the closingprice of the Company's common stock priceof $16.50 on the date of the acquisition), mortgage debt valued at $35.6 million, cash consideration of $4.5 million, and capitalized acquisition ledcosts of $1.1 million. In connection with the acquisition, the Company and the Operating
Partnership entered into a tax protection agreement with the contributors pursuant to an acquisition pricewhich the Company and the Operating Partnership agreed, subject to certain exceptions, to indemnify the contributors for up to 10 years against certain tax liabilities incurred by them, if such liabilities result from a transaction involving a direct or indirect taxable disposition of $26.2either or both of these properties or if the Operating Partnership fails to maintain and allocate to the contributors for taxation purposes minimum levels of Operating Partnership liabilities.
On June 26, 2019, the Company acquired Thames Street Wharf, a Class A office building located in the Harbor Point development of Baltimore, Maryland, for $101.0 million excludingin cash and $0.3 million of capitalized acquisition costs.
On November 17, 2016, the Company completed the acquisition of Renaissance Square, a 80,000 square foot retail center located in Davidson, North Carolina, for $17.1 million, excluding capitalized acquisition costs.
The following table summarizes the purchase price allocation (including acquisition costs for Columbus Village II and Renaissance Square)costs) based on the relative fair value of the assets acquired and intangible liabilities assumed for the 6 operating properties acquired during the year ended December 31, 20162019 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Wendover Village outparcel | | One City Center | | 1405 Point | | Red Mill Commons | | Marketplace at Hilltop | | Thames Street Wharf | Land | | $ | 1,633 | | | $ | 2,678 | | | $ | 0 | | (a) | $ | 44,252 | | | $ | 2,023 | | (b) | $ | 15,861 | | Site improvements | | 50 | | | 163 | | | 298 | | | 2,558 | | | 691 | | | 150 | | Building and improvements | | 888 | | | 28,039 | | | 92,866 | | | 27,790 | | | 19,195 | | | 64,539 | | Furniture and fixtures | | 0 | | | 0 | | | 2,302 | | | 0 | | | 0 | | | 0 | | In-place leases | | 101 | | | 15,140 | | | 3,371 | | | 9,973 | | | 4,565 | | | 24,385 | | Above-market leases | | 111 | | | 0 | | | 0 | | | 1,463 | | | 599 | | | 0 | | Below-market leases | | 0 | | | 0 | | | 0 | | | (6,221) | | | (1,136) | | | (3,636) | | Finance lease liabilities | | 0 | | | 0 | | | (8,671) | | | 0 | | | (9,200) | | | 0 | | Finance lease right-of-use assets | | 0 | | | 0 | | | 11,730 | | (a) | 0 | | | 12,770 | | (b) | 0 | | Net assets acquired | | $ | 2,783 | | | $ | 46,020 | | | $ | 101,896 | | | $ | 79,815 | | | $ | 29,507 | | | $ | 101,299 | |
(a) Land is subject to a ground lease. (b) Portion of land is subject to a ground lease. | | | | | | | | | | | | | | | | | | | | | | | | | | Retail Portfolio | | Southgate Square | | Southshore Shops | | Columbus Village II | | Renaissance Square | | Total | Land | $ | 66,260 |
| | $ | 8,890 |
| | $ | 1,770 |
| | $ | 14,536 |
| | $ | 6,730 |
| | $ | 98,186 |
| Site improvements | 3,870 |
| | 2,140 |
| | 490 |
| | 939 |
| | 303 |
| | 7,742 |
| Building and improvements | 88,820 |
| | 23,810 |
| | 6,019 |
| | 9,983 |
| | 8,137 |
| | 136,769 |
| In-place leases | 20,630 |
| | 5,990 |
| | 1,140 |
| | 2,225 |
| | 2,008 |
| | 31,993 |
| Above-market leases | 1,960 |
| | 100 |
| | 120 |
| | — |
| | 70 |
| | 2,250 |
| Below-market leases | (11,040 | ) | | (1,400 | ) | | (190 | ) | | (939 | ) | | (10 | ) | | (13,579 | ) | Net assets acquired | $ | 170,500 |
| | $ | 39,530 |
| | $ | 9,349 |
| | $ | 26,744 |
| | $ | 17,238 |
| | $ | 263,361 |
|
Rental revenues and net income from the 2016 acquired properties for the period from the respective acquisition dates to December 31, 2016 included in the consolidated statement of comprehensive income was $18.7 million and $2.9 million, respectively.
20152018 Operating Property Acquisitions
On April 8, 2015, the Company completed the acquisitions of Stone House Square in Hagerstown, Maryland and Perry Hall Marketplace in Perry Hall, Maryland. In exchange for both properties, the Company paid $35.4 million of cash and issued 415,500 shares of common stock. The acquisition date fair value of the total consideration transferred in exchange for Stone House Square and Perry Hall Marketplace was $39.8 million.
On July 1, 2015, the Company completed the acquisition of Socastee Commons, a 57,000 square foot retail center in Myrtle Beach, South Carolina. The total consideration for Socastee Commons was $8.7 million, which was comprised of $3.7 million of cash and the assumption of debt with an outstanding principal balance of $5.0 million. The fair value adjustment to the assumed debt of Socastee Commons was a $0.1 million premium.
On July 10, 2015, the Company acquired Columbus Village, a 65,000 square foot retail center in Virginia Beach, Virginia. In exchange for Columbus Village, the Company assumed debt with an aggregate outstanding principal balance and fair value of $8.8 million, issued 1,000,000 Class B units of limited partnership interest in the Operating Partnership (“Class B Units”) and agreed to issue 275,000 Class C units of limited partnership interest in the Operating Partnership (“Class C Units”) on January 10, 2017. The Class B Units were automatically converted to
Class A Units on July 10, 2017. The Class C Units were converted to Class A Units on January 10, 2018. The acquisition date fair value of the total consideration transferred in exchange for Columbus Village was $19.2 million.
On September 1, 2015, the Company acquired Providence Plaza in Charlotte, North Carolina for $26.2 million of cash. Providence Plaza is a mixed-use property comprised of three buildings totaling 103,000 square feet, a two-level parking garage and approximately one acre of land zoned for multifamily development.
The following table summarizes the acquisition date fair values of the assets acquired and liabilities assumed during the year ended December 31, 2015 (in thousands):
| | | | | Land | $ | 29,500 |
| Site improvements | 3,290 |
| Building and improvements | 49,260 |
| In-place leases | 14,160 |
| Above-market leases | 2,260 |
| Below-market leases | (4,420 | ) | Indebtedness | (13,935 | ) | Net assets acquired | $ | 80,115 |
|
Rental revenues and net income from the 2015 acquired properties for the period from the respective acquisition dates to December 31, 2015 included in the consolidated statement of comprehensive income was $4.8 million and $0.8 million, respectively.
Pro Forma Financial Information (Unaudited)
The following table summarizes the consolidated results of operations of the Company on a pro forma basis, as if the 2017 acquisition had been acquired on January 1, 2016, each of the 2016 acquisitions had been acquired on January 1, 2015, and each of the 2015 acquisitions had been acquired on January 1, 2014 (in thousands):
| | | | | | | | | | | | | | Years Ended December 31, | | 2017 | | 2016 | | 2015 | Rental revenues | $ | 109,472 |
| | $ | 102,579 |
| | $ | 105,479 |
| Net income | 30,354 |
| | 14,060 |
| | 18,492 |
|
The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if these acquisitions had taken place on January 1, 2016, 2015, and 2014. The pro forma financial information includes adjustments to rental revenue and rental expenses for above and below-market leases, adjustments to depreciation and amortization expense for acquired property and in-place lease assets and adjustments to interest expense for fair value adjustments to assumed debt.
Subsequent to December 31, 2017
On January 9, 2018, the Company acquired Indian Lakes Crossing, a Harris Teeter-anchored shopping center in Virginia Beach, Virginia, for a contract price of $14.7$14.7 million plus capitalized acquisition costs of $0.2 million. This property was sold in 2020.
On January 29, 2018, the Company acquired Parkway Centre, a newly developed Publix-anchored shopping center in Moultrie, Georgia, for total consideration of $11.3 million ($9.6(comprised of $9.6 million in cash and $1.7 million in the form of Class A Units) plus estimated capitalized acquisition costs of $0.3 million.
On August 28, 2018, the Company acquired Lexington Square, a newly developed Lowes Foods-anchored shopping center in Lexington, South Carolina, for a purchase price of $27.0 million, consisting of cash consideration of $24.2 million and $2.8 million of additional consideration in the form of Class A Units issued during 2019. As part of this transaction, the Company also capitalized acquisition costs of $0.4 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 3 operating properties purchased during the year ended December 31, 2018 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | Indian Lakes Crossing | | Parkway Centre | | Lexington Square | Land | | $ | 10,926 | | | $ | 1,372 | | | $ | 3,036 | | Site improvements | | 531 | | | 696 | | | 7,396 | | Building and improvements | | 1,913 | | | 7,168 | | | 10,387 | | In-place leases | | 1,648 | | | 2,346 | | | 4,113 | | Above-market leases | | 11 | | | 0 | | | 89 | | Below-market leases | | (175) | | | (10) | | | (447) | | Net assets acquired | | $ | 14,854 | | | $ | 11,572 | | | $ | 24,574 | |
Other 2020 Real Estate Transactions
On January 10, 2020, the Company entered into an operating agreement with a partner to develop a mixed-use property in Charlotte, North Carolina. The Company has an 80% interest in 10th and Tryon Partners, LLC (the "Tryon Partnership"). On January 10, 2020, the Tryon Partnership purchased land for a purchase price of $6.3 million for this project. The Company is responsible for funding the equity requirements of this development, including the $6.3 million purchase of the land. Management has concluded that this entity is a VIE as it lacks sufficient equity to fund its operations without additional financial support. The Company is the developer of the project and has the power to direct the activities of the project that most significantly impact its financial performance. Therefore, the Company is the project's primary beneficiary and consolidates the Tryon Partnership in its consolidated financial statements.
On September 12, 2019, the Company entered into an operating agreement with a partner to develop a mixed-use property in Belmont, North Carolina. The Company has an 85% interest in Chronicle Holdings, LLC (the "Chronicle Partnership"). On March 20, 2020, the Chronicle Partnership purchased land for a purchase price of $2.3 million for this project. The Company is responsible for funding the equity requirements of this development, including the $2.3 million purchase of the land. Management has concluded that this entity is a VIE as it lacks sufficient equity to fund its operations without additional financial support. The Company is the developer of the project and has the power to direct the activities of the project that most significantly impact its financial performance. Therefore, the Company is the project's primary beneficiary and consolidates the Chronicle Partnership in its consolidated financial statements.
On May 29, 2020, the Company sold a portfolio of 7 retail properties for $90.0 million. The portfolio consisted of Alexander Pointe, Bermuda Crossroads, Gainsborough Square, Harper Hill Commons, Indian Lakes Crossing, Renaissance Square, and Stone House Square. The gain on sale was $2.8 million. In connection with the sale of this portfolio, the Company repaid $61.9 million on the revolving credit facility, resulting in net proceeds of $25.9 million.
On August 31, 2020, the Company entered into an operating agreement with a partner to develop a mixed-use project in Gainesville, Georgia. The Company has a 95% ownership interest in Gainesville Development, LLC (the "Gainesville Partnership"). The Gainesville Partnership acquired undeveloped land on August 31, 2020 for a purchase price of $5.0 million and immediately began development of the site. The Company is responsible for funding the equity requirements of this development, which are estimated to total $17.3 million. Management has concluded that this entity is a VIE as it lacks sufficient equity to fund its operations without additional financial support. By August 31, 2023, the Company is required to acquire its partner's 5% ownership interest for up to $4.2 million, subject to the initial operating performance of the property. As the Company is required to obtain this ownership interest, the Company consolidates the project in its consolidated financial statements. The Company has recorded a note payable liability of $3.8 million, which is the fair value of the anticipated payments to be made to its partner.
On September 1, 2020, the Company completed the sale of the Walgreens outparcel at Hanbury Village. Net proceeds after the transaction costs were $7.0 million. The gain on disposition was $3.6 million.
On October 2, 2020, the Company purchased the remaining 20% noncontrolling interest in the Southern Post, a mixed-use development project in Roswell, Georgia in exchange for a cash payment of $3.5 million and future consideration of $1.5 million to be paid in cash upon satisfaction of certain conditions.
Other 2019 Real Estate Transactions
On April 1, 2019, the Company sold Waynesboro Commons for a sale price of $1.1 million. There was no gain or loss recognized on the disposition.
On August 15, 2019, the Company sold Lightfoot Marketplace for a sale price of $30.3 million. The gain on disposition was $4.5 million. In conjunction with this sale, the Company paid off the $17.9 million note payable secured by this property. The Company retained the interest rate swap associated with the note payable.
On October 15, 2019, the Company entered into an operating agreement with a partner to develop the Southern Post, a mixed-use project in Roswell, Georgia. The Company has an 80% interest in the partnership. On October 25, 2019, the partnership, 1023 Roswell, LLC, purchased land for a purchase price of $5.0 million in cash for this project. The Company is responsible for funding the equity requirements of this development, including the $5.0 million purchase of the land. Management has concluded that this entity is a VIE as it lacks sufficient equity to fund its operations without additional financial support. The Company is the developer of the project 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.
Other 2018 Real Estate Transactions
On November 30, 2017, the Company entered into a lease agreement with Bottling Group, LLC for a new distribution facility that the Company will developdeveloped and construct for expected delivery in 2018.constructed. On January 29, 2018, the Company acquired undeveloped land in Chesterfield, Virginia, a portion of which will serveserves as the site for this facility, for a contract price of $2.4 million plus capitalized acquisition costs of $0.1 million. On December 20, 2018, the Company sold the completed facility for $25.9 million, resulting in a gain of $3.4 million.
On February 16,January 18, 2018, through a consolidated joint venture, the Company acquired undeveloped landentered into an operating agreement with a partner to develop a Lowes Foods-anchored shopping center in Mount Pleasant, South CarolinaCarolina. 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 plansis responsible for funding the equity requirements of this development. Management has concluded that this entity is a VIE as it lacks sufficient equity to usefund its operations without additional financial support. The Company was the land fordeveloper of the developmentshopping center and has the power to direct the activities of an estimated $23.0 million Lowes Foods-anchored shopping center.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.
Other 2017 Real Estate Transactions
On January 4, 2017,April 2, 2018, the Company acquired undeveloped land in Charleston, South CarolinaNewport News, Virginia for a contract price of $7.1 million plus capitalized acquisition costs of $0.2less than $0.1 million. The Company is using theThis land forparcel was used in the development of the 595 King StreetBrooks Crossing Office property.
On January 20, 2017,May 24, 2018, the Company completed the sale of the Wawa outparcel at Greentree Shopping Center. Net proceeds after transaction costs were $4.4 million. The gain on the disposition was $3.4 million.
On July 11, 2017, the Company acquired undeveloped land in Charleston, South CarolinaIndian Lakes Crossing for a contract price of $7.2 million plus capitalized acquisition costs of $0.1$4.4 million. The Company is usingThere was 0 gain or loss on the land for the development of the 530 Meeting Street property.disposition.
On July 13, 2017,2, 2018, the Company completedexecuted a ground lease for the sale of two office properties leased by the Commonwealth of Virginia in Chesapeake, Virginia and Virginia Beach, Virginia. Aggregate net proceeds from the dispositions of the properties after transaction costs and repayment of the loan associated with the Chesapeake, Virginia property were $7.9 million, and the aggregate gain on the dispositions was $4.2 million.
On August 10, 2017, the Company completed the salesite of a land outparcel at Sandbridge Commons. Net proceeds after transaction costs and a partial loan paydown were $0.3 million. The gain on the disposition was $0.5 million.
Other 2016 Real Estate Transactions
On January 7, 2016, the Company completed the sale of a building constructed for the Economic Development Authority of Newport News, Virginia. Net proceeds after transaction costs were $6.6 million. The gain on the disposition was $0.4 million.
On January 8, 2016, the Company completed the sale of the Richmond Tower office building for $78.0 million. Net proceeds after transaction costs were $77.0 million. The gain on the disposition of Richmond Tower was $26.2 million.
On June 20, 2016, the Company completed the sale of the Willowbrook Commons property located in Nashville, Tennessee for $9.2 million. The gain on the sale of the Willowbrook Commons property was less than $0.1 million.
On July 29, 2016, the Company completed the sale of the Kroger Junction property located in Pasadena, Texas for $3.7 million. The loss on the sale of the Kroger Junction property was less than $0.1 million.
On August 30, 2016, the Company entered into an operating agreement with Southern Apartment Group-Harding, LLC ("SAGH") to jointly develop an apartmentnew mixed-use development project at Wills Wharf, a site in Charlotte, North Carolina. During the year ended December 31, 2016, the Company purchased $5.7 millionHarbor Point area of land in conjunction with the project.Baltimore, Maryland. The lease has an initial term of five years and includes 10 extension options of seven years each.
On September 15, 2016, the Company completed the sale of the Oyster Point office property for $6.4 million. Net proceeds after transaction costs and settlement of liabilities were not significant. The gain on the disposition of Oyster Point was $3.8 million.
On December 22, 2016,31, 2018, the Company completedsold the sale of land adjacent toleasehold interest in the Brooks Crossing developmentbuilding previously leased by Home Depot at Broad Creek Shopping Center for $0.4 million. The gain on the disposition of the land was less than $0.1 million. Other 2015 Real Estate Transactions
On January 5, 2015, the Company completed the sale of the Sentara Williamsburg office property for $15.4 million. Net proceeds to the Company after transaction costs were $15.2 million. The Company recognized$2.4 million, resulting in a gain on the disposition of the Sentara Williamsburg office property of $6.2 million.
On March 31, 2015, the Company purchased land held for development in the Town Center of Virginia Beach, Virginia for $1.2 million.
On May 20, 2015, the Company completed the sale of Whetstone Apartments for $35.6 million. Net proceeds to the Company after transaction costs were $35.5 million. The Company recognized a gain on the disposition of Whetstone Apartments of $7.2 million.
On October 5, 2015, the Company purchased 3.24 acres of land in Newport News, Virginia for $0.1 million for the development of Brooks Crossing, a new urban, mixed-use and low-rise development project, in partnership with the City of Newport News.
On October 30, 2015, the Company completed the sale of the Oceaneering International facility for $30.0 million. Net proceeds to the Company after transaction costs were $29.0 million. The Company recognized a gain on the disposition of Oceaneering of $5.0$0.8 million.
