UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

~~WASHINGTON,~~Washington, D.C. 20549



FORM	10-Q

x☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2020

¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission ~~file number:~~ File Number: 001-35908

ARMADA HOFFLER PROPERTIES, INC.

(Exact ~~Name~~name of ~~Registrant~~registrant as ~~Specified~~specified in its ~~Charter)~~charter)



Maryland			46-1214914
(State or other jurisdiction of ~~Organization)~~incorporation or organization)			(~~IRS~~I.R.S. Employer Identification No.)

222 Central Park Avenue	,	Suite 2100
Virginia Beach	,	Virginia	23462
(Address of ~~Principal Executive Offices)~~principal executive offices)			(Zip Code)

~~(757)~~ (757) 366-4000

(Registrant’s ~~Telephone Number, Including Area Code)~~telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	AHH	New York Stock Exchange
6.75% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share	AHHPrA	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x☒Yes ◻☐ No

Indicate by check mark whether the Registrant has submitted electronically ~~and posted on its corporate Website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit ~~and post~~ such files). x☒Yes ◻☐ No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of ~~“large~~"large accelerated filer,~~” “accelerated~~" "accelerated filer,~~” “smaller~~" "smaller reporting ~~company”~~company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. ~~(Check one):~~



Large Accelerated Filer	◻ ☒	Accelerated Filer	x
			☐
Non-Accelerated Filer	~~◻ (Do not check if a smaller reporting company)~~☐	Smaller Reporting Company	◻ ☐
		Emerging Growth Company	x ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

◻☐ Yes x☒ No

As of ~~November~~May 1, ~~2017,~~2020, the ~~Registrant~~registrant had ~~44,936,652~~56,492,059 shares of common stock, $0.01 par value per share, outstanding. In addition, as of May 1, 2020, Armada Hoffler, L.P., the registrant's operating partnership subsidiary, had 21,272,962 units of limited partnership interest ("OP Units") outstanding (other than OP Units held by the registrant).

ARMADA HOFFLER PROPERTIES, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED ~~SEPTEMBER 30, 2017~~MARCH 31, 2020

Table of Contents



		Page

Part I. Financial Information		1

Item 1.	Financial Statements	1

	~~Item 2.~~ Condensed Consolidated Balance Sheets	1

	Condensed Consolidated Statements of Comprehensive Income	2

	Condensed Consolidated Statements of Equity	3

	Condensed Consolidated Statements of Cash Flows	5

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1923

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3646

Item 4.	Controls and Procedures	3746

Part II. Other Information		3748

Item 1.	Legal Proceedings	3748

Item 1A.	Risk Factors	3748

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3749

Item 3.	Defaults Upon Senior Securities	3950

Item 4.	Mine Safety Disclosures	3950

Item 5.	Other Information	3950

Item 6.	Exhibits	3951



Signatures		4052

PART I. Financial Information

Item 1. Financial Statements

ARMADA HOFFLER PROPERTIES, INC.

Condensed Consolidated Balance Sheets

(In thousands, except par value and share data)


	September 30, 2017			December 31, 2016			March 31, 2020			December 31, 2019
	(Unaudited)						(Unaudited)
ASSETS
Real estate investments:
Income producing property	$	906,225		$	894,078		$	1,465,882		$	1,460,723
Held for development	680			680			13,607			5,000
Construction in progress	62,948			13,529			155,672			140,601
	969,853			908,287			1,635,161			1,606,324
Accumulated depreciation	(157,932		)	(139,553		)	(235,249		)	(224,738		)
Net real estate investments	811,921			768,734			1,399,912			1,381,586
Real estate investments held for sale							—			1,460
Cash and cash equivalents	19,721			21,942			48,096			39,232
Restricted cash	3,195			3,251			4,692			4,347
Accounts receivable, net	15,826			15,052			22,831			23,470
Notes receivable	75,522			59,546
Construction receivables, including retentions	35,923			39,433
Construction contract costs and estimated earnings in excess of billings	110			110
Equity method investments	11,169			10,235
Notes receivable, net							178,652			159,371
Construction receivables, including retentions, net							35,051			36,361
Construction contract costs and estimated earnings in excess of billings, net							458			249
Operating lease right-of-use assets							32,997			33,088
Finance lease right-of-use assets							23,983			24,130
Acquired lease intangible assets, net							65,014			68,702
Other assets	57,611			64,165			34,404			32,901
Total Assets	$	1,030,998		$	982,468		$	1,846,090		$	1,804,897
LIABILITIES AND EQUITY
Indebtedness, net	$	488,609		$	522,180		$	1,006,617		$	950,537
Accounts payable and accrued liabilities	14,383			10,804			15,768			17,803
Construction payables, including retentions	48,160			51,130			50,161			53,382
Billings in excess of construction contract costs and estimated earnings	5,232			10,167			6,311			5,306
Operating lease liabilities							41,512			41,474
Finance lease liabilities							17,916			17,903
Other liabilities	41,181			39,209			69,404			63,045
Total Liabilities	$	597,565		$	633,490		1,207,689			1,149,450

Redeemable noncontrolling interest	2,000			—

Stockholders’ equity:
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued and outstanding as of September 30, 2017 and December 31, 2016	—			—
Common stock, $0.01 par value, 500,000,000 shares authorized, 44,936,652 and 37,490,361 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively	449			374
Preferred stock, $0.01 par value, 100,000,000 shares authorized: 6.75% Series A Cumulative Redeemable Perpetual Preferred Stock, 2,930,000 shares authorized, 2,530,000 shares issued and outstanding as of March 31, 2020 and December 31, 2019							63,250			63,250
Common stock, $0.01 par value, 500,000,000 shares authorized; 56,492,134 and 56,277,971 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively							565			563
Additional paid-in capital	288,485			197,114			457,804			455,680
Distributions in excess of earnings	(56,755		)	(49,345		)	(115,390		)	(106,676		)
Accumulated other comprehensive loss							(9,393		)	(4,240		)
Total stockholders’ equity	232,179			148,143			396,836			408,577
Noncontrolling interests	199,254			200,835
Noncontrolling interests in investment entities							4,370			4,462
Noncontrolling interests in Operating Partnership							237,195			242,408
Total Equity	431,433			348,978			638,401			655,447
Total Liabilities and Equity	$	1,030,998		$	982,468		$	1,846,090		$	1,804,897

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

ARMADA HOFFLER PROPERTIES, INC.

Condensed Consolidated Statements of Comprehensive Income

(In thousands, except per share data)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2020			2019
Revenues
Rental revenues	$	27,096		$	25,305		$	81,083		$	72,839		$	42,289		$	30,909
General contracting and real estate services revenues	41,201			38,552			161,391			108,555			47,268			17,036
Total revenues	68,297			63,857			242,474			181,394			89,557			47,945