Equity Method InvestmentsInvestment
City CenterHarbor Point Parcel 3
On February 25, 2016,November 30, 2020, the Company acquired a 37%50% interest in Durham City Center II, LLC (“City Center”)Harbor Point Parcel 3, a joint venture with Beatty Development Group, for purposes of developing a 22-story mixed-use towerT. Rowe Price's new global headquarters office building in Durham, North Carolina.Baltimore, Maryland. The Company is a minoritynoncontrolling partner in the joint venture and will serve as the project's general contractor, with full ownershipcontractor. During the year ended December 31, 2020, the Company invested $1.1 million in Harbor Point Parcel 3. The Company has a total equity commitment of the office and retail portions of theup to $30.0 million relating to this project. As of December 31, 2017 and 2016, the Company has invested $11.4 million and $10.3 million, respectively, in City Center. The Company has agreed to guarantee 37% of the construction loan for City Center; however, the loan is collateralized by 100% of the assets of City Center. As of December 31, 2017, $29.2 million has been drawn against the construction loan, of which $11.2 million is attributable to the Company's portion of the loan. As of December 31, 2016, the construction loan had not been drawn against.
As of December 31, 2017, the difference between2020, the carrying value of the Company’s initialCompany's investment in City Center and the amount of underlying equityHarbor Point Parcel 3 was immaterial.$1.1 million. For the yearsyear ended December 31, 2017 and 2016, City Center did not have any2020, Harbor Point Parcel 3 had no operating activity, and therefore the Company did not receive any dividends orreceived no allocated income.
Based on the terms of City Center’sthe operating agreement, the Company has concluded that City CenterHarbor Point Parcel 3 is a VIE and that the Company holds a variable interest. The Company does not have the power to direct the activities of the project that most significantly impact its performance. Accordingly, the Company is not the project’s primary beneficiary and, therefore, does not consolidate City CenterHarbor Point Parcel 3 in its consolidated financial statements. The Company has significant influence over the project due to its 50% ownership as well as certain rights and responsibilities relating to the development project. The Company's investment in the project is recorded as an equity method investment in the consolidated balance sheets.
6. Notes Receivable and Allowance for Loan Losses
Notes Receivable
The Company had the following loans receivable outstanding as of December 31, 2020 and December 31, 2019 ($ in thousands): Point Street Apartments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding loan amount | | Maximum loan commitment | | Interest rate | | Interest compounding | Development Project | | December 31, 2020 | | December 31, 2019 | | | The Residences at Annapolis Junction | | $ | 0 | | | $ | 40,049 | | | N/A | | N/A | (a) | N/A | Delray Plaza | | 14,289 | | | 12,995 | | | 17,000 | | | 15.0 | % | (a)(b) | Annually | Nexton Square | | 0 | | | 15,097 | | | N/A | | N/A | | N/A | Interlock Commercial | | 85,318 | | | 59,224 | | | 103,000 | | | 15.0 | % | (c) | None | Solis Apartments at Interlock | | 28,969 | | | 25,588 | | | 41,100 | | | 13.0 | % | | Annually | Total mezzanine | | 128,576 | | | 152,953 | | | $ | 161,100 | | | | | | Other notes receivable | | 6,809 | | | 1,147 | | | | | | | | Notes receivable guarantee premium | | 2,631 | | | 5,271 | | | | | | | | Allowance for credit losses | | (2,584) | | | 0 | | | | | | | | Total notes receivable | | $ | 135,432 | | | $ | 159,371 | | | | | | | |
(a) Loan was placed on nonaccrual status effective April 1, 2020. (b) $2.0 million of this loan is subject to an interest rate of 6%.
(c) $3.0 million of this loan is subject to an interest rate of 18%.
Interest on the mezzanine loans is accrued and funded utilizing the interest reserves for each loan, which are components of the respective maximum loan commitments, and such accrued interest is added to the loan receivable balances. The Company recognized interest income for the years ended December 31, 2020, 2019, and 2018 as follows (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | Development Project | | 2020 | | 2019 | | 2018 | | 1405 Point | | $ | 0 | | | $ | 783 | | | $ | 2,080 | | | The Residences at Annapolis Junction | | 2,468 | | (a)(b) | 8,776 | | (b) | 4,939 | | (b) | North Decatur Square | | 0 | | | 1,509 | | | 2,212 | | | Delray Plaza | | 489 | | (a) | 1,622 | | | 928 | | | Nexton Square | | 1,177 | | | 1,962 | | | 235 | | | Interlock Commercial | | 12,267 | | (c) | 6,142 | | (c) | 202 | | | Solis Apartments at Interlock | | 3,382 | | | 2,333 | | | 55 | | | Total mezzanine | | 19,783 | | | 23,127 | | | 10,651 | | | Other interest income | | 58 | | | 88 | | | 78 | | | Total interest income | | $ | 19,841 | | | $ | 23,215 | | | $ | 10,729 | | |
(a) Loan was placed on nonaccrual status effective April 1, 2020. (b) Includes amortization of the $5.0 million loan modification fee paid by the borrower in November 2018. Additionally, the 2020 and 2019 amounts include $1.5 million and $0.5 million, respectively, of interest income recognition relating to an exit fee that was due upon repayment of the loan. (c) The 2020 and 2019 amounts included $2.3 million and $0.6 million, respectively, of interest income recognition relating to an exit fee that is due upon repayment of the loan.
1405 Point
On October 15, 2015, the Company agreed to invest up toentered into a note receivable with a maximum principal balance of $28.2 million infor the 1405 Point Street Apartments project in the Harbor Point area of Baltimore, Maryland.Maryland (also known as Point Street Apartments is an estimated $98.0 million development project with plansApartments).
On April 24, 2019, the Company exercised its option to purchase 79% of the interest in the partnership that owns 1405 Point in exchange 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 ofextinguishing its note receivable on the project and has engaged the Company to serve as construction general contractor. Point Street Apartments is scheduled to open in the first quartera cash payment of 2018; however, management can provide no assurances that 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.$0.3 million. 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 under 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 December 31, 2017 and 2016, the Company had funded $22.4 million and $20.6 million, respectively, under the BDG loan and for the years ended December 31, 2017 and 2016, the Company recognized $1.7 million and $1.2 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 consolidateconsolidated the project in its consolidated financial statements.statements for the year ended December 31, 2019. The project was acquired subject to a loan payable of $64.9 million.
The Residences at Annapolis Junction
On April 21, 2016, the Company entered into a note receivable with a maximum principal balance of $48.1 million in the Annapolis Junction residential component of the Annapolis Junction Town Center project in Maryland (“("Annapolis Junction”Junction"). The Residences at Annapolis Junction is an estimated $106.0 million mixed-useapartment 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”("AJAO") is the developer of the residential component and has engaged the Company to serve as construction general contractor for the residential component. Portions ofThe Residences at Annapolis Junction opened during the third and fourth quarters of 2017 and the remaining portions are scheduled to open during the first quarter of 2018; however, management can provide no assurances that Annapolis Junction will open on the anticipated timeline or at the anticipated cost.2018. AJAO securedOn October 30, 2020, the Company acquired 79% of AJAO. As part of this purchase, the Company extinguished its note receivable for this project, assumed an $83.4 million senior loan, and made a senior construction loancash payment of up to $60.0 million to fund the development and construction of Annapolis Junction's residential component on September 30, 2016.$0.2 million. 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 upon completion of the project 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 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 8% indirect interest in Annapolis Junction for the lesser of the seller’s actual or budgeted cost, exercisable within 27 months from the project’s completion (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 $43.0 million and $38.9 million as of December 31, 2017 and 2016, respectively. During the years ended December 31, 2017 and 2016, the Company recognized $4.1 million and $2.0 million, respectively, of interest income on the 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 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 consolidateconsolidated the project in its consolidated financial statements.statements for the year ended December 31, 2020.
North Decatur Square
On May 15, 2017, the Company invested in the development of an estimated $34.0 million Whole Foods anchoredFoods-anchored center located in Decatur, Georgia. The Company's investment iswas in the form of a mezzanine loan of up to $21.8 million to the developer, North Decatur Square Holdings, LLC ("NDSH"). The mezzanineInterest on the loan bears interesthad accumulated at an annuala rate of 15%. The note matures on15.0% per annum. During 2018, this loan was modified to increase the earliest of (i) May 15, 2022, (ii) the maturitymaximum amount of the senior construction loan (iii)to $29.7 million due to an increase in the sale of NDSH or (iv) the salesquare footage of the center. NDSH is current on this loan.Whole Foods store.
As of December 31, 2017,
On July 22, 2019, the Company had funded $11.8 million on this loan. Duringborrower paid off the year ended December 31, 2017, the Company recognized $1.0 million of interest income on this 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 NDSH is the developer of North Decatur Square note receivable in full. The Company received the Company does not haveoutstanding principal and interest in the power to direct the activitiesamount 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.$20.0 million.
Delray Plaza
On October 27, 2017, the Company invested in the development of an estimated $20.0 million Whole Foods anchoredFoods-anchored center located in Delray Beach, Florida. The Company's investment iswas in the form of a mezzanine loan of up to $13.1 million to the developer, Delray Plaza Holdings, LLC ("DPH"). The Company has agreed to guarantee payment of up to $4.8 million of the senior construction loan. On January 8, 2019, this loan was modified to increase the maximum amount of the loan to $15.0 million and the payment guarantee amount increased to $5.2 million. The mezzanine loan bears interest at an annuala rate of 15%. The note matures on15.0% per annum.
During 2020, the earliest ofDelray Plaza loan was modified to (i) October 27, 2020, (ii)increase the date of any sale or refinancemaximum amount of the loan to $17.0 million, with $2.0 million of additional funds borrowed at an interest rate of 6% in order to fund final development activities, (ii) extend the maturity date to April 1, 2020, and (iii) require the borrower to tender 125,843 Class A Units that were pledged as collateral for this loan and establish a $2.5 million reserve account to be used for certain unpaid development project or (iii) the disposition or change in control of the development project.costs.
As of December 31, 2017, the Company had funded $5.4 million on this loan. During the year ended December 31, 2017, the Company recognized $0.2 million of interest income on this 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 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.
Subsequent to December 31, 2017Nexton Square
On JanuaryAugust 31, 2018, the North DecaturCompany financed a $2.2 million bridge loan to SC Summerville Brighton, LLC ("Brighton"), the developer of Nexton Square, a shopping center development project located in Summerville, South Carolina. The shopping center may comprise as many as 16 buildings. The loan was subsequently increased to $17.0 million.
On September 22, 2020, the Company exercised its option to purchase Nexton Square for $17.9 million cash and the assumption of a note payable of $22.9 million. The Company also incurred capitalized acquisition costs of $0.2 million. The developer of this property repaid the Company's mezzanine note receivable of $16.4 million at the time of the acquisition.
Interlock Commercial
In October 2018, the Company financed a bridge loan with a maximum commitment of $4.0 million to The Interlock, LLC ("Interlock"), the developer of the office and retail components of The Interlock, a new mixed-use public-private partnership with Georgia Tech in West Midtown Atlanta. This loan was subsequently modified as described below.
On December 21, 2018, the Company entered into a mezzanine loan agreement with Interlock for a maximum principal amount of $67.0 million and a total maximum commitment, including accrued interest reserves, of $95.0 million. The previous loan was repaid from proceeds of the mezzanine loan. The mezzanine loan bears interest at a rate of 15.0% per annum and matures at the earlier of (i) 24 months after the original maturity date or earlier termination date of the senior construction loan or (ii) any sale, transfer, or refinancing of the project. In the event that the maturity date is established as being 24 months after the original maturity date or earlier termination date of the senior construction loan, Interlock will have the right to extend the maturity date for 5 years.
On April 19, 2019, the borrower executed its senior construction loan, and the Company's payment guarantee of up to $30.7 million became effective. See Note 15 for additional information. See Note 18 for additional discussion.
In May 2020, the Company modified the Interlock Commercial loan to allow for an additional $8.0 million of loan funding; this additional loan funding may be available for cost overruns as well as the building of townhome units as an additional phase of this development project. The borrower subsequently decided to forego development of these townhome units. The borrower also modified the senior construction loan on the project.
On October 2, 2020, the Interlock Commercial loan was modified to increasedecrease the maximum amountexit fee, subject to the satisfaction of certain conditions. As a result, the exit fee for this loan may range from $6.5 million to $7.5 million.The Company has reduced its estimate of exit fees to be collected to $6.5 million and prospectively adjusted the recognition of the exit fee in interest income. The Company has recognized $2.9 million of this fee as of December 31, 2020.
Management has concluded that this entity is a VIE. Because Interlock is the developer of The Interlock, 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.
Solis Apartments at Interlock
On December 21, 2018, the Company entered into a mezzanine loan agreement with Interlock Mezz Borrower, LLC ("Solis Interlock"), the developer of Solis Apartments at Interlock, which is the apartment component of The Interlock. The mezzanine loan has a maximum principal commitment of $25.2 million and a total maximum commitment, including accrued interest reserves, of $41.1 million. The mezzanine loan bears interest at a rate of 13.0% per annum and matures on the earlier of (a) the later of (i) December 21, 2021 or (ii) the maturity date or earlier termination date of the senior construction loan, including any extensions of the senior construction loan, or (b) the date of any sale of the project or refinance of the loan.
Management has concluded that this entity is a VIE. Because Solis Interlock is the developer of Solis Apartments at Interlock, 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.
Harbor Point Parcel 3
On December 15, 2020, the Company funded a $6.8 million loan to $25.7Harbor Point Parcel 3 Holdings, LLC ("Parcel 3 Holdings"), the developer and the Company's joint venture partner for the development of future Harbor Point Parcel 3 office building in Baltimore, Maryland. Harbor Point Parcel 3 is a project to develop and build T. Rowe Price's new 450,000 square feet global headquarters in Baltimore's Harbor Point. The loan bears interest at a rate of 6% per annum and is secured by the joint venture membership interest held by Parcel 3 Holdings. The loan matures on December 1, 2021 and has an option to extend the maturity date to March 1, 2022.
Guarantee liabilities
As of December 31, 2020, the Company had outstanding payment guarantees for the senior loans on Delray Plaza, and Interlock Commercial as described above. As of December 31, 2020 and 2019, the Company has recorded a guarantee liability of $2.6 million and $5.3 million, respectively, representing their unamortized fair value. These guarantees are classified as other liabilities on the Company's consolidated balance sheets, with a corresponding adjustment to the notes receivable balance on the consolidated balance sheets. See Note 18 for additional information on the Company's outstanding guarantees.
Allowance for Loan Losses
The Company is exposed to credit losses primarily through its mezzanine lending activities. As of December 31, 2020, the Company had 3 mezzanine loans, all of which are secured by second liens on development projects in various stages of completion or lease-up. Each of these projects is subject to a loan that is senior to the Company’s mezzanine loan. Interest on these loans is paid in kind and is generally not expected to be paid until a sale of the project after completion of the development.
The Company updated the risk ratings for each of its notes receivable as of December 31, 2020 and obtained industry loan loss data relative to these risk ratings. The Company’s analysis resulted in an allowance for loan losses of approximately $2.6 million as of the year ended December 31, 2020.
The following table presents amortized cost basis of the portfolio by year of origination and risk rating as of December 31, 2020 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year of Origination | Risk Ratings | | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | | | Total | Pass | | $ | 6,766 | | | $ | 0 | | | $ | 115,082 | | | $ | 0 | | | $ | 0 | | | | | $ | 121,848 | | Special Mention | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | | | 0 | | Substandard | | 0 | | | 0 | | | 0 | | | 13,570 | | | 0 | | | | | 13,570 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total amortized cost basis | | $ | 6,766 | | | $ | 0 | | | $ | 115,082 | | | $ | 13,570 | | | $ | 0 | | | | | $ | 135,418 | |
As of December 31, 2019, there was no allowance for loan losses. At December 31, 2020, the Company reported $135.4 million of notes receivable, net of allowances of $2.6 million. Changes in the allowance for the year ended December 31, 2020 were as follows (in thousands):
| | | | | | | | | | | 7. | Construction Contracts | Twelve Months Ended December 31, 2020 | | | Beginning balance (December 31, 2019) | | $ | 0 | | | | Cumulative effect of accounting change | | 2,825 | | | | Unrealized credit loss provision | | 256 | | | | Extinguishment due to acquisition | | (497) | | | | | | | | | Ending balance | | $ | 2,584 | | | |
As of December 31, 2019, there were no loans on nonaccrual status. During the year ended December 31, 2020, the Company placed the loans for Delray Plaza and The Residences at Annapolis Junction on nonaccrual status with total amortized cost basis of $13.6 million. As a result, there was $5.1 million of interest income not recognized during the twelve months ended December 31, 2020.
7. 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 December 31, 2020 during the year ending December 31, 2021.
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 year ended December 31, 2020 and 2019 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2020 | | Year ended December 31, 2019 | | | Construction contract costs and estimated earnings in excess of billings | | Billings in excess of construction contract costs and estimated earnings | | Construction contract costs and estimated earnings in excess of billings | | Billings in excess of construction contract costs and estimated earnings | Beginning balance | | $ | 249 | | | $ | 5,306 | | | $ | 1,358 | | | $ | 3,037 | | Revenue recognized that was included in the balance at the beginning of the period | | — | | | (5,306) | | | — | | | (3,037) | | Increases due to new billings, excluding amounts recognized as revenue during the period | | — | | | 6,244 | | | — | | | 6,283 | | Transferred to receivables | | (545) | | | — | | | (2,557) | | | — | | Construction contract costs and estimated earnings not billed during the period | | 138 | | | — | | | 249 | | | — | | Changes due to cumulative catch-up adjustment arising from changes in the estimate of the stage of completion | | 296 | | | (156) | | | 1,199 | | | (977) | | Ending balance | | $ | 138 | | | $ | 6,088 | | | $ | 249 | | | $ | 5,306 | |
The Company defers precontractpre-contract costs when such costs are directly associated with specific anticipated contracts and their recovery is probable. PrecontractPre-contract costs of $0.6$1.7 million and $1.5$0.9 million were deferred as of December 31, 20172020 and 2016,2019, respectively. Amortization of pre-contract costs for the years ended December 31, 2020 and 2019 was $0.8 million and $0.6 million, 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 December 31, 20172020 and 2016,2019, construction receivables included retentions of $9.9$17.1 million and $11.5$9.0 million, respectively. The Company expects to collect substantially all construction receivables as of December 31, 20172020 during the year ending December 31, 2018.2021. As of December 31, 20172020 and 2016,2019, construction payables included retentions of $17.4$17.7 million and $14.6$18.0 million, respectively. The Company expects to pay substantially all construction payables as of December 31, 20172020 during the year ending December 31, 2018.2021.
The Company’s net position on uncompleted construction contracts comprised the following as of December 31, 20172020 and 20162019 (in thousands): | | | December 31, | | December 31, | | 2017 | | 2016 | | 2020 | | 2019 | Costs incurred on uncompleted construction contracts | $ | 520,368 |
| | $ | 333,744 |
| Costs incurred on uncompleted construction contracts | $ | 905,037 | | | $ | 695,564 | | Estimated earnings | 18,070 |
| | 10,936 |
| Estimated earnings | 32,130 | | | 24,553 | | Billings | (541,784 | ) | | (354,737 | ) | Billings | (943,117) | | | (725,174) | | Net position | $ | (3,346 | ) | | $ | (10,057 | ) | Net position | $ | (5,950) | | | $ | (5,057) | | | Construction contract costs and estimated earnings in excess of billings | | Construction contract costs and estimated earnings in excess of billings | $ | 138 | | | $ | 249 | | Billings in excess of construction contract costs and estimated earnings | | Billings in excess of construction contract costs and estimated earnings | (6,088) | | | (5,306) | | Net position | | Net position | $ | (5,950) | | | $ | (5,057) | |
| | | | | | | | | | December 31, | | 2017 | | 2016 | Construction contract costs and estimated earnings in excess of billings | $ | 245 |
| | $ | 110 |
| Billings in excess of construction contract costs and estimated earnings | (3,591 | ) | | (10,167 | ) | Net position | $ | (3,346 | ) | | $ | (10,057 | ) |
The Company's balances and changes in construction contract price allocated to unsatisfied performance obligations (backlog) for each of the three years ended December 31, 2020, 2019 and 2018 were as follows (in thousands): | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | 2020 | | 2019 | | 2018 | Beginning backlog | $ | 242,622 | | | $ | 165,863 | | | $ | 49,167 | | New contracts/change orders | 45,882 | | | 182,495 | | | 192,852 | | Work performed | (217,246) | | | (105,736) | | | (76,156) | | Ending backlog | $ | 71,258 | | | $ | 242,622 | | | $ | 165,863 | |
The Company expects to complete alla majority of the uncompleted contracts as of December 31, 20172020 during the years ending December 31, 2018 and 2019.next 12 to 18 months.
8. Indebtedness
The Company’s indebtedness was comprised of the following as of December 31, 20172020 and 20162019 (dollars in thousands): | | | | | | | | | | | | | | | | | Stated Interest | | Stated Maturity | | Principal Balance | | Rate | | Date | | December 31, | | December 31, | | 2017 | | 2016 | | 2017 | North Point Center Note 5 | $ | — |
| | $ | 643 |
| | LIBOR + 2.00% |
| | February 1, 2017 | Harrisonburg Regal | — |
| | 3,256 |
| | 6.06 | % | | June 8, 2017 | Commonwealth of Virginia - Chesapeake | — |
| | 4,933 |
| | LIBOR + 1.90% |
| | August 28, 2017 | Sandbridge Commons (2) | 8,468 |
| | 9,376 |
| | LIBOR + 1.75% |
| | January 17, 2018 | Columbus Village Note 1 (1) | 6,080 |
| | 6,258 |
| | LIBOR + 2.00% |
| | April 5, 2018 | Columbus Village Note 2 | 2,218 |
| | 2,266 |
| | LIBOR + 2.00% |
| | April 5, 2018 | Johns Hopkins Village | 46,698 |
| | 43,841 |
| | LIBOR + 1.90% |
| | July 30, 2018 | Lightfoot Marketplace | 10,500 |
| | 12,194 |
| | LIBOR + 1.75% |
| | November 14, 2018 | North Point Note 1 | 9,571 |
| | 9,776 |
| | 6.45 | % | | February 5, 2019 | Harding Place | 3,874 |
| | — |
| | LIBOR + 2.95% |
| | February 24, 2020 | Town Center Phase VI | 1,505 |
| | — |
| | LIBOR + 3.50% |
| | June 29, 2020 | Southgate Square | 20,708 |
| | 21,150 |
| | LIBOR + 2.00% |
| | April 29, 2021 | 249 Central Park Retail (3) | 16,851 |
| | 17,076 |
| | LIBOR + 1.95% |
| | August 8, 2021 | Fountain Plaza Retail (3) | 10,145 |
| | 10,281 |
| | LIBOR + 1.95% |
| | August 8, 2021 | South Retail (3) | 7,394 |
| | 7,493 |
| | LIBOR + 1.95% |
| | August 8, 2021 | 4525 Main Street (4) | 32,034 |
| | 32,034 |
| | 3.25 | % | | September 10, 2021 | Encore Apartments (4) | 24,966 |
| | 24,966 |
| | 3.25 | % | | September 10, 2021 | Revolving credit facility | 66,000 |
| | 107,000 |
| | LIBOR+1.40%-2.00% |
| | October 26, 2021 | Hanbury Village | 19,503 |
| | 20,709 |
| | 0.0378 |
| | August 15, 2022 | Term loan (1) | 50,000 |
| | 50,000 |
| | LIBOR+1.35%-1.95% |
| | October 26, 2022 | Term loan | 100,000 |
| | 50,000 |
| | LIBOR+1.35%-1.95% |
| | October 26, 2022 | Socastee Commons | 4,771 |
| | 4,866 |
| | 4.57 | % | | January 6, 2023 | North Point Note 2 | 2,459 |
| | 2,564 |
| | 7.25 | % | | September 15, 2025 | Smith's Landing | 19,764 |
| | 20,511 |
| | 4.05 | % | | June 1, 2035 | Liberty Apartments | 14,694 |
| | 20,005 |
| | 5.66 | % | | November 1, 2043 | The Cosmopolitan | 45,209 |
| | 45,884 |
| | 3.35 | % | | July 1, 2051 | Total principal balance | $ | 523,412 |
| | $ | 527,082 |
| | | | | Unamortized fair value adjustments | (1,211 | ) | | (1,250 | ) | | | | | Unamortized debt issuance costs | (4,929 | ) | | (3,652 | ) | | | | | Indebtedness, net | $ | 517,272 |
| | $ | 522,180 |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | Principal Balance | | Interest Rate (a) | | Maturity Date | | December 31, | | December 31, | | 2020 | | 2019 | | 2020 | Secured Debt | | | | | | | | Hanbury Village (b) | $ | 0 | | | $ | 18,515 | | | 3.78 | % | | August 15, 2022 | Sandbridge Commons (c) | 0 | | | 8,020 | | | LIBOR + 1.75% | | January 17, 2023 | Southgate Square | 19,682 | | | 20,562 | | | LIBOR + 1.60% | | April 29, 2021 | Nexton Square (d) | 22,909 | | | 0 | | | LIBOR + 2.25% | | August 8, 2021 | Encore Apartments (d)(e) | 24,337 | | | 24,842 | | | 3.25 | % | | September 10, 2021 | 4525 Main Street (d)(e) | 31,231 | | | 31,876 | | | 3.25 | % | | September 10, 2021 | Red Mill West | 10,851 | | | 11,296 | | | 4.23 | % | | June 1, 2022 | Thames Street Wharf | 70,000 | | | 70,000 | | | LIBOR + 1.30% | (h) | June 26, 2022 | Marketplace at Hilltop | 10,120 | | | 10,517 | | | 4.42 | % | | October 1, 2022 | 1405 Point | 53,000 | | | 53,000 | | | LIBOR + 2.25% | | January 1, 2023 | Socastee Commons | 4,458 | | | 4,567 | | | 4.57 | % | | January 6, 2023 | Wills Wharf | 59,044 | | | 29,154 | | | LIBOR + 2.25% | | June 26, 2023 | 249 Central Park Retail (f) | 16,597 | | | 16,828 | | | LIBOR + 1.60% | (h) | August 10, 2023 | Fountain Plaza Retail (f) | 9,988 | | | 10,127 | | | LIBOR + 1.60% | (h) | August 10, 2023 | South Retail (f) | 7,287 | | | 7,388 | | | LIBOR + 1.60% | (h) | August 10, 2023 | Hoffler Place (g) | 18,400 | | | 29,059 | | | LIBOR + 2.60% | | January 1, 2024 | Summit Place (g) | 23,100 | | | 28,824 | | | LIBOR + 2.60% | | January 1, 2024 | One City Center | 24,712 | | | 25,286 | | | LIBOR + 1.85% | | April 1, 2024 | Red Mill Central | 2,363 | | | 2,538 | | | 4.80 | % | | June 17, 2024 | Solis Gainesville | 0 | | | 0 | | | LIBOR + 3.00% | | August 31, 2024 | Premier Apartments (i) | 16,716 | | | 16,750 | | | LIBOR + 1.55% | | October 31, 2024 | Premier Retail (i) | 8,241 | | | 8,250 | | | LIBOR + 1.55% | | October 31, 2024 | Red Mill South | 5,833 | | | 6,137 | | | 3.57 | % | | May 1, 2025 | Brooks Crossing Office | 15,393 | | | 14,411 | | | LIBOR + 1.60% | | July 1, 2025 | Market at Mill Creek | 13,789 | | | 14,727 | | | LIBOR + 1.55% | | July 12, 2025 | Johns Hopkins Village | 50,859 | | | 51,800 | | | LIBOR + 1.25% | (h) | August 7, 2025 | North Point Center Note 2 | 2,094 | | | 2,214 | | | 7.25 | % | | September 15, 2025 | Lexington Square | 14,440 | | | 14,696 | | | 4.50 | % | | September 1, 2028 | Red Mill North | 4,294 | | | 4,394 | | | 4.73 | % | | December 31, 2028 | Greenside Apartments | 33,310 | | | 34,000 | | | 3.17 | % | | December 15, 2029 | The Residences at Annapolis Junction | 84,375 | | | 0 | | | SOFR + 2.66% | | November 1, 2030 | Smith's Landing | 17,331 | | | 18,174 | | | 4.05 | % | | June 1, 2035 | Liberty Apartments | 13,877 | | | 14,165 | | | 5.66 | % | | November 1, 2043 | Edison Apartments | 16,272 | | | 0 | | | 5.30 | % | | December 1, 2044 | The Cosmopolitan | 42,909 | | | 43,702 | | | 3.35 | % | | July 1, 2051 | Total secured debt | $ | 747,812 | | | $ | 645,819 | | | | | | Unsecured Debt | | | | | | | | Senior unsecured revolving credit facility | 10,000 | | | 110,000 | | | LIBOR+1.30%-1.85% | | January 24, 2024 | Senior unsecured term loan | 19,500 | | | 44,500 | | | LIBOR+1.25%-1.80% | | January 24, 2025 | Senior unsecured term loan | 185,500 | | | 160,500 | | | LIBOR+1.25%-1.80% | (h) | January 24, 2025 | | | | | | | | | Total unsecured debt | $ | 215,000 | | | $ | 315,000 | | | | | | Total principal balances | $ | 962,812 | | | $ | 960,819 | | | | | | Unamortized GAAP adjustments | (8,971) | | | (10,282) | | | | | | Other note payable (j) | 10,004 | | | 0 | | | | | | Indebtedness, net | $ | 963,845 | | | $ | 950,537 | | | | | |
| | (1) | Subject to an interest rate swap agreement. |
| | (2) | Subsequent to December 31, 2017, the Sandbridge Commons mortgage was extended for an additional 5 years. |
(a) LIBOR and SOFR rates are determined by individual lenders.
(b) On September 22, 2020, Hanbury Village Note was paid off.
(c) On October 6, 2020, Sandbridge Commons Note was paid off.
(d) Refinanced subsequent to year end. (e) Cross collateralized. (f) Cross collateralized. (g) Cross collateralized. (h) Includes debt subject to interest rate swap agreements. (i) Cross collateralized. (j) Represents the fair value of additional ground lease payments at 1405 Point over the approximately 42-year remaining lease term and an earn-out liability for the Gainesville development project.
The Company’s indebtedness was comprised of the following fixed and variable-rate debt as of December 31, 20172020 and 20162019 (in thousands): | | | December 31, | | December 31, | | 2017 | | 2016 | | 2020 | | 2019 | Fixed-rate debt | $ | 229,051 |
| | $ | 241,472 |
| Fixed-rate debt | $ | 573,951 | | | $ | 488,276 | | Variable-rate debt | 294,361 |
| | 285,610 |
| Variable-rate debt | 388,861 | | | 472,543 | | Total principal balance | $ | 523,412 |
| | $ | 527,082 |
| Total principal balance | $ | 962,812 | | | $ | 960,819 | |
Certain loans require the Company to comply with various financial and other covenants, including the maintenance of minimum debt coverage ratios. As of December 31, 2017,2020, the Company was in compliance with all loan covenants. Scheduled principal repayments and maturities during each of the next five years and thereafter are as follows (in thousands): | | | | | | | | | | | | | | | | | | | | | | Year Ending December 31, | | Scheduled Principal Payments | | Maturities | | Total Payments | | 2021 | | $ | 10,682 | | | $ | 97,151 | | | $ | 107,833 | | | 2022 | | 9,667 | | | 89,570 | | | 99,237 | | | 2023 | | 9,060 | | | 147,320 | | | 156,380 | | | 2024 | | 9,346 | | | 98,918 | | | 108,264 | | | 2025 | | 7,539 | | | 279,107 | | | 286,646 | | | Thereafter | | 91,356 | | | 113,096 | | | 204,452 | | | Total (1) | | $ | 137,650 | | | $ | 825,162 | | | $ | 962,812 | | |
(1)Debt principal payments and maturities exclude increased ground lease payments at 1405 Point and accrued earn-out payments to the Company’s joint venture partner at Gainesville, each of which is classified as notes payable in the Company's consolidated balance sheets. | | | | | | | | | | | | | Year | Scheduled Principal Payments | | Maturities | | Total Payments | 2018 | $ | 4,361 |
| | $ | 73,322 |
| | $ | 77,683 |
| 2019 | 3,951 |
| | 9,333 |
| | 13,284 |
| 2020 | 4,959 |
| | 5,379 |
| | 10,338 |
| 2021 | 4,073 |
| | 172,274 |
| | 176,347 |
| 2022 | 2,699 |
| | 167,109 |
| | 169,808 |
| Thereafter | 70,385 |
| | 5,567 |
| | 75,952 |
| Total | $ | 90,428 |
| | $ | 432,984 |
| | $ | 523,412 |
|
Credit Facility On October 26, 2017, the Operating Partnership entered into anThe Company has a senior credit facility that was amended and restated credit agreement (the “amended credit agreement”),on October 3, 2019, which provides for a $300.0$355.0 million credit facility comprised of a $150.0 million senior unsecured revolving credit facility (the "revolving credit facility") and a $150.0$205.0 million senior unsecured term loan facility (the “term"term loan facility”facility" and, together with the revolving credit facility, the “credit facility”"credit facility"), with a syndicate of banks. The amended credit facility replaces the prior $150.0 million revolving credit facility, which was scheduled to mature on February 20, 2019, and the prior $125.0 million term loan facility, which was scheduled to mature on February 20, 2021.
The credit facility includes an accordion feature that allows the total commitments to be increased to $450.0$700.0 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,January 24, 2024, with two2 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.January 24, 2025.
The revolving credit facility bears interest at LIBOR (the London Inter-Bank Offered Rate) plus a margin ranging from 1.40%1.30% to 2.00%1.85%, and the term loan facility bears interest at LIBOR plus a margin ranging from 1.35%1.25% to 1.95%1.80%, 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 December 31, 2017,2020, the interest rates on the revolving credit facility and the term loan facility were 3.11%1.64% and 3.06%1.59%, respectively. If the Company attains investment grade
credit ratings from S&P and Moody’s, the Operating Partnership may elect to have borrowings become subject to interest rates based on such credit ratings. The 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 facility.agreement.
Other 20172020 Financing Activity
In June 2020, the Company exercised its option to purchase the remaining 21% ownership interest in 1405 Point in exchange for increased ground lease payments to be made over the approximately 42-year remaining lease term. The Company recorded a note payable of $6.1 million, which represents the present value of these payments. The ground lessor is an affiliate of our former joint venture partner.
On February 1, 2017, the Company paid off the North Point Center Note 5 in full for $0.6 million.
On February 24, 2017, the Company secured a $29.8 million construction loan for the Harding Place project in Charlotte, North Carolina.
On April 7, 2017, the Company paid off the Harrisonburg Regal note in full for $3.2 million.
On April 19, 2017,August 31, 2020, the Company entered into a second amendment to the credit$31.4 million construction loan agreement for the Lightfoot Marketplace loan, which amended certain definitions and covenant requirements.
On June 29, 2017, the Company secured a $27.9 million construction loan for the Town Center Phase VIdevelopment project in Virginia Beach, Virginia.
On July 13, 2017, the Company paid off the remaining balance of $4.9 million for the note securedowned by the Commonwealth of Virginia building in Chesapeake, Virginia in conjunction with the sale of this property.
On August 9, 2017, the Company refinanced the Hanbury Village note. The new note matures in August 2022 and has a fixed annual interest rate of 3.78%.
On August 10, 2017, the Company paid off $0.7 million of the Sandbridge Commons note in conjunction with the sale of a land outparcel at this property.
On September 1, 2017, the Company entered into a modification of The Cosmopolitan note, which reduced the interest rate from 3.75% to 3.35%.
On October 13, 2017, the Company paid down $5.0 million of the Liberty Apartments note.
On November 1, 2017, the Company extended the Lightfoot construction loan after paying the balance down to $10.5 million and paying an extension fee. The loan is now set to mature in November 2018.
On December 28, 2017, the Company secured a $66.5 million construction loan for the 595 King Street and 530 Meeting Street development projects. There are no borrowings on this loan as of December 31, 2017.
During the year ended December 31, 2017, the Company borrowed $8.9 million under its construction loans to fund new development and construction.
Subsequent to December 31, 2017
On January 22, 2018, the Company extended the Sandbridge Commons mortgage.Gainesville Partnership. The loan bears interest at a rate of LIBOR plus a spread of 1.75%3.00% (LIBOR has a floor of 0.75%). The loan matures on August 31, 2024 and has one 12-month extension option. The Company's joint venture partner in the Gainesville Partnership has guaranteed payment of 55% of loan advances.
On September 22, 2020, as a part of the Nexton Square acquisition, the Company assumed a note payable of $22.9 million. The loan bears interest at a rate of LIBOR plus a spread of 2.25% and will mature on August 8, 2021.
On September 22, 2020, the Company paid off the Hanbury Village loan in full. This property was added to the unencumbered borrowing base for the revolving credit facility.
On October 1, 2020, the Company assumed a $16.4 million loan payable with the acquisition of Edison Apartments, a multifamily property located in downtown Richmond, Virginia
On October 6, 2020, the Company paid off the Sandbridge Commons loan in full. This property was added to the unencumbered borrowing base for the revolving credit facility.
On October 30, 2020, as part of the acquisition of The Residences at Annapolis Junction, the Company assumed an $83.4 million senior loan, which was immediately refinanced with a new $84.4 million loan. This new loan bears interest at a rate of SOFR plus a spread of 2.66% and will mature on November 1, 2030.
On December 22, 2020, the Company refinanced the Summit Place loan. The Company decreased the balance to $23.1 million by paying down $11.5 million. The loan bears interest at a rate of LIBOR plus a spread of 2.60% (LIBOR has a 0.40% floor) and will mature on January 17, 2023.1, 2024.