Expenses
Rental expenses	6,830			5,834			19,069			16,234			9,375			6,725
Real estate taxes	2,693			2,356			7,797			7,087			4,333			3,128
General contracting and real estate services expenses	39,377			37,274			154,588			104,336			45,550			16,286
Depreciation and amortization	9,239			8,885			28,018			25,636			14,279			9,904
Amortization of right-of-use assets - finance leases													147			—
General and administrative expenses	2,098			2,156			7,762			6,864			3,793			3,401
Acquisition, development and other pursuit costs	61			345			477			1,486			27			400
Impairment charges	19			149			50			184			158			—
Total expenses	60,317			56,999			217,761			161,827			77,662			39,844
Operating income	7,980			6,858			24,713			19,567			11,895			8,101
Interest income	1,910			1,024			4,966			1,928			7,226			5,319
Interest expense	(4,253		)	(4,124		)	(13,282		)	(11,893		)
Loss on extinguishment of debt	—			(82		)	—			(82		)
Gain on real estate dispositions	4,692			3,753			8,087			30,440
Interest expense on indebtedness													(7,959		)	(5,886		)
Interest expense on finance leases													(229		)	—
Equity in income of unconsolidated real estate entities													—			273
Change in fair value of interest rate derivatives	87			498			300			(2,264		)	(1,736		)	(1,463		)
Other income	74			35			154			154
Provision for unrealized credit losses													(377		)	—
Other income (expense), net													58			60
Income before taxes	10,490			7,962			24,938			37,850			8,878			6,404
Income tax provision	(29		)	(16		)	(781		)	(240		)
Income tax benefit													257			110
Net income	10,461			7,946			24,157			37,610			9,135			6,514
Net income attributable to noncontrolling interests	(2,973		)	(2,734		)	(7,262		)	(12,994		)
Net income attributable to stockholders	$	7,488		$	5,212		$	16,895		$	24,616
Net income attributable to stockholders per share (basic and diluted)	$	0.17		$	0.15		$	0.41		$	0.77
Net (income) loss attributable to noncontrolling interests:
Investment entities													92			—
Operating Partnership													(2,235		)	(1,630		)
Net income attributable to Armada Hoffler Properties, Inc.													6,992			4,884
Preferred stock dividends													(1,067		)	—
Net income attributable to common stockholders													$	5,925		$	4,884
Net income attributable to common stockholders per share (basic and diluted)													$	0.11		$	0.10
Weighted-average common shares outstanding (basic and diluted)	44,934			33,792			41,575			31,913			56,398			50,926
Dividends and distributions declared per common share and unit	$	0.19		$	0.18		$	0.57		$	0.54

Comprehensive income:
Net income													$	9,135		$	6,514
Unrealized cash flow hedge losses													(7,489		)	(1,003		)
Realized cash flow hedge losses reclassified to net income													392			72
Comprehensive income													2,038			5,583
Comprehensive (income) loss attributable to noncontrolling interests:
Investment entities													92			—
Operating Partnership													(291		)	(1,397		)
Comprehensive income attributable to Armada Hoffler Properties, Inc.													$	1,839		$	4,186

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

ARMADA HOFFLER PROPERTIES, INC.

Condensed Consolidated ~~Statement~~Statements of Equity

(In thousands, except share data)

(Unaudited)



	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, 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⁽¹⁾	—		—		—			(2,185		)	—			(2,185		)	—			(824		)	(3,009		)
Net income	—		—		—			6,992			—			6,992			(92		)	2,235			9,135
Unrealized cash flow hedge losses	—		—		—			—			(5,438		)	(5,438		)	—			(2,051		)	(7,489		)
Realized cash flow hedge losses reclassified to net income	—		—		—			—			285			285			—			107			392
Net proceeds from issuance of common stock	—		1		1,348			—			—			1,349			—			—			1,349
Restricted stock awards, net of tax withholding	—		1		782			—			—			783			—			—			783
Restricted stock award forfeitures	—		—		(6		)	—			—			(6		)	—			—			(6		)
Dividends declared on preferred stock	—		—		—			(1,067		)	—			(1,067		)	—			—			(1,067		)
Dividends and distributions declared on common shares and units ($0.22 per share and unit)	—		—		—			(12,454		)	—			(12,454		)	—			(4,680		)	(17,134		)
Balance, March 31, 2020	$	63,250	$	565	$	457,804		$	(115,390	)	$	(9,393	)	$	396,836		$	4,370		$	237,195		$	638,401

(1) 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.

Table of Contents

Shares of common stock Common Stock Additional paid-in capital Distributions in excess of earnings Total stockholders' equity Noncontrolling interests Total Equity
Balance, January 1, 2017 37,490,361
$ 374
$ 197,114
$ (49,345 ) $ 148,143
$ 200,835
$ 348,978
Net income —
—
—
16,895
16,895
7,262
24,157
Net proceeds from sales of common stock 7,350,690
74
91,307
—
91,381
—
91,381
Restricted stock awards 116,704
1
1,381
—
1,382
—
1,382
Restricted stock award forfeitures (21,103 ) —
(289 ) —
(289 ) —
(289 )
Issuance of common units for acquisition of interest in real estate investment —
—
(987 ) —
(987 ) 982
(5 )
Redemption of operating partnership units —
—
(41 ) —
(41 ) (188 ) (229 )
Dividends and distributions declared —
—
—
(24,305 ) (24,305 ) (9,637 ) (33,942 )
Balance, September 30, 2017 44,936,652
$ 449
$ 288,485
$ (56,755 ) $ 232,179
$ 199,254
$ 431,433



	Common stock		Additional paid-in capital			Distributions in excess of earnings			Accumulated other comprehensive loss			Total stockholders' equity			Noncontrolling interests in Operating Partnership			Total equity
Balance, December 31, 2018	$	500	$	357,353		$	(82,699	)	$	(1,283	)	$	273,871		$	182,019		$	455,890
Cumulative effect of accounting change ⁽²⁾	—		—			(125		)	—			(125		)	(42		)	(167		)
Net income	—		—			4,884			—			4,884			1,630			6,514
Unrealized cash flow hedge losses	—		—			—			(752		)	(752		)	(251		)	(1,003		)
Realized cash flow hedge losses reclassified to net income	—		—			—			54			54			18			72
Net proceeds from sales of common stock	21		30,185			—			—			30,206			—			30,206
Restricted stock awards, net of tax withholding	1		754			—			—			755			—			755
Restricted stock award forfeitures	—		(4		)	—			—			(4		)	—			(4		)
Redemption of operating partnership units	1		1,259			—			—			1,260			(1,260		)	—
Dividends and distributions declared on common shares and units ($0.21 per share and unit)	—		—			(11,009		)	—			(11,009		)	(3,568		)	(14,577		)
Balance, March 31, 2019	$	523	$	389,547		$	(88,949	)	$	(1,981	)	$	299,140		$	178,546		$	477,686

(2) 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.

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

ARMADA HOFFLER PROPERTIES, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)(Unaudited)

~~(Unaudited)~~



	Three Months Ended March 31,
	2020			2019
OPERATING ACTIVITIES
Net income	$	9,135		$	6,514
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of buildings and tenant improvements	10,510			7,743
Amortization of leasing costs, in-place lease intangibles and below market ground rents - operating leases	3,769			2,161
Accrued straight-line rental revenue	(557		)	(837		)
Amortization of leasing incentives and above or below-market rents	(219		)	(35		)
Amortization of right-of-use assets - finance leases	147			—
Accrued straight-line ground rent expense	(6		)	(3		)
Provision for unrealized credit losses	377			—
Adjustment for uncollectable lease accounts	301			128
Noncash stock compensation	1,030			689
Impairment charges	158			—
Noncash interest expense	409			304
Interest expense on finance leases	229			—
Adjustment for Annapolis Junction loan discount amortization ⁽¹⁾	—			(1,118		)
Change in fair value of interest rate derivatives	1,736			1,463
Equity in income of unconsolidated real estate entities	—			(273		)
Changes in operating assets and liabilities:
Property assets	1,196			2,591
Property liabilities	(4,151		)	(139		)
Construction assets	1,370			(502		)
Construction liabilities	2,097			579
Interest receivable	(7,224		)	(3,186		)
Net cash provided by operating activities	20,307			16,079
INVESTING ACTIVITIES
Development of real estate investments	(22,892		)	(41,296		)
Tenant and building improvements	(2,526		)	(3,629		)
Acquisitions of real estate investments, net of cash received	(8,607		)	(25,792		)
Dispositions of real estate investments, net of selling costs	1,442			—
Notes receivable issuances	(17,020		)	(9,668		)
Notes receivable paydowns	1,000			1,692
Leasing costs	(567		)	(575		)
Contributions to equity method investments	—			(535		)
Net cash used for investing activities	(49,170		)	(79,803		)
FINANCING ACTIVITIES
Proceeds from issuance of common stock, net	1,349			30,206
Common shares tendered for tax withholding	(534		)	(344		)
Debt issuances, credit facility and construction loan borrowings	62,604			100,327
Debt and credit facility repayments, including principal amortization	(7,971		)	(57,690		)
Debt issuance costs	(3		)	(420		)
Dividends and distributions	(17,373		)	(13,447		)
Net cash provided by financing activities	38,072			58,632
Net increase (decrease) in cash, cash equivalents, and restricted cash	9,209			(5,092		)
Cash, cash equivalents, and restricted cash, beginning of period	43,579			24,051
Cash, cash equivalents, and restricted cash, end of period⁽²⁾	$	52,788		$	18,959