On December 22, 2020, the Company refinanced the Hoffler Place loan. The Company decreased the balance to $18.4 million by paying down $12.8 million. The loan bears interest at a rate of LIBOR plus a spread of 2.60% (LIBOR has a 0.40% floor) and will mature on January 1, 2024.
In January 2018,April 2020, the Company increased its borrowings underproactively obtained a waiver from the revolving credit facility by $58.0 million.
Other 2016 Financing Activity
On August 8, 2016,lender for the Premier Retail/Apartments property wherein it did not have to meet the minimum debt service coverage requirement for the period ended June 30, 2020. The Company repaidalso proactively obtained a waiver from the existing $15.1 million mortgage loan secured bylender for the 249 Central Park, Fountain Plaza Retail, the $6.7 million mortgage loan onand South Retail properties wherein it did not have to meet the minimum debt service coverage requirement for the periods ended June 30, 2020 and the $7.6 million mortgage loan on Fountain Plaza and refinanced them with a $35.0 million five-year term mortgage loan that bears interest at LIBOR plus 1.95% and matures on August 8, 2021. The new mortgage loan is collateralized by all three properties. The loss on extinguishmentDecember 31, 2020. As of debt recognized on the refinancing was less than $0.1 million.
On August 30, 2016,December 31, 2020, the Company repaidwas in compliance with all covenants on its outstanding indebtedness after giving effect to the existing $31.6 million construction loan secured by 4525 Main Street and the $25.2 million construction loan on Encore Apartments and refinanced them with a $57.0 million five-year term mortgage loan that bears interest at 3.25% and matures on September 10, 2021. The new mortgage is collateralized by both properties. The loss on extinguishmentwaivers granted.
During the year ended December 31, 2016,2020, the Company borrowed $44.4$39.7 million under its existing construction loans to fund new development and construction.
Other 20152019 Financing Activity
On January 31, 2019, the Company paid off North Point Center Note 1.
On March 11, 2019, the Company received $7.4 million of additional funding on the loan secured by Lightfoot Marketplace. On August 15, 2019, the Company sold the property and paid off the outstanding balance of $17.9 million. The Company retained the interest rate swap associated with the loan.
On March 14, 2019, the Company obtained a loan secured by One City Center in the amount of $25.6 million in conjunction with the acquisition of this property. This loan may be increased to $27.6 million subject to certain conditions. The loan bears interest at a rate of LIBOR plus a spread of 1.85% and will mature on April 1, 2024.
On April 24, 2019, the Company exercised its option to purchase 79% of the partnership that owns 1405 Point in exchange for extinguishing its note receivable on the project and a cash payment of $0.3 million. The project was acquired subject to a loan payable of $64.9 million, which was recorded at its fair value of $65.8 million. On December 27, 2019, the Company extended and modified the 1405 Point loan. The Company decreased the balance on the loan to $53.0 million by paying the balance of $12.3 million. The loan matures on January 1, 2023 and bears interest at a rate of LIBOR plus a spread of 2.25%; this spread will decrease to 2.00% upon achieving Debt Yield of 8.5% and further to 1.75% upon achieving Debt Yield of 9.5% (as defined in the loan agreement).
On May 20, 2015, the Company repaid the $17.8 million construction loan secured by Whetstone Apartments and recognized a loss on extinguishment of debt of $0.1 million representing unamortized debt issuance costs. On May 27, 2015, the Company repaid the existing $24.4 million mortgage secured by Smith’s Landing and refinanced the property with a new $21.6 million loan that bears interest at 4.05% and matures on June 1, 2035. As a result of the refinancing, the Company recognized a $0.1 million loss on extinguishment of debt representing the unamortized debt issuance costs associated with the repaid mortgage.
On July 1, 2015,23, 2019, the Company assumed debt with an outstanding principal balance of $5.0 millionnotes payable in connection with the acquisition of Socastee Commons.Red Mill Commons and Marketplace at Hilltop with outstanding principal balances of $24.9 million and $10.8 million, respectively. The mortgage bearsfollowing table summarizes the note balance at assumption, fair value at assumption, maturity date, and interest at 4.57% and matures on January 6, 2023.rate for each loan ($ in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | Loan name | | Note balance at assumption | | Fair value of loan at assumption | | Loan maturity date | | Loan interest rate | Red Mill North | | $ | 4,451 | | | $ | 4,520 | | | 12/31/2028 | | 4.73 | % | Red Mill South | | 6,310 | | | 6,090 | | | 5/1/2025 | | 3.57 | % | Red Mill Central | | 2,640 | | | 2,690 | | | 6/17/2024 | | 4.80 | % | Red Mill West | | 11,548 | | | 11,540 | | | 6/1/2022 | | 4.23 | % | Marketplace at Hilltop | | 10,740 | | | 10,790 | | | 10/1/2022 | | 4.42 | % | | | $ | 35,689 | | | $ | 35,630 | | | | | |
On July 10, 2015,June 26, 2019, the Company assumed two loans with an aggregate outstanding principal balanceobtained a loan secured by Thames Street Wharf in the amount of $8.8$70.0 million in connectionconjunction with the acquisition of Columbus Village. Both loans bearthis property. The loan bears interest at a rate of LIBOR plus 2.00%a spread of 1.30% and will mature on April 5, 2018.June 26, 2022.
On July 30, 2015,June 26, 2019, the Company entered into a $50.0$76.0 million syndicated construction loan agreementfacility for the Wills Wharf development project in Baltimore, Maryland. The facility bears interest at a rate of LIBOR plus a spread of 2.25% during construction activities and will mature on June 26, 2023.
On October 29, 2019, the Company extended and modified the Premier loan. The Company increased the balance on the loan to fund the development and construction$25.0 million by receiving additional proceeds of Johns Hopkins Village.$2.7 million. The construction loan bears interest at a rate of LIBOR plus 1.90%a spread of 1.55% and matureswill mature on July 30, 2018.October 31, 2024.
On December 12, 2019, the Company refinanced the Greenside loan. The Company increased the balance to $34.0 million by receiving additional proceeds of $5.1 million. The loan bears interest at a rate of 3.17% and will mature on December 15, 2029.
During the year ended December 31, 2019, the Company borrowed $96.3 million under its construction loans to fund development and construction.
Other 2018 Financing Activity
On September 1, 2015,January 22, 2018, the Company repaidextended and modified the $6.1 million mortgage secured by the Oyster Point office building. Sandbridge Commons note. The note bore interest at a rate of LIBOR plus a spread of 1.75%. On October 6, 2015,2020, the Operating PartnershipCompany paid off the Sandbridge Commons note in full.
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.
On May 31, 2018, the Company modified the Southgate Square note. The principal amount of the note was increased to $22.0 million, and the note now bears interest at a rate of LIBOR plus a spread of 1.60%. This note will still mature on April 29, 2021.
On June 1, 2018, the Company entered into a $6.4$16.3 million construction loan for the River City industrial facility in Chesterfield, Virginia. The loan bore interest at a rate of LIBOR plus a spread of 1.50%. On December 20, 2018, the Company sold the completed facility and paid the loan in full.
On June 14, 2018, the Company extended and modified the note secured by 249 Central Park Retail, Fountain Plaza Retail, and South Retail. The principal amount of the note was increased to $35.0 million. The note bears interest at a rate of LIBOR plus a spread of 1.60% and will mature on August 10, 2023.
On June 29, 2018, the Company entered into a $15.6 million construction loan for the Brooks Crossing Office development project. The loan bears interest at a rate of LIBOR plus a spread of 1.60% and will mature on July 1, 2025.
On July 12, 2018, the Company entered into a $16.2 million construction loan for the Market at Mill Creek development project in Mt. Pleasant, South Carolina. The loan bears interest at a rate of LIBOR plus a spread of 1.55% and will mature on July 12, 2025.
On July 27, 2018, the Company paid off the Johns Hopkins Village note and entered into a new loan. The principal amount of the new loan is $53.0 million. The loan bears interest at a rate of LIBOR plus a spread of 1.25% and will mature on August 7, 2025. The Company simultaneously entered into an interest rate swap agreement that effectively fixes the interest rate at 4.19% for the term of the loan.
On August 28, 2018, the Company entered into a $15.0 million note secured by the Oyster Point office building, whichnewly acquired Lexington Square shopping center. The note bears interest at a rate of 4.50% and will mature on September 1, 2028.
On October 12, 2018, the Company extended and modified the note secured by Lightfoot Marketplace. The Company borrowed an initial tranche of $10.5 million on this note, which bore interest at a rate of LIBOR plus 1.40% to 2.00% and matures on February 28, 2017. Thisa spread of 1.75%. The Company simultaneously entered into an interest rate swap agreement that effectively fixed the interest rate of the initial tranche at 4.77% per annum. On March 11, 2019, the Company received $7.4 million of additional funding under this note. On August 15, 2019, the Company paid off the $17.9 million outstanding balance of the note was paid in full in conjunction with the sale of the Oyster Point office building.property.
During the year ended December 31, 2018, the Company borrowed $86.9 million under its existing construction loans to fund new development and construction and repaid $10.5 million in conjunction with the sale of the River City industrial facility.
9. Derivative Financial Instruments On October 30, 2015,During the three years ended December 31, 2020, the Company repaidhad the $18.7 million construction loan secured by the Oceaneering International buildingfollowing LIBOR and recognized a loss on debt extinguishment of debt of $0.1 million representing unamortized debt issuance costs.
| | 9. | Derivative Financial Instruments |
On February 20, 2015, the Operating Partnership entered into a $50.0 million floating-to-fixedSOFR interest rate swap attributable to one-month LIBOR indexed interest payments. The $50.0 million interest rate swap has a fixed rate of 2.00%, an effective date of March 1, 2016 and a maturity date of February 20, 2020. The Operating Partnership entered into this interest rate swap agreementcaps ($ in connection with the $50.0 million senior unsecured term loan facility that bears interest at LIBOR plus 1.35% to 1.95%, depending on the Operating Partnership’s total leverage. The Company designated this interest rate swapthousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Effective Date | | Maturity Date | | Notional Amount | | LIBOR Strike Rate | | SOFR Strike Rate | | Premium Paid | 2/25/2016 | | 3/1/2018 | | $ | 75,000 | | | 1.50 | % | | N/A | | $ | 57 | | 6/17/2016 | | 6/17/2018 | | 70,000 | | | 1.00 | % | | N/A | | 150 | | 2/7/2017 | | 3/1/2019 | | 50,000 | | | 1.50 | % | | N/A | | 187 | | 6/23/2017 | | 7/1/2019 | | 50,000 | | | 1.50 | % | | N/A | | 154 | | 9/18/2017 | | 10/1/2019 | | 50,000 | | | 1.50 | % | | N/A | | 199 | | 11/28/2017 | | 12/1/2019 | | 50,000 | | | 1.50 | % | | N/A | | 359 | | 3/7/2018 | | 4/1/2020 | | 50,000 | | | 2.25 | % | | N/A | | 310 | | 7/16/2018 | | 8/1/2020 | | 50,000 | | | 2.50 | % | | N/A | | 319 | | 12/11/2018 | | 1/1/2021 | | 50,000 | | | 2.75 | % | | N/A | | 210 | | 5/15/2019 | | 6/1/2022 | | 100,000 | | | 2.50 | % | | N/A | | 288 | | 1/10/2020 | | 2/1/2022 | | 50,000 | | (a) | 1.75 | % | | N/A | | 87 | | 1/28/2020 | | 2/1/2022 | | 50,000 | | (a) | 1.75 | % | | N/A | | 62 | | 3/2/2020 | | 3/1/2022 | | 100,000 | | (a) | 1.50 | % | | N/A | | 111 | | 7/1/2020 | | 7/1/2023 | | 100,000 | | (a) | 0.50 | % | | N/A | | 232 | | 11/1/2020 | | 11/1/2023 | | 84,375 | | (a) | N/A | | 1.84 | % | | 91 | | | | | | | | | | | | $ | 2,816 | |
(a) Designated as a cash flow hedgehedge.
As of variable interest payments based on one-month LIBOR.
On July 13, 2015,December 31, 2020, the Operating Partnership entered into a $6.5 millionCompany held the following floating-to-fixed interest rate swap attributable to one-month LIBOR indexed interest payments. The $6.5 millionswaps ($ in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Related Debt | | Notional Amount | | | Index | | Swap Fixed Rate | | Debt effective rate | | Effective Date | | Expiration Date | Senior unsecured term loan | | $ | 50,000 | | | | 1-month LIBOR | | 2.78 | % | | 4.23 | % | | 5/1/2018 | | 5/1/2023 | John Hopkins Village | | 50,859 | | (a) | | 1-month LIBOR | | 2.94 | % | | 4.19 | % | | 8/7/2018 | | 8/7/2025 | Senior unsecured term loan | | 10,500 | | (a) | | 1-month LIBOR | | 3.02 | % | | 4.47 | % | | 10/12/2018 | | 10/12/2023 | 249 Central Park Retail, South Retail, and Fountain Plaza Retail | | 33,872 | | (a) | | 1-month LIBOR | | 2.25 | % | | 3.85 | % | | 4/1/2019 | | 8/10/2023 | Senior unsecured term loan | | 50,000 | | (a) | | 1-month LIBOR | | 2.26 | % | | 3.71 | % | | 4/1/2019 | | 10/26/2022 | Thames Street Wharf | | 70,000 | | (a) | | 1-month LIBOR | | 0.51 | % | | 1.81 | % | | 3/26/2020 | | 6/26/2024 | Senior unsecured term loan | | 25,000 | | (a) | | 1-month LIBOR | | 0.50 | % | | 1.95 | % | | 4/1/2020 | | 4/1/2024 | Senior unsecured term loan | | 25,000 | | (a) | | 1-month LIBOR | | 0.50 | % | | 1.95 | % | | 4/1/2020 | | 4/1/2024 | Senior unsecured term loan | | 25,000 | | (a) | | 1-month LIBOR | | 0.55 | % | | 2.00 | % | | 4/1/2020 | | 4/1/2024 | Total | | $ | 340,231 | | | | | | | | | | | | |
| | | (a) Designated as a cash flow hedge. |
For the interest rate swap has a fixed rate of 3.05%, an
effective date of July 13, 2015 and a maturity date of April 5, 2018. The Companyswaps designated this interest rate swap as a cash flow hedgehedges, realized losses are reclassified out of variableaccumulated other comprehensive loss to interest expense in the Consolidated Statements of Comprehensive Income due to payments based on one-month LIBOR.made to the swap counterparty. During the next 12 months, the Company anticipates reclassifying approximately $4.3 million of net hedging losses from accumulated other comprehensive loss into earnings to offset the variability of the hedged items during this period.
On October 26, 2015, the Operating Partnership entered into a LIBOR interest rate cap agreement on a notional amount of $75.0 million at a strike rate of 1.25% for a premium of $0.1 million. The interest rate cap agreement expired on October 15, 2017.
On February 25, 2016, the Operating Partnership entered into a LIBOR interest rate cap agreement on a notional amount of $75.0 million at a strike rate of 1.50% for a premium of less than $0.1 million. The interest rate cap agreement expires on March 1, 2018.
On June 17, 2016, the Operating Partnership entered into a LIBOR interest rate cap agreement on a notional amount of $70.0 million at a strike rate of 1.00% for a premium of less than $0.1 million. The interest rate cap agreement expires on June 17, 2018.
On February 7, 2017, the Operating Partnership entered into a LIBOR interest rate cap agreement on a notional amount of $50.0 million at a strike rate of 1.50% for a premium of $0.2 million. The interest rate cap expires on March 1, 2019.
On June 23, 2017, the Operating Partnership entered into a LIBOR interest rate cap agreement on a notional amount of $50.0 million at a strike rate of 1.50% for a premium of less than $0.2 million. The interest rate cap agreement expires on July 1, 2019.
On September 18, 2017, the Operating Partnership entered into a LIBOR interest rate cap agreement on a notional amount of $50.0 million at a strike rate of 1.50% for a premium of less than $0.2 million. The interest rate cap agreement expires on October 1, 2019.
On November 28, 2017, the Operating Partnership entered into a LIBOR interest rate cap agreement on a notional amount of $50.0 million at a strike rate of 1.50% for a premium of less than $0.4 million. The interest rate cap agreement expires on December 1, 2019.
The Company’s derivatives comprised the following as of December 31, 20172020 and 20162019 (in thousands):
| | | | | | | | | | | | | | | | | December 31, 2020 | | December 31, 2019 | | December 31, | | | | Fair Value | | | Fair Value | | 2017 | | 2016 | | Notional Amount | | Asset | | Liability | | Notional Amount | | Asset | | Liability | | Notional | | Fair Value | | Notional | | Fair Value | | | Amount | | Asset | | Liability | | Amount | | Asset | | Liability | | Derivatives not designated as accounting hedges | | Derivatives not designated as accounting hedges | | | | | | | | | | | | | Interest rate swaps | $ | 56,079 |
| | $ | 10 |
| | $ | (69 | ) | | $ | 56,901 |
| | $ | — |
| | $ | (829 | ) | Interest rate swaps | | $ | 50,000 | | | $ | 0 | | | $ | (3,056) | | | $ | 100,000 | | | $ | 0 | | | $ | (1,992) | | Interest rate caps | 345,000 |
| | 1,515 |
| | — |
| | 270,000 |
| | 259 |
| | — |
| Interest rate caps | | 150,000 | | | 4 | | | 0 | | | 250,000 | | | 25 | | | 0 | | Total | $ | 401,079 |
| | $ | 1,525 |
| | $ | (69 | ) | | $ | 326,901 |
| | $ | 259 |
| | $ | (829 | ) | | Total derivatives not designated as accounting hedges | | Total derivatives not designated as accounting hedges | | 200,000 | | | 4 | | | (3,056) | | | 350,000 | | | 25 | | | (1,992) | | Derivatives designated as accounting hedges | | Derivatives designated as accounting hedges | | Interest rate swaps | | Interest rate swaps | | 290,231 | | | 0 | | | (11,797) | | | 146,642 | | | 0 | | | (5,728) | | Interest rate caps | | Interest rate caps | | 384,375 | | | 86 | | | 0 | | | 0 | | | 0 | | | 0 | | Total derivatives | | Total derivatives | | $ | 874,606 | | | $ | 90 | | | $ | (14,853) | | | $ | 496,642 | | | $ | 25 | | | $ | (7,720) | |
The changes in the fair value of the Company’s derivatives during the years ended December 31, 2017, 2016,2020, 2019, and 20152018 was as follows (in thousands): | | | | | | | | | | | | | | Years Ended December 31, | | 2017 | | 2016 | | 2015 | Interest rate swaps | $ | 770 |
| | $ | (795 | ) | | $ | (1,071 | ) | Interest rate caps | 357 |
| | (146 | ) | | (233 | ) | Total | $ | 1,127 |
| | $ | (941 | ) | | $ | (1,304 | ) | Comprehensive income statement presentation: | |
| | |
| | |
| Change in fair value of interest rate derivatives | $ | 1,127 |
| | $ | (941 | ) | | $ | (229 | ) | Unrealized gain (loss) on cash flow hedge | — |
| | — |
| | (1,075 | ) | Total | $ | 1,127 |
| | $ | (941 | ) | | $ | (1,304 | ) |
| | | | | | | | | | | | | | | | | | | Years Ended December 31, | | 2020 | | 2019 | | 2018 | Interest rate swaps | $ | (10,318) | | | $ | (6,050) | | | $ | (2,281) | | Interest rate caps | (518) | | | (2,053) | | | (564) | | Total change in fair value of interest rate derivatives | $ | (10,836) | | | $ | (8,103) | | | $ | (2,845) | | Comprehensive income statement presentation: | | | | | | Change in fair value of derivatives and other | $ | (1,085) | | | $ | (3,599) | | | $ | (951) | | Unrealized cash flow hedge losses | (9,751) | | | (4,504) | | | (1,894) | | Total change in fair value of interest rate derivatives | $ | (10,836) | | | $ | (8,103) | | | $ | (2,845) | |
Effective March 31, 2016, the Company determined that the short-cut method of hedge accounting was not appropriate for two of its interest-rate swaps and, for accounting purposes, the hedge relationship was terminated. The swaps were entered into in February and July 2015. Accordingly, changes in fair value of the swap should have been recorded in income rather than other comprehensive income. The Company determined that the errors were immaterial to all previously issued financial statements. The Company recognized $0.7 million of accumulated other comprehensive income and $0.4 million, which was previously allocated to noncontrolling interest as of December 31, 2015, in earnings during the first quarter of 2016. Subsequent changes in the value of the interest rate swap for the period from January 1, 2016 to December 31, 2017 were also recognized in earnings during the years ended December 31, 2017 and 2016. Net income for the year ended December 31, 2015 was overstated by $1.0 million. In reaching its conclusions, management considered the nature of the error, the effect of the error on operating results for 2015, and the effects of the error on important financial statement measures, including related trends. 10. Equity
The Company has not designated any of its interest rate caps as hedging instruments under GAAP.
Stockholders’ Equity As of December 31, 20172020 and 2016,2019, the Company’s authorized capital was 500 million shares of common stock and 100 million shares of preferred stock. The Company had 44.959.1 million and 37.556.3 million shares of common stock issued and outstanding as of December 31, 20172020 and 2016,2019, respectively. NoThe Company had 6.8 million and 2.5 million shares of preferred stock wereits Series A Preferred Stock (as defined below) issued and outstanding as of December 31, 20172020 and 2016.2019, respectively.
Common Stock
On April 8, 2015, the Company issued 415,500 shares of common stock in a private placement as partial consideration for the acquisition of Perry Hall Marketplace.
On May 5, 2015,February 26, 2018, the Company commenced an at-the-market continuous equity offering program (the "2018 ATM Program") through which the Company was ablemay, from time to time, issue and sell shares of its common stock. Upon commencing the 2018 ATM Program, the Company simultaneously terminated the 2016 ATM Program. On August 6, 2019, the Company entered into amendments (the "Amendments") to the separate sales agreements related to the 2018 ATM Program, which, among other things, increased the aggregate offering price of shares of the Company’s common stock under the ATM Program from $125.0 million to $180.7 million. During the years ended December 31, 2020 and 2019, the Company issued and sold 92,577 and 5,871,519 shares of common stock at a weighted average price of $18.23 and $16.76 per share under the 2018 ATM Program, receiving net proceeds after offering costs and commissions of $1.7 million and $97.0 million, respectively.
On March 10, 2020, the Company commenced a new 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 and shares of its 6.75% Series A Cumulative Redeemable Perpetual Preferred Stock (the "Series A Preferred Stock") having an aggregate offering price of up to $50.0$300.0 million, (the "2015 ATM Program"). During the years ended December 31, 2016to or through its sales agents and, 2015, the Company issued and sold 1,152,919 and 1,108,149with respect to shares of its
common stock, at weighted average prices of $10.87 and $10.26 per share, resulting in net proceedsmay enter into separate forward sales agreements to or through the Company after offering costs and commissions of $12.2 million and $10.9 million, respectively.
On December 9, 2015, the Company completed an underwritten public offering of 3,450,000 shares of common stock. The net proceeds to the Company after deducting the underwriting discount and related offering costs were $35.1 million.
On May 4, 2016, the Company commenced a new at-the-market continuous equity offering program (the “2016 ATM Program”) through which the Company was able to, from time to time, issue and sell shares of its common stock having an aggregate offering price of up to $75.0 million.forward purchaser. Upon commencing the 2016 ATM Program, the Company simultaneously terminated the Prior2018 ATM Program. During the yearsyear ended December 31, 2017 and 2016,2020, the Company issued and sold 450,890 and 4,159,9361,783,768 shares of common stock at a weighted average price of $14.08 and $13.45$10.48 per share under the 2016 ATM Program, receiving net proceeds, after offering costs and commissions, of $6.2 million and $54.8 million, respectively.
On October 13, 2016,$18.4 million. During the year ended December 31, 2020, the Company completed the acquisition of Columbus Village II, a stabilized retail asset for aggregate consideration of 2,000,000issued and sold 713,418 shares of common stock, which based on the closing stock price on the date of the acquisition, resulting in an acquisitionSeries A Preferred Stock at a weighted average price of $26.2 million. On October 19, 2016, the Company filed a registration statement covering resales of the shares pursuant to a registration rights agreement with the sellers.
On May 12, 2017, the Company completed an underwritten public offering of 6,900,000 shares of common stock at a public offering price of $13.00$22.88 per share which resulted in(inclusive of accrued dividends) under the ATM Program, receiving net proceeds, after offering costs and commissions, of $85.3$16.1 million.
Preferred Stock
On June 18, 2019, the Company issued 2,530,000 shares of its 6.75% Series A Cumulative Redeemable Noncontrolling InterestsPerpetual Preferred Stock, $0.01 par value per share ("Series A Preferred Stock"), with a liquidation preference of $25.00 per share, which included 330,000 shares issued upon the underwriters’ full exercise of their option to purchase additional shares. Net proceeds from the offering, after the underwriting discount but before offering expenses payable by the Company, were approximately $61.3 million. The Company used the net proceeds to fund a portion of the purchase price of Thames Street Wharf, a 263,426 square foot office building located in the Harbor Point neighborhood of Baltimore, Maryland. The balance of the net proceeds was used to repay a portion of the outstanding borrowings under the Company’s unsecured revolving credit facility and for general corporate purposes.
In connection with the issuance of the Series A Preferred Stock, on June 18, 2019, the Operating Partnership issued to the Company 2,530,000 6.75% Series A Cumulative Redeemable Perpetual Preferred Units (the "Series A Preferred Units"), which have economic terms that are identical to the Company’s Series A Preferred Stock. The former noncontrolling interest holderSeries A Preferred Units were issued in exchange for the Company’s contribution of Johns Hopkins Village had anthe net proceeds from the offering of the Series A Preferred Stock to the Operating Partnership.
On August 20, 2020, the Company sold 3,600,000 shares of its Series A Preferred Stock at a public offering price of $24.75 per share (inclusive of accrued dividends), for net proceeds, after the underwriting discount and offering expenses payable by the Company, of approximately $86.1 million, pursuant to a prospectus supplement, dated August 13, 2020, and a base prospectus dated March 9, 2020. The offering was a re-opening of the Company’s previous issuances of Series A Preferred Stock. The additional shares of Series A Preferred Stock sold in the offering form a single series, and are fully fungible, with the other outstanding shares of Series A Preferred Stock. The Company used the net proceeds to repay a portion of the outstanding borrowings under the Company’s unsecured revolving credit facility and for general corporate purposes.
In connection with the issuance of the Series A Preferred Stock, on August 20, 2020, the Operating Partnership issued to the Company 3,600,000 6.75% Series A Cumulative Redeemable Perpetual Preferred Units (the "Series A Preferred Units"), which have economic terms that are identical to the Series A Preferred Stock. The Series A Preferred Units were issued in exchange for the Company’s contribution of the net proceeds from the offering of the Series A Preferred Stock to the Operating Partnership.
Dividends on the Series A Preferred Stock are payable quarterly in arrears on or about the 15th day of each January, April, July and October. The first dividend on the Series A Preferred Stock was paid on October 15, 2019. The Series A Preferred Stock does not have a stated maturity date and is not subject to any sinking fund or mandatory redemption provisions. Upon liquidation, dissolution or winding up, the Series A Preferred Stock will rank senior to the Company's common stock with respect to the payment of distributions and other amounts. Except in instances relating to preservation of the Company's qualification as a REIT or pursuant to the Company’s special optional redemption right, the Series A Preferred Stock is not redeemable prior to June 18, 2024. On and after June 18, 2024, the Company may, at its option, redeem the Series A Preferred Stock, in whole, at any time, or in part, from time to time, for cash at a redemption price of $25.00 per share, plus any accrued and unpaid dividends (whether or not declared) to, but excluding, the redemption date.
Upon the occurrence of a change of control (as defined in the articles supplementary designating the terms of the Series A Preferred Stock), the Company has a special optional redemption right that enables it to redeem the 20% noncontrolling interestSeries A Preferred Stock, in that entity.whole or in part and within 120 days after the first date on which a change of control has occurred resulting in neither the Company nor the surviving entity having a class of common stock listed on the New York Stock Exchange, NYSE American, or NASDAQ or the acquisition of beneficial ownership of its stock entitling a person to exercise more than 50% of the total voting power of all our stock entitled to vote generally in election of directors. The noncontrolling interestspecial optional redemption price is $25.00 per share, plus any accrued and unpaid dividends (whether or not declared) to, but excluding, the date of $2.0 million wasredemption.
Upon the occurrence of a change of control, holders will have the right (unless the Company has elected to exercise its special optional redemption right to redeem their Series A Preferred Stock) to convert some or all of such holder’s Series A Preferred Stock into a number of shares of the Company's common stock equal to the lesser of:
•the quotient obtained by dividing (i) the sum of the $25.00 liquidation preference plus the amount of any accrued and unpaid distributions to, but not including, the change of control conversion date (unless the change of control conversion date is after a record date for a Series A Preferred Stock distribution payment and prior to the corresponding Series A Preferred Stock distribution payment date, in which case no additional amount for such accrued and unpaid distribution will be included in temporary equity. On December 21, 2017,this sum) by (ii) the Company redeemedCommon Stock Price (as defined in the noncontrolling interestarticles supplementary designating the terms of the Series A Preferred Stock); and
•2.97796 (i.e., the Share Cap), subject to certain adjustments;
subject, in each case, to certain adjustments and provisions for a cash paymentthe receipt of $2.0 million and contingent futurealternative consideration of $0.5 million to be paidequivalent value as described in Class A Unitsthe articles supplementary designating the terms of the Operating Partnership upon the satisfaction of certain conditions. The contingent future consideration of $0.5 million has been recorded in accounts payable and accrued liabilities on the Company's consolidated balance sheets.Series A Preferred Stock. Noncontrolling Interests As of December 31, 20172020 and 2016,2019, the Company held a 72.0%73.9% and 68.1%72.6% common interest in the Operating Partnership, respectively. As of December 31, 2020, the sole general partnerCompany also held a preferred interest in the Operating Partnership in the form of preferred units with a liquidation preference of $171.1 million. 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 majority interest holder,rights to absorb 73.9% 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 OP Unitsunits of limited partnership interest in the Operating Partnership not held by the Company. As of December 31, 2020, there were 20,865,485 Class A Units of limited partnership interest in the Operating partnership not held by the Company. The Company's financial position and results of operations are the same as those of the Operating Partnership.
As partial consideration for Columbus Village,Additionally, the Operating Partnership issued 1,000,000 Class B Units on July 10, 2015owns a majority interest in certain non-wholly-owned operating and issued 275,000 Class C Units on January 10, 2017.development properties. The Class B Unitsnoncontrolling interest for investment entities of $0.5 million relates to the minority partners' interest in certain joint venture entities as of December 31, 2020, including Hoffler Place, The Residences at Annapolis Junction, and Class C Units did not earnSummit Place. The noncontrolling interest for the consolidated entities under development or accrue distributions until July 10, 2017 and January 10, 2018, respectively, at which time they automatically converted to Class A Units.construction was $4.5 million as of December 31, 2019.
On January 10, 2017, the Operating Partnership issued 68,691 Class A Units to acquire the remaining 20% interest in the Town Center Phase VI project.
On October 2, 2017,July 1, 2020, due to the request of holders of Class A Units to tendertendering an aggregate 358,879of 756,697 Class A Units for redemption by the Operating Partnership, the Company elected to satisfy the redemption requests withthrough the issuance of an aggregate cash paymentequal number of $4.9 million.shares of common stock.
As partial consideration for the acquisition of Edison Apartments, the Operating Partnership issued 633,734 Class A Units on October 1, 2020.
Holders of OP Units may not transfer their units without the Company’s prior consent as general partner of the Operating Partnership. Subject to the satisfaction of certain conditions, holders of Class A Units may tender their units for redemption by the Operating Partnership in exchange for cash equal to the market price of shares of the Company’s common stock at the time of redemption or, at the Company’s option and sole discretion, for unregistered or registered shares of common stock on a one-for-one1-for-one basis. Accordingly, the Company presents OP Units of the Operating Partnership not held by the Company as noncontrolling interests within equity in the consolidated balance sheets.
Common Stock Dividends andClass AUnit Distributions
During the yearyears ended December 31, 2017,2020, 2019, and 2018, the Company declared the following dividends per common share and distributions per unit: | | | | | | | | | | Declaration Date | | Record Date | | Paid Date | | Dividend Per Share/Distribution Per Unit | February 2, 2017 | | March 29, 2017 | | April 6, 2017 | | $ | 0.19 |
| May 5, 2017 | | June 28, 2017 | | July 6, 2017 | | 0.19 |
| August 4, 2017 | | September 27, 2017 | | October 5, 2017 | | 0.19 |
| November 2, 2017 | | December 27, 2017 | | January 4, 2018 | | 0.19 |
| | | | | Total | | $ | 0.76 |
|
unit of $0.44, $0.84, and $0.80, respectively. During the yearyears ended December 31, 2017, the Company paid cash2020, 2019, and 2018, these common stock dividends of $31.1totaled $25.3 million, to common stockholders$45.4 million, and the$38.7 million, respectively, and these Operating Partnership paid cash distributions totaled $9.2 million, $16.9 million, and $13.8 million, respectively.
The tax treatment of dividends paid to common stockholders during the yearyears ended December 31, 20172020, 2019, and 2018 was as follows (unaudited): | | | | | | | | | | | | | | | | | | | Years ended December 31, | | 2020 | | 2019 | | 2018 | Capital gains | 0 | % | | 10.62 | % | | 9.49 | % | Ordinary income | 59.09 | % | | 68.83 | % | | 63.40 | % | Return of capital | 40.91 | % | | 20.55 | % | | 27.11 | % | Total | 100.00 | % | | 100.00 | % | | 100.00 | % |
| | | | Capital gains | 9.06 | % | Ordinary income | 71.59 | % | Return of capital | 19.35 | % | Total | 100.00 | % |
During the yearyears ended December 31, 2016,2020 and 2019, the Company declared the following dividends of $1.687500 and $0.970315 per share, and distributions per unit: | | | | | | | | | | Declaration Date | | Record Date | | Paid Date | | Dividend Per Share/Distribution Per Unit | January 31, 2016 | | March 30, 2016 | | April 7, 2016 | | $ | 0.18 |
| May 2, 2016 | | June 29, 2016 | | July 7, 2016 | | 0.18 |
| August 4, 2016 | | September 28, 2016 | | October 6, 2016 | | 0.18 |
| November 3, 2016 | | December 28, 2016 | | January 5, 2017 | | 0.18 |
| | | | | Total | | $ | 0.72 |
|
respectively, to holders of Series A Preferred Stock. During the yearyears ended December 31, 2016, the2020 and 2019, these preferred stock dividends totaled $7.3 million and $2.5 million, respectively. The Company paid cashdid not have dividends of $22.7 million to common stockholders and the Operating Partnership paid cash distributions of $11.1 million to holders of Class A Units. The tax treatment of dividends paid to common stockholdersfor preferred shares during the year ended December 31, 2016 was as follows (unaudited):
| | | | Capital gains | — | % | Ordinary income | 78 | % | Return of capital | 22 | % | Total | 100 | % |
During the year ended December 31, 2015, the Company declared the following dividends per share and distributions per unit:
| | | | | | | | | | Declaration Date | | Record Date | | Paid Date | | Dividend Per Share/Distribution Per Unit | January 28, 2015 | | April 1, 2015 | | April 9, 2015 | | $ | 0.17 |
| May 8, 2015 | | July 1, 2015 | | July 9, 2015 | | 0.17 |
| August 6, 2015 | | October 1, 2015 | | October 8, 2015 | | 0.17 |
| November 6, 2015 | | December 31, 2015 | | January 7, 2016 | | 0.17 |
| | | | | Total | | $ | 0.68 |
|
During the year ended December 31, 2015, the Company paid cash dividends of $17.1 million to common stockholders and the Operating Partnership paid cash distributions of $9.9 million to holders of OP Units.
The tax treatment of dividends paid to common stockholders during the year ended December 31, 2015 was as follows (unaudited):
| | | | Capital gains | — | % | Ordinary income | 64.2 | % | Return of capital | 35.8 | % | Total | 100.0 | % |
Subsequent to 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 requests through the issuance of an equal number of shares of common stock.
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. These dividends and distributions were declared and accrued as of December 31, 2017.
On January 29, 2018, the Company issued 117,228 Class A Units valued at $1.7 million in conjunction with the acquisition of Parkway Centre, a newly developed Publix-anchored shopping center in Moultrie, Georgia.
On February 22, 2018, the Company announced that its Board of Directors declared a cash dividend of $0.20 per common share for the first quarter of 2018. This represents a 5.3% increase over the prior quarter's cash dividend. The first quarter dividend will be payable in cash on April 5, 2018 to stockholders of record on March 28, 2018.
| | 11. | Stock-Based Compensation |
11. Stock-Based Compensation The Company’s Amended and Restated 2013 Equity Incentive Plan (the "Equity Plan") permits the grant of restricted stock awards, stock options, stock appreciation rights, performance units, and other equity-based awards up to an aggregate of 1,700,000 shares of common stock. As of December 31, 2017,2020, the Company had 1,083,838728,783 shares of common stock reservedavailable for issuance under the Equity Plan. During the years ended December 31, 2017, 2016,2020, 2019, and 2015,2018, the Company granted an aggregate of 0.1 million, 0.1 million176,382, 154,030 and 0.1 million164,241 shares of restricted stock to employees and nonemployee directors, respectively. The weighted average grant date fair value of the restricted stock awards granted during the years ended December 31, 2017, 2016,2020, 2019, and 20152018 was $1.7$2.8 million, $1.4$2.4 million and $1.2$2.2 million, respectively. 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. Nonemployee director restricted stock awards vest either immediately upon grant or over a period of one year, subject to continued service to the Company. Unvested restricted stock awards are entitled to receive dividends from their grant date.