Nine Months Ended
September 30,
2017 2016
OPERATING ACTIVITIES
Net income $ 24,157
$ 37,610
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of buildings and tenant improvements 19,385
17,055
Amortization of leasing costs and in-place lease intangibles 8,633
8,581
Accrued straight-line rental revenue (927 ) (765 )
Amortization of leasing incentives and above or below-market rents (140 ) (61 )
Accrued straight-line ground rent expense 401
291
Bad debt expense 425
178
Noncash stock compensation 1,047
864
Impairment charges 50
184
Noncash interest expense 940
687
Noncash loss on extinguishment of debt —
82
Gain on real estate dispositions (8,087 ) (30,440 )
Change in the fair value of interest rate derivatives (300 ) 2,264
Changes in operating assets and liabilities:
Property assets (3,612 ) (4,938 )
Property liabilities 3,209
3,856
Construction assets 4,065
(5,863 )
Construction liabilities (12,648 ) 9,197
Net cash provided by operating activities 36,598
38,782
INVESTING ACTIVITIES
Development of real estate investments (28,731 ) (48,671 )
Tenant and building improvements (8,104 ) (4,399 )
Acquisitions of real estate investments, net of cash received (28,020 ) (177,865 )
Dispositions of real estate investments 12,557
96,312
Notes receivable issuances (15,754 ) (42,110 )
Decrease in capital improvement reserves (203 ) (210 )
Leasing costs (149 ) (1,601 )
Leasing incentives (147 ) (188 )
Contributions to equity method investments (934 ) (8,949 )
Net cash used for investing activities (69,485 ) (187,681 )
FINANCING ACTIVITIES
Proceeds from sales of common stock 96,044
51,088
Offering costs (4,663 ) (1,183 )
Debt issuances, credit facility and construction loan borrowings 124,206
290,105
Debt and credit facility repayments, including principal amortization (152,201 ) (167,659 )
Debt issuance costs (751 ) (1,791 )
Redemption of operating partnership units (229 ) (58 )
Dividends and distributions (31,740 ) (24,702 )
Net cash provided by financing activities 30,666
145,800
Net decrease in cash and cash equivalents (2,221 ) (3,099 )
Cash and cash equivalents, beginning of period 21,942
26,989
Cash and cash equivalents, end of period $ 19,721
$ 23,890
Supplemental Disclosures:
Noncash transactions:
Redeemable noncontrolling interest from development $ 2,000
$ —
Deferred payment for land acquisition $ 600
$ —

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

ARMADA HOFFLER PROPERTIES, INC.

Condensed Consolidated Statements of Cash Flows (Continued)

(In thousands)(Unaudited)



	Three Months Ended March 31,
	2020			2019
Supplemental Disclosures (noncash transactions):
Increase in dividends and distributions payable	$	828		$	1,130
(Decrease) increase in accrued capital improvements and development costs	(3,866		)	(7,609		)
Operating Partnership units redeemed for common shares	—			1,260
Equity method investment redeemed for real estate acquisition	—			23,011
Recognition of operating lease ROU assets	—			32,345
Recognition of operating lease liabilities	—			41,632

(1) Borrower 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 then-remaining term.

(2) The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Condensed Consolidated Statements of Cash Flows (in thousands):



	March 31, 2020		March 31, 2019
Cash and cash equivalents	$	48,096	$	15,577
Restricted cash ^(a)	4,692		3,382
Cash, cash equivalents, and restricted cash	$	52,788	$	18,959

(a) Restricted cash represents amounts held by lenders for real estate taxes, insurance, and reserves for capital improvements.

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

ARMADA HOFFLER PROPERTIES, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Business of Organization

Armada Hoffler Properties, Inc. (the ~~“Company”~~"Company") is a ~~full service~~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"), the sole general partner of Armada Hoffler, L.P. (the ~~“Operating Partnership”~~"Operating Partnership"). and, as of March 31, 2020, owned 72.6% 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 and certain related formation transactions on May 13, 2013.

As of ~~September 30, 2017,~~March 31, 2020, the Company's ~~operating~~ property 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~~	%
~~One Columbus~~	~~Office~~	Virginia Beach, Virginia*	~~100~~	%
~~Two Columbus~~	~~Office~~	Virginia Beach, Virginia*	~~100~~	%
~~249 Central Park Retail~~	~~Retail~~	Virginia Beach, Virginia*	~~100~~	%
~~Alexander Pointe~~	~~Retail~~	~~Salisbury, North Carolina~~	~~100~~	%
~~Bermuda Crossroads~~	~~Retail~~	~~Chester, Virginia~~	~~100~~	%
~~Broad Creek Shopping Center~~	~~Retail~~	~~Norfolk, Virginia~~	~~100~~	%
~~Broadmoor Plaza~~	~~Retail~~	~~South Bend, Indiana~~	~~100~~	%
~~Brooks Crossing~~⁽¹⁾	~~Retail~~	~~Newport News, Virginia~~	65	%
~~Columbus Village~~	~~Retail~~	Virginia Beach, Virginia*	~~100~~	%
~~Columbus Village II~~	~~Retail~~	Virginia Beach, Virginia*	~~100~~	%
~~Commerce Street Retail~~	~~Retail~~	Virginia Beach, Virginia*	~~100~~	%
~~Courthouse 7-Eleven~~	~~Retail~~	~~Virginia Beach, Virginia~~	~~100~~	%
~~Dick's at Town Center~~	~~Retail~~	Virginia Beach, Virginia*	~~100~~	%
~~Dimmock Square~~	~~Retail~~	~~Colonial Heights, Virginia~~	~~100~~	%
~~Fountain Plaza Retail~~	~~Retail~~	Virginia Beach, Virginia*	~~100~~	%
~~Gainsborough Square~~	~~Retail~~	~~Chesapeake, Virginia~~	~~100~~	%
~~Greentree Shopping Center~~	~~Retail~~	~~Chesapeake, Virginia~~	~~100~~	%
~~Hanbury Village~~	~~Retail~~	~~Chesapeake, Virginia~~	~~100~~	%
~~Harper Hill Commons~~	~~Retail~~	~~Winston-Salem, North Carolina~~	~~100~~	%
~~Harrisonburg Regal~~	~~Retail~~	~~Harrisonburg, Virginia~~	~~100~~	%
~~Lightfoot Marketplace~~⁽²⁾	~~Retail~~	~~Williamsburg, Virginia~~	70	%
~~North Hampton Market~~	~~Retail~~	~~Taylors, South Carolina~~	~~100~~	%
~~North Point Center~~	~~Retail~~	~~Durham, North Carolina~~	~~100~~	%
~~Oakland Marketplace~~	~~Retail~~	~~Oakland, Tennessee~~	~~100~~	%
~~Parkway 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~~	%