During the year ended December 31, 2020, 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, 2020, 10,600 shares were issued with a grant date fair value of $18.08 per share due to the partial vesting of performance units awarded to certain employees in 2017. Of those shares, 3,677 were surrendered by the employees for income tax withholdings. During the three months ended December 31, 2020, 10,842 shares were issued with a grant date fair value of $11.11 per share due to the partial vesting of performance units awarded to certain employees in 2016 and 2017. Of those shares, 3,165 were surrendered by the employees for income tax withholdings. During the years ended December 31, 2017, 2016,2020, 2019, and 2015,2018, the Company recognized $1.5$2.9 million, $1.2$2.4 million and $1.0$2.0 million of stock-based compensation, respectively. As of December 31, 2017,2020, the total unrecognized compensation cost related to nonvested restricted shares was $0.5$0.8 million, substantially all of which the Company expects to recognize over the next 2015 months.
Compensation cost relating to stock-based compensation for the years ended December 31, 2020, 2019, and 2018 was recorded as follows (in thousands):
| | | | | | | | | | | | | | | | | | | Years Ended December 31, | | 2020 | | 2019 | | 2018 | General and administrative expense | $ | 1,615 | | | $ | 1,211 | | | $ | 1,073 | | General contracting and real estate services expenses | 763 | | | 402 | | | 213 | | Capitalized in conjunction with development projects | 483 | | | 746 | | | 661 | | Total stock-based compensation cost | $ | 2,861 | | | $ | 2,359 | | | $ | 1,947 | |
The following table summarizes the changes in the Company’s nonvested restricted stock awards during the year ended December 31, 2017:2020: | | | | | | | Restricted Stock Awards | | Weighted Average Grant Date Fair Value Per Share | | Restricted Stock Awards | | Weighted Average Grant Date Fair Value Per Share | | Nonvested as of January 1, 2017 | 104,839 |
| | $ | 11.20 |
| | Nonvested as of January 1, 2020 | | Nonvested as of January 1, 2020 | 143,952 | | | $ | 14.88 | | Granted | 118,361 |
| | 14.04 |
| Granted | 176,382 | | | 15.77 | | Vested | (109,950 | ) | | 12.26 |
| Vested | (151,041) | | | 15.42 | | Forfeited | (461 | ) | | 12.99 |
| Forfeited | (1,715) | | | 16.35 | | Nonvested as of December 31, 2017 | 112,789 |
| | $ | 13.14 |
| | Nonvested as of December 31, 2020 | | Nonvested as of December 31, 2020 | 167,578 | | | $ | 15.31 | |
Restricted stock awards granted and vested during the year ended December 31, 20172020 include 21,18827,060 shares tendered by employees to satisfy minimum statutory tax withholding obligations.
| | 12. | Fair Value of Financial Instruments |
12. 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 Inputs—Inputs — quoted prices in active markets for identical assets or liabilities Level 2 Inputs—Inputs — observable inputs other than quoted prices in active markets for identical assets and liabilities Level 3 Inputs—Inputs — unobservable inputs Except as disclosed below, the carrying amounts of the Company’s financial instruments approximate their fair value.values. Financial assets and liabilities whose fair values are measured on a recurring basis using Level 2 inputs consist of interest rate swaps and interest rate caps. The Company measures the fair values of these assets and liabilities based on prices provided by independent market participants that are based on observable inputs using market-based valuation techniques. Financial assets and liabilities whose fair values are not measured at fair value but for which the fair value is disclosed include the Company's notes receivable and indebtedness. The fair value is estimated by discounting the future cash flows of each instrument at estimated market rates consistent with the maturity, credit characteristics, and other terms of the arrangements, which are Level 3 inputs under the fair value hierarchy.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. For disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. The fair value of the Company’s debt is sensitive to fluctuations in interest rates. Discounted cash flow analysis based on Level 2 inputs is generally used to estimate the fair value of the Company’s debt.
Considerable judgment is used to estimate the fair value of financial instruments. The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments.
The carrying amounts and fair values of the Company’s financial instruments all of which are based on Level 2 inputs, as of December 31, 20172020 and 20162019 were as follows (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | December 31, | | 2020 | | 2019 | | Carrying Value | | Fair Value | | Carrying Value | | Fair Value | Indebtedness, net | $ | 963,845 | | | $ | 980,714 | | | $ | 950,537 | | | $ | 958,421 | | Notes receivable | 135,432 | | | 135,223 | | | 159,371 | | | 159,371 | | Interest rate swap liabilities | 14,853 | | | 14,853 | | | 7,720 | | | 7,720 | | Interest rate swap and cap assets | 90 | | | 90 | | | 25 | | | 25 | |
| | | | | | | | | | | | | | | | | | December 31, | | 2017 | | 2016 | | Carrying Value | | Fair Value | | Carrying Value | | Fair Value | Indebtedness, net | $ | 517,272 |
| | $ | 518,417 |
| | $ | 522,180 |
| | $ | 527,414 |
| Interest rate swap liabilities | 69 |
| | 69 |
| | 829 |
| | 829 |
| Interest rate swap and cap assets | 1,525 |
| | 1,525 |
| | 259 |
| | 259 |
|
13. Income Taxes The income tax benefit (provision) for the years ended December 31, 2017, 2016,2020, 2019, and 20152018 comprised the following (in thousands): | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | 2020 | | 2019 | | 2018 | Federal income taxes: | | | | | | Current | $ | 290 | | | $ | 430 | | | $ | (14) | | Deferred | (18) | | | (20) | | | 37 | | State income taxes: | | | | | | Current | 14 | | | 85 | | | (1) | | Deferred | (3) | | | (4) | | | 7 | | Income tax benefit | $ | 283 | | | $ | 491 | | | $ | 29 | |
| | | | | | | | | | | | | | Years Ended December 31, | | 2017 | | 2016 | | 2015 | Federal income taxes: | | | | | | Current | $ | (516 | ) | | $ | (197 | ) | | $ | 102 |
| Deferred | (131 | ) | | (109 | ) | | (72 | ) | State income taxes: | | | | | | Current | (62 | ) | | (24 | ) | | 13 |
| Deferred | (16 | ) | | (13 | ) | | (9 | ) | Income tax benefit (provision) | $ | (725 | ) | | $ | (343 | ) | | $ | 34 |
|
The legislation commonly known as the Tax Cuts and Jobs Act (the "Tax Act") was enacted on December 22, 2017. The Tax Act reduced the U.S. federal corporate tax rate from 35% to 21% (including with respect to taxable REIT subsidiaries), resulting in the Company's remeasuring its existing deferred tax balances. In addition, generally beginning in 2018, the Tax Act alters the deductibility of certain items (e.g., interest expense) and allows the cost of certain qualifying capital asset investments to be deducted fully in the year they were purchased, subject to a phase-down of the deduction percentage over time. As of December 31, 2017, the Company has not fully completed its analysis of the tax effects of the Tax Act; however, it has made a reasonable estimate of the effects on the deferred tax balances. The Company remeasured deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The provisional amounts recorded related to the remeasurement of the deferred tax balance was approximately $0.2 million of tax expense.
The Company has not fully completed its analysis of the tax effects of the Tax Act; however, it has made a reasonable estimate of the effects on the deferred tax balances. Our estimates are subject to change as additional clarification and implementation guidance is made available by the Internal Revenue Service or other standard-setting bodies, and as a result, we may make adjustments to provisional amounts. It is not expected that such adjustments, however, will materially affect our financial position and results of operations or our effective tax rate in the period in which the adjustments are made.
As of December 31, 20172020 and 2016,2019, the Company had $0.3$0.5 million and $0.5$0.9 million, respectively, of net deferred tax assets representing net operating losses of the TRS that are being carried forward and basis differences in the assets of the TRS and stock-based compensation attributable toTRS. The deferred tax assets are presented within other assets in the TRS.consolidated balance sheets.
Management has evaluated the Company’s income tax positions and concluded that the Company has no0 uncertain income tax positions as of December 31, 20172020 and 2016.2019. The Company is generally subject to examination by the applicable taxing authorities for the tax years 20142017 through 2017.2020. The Company does not currently have any ongoing tax examinations by taxing authorities.
14. Other Assets Other assets were comprised of the following as of December 31, 20172020 and 20162019 (in thousands): | | | | | | | | December 31, | | December 31, | | 2020 | | 2019 | | 2017 | | 2016 | | Acquired lease intangibles, net | $ | 29,881 |
| | $ | 38,853 |
| | Leasing costs, net | 9,651 |
| | 9,338 |
| Leasing costs, net | $ | 13,007 | | | $ | 11,357 | | Leasing incentives, net | 4,217 |
| | 4,764 |
| Leasing incentives, net | 3,303 | | | 2,855 | | Interest rate swaps and caps | 1,515 |
| | 259 |
| Interest rate swaps and caps | 90 | | | 25 | | Prepaid expenses and other | 8,937 |
| | 9,797 |
| Prepaid expenses and other | 11,542 | | | 12,192 | | Advance deposits on property acquisitions | 400 |
| | 75 |
| | Preacquisition development costs | 1,352 |
| | 1,079 |
| | Preacquisition and predevelopment costs | | Preacquisition and predevelopment costs | 15,382 | | | 6,472 | | Other assets | $ | 55,953 |
| | $ | 64,165 |
| Other assets | $ | 43,324 | | | $ | 32,901 | |
15. Other Liabilities Other liabilities were comprised of the following as of December 31, 20172020 and 20162019 (in thousands): | | | December 31, | | December 31, | | 2017 | | 2016 | | 2020 | | 2019 | Dividends and distributions payable | $ | 11,887 |
| | $ | 9,727 |
| Dividends and distributions payable | $ | 11,753 | | | $ | 17,477 | | Deferred ground rent payable | 8,732 |
| | 8,202 |
| | Acquired lease intangibles, net | 13,829 |
| | 15,545 |
| Acquired lease intangibles, net | 15,621 | | | 21,300 | | Prepaid rent and other | 3,171 |
| | 3,227 |
| Prepaid rent and other | 9,068 | | | 8,604 | | Security deposits | 1,674 |
| | 1,679 |
| Security deposits | 2,976 | | | 2,673 | | Interest rate swaps | 59 |
| | 829 |
| Interest rate swaps | 14,853 | | | 7,720 | | Guarantee liability | | Guarantee liability | 2,631 | | | 5,271 | | Other liabilities | $ | 39,352 |
| | $ | 39,209 |
| Other liabilities | $ | 56,902 | | | $ | 63,045 | |
| | 16. | Acquired Lease Intangibles |
16. Acquired Lease Intangibles The following table summarizes the Company’s acquired lease intangibles as of December 31, 20172020 (in thousands): | | | December 31, 2017 | | December 31, 2020 | | Gross Carrying | | Accumulated | | Net Carrying | | Gross Carrying | | Accumulated | | Net Carrying | | Amount | | Amortization | | Amount | | Amount | | Amortization | | Amount | In-place lease assets | $ | 50,506 |
| | $ | 25,193 |
| | $ | 25,313 |
| In-place lease assets | $ | 110,643 | | | $ | 54,276 | | | $ | 56,367 | | Above-market lease assets | 4,817 |
| | 1,923 |
| | 2,894 |
| Above-market lease assets | 5,638 | | | 3,851 | | | 1,787 | | Below-market ground lease assets | | Below-market ground lease assets | | Below-market operating ground lease assets | | Below-market operating ground lease assets | 1,920 | | | 406 | | | 1,514 | | Below-market finance ground lease assets | | Below-market finance ground lease assets | 6,629 | | | 261 | | | 6,368 | | Below-market lease liabilities | 18,089 |
| | 4,260 |
| | 13,829 |
| Below-market lease liabilities | 25,015 | | | 9,394 | | | 15,621 | | Below-market ground lease assets | 1,920 |
| | 246 |
| | 1,674 |
| |
The following table summarizes the Company’s acquired lease intangibles as of December 31, 20162019 (in thousands): | | | | | | | | | | | | | | | | | | | December 31, 2019 | | Gross Carrying | | Accumulated | | Net Carrying | | Amount | | Amortization | | Amount | In-place lease assets | $ | 112,555 | | | $ | 47,341 | | | $ | 65,214 | | Above-market lease assets | 7,039 | | | 3,551 | | | 3,488 | | Below-market ground lease assets | | | | | | Below-market operating ground lease assets | 1,920 | | | 352 | | | 1,568 | | Below-market finance ground lease assets | 6,629 | | | 102 | | | 6,527 | | Below-market lease liabilities | 29,575 | | | 8,275 | | | 21,300 | |
| | | | | | | | | | | | | | December 31, 2016 | | Gross Carrying | | Accumulated | | Net Carrying | | Amount | | Amortization | | Amount | In-place lease assets | $ | 49,124 |
| | $ | 15,350 |
| | $ | 33,774 |
| Above-market lease assets | 4,490 |
| | 1,138 |
| | 3,352 |
| Below-market lease liabilities | 18,039 |
| | 2,494 |
| | 15,545 |
| Below-market ground lease assets | 1,920 |
| | 193 |
| | 1,727 |
|
Amortization of in-place lease assets forDuring the years ended December 31, 2017, 2016,2020, 2019, and 2015 was $9.7 million, $10.2 million,2018, the Company recognized the following amortization of intangible lease assets and $2.9 million, respectively.liabilities (in thousands):
| | | | | | | | | | | | | | | | | | | Years Ended December 31, | | 2020 | | 2019 | | 2018 | Intangible lease assets | | | | | | In-place lease assets | $ | 6,935 | | | $ | 14,971 | | | $ | 7,676 | | Above-market lease assets | 300 | | | 875 | | | 753 | | Below-market ground lease assets | | | | | | Amortization of below-market operating ground lease assets (a) | 54 | | | 53 | | | 53 | | Amortization of below-market finance ground lease assets (a)(b) | 159 | | | 102 | | | 0 | | Intangible lease liabilities | | | | | | Below-market lease liabilities | 1,119 | | | 2,261 | | | 1,754 | |
(a) Prior to 2019, Amortization of above-market lease assets forBelow Market Ground Leases was included in Rental Expenses. With the years ended December 31, 2017, 2016, and 2015 was $0.8 million, $0.9 million, and $0.3 million, respectively.
adoption of ASC 842 on 1/1/2019, Amortization of below-market lease liabilities forbelow market ground rents became a component of the years ended December 31, 2017, 2016,amortization of the right-of-use assets of Operating and 2015 was $1.8 million, $1.8 million, and $0.1 million,Finance Leases, respectively. (b) All of the Company's leases were classified as Operating Leases prior to 2019.
Amortization of below-market ground lease assets for the years ended December 31, 2017, 2016, and 2015 was $0.1 million, $0.1 million, and $0.1 million, respectively.
As of December 31, 2017,2020, the weighted-average remaining lives of in-place lease assets, above-market lease assets, below-market lease liabilities, below-market ground lease assets - operating and below-market ground lease assets - finance were 4.97.3 years, 6.03.0 years, 4.912.9 years, 28.5 years, and 31.540.2 years, respectively. As of December 31, 2017,2020, the weighted-average remaining life of below-market lease renewal options was 13.89.1 years.
Estimated amortization of acquired lease intangibles for each of the five succeeding years is as follows (in thousands): | | | | | | | Depreciation and | | | | Depreciation and | | Rental Revenues | | Rental Expenses | | Amortization | | Rental Revenues | | Amortization | Year ending December 31, | | | | | | Year ending December 31, | | | | 2018 | $ | 928 |
| | $ | 53 |
| | $ | 7,170 |
| | 2019 | 842 |
| | 53 |
| | 5,359 |
| | 2020 | 706 |
| | 53 |
| | 3,659 |
| | 2021 | 721 |
| | 53 |
| | 2,250 |
| 2021 | $ | 1,433 | | | $ | 13,184 | | 2022 | 689 |
| | 53 |
| | 1,669 |
| 2022 | 1,443 | | | 8,232 | | 2023 | | 2023 | 1,341 | | | 6,780 | | 2024 | | 2024 | 1,383 | | | 5,560 | | 2025 | | 2025 | 1,347 | | | 4,962 | |
| | 17. | Related Party Transactions |
17. Related Party Transactions The Companyprovides general contracting and real estate services to certain related party entities that are not included in these consolidated financial statements. Revenue from construction contracts with related party entities of the Company was $7.6$52.2 million, $26.7$5.7 million and $9.6$1.5 million for the years ended December 31, 2017, 2016,2020, 2019, and 2015,2018, respectively. Gross profits from such contracts were $0.4$2.0 million, $1.0$0.2 million and $0.3 million for the years ended December 31, 2017, 2016,2020, 2019, and 2015,2018, respectively. AmountsAs of December 31, 2020 and 2019, there was $8.6 million and $1.9 million, respectively, outstanding from related parties of the Company included in net construction receivables as of December 31, 2017 and 2016 were $0.2 million and $3.4 million, respectively.receivables. Real estate services fees from affiliated entities of the Company were not material for any of the years ended December 31, 2017, 2016,2020, 2019, and 2015.2018. 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 material for any of the years ended December 31, 2017, 2016,2020, 2019, and 2015.2018.
In connectionThe general contracting services described above include contracts with an aggregate price of $81.0 million with the formation transactions for the Company's IPO, the Operating Partnership entered into tax protection agreements that indemnify certain directorsdeveloper of a mixed-use project, including an apartment building, retail space, and executive officersa parking garage to be located in Virginia Beach, Virginia. The developer is owned in part by executives of the Company, from their tax liabilities
resulting fromnot including the potential future saleChief Executive Officer and Chief Financial Officer. These contracts were executed in October and December 2019 and are projected to result in aggregate gross profit of certain$3.1 million to the Company, representing a gross profit margin of 3.8%. As part of these contracts and per the requirements of the Company’s properties within seven (or, inlender for this project, the Company issued a limited numberletter of cases, ten) yearscredit for $9.5 million to secure certain performances of the completionCompany's subsidiary construction company under the contracts, which remains outstanding as of December 31, 2020.
On October 1, 2020, the Company acquired Edison Apartments, a multifamily property located in downtown Richmond, Virginia, for consideration comprised of 633,734 Class A Units, the assumption of a $16.4 million loan payable, and the assumption of $1.1 million in other assets and liabilities. The seller of the formation transactions on May 13, 2013. Upon completing the saleproject is comprised in part by members of the Virginia Natural Gas office property on November 20, 2014,Company's management and board of directors. Additionally, a development fee of $1.8 million, which was included in the Operating Partnershipassumed assets and liabilities, was paid $1.3 million under such tax protection agreements.to the development group partially owned by members of the Company's management and board of directors. | | 18. | Commitments and Contingencies |
18. 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 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, 2020 (in thousands): | | | | | | | | | | | | Payment guarantee amount | | | | | | Delray Plaza | | $ | 5,180 | | | Interlock Commercial | | 34,300 | | | | | | | | | | | | | | | Total | | $ | 39,480 | | |
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 $44.9$2.4 million and $40.5$4.3 million as of December 31, 20172020 and 2016,2019, respectively. In addition, during the year ended December 31, 2019, the Company 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, which was still in effect at December 31, 2020. The Operating Partnership has entered into standby letters of credit using the available capacity under the credit facility. The letters of credit relaterelated 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, 20172020 and 2016,2019, the Operating Partnership had totalan outstanding lettersletter of credit of $2.1$9.5 million, and $4.1 million, respectively. The amounts outstanding at December 31, 2017 and 2016 include a $2.1 million letter of credit related to the guarantee on the Point Street Apartments senior construction loan.as noted above. The Company has five ground leases on four properties with initial terms that range from 20 to 65 years and options to extend up to an additional 40 years in certain cases. The Company also leases automobiles and equipment.
Future minimum rental payments during each of the next five years and thereafter are as follows (in thousands):
| | | | | 2018 | $ | 2,260 |
| 2019 | 2,145 |
| 2020 | 2,104 |
| 2021 | 2,057 |
| 2022 | 1,897 |
| Thereafter | 89,556 |
| Total | $ | 100,019 |
|
Ground rent expense for the years ended December 31, 2017, 2016, and 2015 was $2.5 million, $2.0 million and $1.7 million, respectively.
Concentrations of Credit Risk The majority of the Company’s properties are located in Hampton Roads, Virginia. For the years ended December 31, 2017, 2016,2020, 2019, and 2015,2018, rental revenues from Hampton Roads properties represented 53%44%, 58%48% and 68%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, 2017, 2016,2020, 2019, and 2015,2018, rental revenues from Town Center properties represented 38%27%, 41%31% and 46%38%, respectively, of the Company’s rental revenues. Rental revenues from Richmond Tower, which the Company sold in January 2016, individually represented 1% and 11% of the Company’s rental revenues for the years ended December 31, 2016 and 2015, respectively. A group of fivethree construction customers comprised 88%65%, 52%67%, and 15%55% of the Company’s general contracting and real estate services revenues for the years ended December 31, 2017, 2016,2020, 2019, and 2015,2018, respectively. The same customers represented 83%72%, 43%66%, and 20%28% of the Company’s general contracting and real estate services segment gross profit for the years ended December 31, 2017, 2016,2020, 2019, and 2015,2018, respectively.
| | 19. | Selected Quarterly Financial Data (Unaudited) |
19. Subsequent Events
The following tables summarize certain selected quarterlyCompany has evaluated subsequent events through the date on which this Form 10-K was filed, the date on which these financial datastatements were issued, and identified the items below for 2017discussion.
Real Estate
On January 4, 2021, the Company completed the sale of the 7-Eleven outparcel at Hanbury Village. Net proceeds after the transaction costs were $2.8 million. The gain on disposition is estimated at $2.4 million.
On January 14, 2021, the Company completed the sale of a land outparcel at Nexton Square for a sale price of $0.9 million. There was no gain or loss on the disposition.
Indebtedness
On January 15, 2021, the Company refinanced the loan secured by 4525 Main Street and 2016 (in thousands, except per share data):Encore Apartments. The Company increased the total balance of the loan to $57.0 million. The new loan bears interest at a rate of 2.93% and will mature on February 10, 2026.
On January 28, 2021, the Company refinanced the Nexton Square loan and paid the balance down by $2.0 million, bringing the balance to $20.1 million. The loan bears interest at a rate of LIBOR plus a spread of 2.25% (LIBOR has a 0.25% floor) and will mature on February 1, 2023.
Borrowings under the revolving credit facility were $25.0 million on February 19, 2021.
Derivative Financial Instruments
On February 2, 2021, the Company entered into a LIBOR interest rate cap agreement on a notional amount of $100.0 million at a strike rate of 0.50% for a premium of less than $0.1 million. The interest rate cap will expire on February 1, 2023.
Equity On January 7, 2021, the Company paid cash dividends of $6.5 million to common stockholders and the Operating Partnership paid cash distributions of $2.3 million to holders of Class A Units. These dividends and distributions were declared and accrued as of December 31, 2020.
On January 12, 2021, due to a holder of Class A Units tendering 12,000 Class A Units for redemption by the Operating Partnership, the Company elected to satisfy the redemption request through issuance of an equal numbers of shares of common stock.
On January 15, 2021, the Company paid cash dividends of $2.9 million to the holders of the Series A Preferred Stock. These dividends were declared and accrued as of December 31, 2020.
On February 9, 2021, the Company announced that its board of directors declared a cash dividend of $0.15 per common share for the first quarter of 2021. This represents a 36.0% increase over the prior quarter's cash dividend. The first quarter dividend will be payable in cash on April 8, 2021 to stockholders of record on March 31, 2021.
On February 9, 2021, the Company announced that its board of directors declared a cash dividend of $0.421875 per share of Series A Preferred Stock for the first quarter of 2021. The dividend will be payable in cash on April 15, 2021 to stockholders of record on April 1, 2021.
Commitments
On January 7, 2021, the Operating Partnership entered into a $15.0 million standby letter of credit to guarantee the funding of its investment in the Harbor Point Parcel 3 partnership.
| | | | | | | | | | | | | | | | | | 2017 Quarters | | First | | Second | | Third | | Fourth | Rental revenues | $ | 27,232 |
| | $ | 26,755 |
| | $ | 27,096 |
| | $ | 27,654 |
| General contracting and real estate services revenues | 63,519 |
| | 56,671 |
| | 41,201 |
| | 32,643 |
| Net operating income | 20,978 |
| | 20,645 |
| | 19,397 |
| | 19,211 |
| Net income | 8,753 |
| | 4,943 |
| | 10,461 |
| | 5,768 |
| Net income attributable to stockholders | 5,936 |
| | 3,471 |
| | 7,488 |
| | 4,152 |
| Net income per share: basic and diluted | $ | 0.16 |
| | $ | 0.08 |
| | $ | 0.17 |
| | $ | 0.09 |
|
| | | | | | | | | | | | | | | | | | 2016 Quarters | | First | | Second | | Third | | Fourth | Rental revenues | $ | 23,283 |
| | $ | 24,251 |
| | $ | 25,305 |
| | $ | 26,516 |
| General contracting and real estate services revenues | 36,803 |
| | 33,200 |
| | 38,552 |
| | 50,475 |
| Net operating income | 17,371 |
| | 17,973 |
| | 18,393 |
| | 19,740 |
| Net income | 26,533 |
| | 3,131 |
| | 7,946 |
| | 5,145 |
| Net income attributable to stockholders | 17,370 |
| | 2,034 |
| | 5,212 |
| | 3,458 |
| Net income per share: basic and diluted | $ | 0.57 |
| | $ | 0.06 |
| | $ | 0.15 |
| | $ | 0.09 |
|
SCHEDULE III—Consolidated Real Estate Investments and Accumulated Depreciation December 31, 20172020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Initial Cost | | Cost Capitalized | | Gross Carrying Amount | | | | | | Year of | | | | | | | Building and | | Subsequent to | | | | Building and | | | | Accumulated | | Net Carrying | | Construction/ | | | Encumbrances | | Land | | Improvements | | Acquisition | | Land | | Improvements | | Total | | Depreciation | | Amount (1) | | Acquisition | | Office | | | | | | | | | | | | | | | | | | | | | 4525 Main Street | $ | 31,231 | | | $ | 982 | | | $ | 0 | | | $ | 52,562 | | | $ | 982 | | | $ | 52,562 | | | $ | 53,544 | | | $ | 9,994 | | | $ | 43,550 | | | 2014 | | Armada Hoffler Tower | 0 | | (2) | 1,976 | | | 0 | | | 61,372 | | | 1,976 | | | 61,372 | | | 63,348 | | | 38,057 | | | 25,291 | | | 2002 | | Brooks Crossing Office | 15,393 | | | 295 | | | 0 | | | 19,546 | | | 295 | | | 19,546 | | | 19,841 | | | 1,129 | | | 18,712 | | | 2016 | | One City Center | 24,712 | | | 2,911 | | | 28,202 | | | 6,173 | | | 2,911 | | | 34,375 | | | 37,286 | | | 1,655 | | | 35,631 | | | 2019 | | One Columbus | 0 | | (2) | 960 | | | 10,269 | | | 12,857 | | | 960 | | | 23,126 | | | 24,086 | | | 12,878 | | | 11,208 | | | 1984 | | Thames Street Wharf | 70,000 | | | 15,861 | | | 64,689 | | | 233 | | | 15,861 | | | 64,922 | | | 80,783 | | | 2,539 | | | 78,244 | | | 2010/2019 | | Two Columbus | 0 | | (2) | 53 | | | 0 | | | 21,145 | | | 53 | | | 21,145 | | | 21,198 | | | 9,487 | | | 11,711 | | | 2009 | | Wills Wharf | 59,044 | | | 0 | | | 0 | | | 104,209 | | | 0 | | | 104,209 | | | 104,209 | | | 1,205 | | | 103,004 | | | 2019 | (4) | Total office | $ | 200,380 | | | $ | 23,038 | | | $ | 103,160 | | | $ | 278,097 | | | $ | 23,038 | | | $ | 381,257 | | | $ | 404,295 | | | $ | 76,944 | | | $ | 327,351 | | | | | Retail | | | | | | | | | | | | | | | | | | | | | 249 Central Park Retail | $ | 16,597 | | | $ | 712 | | | $ | 0 | | | $ | 16,526 | | | $ | 712 | | | $ | 16,526 | | | $ | 17,238 | | | $ | 8,703 | | | $ | 8,535 | | | 2004 | | Apex Entertainment | 0 | | (2) | 67 | | | 0 | | | 17,827 | | | 67 | | | 17,827 | | | 17,894 | | | 5,360 | | | 12,534 | | | 2002 | | Broad Creek Shopping Center | 0 | | (2) | 0 | | | 0 | | | 9,101 | | | 0 | | | 9,101 | | | 9,101 | | | 4,593 | | | 4,508 | | | 1997-2001 | | Broadmoor Plaza | 0 | | (2) | 2,410 | | | 9,010 | | | 1,029 | | | 2,410 | | | 10,039 | | | 12,449 | | | 2,356 | | | 10,093 | | | 1980/2016 | | Brooks Crossing Retail | 0 | | | 359 | | | 0 | | | 2,333 | | | 359 | | | 2,333 | | | 2,692 | | | 303 | | | 2,389 | | | 2016 | | Columbus Village | 0 | | (2) | 7,631 | | | 10,135 | | | 8,019 | | | 7,631 | | | 18,154 | | | 25,785 | | | 3,326 | | | 22,459 | | | 1980/2015 | | Columbus Village II | 0 | | (2) | 14,536 | | | 10,922 | | | 63 | | | 14,536 | | | 10,985 | | | 25,521 | | | 1,788 | | | 23,733 | | | 1995/2016 | | Commerce Street Retail | 0 | | (2) | 118 | | | 0 | | | 3,317 | | | 118 | | | 3,317 | | | 3,435 | | | 1,872 | | | 1,563 | | | 2008 | | Courthouse 7-Eleven | 0 | | (2) | 1,007 | | | 0 | | | 1,044 | | | 1,007 | | | 1,044 | | | 2,051 | | | 244 | | | 1,807 | | | 2011 | | Dimmock Square | 0 | | (2) | 5,100 | | | 13,126 | | | 392 | | | 5,100 | | | 13,518 | | | 18,618 | | | 2,438 | | | 16,180 | | | 1998/2014 | | Fountain Plaza Retail | 9,988 | | | 425 | | | 0 | | | 7,406 | | | 425 | | | 7,406 | | | 7,831 | | | 3,799 | | | 4,032 | | | 2004 | | Greentree Shopping Center | 0 | | (2) | 1,103 | | | 0 | | | 4,136 | | | 1,103 | | | 4,136 | | | 5,239 | | | 1,077 | | | 4,162 | | | 2014 | | Hanbury Village | 0 | | (2) | 2,566 | | | 0 | | | 16,249 | | | 2,566 | | | 16,249 | | | 18,815 | | | 7,037 | | | 11,778 | | | 2006 | | Harrisonburg Regal | 0 | | | 1,554 | | | 0 | | | 4,148 | | | 1,554 | | | 4,148 | | | 5,702 | | | 2,309 | | | 3,393 | | | 1999 | | Lexington Square | 14,440 | | | 3,035 | | | 20,581 | | | 269 | | | 3,035 | | | 20,850 | | | 23,885 | | | 1,658 | | | 22,227 | | | 2017/2018 | | Market at Mill Creek | 13,789 | | | 2,261 | | | 0 | | | 20,878 | | | 2,261 | | | 20,878 | | | 23,139 | | | 1,156 | | | 21,983 | | | 2018 | | Marketplace at Hilltop | 10,120 | | | 2,023 | | | 19,886 | | | 50 | | | 2,023 | | | 19,936 | | | 21,959 | | | 955 | | | 21,004 | | | 2000/2019 | | Nexton Square | 22,909 | | | 9,086 | | | 27,760 | | | 807 | | | 9,086 | | | 28,567 | | | 37,653 | | | 337 | | | 37,316 | | | 2020/2020 | | North Hampton Market | 0 | | (2) | 7,250 | | | 10,210 | | | 687 | | | 7,250 | | | 10,897 | | | 18,147 | | | 2,175 | | | 15,972 | | | 2004/2016 | | North Point Center | 2,094 | | (3) | 1,936 | | | 0 | | | 25,733 | | | 1,936 | | | 25,733 | | | 27,669 | | | 15,053 | | | 12,616 | | | 1998 | | Oakland Marketplace | 0 | | (2) | 1,850 | | | 3,370 | | | 692 | | | 1,850 | | | 4,062 | | | 5,912 | | | 1,124 | | | 4,788 | | | 2004/2016 | | Parkway Centre | 0 | | (2) | 1,372 | | | 7,864 | | | 114 | | | 1,372 | | | 7,978 | | | 9,350 | | | 717 | | | 8,633 | | | 2017/2018 | | Parkway Marketplace | 0 | | (2) | 1,150 | | | 0 | | | 3,841 | | | 1,150 | | | 3,841 | | | 4,991 | | | 2,133 | | | 2,858 | | | 1998 | | Patterson Place | 0 | | (2) | 15,059 | | | 20,180 | | | 726 | | | 15,059 | | | 20,906 | | | 35,965 | | | 3,235 | | | 32,730 | | | 2004/2016 | | Perry Hall Marketplace | 0 | | (2) | 3,240 | | | 8,316 | | | 459 | | | 3,240 | | | 8,775 | | | 12,015 | | | 1,901 | | | 10,114 | | | 2001/2015 | | Premier Retail | 8,241 | | | 318 | | | 0 | | | 15,069 | | | 318 | | | 15,069 | | | 15,387 | | | 979 | | | 14,408 | | | 2018 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Initial Cost | | Cost Capitalized | | Gross Carrying Amount | | | | | | Year of | | | | | | | Building and | | Subsequent to | | | | Building and | | | | Accumulated | | Net Carrying | | Construction/ | | | Encumbrances | | Land | | Improvements | | Acquisition | | Land | | Improvements | | Total | | Depreciation | | Amount(1) | | Acquisition | | Office | | | | | | | | | | | | | | | | | | | |
| | 4525 Main Street | $ | 32,034 |
| | $ | 982 |
| | $ | — |
| | $ | 45,338 |
| | $ | 982 |
| | $ | 45,338 |
| | $ | 46,320 |
| | $ | 4,422 |
| | $ | 41,898 |
| | 2014 |
| | Armada Hoffler Tower | — |
| (2) | 1,976 |
| | — |
| | 57,887 |
| | 1,976 |
| | 57,887 |
| | 59,863 |
| | 29,625 |
| | 30,238 |
| | 2002 |