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~~Property~~	~~Segment~~	~~Location~~	~~Ownership Interest~~
~~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~~⁽³⁾	~~Multifamily~~	~~Baltimore, Maryland~~	80	%
~~Liberty Apartments~~	~~Multifamily~~	~~Newport News, Virginia~~	~~100~~	%
~~Smith's Landing~~	~~Multifamily~~	~~Blacksburg, Virginia~~	~~100~~	%
~~The Cosmopolitan~~	~~Multifamily~~	Virginia Beach, Virginia*	~~100~~	%


~~(1)~~	~~The Company is entitled to a preferred return of 8% on its investment in Brooks Crossing.~~


~~(2)~~	~~The Company is entitled to a preferred return of 9% on its investment in Lightfoot Marketplace.~~


~~(3)~~	~~See discussion of redeemable noncontrolling interest in Note 9 for additional information. The Company is entitled to a preferred return of 9% on its investment in Johns Hopkins Village.~~

*Located in the Town Center of Virginia Beach

~~As of September 30, 2017, the following~~58 operating properties ~~that the Company consolidates for financial statement purposes were~~and 3 properties either under development or ~~construction:~~ not yet stabilized.



~~Property~~	~~Segment~~	~~Location~~	~~Ownership Interest~~
~~Town Center Phase VI~~	~~Mixed-use~~	Virginia Beach, Virginia*	~~100~~	%
~~Harding Place~~⁽¹⁾	~~Multifamily~~	~~Charlotte, North Carolina~~	80	%
~~595 King Street~~	~~Multifamily~~	~~Charleston, South Carolina~~	~~92.5~~	%
~~530 Meeting Street~~	~~Multifamily~~	~~Charleston, South Carolina~~	90	%

~~(1) The Company is entitled~~Refer to ~~a preferred return of 9% on a portion of its investment in Harding Place.~~

*Located in the Town Center of Virginia Beach

~~Please see~~ Note 5 for information related to the ~~Company’s investment in Durham City Center II, LLC, which is an unconsolidated subsidiary that the Company accounts for using the equity method~~Company's recent acquisitions and dispositions of ~~accounting.~~operating properties.

2. ~~Summary of~~ Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles ~~generally accepted in the United States (“GAAP”~~("GAAP").

The condensed consolidated financial statements include the financial position and results of operations of the Company and its consolidated ~~subsidiaries.~~subsidiaries, including 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.

In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for the fair presentation of the financial condition and results of operations for the interim periods presented.

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The accompanying condensed consolidated financial statements were prepared in accordance with the requirements for interim financial information. Accordingly, these interim financial statements have not been audited and exclude certain disclosures required for annual financial statements. Also, the operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire ~~year.~~year, particularly in light of the novel coronavirus ("COVID-19") pandemic and its effects on the domestic and global economies. The pandemic has led governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders, causing many of the Company’s tenants, particularly in the Company’s retail portfolio, to suspend or limit operations. We expect to continue to experience effects on our business as the impacts from COVID-19 and the related responses continue to develop. These interim financial statements should be read in conjunction with the audited consolidated financial statements of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed. Such estimates are based on management’s historical experience and best judgment after considering past, current, and expected events and economic conditions. Actual results could differ significantly from management’s estimates.

~~Significant~~

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Reclassifications

Certain items have been reclassified from their prior year classifications to conform to the current year presentation. These reclassifications had no effect on net income or stockholders' equity as previously reported.

Recent Accounting Pronouncements

Accounting Standards Adopted in 2020

Credit losses

In June 2016, the Financial Accounting Standard Board ("FASB") issued ASU 2016-13, Financial Instruments - Credit Losses - Measurement of Credit Losses on Financial Instruments (Topic 326). ASU 2016-13 significantly changes how entities will 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 "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 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 adopted the new standard on January 1, 2020, using the modified retrospective transition method and recorded a noncash cumulative effect adjustment to record a reduction to retained earnings of $3.0 million, $2.8 million of which relates to the Company's mezzanine loans and $0.2 million of which relates to the Company's construction accounts receivable. See Note 6—Notes Receivable and Current Expected Credit Losses, for more information.

Fair Value Measurements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820). The ASU is part of the FASB's disclosure framework project to improve the effectiveness 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 January 1, 2020. Adoption of the ASU did not have a material impact on disclosures in the Company's consolidated financial statements. See Note 12—Fair Value of Financial Instruments, for more information on the Company's presentation of the fair value of financial instruments.

Pending Accounting Guidance

Lease Modification Accounting Q&A

In April 2020, the FASB staff issued a question and answer document (the "Lease Modification Q&A") focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic. Under existing lease guidance, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the 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 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 is evaluating the Lease Modification Q&A.

Other Accounting Policies

~~The accompanying condensed consolidated financial statements were prepared on~~See the ~~basis of the accounting principles described in the Company’s~~Company's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

~~Recent Accounting Pronouncements~~

~~On May 28, 2014,~~2019 for a description of other accounting principles upon which basis the Financial Accounting Standards Board ("FASB") issued a new standard that provides a single, comprehensive model for recognizing revenue from contracts with customers. The new standard requires additional disclosures about the Company's revenue recognition and could change the way the Company recognizes revenue from construction and development contracts with third party customers. Management is currently reviewing the Company's existing construction contracts to assess the potential impacts of the new standard. A substantial portion of the Company's revenue consists of rental revenues from leasing arrangements, such as base rent, which is specifically excluded from the revenue guidance. Non-lease components, such as tenant reimbursements for common area maintenance, will be subject to the revenue guidance. The Company does not expect the new standard to have a material impact on the measure and recognition of gains and losses on the sale of properties. The new standard will be effective for the Company on January 1, 2018. The Company plans to adopt the new standard using the full retrospective method.

On February 25, 2016, the FASB issued a new lease standard that requires lessees to recognize most leases in their balance sheets as lease liabilities with corresponding right-of-use assets. The new standard also makes targeted changes to lessor accounting. The new standard will be effective for the Company on January 1, 2019 and requires a modified retrospective transition approach for all leases existing at, or entered into after, the beginning of the earliest comparative period presented, with an option to use certain transition relief. Management is currently evaluating the potential impact of the new standard on the Company’saccompanying consolidated financial ~~statements.~~statements were prepared.

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 it did not have a material impact on the Company’s consolidated financial statements.

On August 26, 2016, the FASB issued new guidance that addresses eight classification issues related to the statement of cash flows. Early adoption is permitted, including adoption in an interim period. This guidance should be applied retrospectively to each period presented. This new guidance will be effective for the Company on January 1, 2018. Management is currently evaluating the potential impact of the new guidance on the Company’s consolidated financial statements.

On February 22, 2017, the FASB issued new guidance that clarifies the scope and application of guidance on sales or transfers of nonfinancial assets and in substance nonfinancial assets to customers, including partial sales. The new guidance applies to all nonfinancial assets, including real estate, and defines an in substance nonfinancial asset. The new guidance will be effective for the Company on January 1, 2018, with early adoption permitted. Management is currently evaluating the potential impact of the new standard on the Company’s consolidated financial statements.

On August 28, 2017, the FASB issued new guidance that simplifies some of the requirements relating to accounting for derivatives and hedging. The new guidance eliminates the requirement to separately measure and report hedge ineffectiveness for a highly effective hedge and also simplifies certain documentation and assessment requirements relating

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to the determination of hedge effectiveness. The new guidance will be effective for the Company on January 1, 2019, with early adoption permitted. The Company does not currently have any derivatives designated as hedging instruments for accounting purposes. The application of this guidance to future hedging relationships could reduce or eliminate the gains and losses that would otherwise be recorded for these derivative instruments.

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 an alternative to cash flows as a measure of liquidity. Not all companies calculate net operating income in the same manner. The Company considers net operating income to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the core operations of the Company’s real estate and construction businesses.

Net operating income of the Company’s reportable segments for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 was as follows (in thousands):



	Three Months Ended March 31,
	2020		2019
Office real estate
Rental revenues	$	10,192	$	5,556
Rental expenses	2,546		1,486
Real estate taxes	1,146		526
Segment net operating income	6,500		3,544
Retail real estate
Rental revenues	20,411		17,257
Rental expenses	3,020		2,600
Real estate taxes	2,166		1,811
Segment net operating income	15,225		12,846
Multifamily residential real estate
Rental revenues	11,686		8,096
Rental expenses	3,809		2,639
Real estate taxes	1,021		791
Segment net operating income	6,856		4,666
General contracting and real estate services
Segment revenues	47,268		17,036
Segment expenses	45,550		16,286
Segment gross profit	1,718		750
Net operating income	$	30,299	$	21,806

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
(Unaudited)
Office real estate
Rental revenues $ 4,762
$ 5,277
$ 14,427
$ 16,097
Rental expenses 1,447
1,553
4,138
4,307
Real estate taxes 481
485
1,381
1,550
Segment net operating income 2,834
3,239
8,908
10,240
Retail real estate
Rental revenues 15,880
14,340
47,089
41,485
Rental expenses 2,699
2,264
7,698
6,820
Real estate taxes 1,588
1,339
4,557
3,953
Segment net operating income 11,593
10,737
34,834
30,712
Multifamily residential real estate
Rental revenues 6,454
5,688
19,567
15,257
Rental expenses 2,684
2,017
7,233
5,107
Real estate taxes 624
532
1,859
1,584
Segment net operating income 3,146
3,139
10,475
8,566
General contracting and real estate services
Segment revenues 41,201
38,552
161,391
108,555
Segment expenses 39,377
37,274
154,588
104,336
Segment gross profit 1,824
1,278
6,803
4,219
Net operating income $ 19,397
$ 18,393
$ 61,020
$ 53,737

Rental expenses represent costs directly associated with the operation and management of the Company’s real estate properties. Rental expenses include asset management expenses, property management fees, repairs and maintenance, insurance, and utilities.

General contracting and real estate services revenues for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 exclude revenue related to intercompany construction contracts of ~~$13.9~~$13.1 million and ~~$7.9~~$30.2 million, respectively. General contracting services revenues for the nine months ended September 30, 2017 and 2016 exclude revenue related to intercompany construction contracts of $31.3 million and $40.7 million, respectively.

respectively, as it is eliminated in consolidation. General contracting and real estate services expenses for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 exclude expenses related to intercompany construction contracts of ~~$13.7~~$13.0 million and $7.7 million, respectively. General contracting and real estate services expenses for the nine months ended September 30, 2017 and 2016 exclude expenses related to intercompany construction contracts of $31.0 million and $40.2$29.9 million, respectively.

General contracting and real estate services expenses for the three months ended September 30, 2017 and 2016 include noncash stock compensation expense of less than $0.1 million and $0.1 million, respectively. General contracting and real

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~~estate services expenses for the nine months ended September 30, 2017 and 2016 include noncash stock compensation expense of $0.2 million and $0.4 million, respectively.~~

The following table reconciles net operating income to net income, the most directly comparable GAAP measure, for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 (in thousands):



	Three Months Ended March 31,
	2020			2019
Net operating income	$	30,299		$	21,806
Depreciation and amortization	(14,279		)	(9,904		)
Amortization of right-of-use assets - finance leases	(147		)	—
General and administrative expenses	(3,793		)	(3,401		)
Acquisition, development and other pursuit costs	(27		)	(400		)
Impairment charges	(158		)	—
Interest income	7,226			5,319
Interest expense on indebtedness	(7,959		)	(5,886		)
Interest expense on finance leases	(229		)	—
Equity in income of unconsolidated real estate entities	—			273
Change in fair value of interest rate derivatives	(1,736		)	(1,463		)
Provision for unrealized credit losses	(377		)	—
Other income (expense), net	58			60
Income tax benefit	257			110
Net income	$	9,135		$	6,514

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
(Unaudited)
Net operating income $ 19,397
$ 18,393
$ 61,020
$ 53,737
Depreciation and amortization (9,239 ) (8,885 ) (28,018 ) (25,636 )
General and administrative expenses (2,098 ) (2,156 ) (7,762 ) (6,864 )
Acquisition, development and other pursuit costs (61 ) (345 ) (477 ) (1,486 )
Impairment charges (19 ) (149 ) (50 ) (184 )
Interest income 1,910
1,024
4,966
1,928
Interest expense (4,253 ) (4,124 ) (13,282 ) (11,893 )
Loss on extinguishment of debt —
(82 ) —
(82 )
Gain on real estate dispositions 4,692
3,753
8,087
30,440
Change in fair value of interest rate derivatives 87
498
300
(2,264 )
Other income 74
35
154
154
Income tax provision (29 ) (16 ) (781 ) (240 )
Net income $ 10,461
$ 7,946
$ 24,157
$ 37,610

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, including corporate office personnel salaries and benefits, bank fees, accounting fees, legal fees, and other corporate office expenses.

4. Leases

Lessee Disclosures

As a lessee, the Company has 8 ground leases on 7 properties with initial terms that range from 5 to 65 years and options 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. For more information about the Company's leases refer to the audited consolidated financial statements of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

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 include 1 or more options to renew, with renewal terms that can extend the lease term from one to 15 years or more. The exercise 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 assured.

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Rental revenue for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016 include noncash stock compensation expense of $0.2 million and $0.1 million, respectively. General and administrative expenses for~~2019 comprised the ~~nine months ended September 30, 2017 and 2016 include noncash stock compensation expense of $0.8 million and $0.6 million, respectively.~~following (in thousands):



	Three Months Ended March 31,
	2020			2019
Base rent and tenant charges	$	41,513		$	29,925
Accrued straight-line rental adjustment	557			961
Lease incentive amortization	(173		)	(184		)
Above/below market lease amortization	392			207
Total rental revenue	$	42,289		$	30,909

4.5. Real Estate Investment

Property Acquisitions

On January ~~4, 2017,~~10, 2020, the Company ~~acquired undeveloped land~~entered into an operating agreement with a partner to develop a mixed-use property in Charleston, South Carolina for a contract price of $7.1 million plus capitalized acquisition costs of $0.2 million. The Company intends to use the land for the future development of the 595 King Street property.

On July 11, 2017, the Company acquired undeveloped land in Charleston, South Carolina for a contract price of $6.7 million plus capitalized acquisition costs of $0.1 million. The Company intends to use the land for the future development of the 530 Meeting Street property.

~~On July 25, 2017, the Company acquired the outparcel phase of Wendover Village in Greensboro,~~Charlotte, North Carolina for a contract price of $14.3 million plus capitalized acquisition costs of $0.1 million. The following table summarizes the purchase price allocation, including acquisition costs, for this property (in thousands):

Land $ 5,550
Site improvements 232
Building and improvements 6,975
In-place leases 1,382
Above-market leases 327
Below-market leases (50 )
Net assets acquired $ 14,416

~~Property Dispositions~~

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On January 20, 2017, the Company completed the sale of the Wawa outparcel at Greentree Shopping Center. Net proceeds after transaction costs were $4.4 million. The gain on the disposition was $3.4 million.