| | One Columbus | — |
| (2) | 960 |
| | 10,269 |
| | 8,772 |
| | 960 |
| | 19,041 |
| | 20,001 |
| | 10,280 |
| | 9,721 |
| | 1984 |
| | Two Columbus | — |
| (2) | 53 |
| | — |
| | 19,364 |
| | 53 |
| | 19,364 |
| | 19,417 |
| | 6,941 |
| | 12,476 |
| | 2009 |
| | Total office | $ | 32,034 |
| | $ | 3,971 |
| | $ | 10,269 |
| | $ | 131,361 |
| | $ | 3,971 |
| | $ | 141,630 |
| | $ | 145,601 |
| | $ | 51,268 |
| | $ | 94,333 |
| | |
| | Retail | | | | | | | | | | | | | | | | | | | |
| | 249 Central Park Retail | $ | 16,851 |
| | $ | 712 |
| | $ | — |
| | $ | 15,108 |
| | $ | 712 |
| | $ | 15,108 |
| | $ | 15,820 |
| | $ | 8,228 |
| | $ | 7,592 |
| | 2004 |
| | Alexander Pointe | — |
| (2) | 4,050 |
| | 4,880 |
| | 58 |
| | 4,050 |
| | 4,938 |
| | 8,988 |
| | 466 |
| | 8,522 |
| | 1997/2016 |
| | Bermuda Crossroads | — |
| (2) | 5,450 |
| | 10,641 |
| | 1,053 |
| | 5,450 |
| | 11,694 |
| | 17,144 |
| | 2,183 |
| | 14,961 |
| | 2001/2013 |
| | Broad Creek Shopping Center | — |
| (2) | — |
| | — |
| | 15,945 |
| | — |
| | 15,945 |
| | 15,945 |
| | 9,010 |
| | 6,935 |
| | 1997-2001 |
| | Broadmoor Plaza | — |
| (2) | 2,410 |
| | 9,010 |
| | 346 |
| | 2,410 |
| | 9,356 |
| | 11,766 |
| | 881 |
| | 10,885 |
| | 1980/2016 |
| | Brooks Crossing | — |
| | 117 |
| | — |
| | 2,213 |
| | 117 |
| | 2,213 |
| | 2,330 |
| | 88 |
| | 2,242 |
| | 2016 |
| | Columbus Village | 8,298 |
| | 7,631 |
| | 10,135 |
| | 9 |
| | 7,631 |
| | 10,144 |
| | 17,775 |
| | 732 |
| | 17,043 |
| | 1980/2015 |
| | Columbus Village II | — |
| (2) | 14,536 |
| | 10,922 |
| | 23 |
| | 14,536 |
| | 10,945 |
| | 25,481 |
| | 520 |
| | 24,961 |
| | 1995/2016 |
| | Commerce Street Retail | — |
| (2) | 118 |
| | — |
| | 3,220 |
| | 118 |
| | 3,220 |
| | 3,338 |
| | 1,342 |
| | 1,996 |
| | 2008 |
| | Courthouse 7-Eleven | — |
| (2) | 1,007 |
| | — |
| | 1,043 |
| | 1,007 |
| | 1,043 |
| | 2,050 |
| | 163 |
| | 1,887 |
| | 2011 |
| | Dick’s at Town Center | — |
| (2) | 67 |
| | — |
| | 10,572 |
| | 67 |
| | 10,572 |
| | 10,639 |
| | 3,920 |
| | 6,719 |
| | 2002 |
| | Dimmock Square | — |
| (2) | 5,100 |
| | 13,126 |
| | 188 |
| | 5,100 |
| | 13,314 |
| | 18,414 |
| | 1,254 |
| | 17,160 |
| | 1998/2014 |
| | Fountain Plaza Retail | 10,145 |
| | 425 |
| | — |
| | 7,135 |
| | 425 |
| | 7,135 |
| | 7,560 |
| | 3,154 |
| | 4,406 |
| | 2004 |
| | Gainsborough Square | — |
| (2) | 2,229 |
| | — |
| | 7,182 |
| | 2,229 |
| | 7,182 |
| | 9,411 |
| | 3,206 |
| | 6,205 |
| | 1999 |
| | Greentree Shopping Center | — |
| | 1,103 |
| | — |
| | 4,018 |
| | 1,103 |
| | 4,018 |
| | 5,121 |
| | 513 |
| | 4,608 |
| | 2014 |
| | Hanbury Village | 19,503 |
| (2) | 3,793 |
| | — |
| | 19,342 |
| | 3,793 |
| | 19,342 |
| | 23,135 |
| | 6,344 |
| | 16,791 |
| | 2006 |
| | Harper Hill Commons | — |
| (2) | 2,840 |
| | 8,510 |
| | 93 |
| | 2,840 |
| | 8,603 |
| | 11,443 |
| | 608 |
| | 10,835 |
| | 2004/2016 |
| | Harrisonburg Regal | — |
| | 1,554 |
| | — |
| | 4,148 |
| | 1,554 |
| | 4,148 |
| | 5,702 |
| | 1,989 |
| | 3,713 |
| | 1999 |
| | Lightfoot Marketplace | 10,500 |
| | 7,628 |
| | — |
| | 14,714 |
| | 7,628 |
| | 14,714 |
| | 22,342 |
| | 794 |
| | 21,548 |
| | 2016 |
| | North Hampton Market | — |
| (2) | 7,250 |
| | 10,210 |
| | 401 |
| | 7,250 |
| | 10,611 |
| | 17,861 |
| | 953 |
| | 16,908 |
| | 2004/2016 |
| | North Point Center | 12,030 |
| (2) | 1,936 |
| | — |
| | 25,417 |
| | 1,936 |
| | 25,417 |
| | 27,353 |
| | 12,652 |
| | 14,701 |
| | 1998 |
| | Oakland Marketplace | — |
| (2) | 1,850 |
| | 3,370 |
| | 26 |
| | 1,850 |
| | 3,396 |
| | 5,246 |
| | 584 |
| | 4,662 |
| | 2004/2016 |
| | Parkway Marketplace | — |
| (2) | 1,150 |
| | — |
| | 3,664 |
| | 1,150 |
| | 3,664 |
| | 4,814 |
| | 1,776 |
| | 3,038 |
| | 1998 |
| | Patterson Place | — |
| (2) | 15,059 |
| | 20,180 |
| | 231 |
| | 15,059 |
| | 20,411 |
| | 35,470 |
| | 1,353 |
| | 34,117 |
| | 2004/2016 |
| | Perry Hall Marketplace | — |
| (2) | 3,240 |
| | 8,316 |
| | 383 |
| | 3,240 |
| | 8,699 |
| | 11,939 |
| | 872 |
| | 11,067 |
| | 2001/2015 |
| | Providence Plaza | — |
| (2) | 9,950 |
| | 12,369 |
| | 670 |
| | 9,950 |
| | 13,039 |
| | 22,989 |
| | 937 |
| | 22,052 |
| | 2007/2015 |
| | Renaissance Place | — |
| (2) | 6,730 |
| | 8,439 |
| | 89 |
| | 6,730 |
| | 8,528 |
| | 15,258 |
| | 335 |
| | 14,923 |
| | 2008/2016 |
| |
| | Providence Plaza | | Providence Plaza | 0 | | (2) | 9,950 | | | 12,369 | | | 1,580 | | | 9,950 | | | 13,949 | | | 23,899 | | | 2,460 | |
| 21,439 | | | 2007/2015 | | Red Mill Commons | | Red Mill Commons | 23,341 | | (3) | 44,252 | | | 30,348 | | | 778 | | | 44,252 | | | 31,126 | | | 75,378 | | | 2,623 | | | 72,755 | | | 2000/2019 | | Sandbridge Commons | 8,468 |
| | 4,825 |
| | — |
| | 7,285 |
| | 4,825 |
| | 7,285 |
| | 12,110 |
| | 839 |
| | 11,271 |
| | 2015 |
| | Sandbridge Commons | 0 | | (2) | 4,825 | | | 0 | | | 7,365 | | | 4,825 | | | 7,365 | | | 12,190 | | | 1,833 | |
| 10,357 | | | 2015 | | Socastee Commons | 4,771 |
| | 2,320 |
| | 5,380 |
| | 121 |
| | 2,320 |
| | 5,501 |
| | 7,821 |
| | 530 |
| | 7,291 |
| | 2000/2015 |
| | Socastee Commons | 4,458 | | | 2,320 | | | 5,380 | | | 149 | | | 2,320 | | | 5,529 | | | 7,849 | | | 1,147 | |
| 6,702 | | | 2000/2015 | | South Retail | 7,394 |
| | 190 |
| | — |
| | 7,635 |
| | 190 |
| | 7,635 |
| | 7,825 |
| | 3,964 |
| | 3,861 |
| | 2002 |
| | South Retail | 7,287 | | | 190 | | | 0 | | | 8,165 | | | 190 | | | 8,165 | | | 8,355 | | | 4,809 | |
| 3,546 | | | 2002 | | South Square | — |
| (2) | 14,130 |
| | 12,670 |
| | 164 |
| | 14,130 |
| | 12,834 |
| | 26,964 |
| | 953 |
| | 26,011 |
| | 1977/2016 |
| | South Square | 0 | | (2) | 14,130 | | | 12,670 | | | 930 | | | 14,130 | | | 13,600 | | | 27,730 | | | 2,390 | | | 25,340 | | | 1977/2016 | | Southgate Square | 20,708 |
| | 8,890 |
| | 25,950 |
| | 249 |
| | 8,890 |
| | 26,199 |
| | 35,089 |
| | 1,467 |
| | 33,622 |
| | 1991/2016 |
| | Southgate Square | 19,682 | | | 10,238 | | | 25,950 | | | 4,700 | | | 10,238 | | | 30,650 | | | 40,888 | | | 4,336 | | | 36,552 | | | 1991/2016 | | Southshore Shops | — |
| (2) | 1,770 |
| | 6,509 |
| | 16 |
| | 1,770 |
| | 6,525 |
| | 8,295 |
| | 289 |
| | 8,006 |
| | 2006/2016 |
| | Southshore Shops | 0 | | (2) | 1,770 | | | 6,509 | | | 208 | | | 1,770 | | | 6,717 | | | 8,487 | | | 937 | | | 7,550 | | | 2006/2016 | | Stone House Square | — |
| (2) | 6,360 |
| | 16,350 |
| | 277 |
| | 6,360 |
| | 16,627 |
| | 22,987 |
| | 1,548 |
| | 21,439 |
| | 2008/2015 |
| | | Studio 56 Retail | — |
| (2) | 76 |
| | — |
| | 2,475 |
| | 76 |
| | 2,475 |
| | 2,551 |
| | 825 |
| | 1,726 |
| | 2007 |
| | Studio 56 Retail | 0 | | (2) | 76 | | | 0 | | | 2,532 | | | 76 | | | 2,532 | | | 2,608 | | | 1,083 | |
| 1,525 | | | 2007 | | Tyre Neck Harris Teeter | — |
| (2) | — |
| | — |
| | 3,306 |
| | — |
| | 3,306 |
| | 3,306 |
| | 923 |
| | 2,383 |
| | 2011 |
| | Tyre Neck Harris Teeter | 0 | | (2) | 0 | | | 0 | | | 3,306 | | | 0 | | | 3,306 | | | 3,306 | | | 1,422 | |
| 1,884 | | | 2011 | | Waynesboro Commons | — |
| (2) | 1,300 |
| | 1,610 |
| | 47 |
| | 1,300 |
| | 1,657 |
| | 2,957 |
| | 385 |
| | 2,572 |
| | 1993/2016 |
| | | Wendover Village | — |
| (2) | 18,260 |
| | 21,700 |
| | 52 |
| | 18,260 |
| | 21,752 |
| | 40,012 |
| | 1,100 |
| | 38,912 |
| | 2004/2016-2017 |
| | Wendover Village | 0 | | (2) | 19,893 | | | 22,638 | | | 475 | | | 19,893 | | | 23,113 | | | 43,006 | | | 3,115 | | | 39,891 | | | 2004/2016-2019 | | Total retail | $ | 118,668 |
| | $ | 166,056 |
| | $ | 220,277 |
| | $ | 158,918 |
| | $ | 166,056 |
| | $ | 379,195 |
| | $ | 545,251 |
| | $ | 77,680 |
| | $ | 467,571 |
| | |
| | Total retail | $ | 152,946 | | | $ | 193,812 | | | $ | 277,224 | | | $ | 191,103 | | | $ | 193,812 | | | $ | 468,327 | | | $ | 662,139 | | | $ | 102,783 | |
| $ | 559,356 | | | | | Mutifamily | | | | | | | | | | | | | | | | | | | |
| | | Multifamily | | Multifamily | | | | | | | | | | | | | | | | | | | 1405 Point | | 1405 Point | $ | 53,000 | | | $ | 0 | | | $ | 95,466 | | | $ | 2,775 | | | $ | 0 | | | $ | 98,241 | | | $ | 98,241 | | | $ | 5,261 | | | $ | 92,980 | | | 2018/2019 | | Edison Apartments | | Edison Apartments | 16,272 | | | 3,428 | | | 18,582 | | | 383 | | | 3,428 | | | 18,965 | | | 22,393 | | | 128 | | | 22,265 | | | 1919 & 2014/2020 | | Encore Apartments | $ | 24,966 |
| | $ | 1,293 |
| | $ | — |
| | $ | 30,183 |
| | $ | 1,293 |
| | $ | 30,183 |
| | $ | 31,476 |
| | $ | 3,033 |
| | $ | 28,443 |
| | 2014 |
| | Encore Apartments | 24,337 | | | 1,293 | | | 0 | | | 30,548 | | | 1,293 | | | 30,548 | | | 31,841 | | | 6,083 | | | 25,758 | | | 2014 | | Harding Place | 3,874 |
| | 5,706 |
| | — |
| | 22,997 |
| | 5,706 |
| | 22,997 |
| | 28,703 |
| | — |
| | 28,703 |
| | — |
| (3) | | Greenside Apartments | | Greenside Apartments | 33,310 | | | 5,711 | | | 0 | | | 45,216 | | | 5,711 | | | 45,216 | | | 50,927 | | | 3,327 | | | 47,600 | | | 2018 | | Hoffler Place | | Hoffler Place | 18,400 | | | 7,401 | | | 0 | | | 40,197 | | | 7,401 | | | 40,197 | | | 47,598 | | | 1,668 | | | 45,930 | | | 2019 | | Johns Hopkins Village | 46,698 |
| | — |
| | — |
| | 69,229 |
| | — |
| | 69,229 |
| | 69,229 |
| | 3,107 |
|
| 66,122 |
| | 2016 |
| | Johns Hopkins Village | 50,859 | | | 0 | | | 0 | | | 70,117 | | | 0 | | | 70,117 | | | 70,117 | | | 10,071 | | | 60,046 | | | 2016 | | King Street | — |
| | 7,276 |
| | — |
| | 5,452 |
| | 7,276 |
| | 5,452 |
| | 12,728 |
| | — |
| | 12,728 |
| | — |
| (3) | | Liberty Apartments | 14,694 |
| | 3,580 |
| | 23,494 |
| | 1,407 |
| | 3,580 |
| | 24,900 |
| | 28,480 |
| | 3,456 |
| | 25,024 |
| | 2013/2014 |
| | Liberty Apartments | 13,877 | | | 3,580 | | | 23,494 | | | 2,084 | | | 3,580 | | | 25,578 | | | 29,158 | | | 5,951 | | | 23,207 | | | 2013/2014 | | Meeting Street | — |
| | 7,265 |
| | — |
| | 6,372 |
| | 7,265 |
| | 6,372 |
| | 13,637 |
| | — |
| | 13,637 |
| | — |
| (3) | | Premier Apartments | | Premier Apartments | 16,716 | | | 647 | | | 0 | | | 29,169 | | | 647 | | | 29,169 | | | 29,816 | | | 2,060 | | | 27,756 | | | 2018 | | | Smith’s Landing | 19,764 |
| | — |
| | 35,105 |
| | 1,765 |
| | — |
| | 36,870 |
| | 36,870 |
| | 5,613 |
| | 31,257 |
| | 2009/2013 |
| | Smith’s Landing | 17,331 | | | 0 | | | 35,105 | | | 2,588 | | | 0 | | | 37,693 | | | 37,693 | | | 9,164 | | | 28,529 | | | 2009/2013 | | Solis Gainesville | | Solis Gainesville | 0 | | | 5,200 | | | 0 | | | 6,208 | | | 5,200 | | | 6,208 | | | 11,408 | | | 0 | | | 11,408 | | | 2020 | (4) | Summit Place | | Summit Place | 23,100 | | | 7,315 | | | 0 | | | 48,567 | | | 7,315 | | | 48,567 | | | 55,882 | | | 576 | | | 55,306 | | | 2020 | | The Cosmopolitan | 45,209 |
| | 985 |
| | — |
| | 57,504 |
| | 985 |
| | 57,504 |
| | 58,489 |
| | 20,364 |
| | 38,125 |
| | 2006 |
| | The Cosmopolitan | 42,909 | | | 985 | | | 0 | | | 72,208 | | | 985 | | | 72,208 | | | 73,193 | | | 29,199 | | | 43,994 | | | 2006 | | Town Center Phase VI | 1,505 |
| | 965 |
| | — |
| | 22,328 |
| | 965 |
| | 22,328 |
| | 23,293 |
| | — |
| | 23,293 |
| | — |
| (3) | | The Residences at Annapolis Junction | | The Residences at Annapolis Junction | 84,375 | | | 14,774 | | | 104,801 | | | 34 | | | 14,774 | | | 104,835 | | | 119,609 | | | 750 | | | 118,859 | | | 2018/2020 | | Total multifamily | $ | 156,710 |
| | $ | 27,070 |
| | $ | 58,599 |
| | $ | 217,237 |
| | $ | 27,070 |
| | $ | 275,835 |
| | $ | 302,905 |
| | $ | 35,573 |
| | $ | 267,332 |
| | |
| | Total multifamily | $ | 394,486 | | | $ | 50,334 | | | $ | 277,448 | | | $ | 350,094 | | | $ | 50,334 | | | $ | 627,542 | | | $ | 677,876 | | | $ | 74,238 | | | $ | 603,638 | | | | | Held for development | $ | — |
| | $ | 680 |
| | $ | — |
| | $ | — |
| | $ | 680 |
| | $ | — |
| | $ | 680 |
| | $ | — |
| | $ | 680 |
| | |
| | Held for development | $ | 0 | | | $ | 13,607 | | | $ | 0 | | | $ | 0 | | | $ | 13,607 | | | $ | 0 | | | $ | 13,607 | | | $ | 0 | | | $ | 13,607 | | | | | Real estate investments | $ | 307,412 |
| | $ | 197,777 |
| | $ | 289,145 |
| | $ | 507,516 |
| | $ | 197,777 |
| | $ | 796,660 |
| | $ | 994,437 |
| | $ | 164,521 |
| | $ | 829,916 |
| | |
| | Real estate investments | $ | 747,812 | | | $ | 280,791 | | | $ | 657,832 | | | $ | 819,294 | | | $ | 280,791 | | | $ | 1,477,126 | | | $ | 1,757,917 | | | $ | 253,965 | | | $ | 1,503,952 | | | | |
| | (1) | The net carrying amount of real estate for federal income tax purposes was $698.1 million as of December 31, 2017. |
| | (2) | Borrowing base collateral for the credit facility as of December 31, 2017. |
| | (3) | Construction in progress as of December 31, 2017. |
(1)The net carrying amount of real estate for federal income tax purposes was $1,288.5 million as of December 31, 2020. (2)Borrowing base collateral for the credit facility as of December 31, 2020. (3)A portion of this property is borrowing base collateral for the credit facility as of December 31, 2020.
(4)Construction in progress as of December 31, 2020.
Income producing property is depreciated on a straight-line basis over the following estimated useful lives: | | | | | | Buildings | 39 years | Capital improvements | 15—5—20 years | Equipment | 5—153—7 years | Tenant improvements | Term of the related lease | | (or estimated useful life, if shorter) |
| | | | | | | | | | | | | | | | | | | | | | | | | Real Estate | | Accumulated | | Investments | | Depreciation | | December 31, | | 2020 | | 2019 | | 2020 | | 2019 | Balance at beginning of the year | $ | 1,606,324 | | | $ | 1,176,586 | | | $ | 224,738 | | | $ | 188,775 | | Construction costs and improvements | 58,039 | | | 143,700 | | | — | | | — | | Acquisitions | 196,214 | | | 314,898 | | | — | | | — | | Dispositions | (101,768) | | | (28,117) | | | (14,444) | | | (1,818) | | Reclassifications | (892) | | | (743) | | | 0 | | | (58) | | Depreciation | — | | | — | | | 43,671 | | | 37,839 | | Balance at end of the year | $ | 1,757,917 | | | $ | 1,606,324 | | | $ | 253,965 | | | $ | 224,738 | |
| | | | | | | | | | | | | | | | | | Real Estate | | Accumulated | | Investments | | Depreciation | | December 31, | | 2017 | | 2016 | | 2017 | | 2016 | Balance at beginning of the year | $ | 908,287 |
| | $ | 633,591 |
| | $ | 139,553 |
| | $ | 125,380 |
| Construction costs and improvements | 84,142 |
| | 56,630 |
| | — |
| | — |
| Acquisitions | 12,760 |
| | 248,987 |
| | — |
| | — |
| Dispositions | (10,146 | ) | | (30,467 | ) | | (1,006 | ) | | (352 | ) | Reclassifications | (606 | ) | | (454 | ) | | — |
| | (8,928 | ) | Depreciation | — |
| | — |
| | 25,974 |
| | 23,453 |
| Balance at end of the year | $ | 994,437 |
| | $ | 908,287 |
| | $ | 164,521 |
| | $ | 139,553 |
|
|