On July 13, 2017, the Company completed the sale of two office properties leased by the Commonwealth of Virginia in Chesapeake, Virginia and Virginia Beach, Virginia. Aggregate net proceeds from the dispositions of the properties after transaction costs and repayment of the loan associated with the Chesapeake, Virginia property were $7.9 million, and the aggregate gain on the dispositions was $4.2 million.

On August 10, 2017, the Company completed the sale of a land outparcel at Sandbridge Commons. Net proceeds after transaction costs and a partial loan paydown were $0.3 million. The gain on the disposition was $0.5 million.

~~5. Equity Method Investment~~

~~City Center~~

~~On February 25, 2016, the Company acquired a 37% interest in Durham City Center II, LLC (“City Center”) for purposes of developing a 22-story mixed use tower in Durham, North~~ Carolina. ~~As of September 30, 2017 and December 31, 2016, the Company has invested $11.2 million and $10.3 million, respectively, in City Center.~~ The Company has ~~agreed to guarantee 37%~~an 80% interest in 10^th 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 construction loan for City Center; however, the loan is collateralized by 100% of the assets of City Center. As of September 30, 2017, $18.7 million has been drawn against the construction loan, of which $7.8 million is attributable to the Company's portion of the loan.

As of September 30, 2017 and December 31, 2016, the difference between the carrying value of the Company’s initial investment in City Center and the amount of underlying equity was immaterial. For the three and nine months ended September 30, 2017 and 2016, City Center did not have any operating activity, and therefore the Company did not receive any dividends or allocated income.

~~Based on the terms of City Center’s operating agreement, the Company~~land. Management has concluded that ~~City Center~~this entity is a ~~variable interest entity ("VIE"), and that the Company holds a variable interest.~~VIE as it lacks sufficient equity to fund its operations without additional financial support. The Company does not have the power to direct the activities of the project that most significantly impact its performance. Accordingly, the Company is not the project’s primary beneficiary and, therefore, does not consolidate City Center in its consolidated financial statements.

~~6. Notes Receivable~~

~~Point Street Apartments~~

On October 15, 2015, the Company agreed to invest up to $28.2 million in the Point Street Apartments project in the Harbor Point area of Baltimore, Maryland. Point Street Apartments is an estimated $92 million development project with plans for a 17-story building comprised of 289 residential units and 18,000 square feet of street-level retail space. Beatty Development Group (“BDG”) is the developer of the project and has engaged the Company to serve as construction general contractor. Point Street Apartments is scheduled to open in the first quarter 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. The Company has agreed to guarantee $25.0 million of the senior construction loan in exchange for the option to purchase up to an 88% controlling interest in Point Street Apartments upon completion of the project as follows: (i) an option to purchase a 79% indirect interest in Point Street Apartments for $27.3 million, exercisable within one year from the project’s completion (the “First Option”) and (ii) provided that the Company has exercised the First Option, an option to purchase an additional 9% indirect interest in Point Street Apartments for $3.1 million, exercisable within 27 months from the project’s completion (the “Second Option”). The Company currently has a $2.1 million letter of credit for the guarantee of the senior construction loan.

The Company’s investment in the Point Street Apartments project is in the form of a loan pursuant to which BDG may borrow up to $28.2 million (the “BDG loan”). Interest on the BDG loan accrues at 8.0% per annum and matures on the earliest of: (i) November 1, 2018, which may be extended by BDG under two one-year extension options, (ii) the maturity date or earlier termination of the senior construction loan or (iii) the date the Company exercises the Second Option as described further below.

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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 September 30, 2017 and December 31, 2016, the Company had funded $22.0 million and $20.7 million, respectively, under the BDG loan. During the three months ended September 30, 2017 and 2016, the Company recognized $0.4 million and $0.4 million, respectively, of interest income on the BDG loan. During the nine months ended September 30, 2017 and 2016, the Company recognized $1.3 million and $0.8 million, respectively, of interest income on the BDG loan. BDG is current on the BDG loan.

~~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~~and is ~~the Company~~ the party most closely associated with the project. Therefore, the Company is ~~not~~ the project's primary beneficiary and ~~does not consolidate~~consolidates the ~~project~~Tryon Partnership in its consolidated financial statements.

~~Annapolis Junction~~

On ~~April 21, 2016,~~September 12, 2019, the Company entered into ~~a note receivable~~an operating agreement with a maximum balance of $48.1 million in connection with the Annapolis Junction Apartments project in Maryland ("Annapolis Junction"). Annapolis Junction Apartments is an estimated $102.0 million development project with plans for 416 residential units. It is part ofpartner to develop a mixed-use development project that is also planned to have 17,000 square feet of retail space and a 150-room hotel. Annapolis Junction Apartments Owner, LLC (“AJAO”) is the developer of the residential component and has engaged the Company to serve as construction general contractor for the residential component. Portions of Annapolis Junction opened during the third quarter of 2017, and the remaining portions are scheduled to open during the fourth quarter of 2017; however, management can provide no assurances that the remaining portions of Annapolis Junction will open on the anticipated timeline or at the anticipated cost.

~~AJAO secured a senior construction loan of up to $60.0 million to fund the development and construction of Annapolis Junction's residential component on September 30, 2016.~~property in Belmont, North Carolina. The Company has ~~agreed to guarantee up to $25.0~~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 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.

As of September 30, 2017 and December 31, 2016, the Company had funded $41.9 million and $38.9 million, respectively, on the AJAO loan. During the three months ended September 30, 2017 and 2016, the Company recognized $1.1 million and $0.7 million, respectively, of interest income on the AJAO loan. During the nine months ended September 30, 2017 and 2016, the Company recognized $3.1 million and $1.1 million, respectively, of interest income on the AJAO loan. AJAO is current on the AJAO loan.

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land. Management has concluded that this entity is a ~~VIE. Because AJAO~~VIE as it lacks sufficient equity to fund its operations without additional financial support. The Company is the developer of ~~Annapolis Junction,~~ the ~~Company does not have~~project and has the power to direct the activities of the project that most significantly impact its performance ~~nor~~and is ~~the Company~~ the party most closely associated with the project. Therefore, the Company is ~~not~~ the project's primary beneficiary and ~~does not consolidate~~consolidates the ~~project~~Chronicle Partnership in its consolidated financial statements.

~~Decatur~~Property Disposition

On ~~May 15, 2017,~~March 16, 2020, the Company ~~invested~~executed an agreement to sell a portfolio of 7 retail properties for $106.5 million. The portfolio consists of Alexander Pointe, Bermuda Crossroads, Gainsborough Square, Harper Hill Commons, Indian Lakes Crossing, Renaissance Square, and Stone House Square properties. This agreement was terminated on April 8, 2020.

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6. Notes Receivable and Current Expected Credit Losses

Notes Receivable

The Company had the following notes receivable outstanding as of March 31, 2020 and December 31, 2019 ($ in thousands):



	Outstanding loan amount										Interest compounding
Development Project	March 31, 2020			December 31, 2019		Maximum loan commitment		Interest rate			Interest compounding
The Residences at Annapolis Junction	$	42,517		$	40,049	$	48,105	10.0	%		Monthly
Delray Plaza	15,484			12,995		17,000		15.0	%	^(a)	Annually
Nexton Square	15,904			15,097		17,000		10.0	%		Monthly
Interlock Commercial	75,846			59,224		95,000		15.0	%		None
Solis Apartments at Interlock	26,425			25,588		41,100		13.0	%		Annually
Total mezzanine	176,176			152,953		$	218,205
Other notes receivable	1,167			1,147
Notes receivable guarantee premium	4,511			5,271
Allowance for credit losses	(3,202		)	—
Total notes receivable	$	178,652		$	159,371

(a) $2.0 million of this loan is subject to an interest rate of 6%.

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 three months ended March 31, 2020 and 2019 as follows (in thousands):



	Three Months Ended March 31,
Development Project	2020			2019
1405 Point	$	—		$	610
The Residences at Annapolis Junction	2,468		^(a)	2,024		^(b)
North Decatur Square	—			638
Delray Plaza	489			310
Nexton Square	391			510
Interlock Commercial	3,017		^(a)	743
Solis Apartments at Interlock	838			463
Total mezzanine	7,203			5,298
Other interest income	23			21
Total interest income	$	7,226		$	5,319

(a) Includes partial recognition of interest income related to an exit fee that is due upon repayment of the loan.

(b) Includes amortization of the $5.0 million loan modification fee paid by the borrower in November 2018.

Delray Plaza

On March 3, 2020, the Delray Plaza loan was modified to increase the maximum 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. The borrower pledged 125,832 Class A Units as additional collateral for this loan.

Current Expected Credit Losses

The Company is exposed to credit losses primarily through its mezzanine lending activities. As of March 31, 2020, the Company had 5 mezzanine loans, all of which are secured by second liens on development projects in various stages of

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completion or lease-up. Each of these projects is subject to a ~~$34 million Whole Foods anchored center located~~loan that is senior to the Company’s mezzanine loan. Interest on these loans is paid in ~~Decatur, Georgia.~~ kind and is generally not expected to be paid until a sale of the project after completion of the development.

The Company's ~~investment is in~~management performs a quarterly analysis of the ~~form~~loan portfolio to determine the risk of ~~a mezzanine loan of up to $21.8 million to the developer, North Decatur Square Holdings, LLC ("NDSH"). The mezzanine loan bears interest at an annual rate of 15%. The note matures~~credit loss based on the ~~earliest~~progress of ~~(i) May 15, 2022, (ii) the maturity of the~~development activities including leasing activities, projected development costs, and current and projected mezzanine and senior construction loan ~~(iii)~~balances. The Company estimates future losses on its notes receivable using risk ratings that correspond to probabilities of default and loss given default. 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 ~~sale of NDSH or (iv)~~Company's underwriting assumptions.

Special Mention: loans in this category show signs that the ~~sale~~economic performance of the ~~center. NDSH is current~~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 unless remediation actions are taken. Remediation actions may include obtaining additional collateral or assisting the borrower with asset management activities to prepare the project for sale. The Company may also consider placing the loan on ~~this loan.~~non-accrual status if it does not believe that additional interest accruals will ultimately be collected.

On a quarterly basis, the Company compares the risk inherent in its loans to industry loan loss data experienced during past business cycles. The Company updated the risk ratings for each of its notes receivable during the three months ended March 31, 2020. The Company obtained industry loan loss data relative to these risk ratings as of December 31, 2019.

The following table presents amortized cost basis of the portfolio by year of origination and risk rating as of March 31, 2020 (in thousands):



	Year of Origination
Risk Ratings	2020		2019		2018		2017		2016		Total
Pass	$	—	$	—	$	120,495	$	—	$	—	$	120,495
Special Mention	—		—		—		—		—		—
Substandard	—		—		—		14,839		42,150		56,989
Total amortized cost basis	$	—	$	—	$	120,495	$	14,839	$	42,150	$	177,484

As of ~~September 30, 2017,~~December 31, 2019, there was 0 allowance for loan losses. At March 31, 2020, the Company ~~had funded $11.4~~reported $178.7 million ~~on this loan. During~~of notes receivable, net of allowances of $3.2 million. Changes in the allowance for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2020 were as follows (in thousands):



	Three Months Ended March 31, 2020
Beginning balance (December 31, 2019)	$	—
Cumulative effect of accounting change	2,825
Provision for unrealized credit losses	377
Ending balance	$	3,202

The Company places loans on non-accrual status when the loan balance, together with the balance of any senior loan, approximately equal the estimated realizable value of the underlying development project. As of March 31, 2020 and December 31, 2019, there were no loans on non-accrual status. Effective April 1, 2020, the Company ~~recognized $0.4 million and $0.6 million, respectively, of interest income on this loan.~~

~~Subsequent to September 30, 2017~~

~~Delray Plaza~~

~~On October 27, 2017,~~placed the Company invested in the development of a $20.0 million Whole Foods anchored center located in Delray Beach, Florida. The Company's investment is in the form of a mezzanine loan of up to $13.1 million to the developer,loans for Delray Plaza ~~Holdings, LLC ("DPH").~~and The ~~mezzanine loan bears interest~~Residences at ~~an annual rate~~Annapolis Junction on non-accrual status.

Table of ~~15%. The note matures on the earliest~~Contents

7. Construction Contracts

Construction contract costs and estimated earnings in excess of ~~(i) October 27, 2020, (ii) the date of any sale or refinance~~billings represent reimbursable costs and amounts earned under contracts in progress as of the ~~development project,~~balance sheet date. Such amounts become billable according to contract terms, which usually consider the passage of time, achievement of certain milestones, or ~~(iii) the disposition or change in control~~completion of the ~~development~~ project. The Company ~~has funded $5.9~~expects to bill and collect substantially all construction contract costs and estimated earnings in excess of billings as of March 31, 2020 during the next twelve months.

Billings in excess of construction contract costs and estimated earnings represent billings or collections on contracts made in advance of revenue recognized.

The following table summarizes the changes to the balances in the Company’s construction contract costs and estimated earnings in excess of billings account and the billings in excess of construction contract costs and estimated earnings account for the three months ended March 31, 2020 and 2019 (in thousands):



	Three Months Ended March 31, 2020						Three Months Ended March 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	—			6,311			—			3,859
Transferred to receivables	(285		)	—			(1,358		)	—
Construction contract costs and estimated earnings not billed during the period	458			—			17			—
Changes due to cumulative catch-up adjustment arising from changes in the estimate of the stage of completion	36			—			300			(237		)
Ending balance	$	458		$	6,311		$	317		$	3,622

The Company defers pre-contract costs when such costs are directly associated with specific anticipated contracts and their recovery is probable. Pre-contract costs of $1.5 million and $0.9 million were deferred as of ~~this loan.~~March 31, 2020 and December 31, 2019, respectively. Amortization of pre-contract costs for the three months ended March 31, 2020 and 2019 was $0.2 million and less than $0.1 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 March 31, 2020 and December 31, 2019, construction receivables included retentions of $10.9 million and $9.0 million, respectively. The Company expects to collect substantially all construction receivables outstanding as of March 31, 2020 during the next twelve months. As of March 31, 2020 and December 31, 2019, construction payables included retentions of $16.0 million and $18.0 million, respectively. The Company expects to pay substantially all construction payables outstanding as of March 31, 2020 during the next twelve months.

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The Company’s net position on uncompleted construction contracts comprised the following as of March 31, 2020 and December 31, 2019 (in thousands):



	March 31, 2020			December 31, 2019
Costs incurred on uncompleted construction contracts	$	741,116		$	695,564
Estimated earnings	26,240			24,553
Billings	(773,209		)	(725,174		)
Net position	$	(5,853	)	$	(5,057	)

Construction contract costs and estimated earnings in excess of billings	$	458		$	249
Billings in excess of construction contract costs and estimated earnings	(6,311		)	(5,306		)
Net position	$	(5,853	)	$	(5,057	)

The Company’s balances and changes in construction contract price allocated to unsatisfied performance obligations (backlog) as of March 31, 2020 and 2019 were as follows (in thousands):



	Three Months Ended March 31,
	2020			2019
Beginning backlog	$	242,622		$	165,863
New contracts/change orders	40,440			12,019
Work performed	(47,420		)	(17,011		)
Ending backlog	$	235,642		$	160,871

The Company expects to complete a majority of the uncompleted contracts in place as of March 31, 2020 during the next 12 to 18 months.

7.8. Indebtedness

Credit Facility

~~On February 20, 2015, the Operating Partnership, as borrower, and the~~The Company ~~as parent guarantor, entered into~~has a ~~$200.0 million~~ senior ~~unsecured~~ credit facility ~~(the "credit facility")~~ that ~~included~~was amended and restated on October 3, 2019, which provides for a

$355.0 million credit facility comprised of a $150.0 million senior unsecured revolving credit facility (the "revolving credit facility") and a ~~$50.0~~$205.0 million senior unsecured term loan ~~facility. During 2016, the Company increased the borrowing capacity under the term~~facility (the "term loan facility to $100.0 million. During the first quarter of 2017, the Company increased the borrowing capacity under the term loan facility to $125.0 million, increasing the total capacity of the credit facility to $275.0 million pursuant to the accordion feature.

~~Depending on the Operating Partnership’s total leverage,~~facility" and, together with the revolving credit facility, ~~bore~~the "credit facility"), with a syndicate of banks.

The credit facility includes an accordion feature that allows the total commitments to be further increased to $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 January 24, 2024, with 2 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 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 ~~bore~~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 as defined~~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 ~~agreement.~~ facility.

As of ~~September 30, 2017,~~March 31, 2020 and December 31, 2019, the outstanding balance on the revolving credit facility was $150.0 million and $110.0 million, respectively, and the outstanding balance on the term loan facility was $205.0 million on each of those dates. As of March 31, 2020, 0 borrowing capacity was available under the credit facility. As of March 31, 2020, the effective interest rates on the revolving credit facility and the term loan facility were ~~2.78%~~2.49% and ~~2.74%~~2.44%, respectively. As of September 30, 2017, the revolving credit facility had a scheduled maturity date of February 20, 2019, with a one-year extension option, subject to certain conditions, and the term loan facility had a scheduled maturity date of February 20, 2020. The ~~Operating Partnership~~Company may, at any time, voluntarily prepay any loan under the credit facility in whole or in part without premium or penalty.

Table of ~~September 30, 2017,~~Contents

The Operating Partnership is the ~~outstanding balances on~~borrower under the ~~revolving~~ credit facility, and ~~the term loan facility were $58.0 million and $125.0 million, respectively.~~

~~Subsequent to September 30, 2017~~

~~On October 26, 2017, the Company amended and restated~~its obligations under the credit facility ~~(the "amended~~are guaranteed by the Company and certain of its subsidiaries that are not otherwise prohibited from providing such guaranty. The credit ~~facility")~~agreement contains customary representations and warranties and financial and other affirmative and negative covenants. The Company's ability to ~~(i) extend~~borrow under the ~~maturity date~~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 ~~revolving~~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 ~~October 2021 (with options to extend up to October 2022, subject to certain conditions)~~be immediately due and ~~(ii) extend~~payable.

The Company is currently in compliance with all covenants governing the ~~maturity date of the term loan facility to October 2022. The borrowing capacity under the term loan facility was increased to $150.0 million, increasing the total capacity of the amended~~ credit ~~facility to $300.0 million. The determination of interest rates charged under the amended credit facility remained unchanged.~~facility.

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In October 2017, the Company increased its borrowings under the revolving credit facility by $8.0 million and, in conjunction with the closing of the amended credit facility, increased its borrowings under the term loan facility by $25.0 million.

Other 2020 Financing Activity

~~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, the Company entered into a second amendment to the credit 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 VI project in Virginia Beach, Virginia.~~

On July 13, 2017, the Company paid off the remaining balance of $4.9 million for the note secured 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%.~~

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, the Company borrowed ~~$3.6~~$18.9 million under its existing construction loans to fund new development and construction.

~~Subsequent to September 30, 2017~~

~~On October 13, 2017, the Company paid off $5.0 million of the Liberty Apartments note.~~

8.9. Derivative Financial Instruments

The Company ~~may enter~~enters into interest rate derivative contracts to manage exposure to interest rate risks. The Company does not use derivative financial instruments for trading or speculative purposes. Derivative financial instruments are recognized at fair value and presented within other assets and other liabilities in the condensed consolidated balance sheets. Gains and losses resulting from changes in the fair value of derivatives that are neither designated nor qualify as hedging instruments are recognized within the change in fair value of interest rate derivatives in the condensed consolidated statements of 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 ~~loss~~income (loss) and reclassified into earnings in the periods during which the hedged forecasted transaction affects earnings.

~~On February 1, 2017,~~As of March 31, 2020, the ~~North Point Center Note 5 was paid~~Company had the following LIBOR interest rate caps ($ in ~~full, which terminated~~thousands):



Origination Date	Expiration Date	Notional Amount			Strike Rate		Premium Paid
3/7/2018	4/1/2020	$	50,000		2.25	%	$	310
7/16/2018	8/1/2020	50,000			2.50	%	319
12/11/2018	1/1/2021	50,000			2.75	%	210
5/15/2019	6/1/2022	100,000			2.50	%	288
1/10/2020	2/1/2022	50,000		^(a)	1.75	%	87
1/28/2020	2/1/2022	50,000		^(a)	1.75	%	62
2/28/2020	3/1/2022	100,000		^(a)	1.50	%	111
Total		$	450,000				$	1,387

(a) Designated as a cash flow hedge.

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As of March 31, 2020, the Company held the following floating-to-fixed interest rate swaps ($ 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	51,566		^(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	34,228		^(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	$	341,294

(a) Designated as a cash flow hedge.

For the interest rate swaps designated as cash flow hedges, realized losses are reclassified out of accumulated other comprehensive loss to interest expense in the Condensed Consolidated Statements of Comprehensive Income due to payments made to the swap ~~agreement associated with~~counterparty. During the ~~note. The~~next 12 months, the Company anticipates reclassifying approximately $3.7 million of net hedging losses from accumulated other comprehensive loss oninto earnings to offset the ~~interest rate swap agreement was not significant.~~variability of the hedged items during this period.

~~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 less than $0.2 million. The interest rate cap agreement 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.

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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.

The Company’s derivatives were comprised of the following as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 (in thousands):



	March 31, 2020							December 31, 2019
	(Unaudited)
	Notional Amount		Fair Value					Notional Amount		Fair Value
			Asset		Liability					Asset		Liability
Derivatives not designated as accounting hedges
Interest rate swaps	$	50,000	$	—	$	(3,755	)	$	100,000	$	—	$	(1,992	)
Interest rate caps	250,000		52		—			250,000		25		—
Total derivatives not designated as accounting hedges	300,000		52		(3,755		)	350,000		25		(1,992		)
Derivatives designated as accounting hedges
Interest rate swaps	291,294		—		(12,676		)	146,642		—		(5,728		)
Interest rate caps	200,000		91		—
Total derivatives	$	791,294	$	143	$	(16,431	)	$	496,642	$	25	$	(7,720	)

September 30, 2017 December 31, 2016
(Unaudited)

Notional
Amount
Fair Value
Notional
Amount
Fair Value
Asset Liability Asset Liability
Interest rate swaps $ 56,124
$ 10
$ (447 ) $ 56,901
$ —
$ (829 )
Interest rate caps 370,000
707
—
270,000
259
—
Total $ 426,124
$ 717
$ (447 ) $ 326,901
$ 259
$ (829 )

The changes in the fair value of the Company’s derivatives during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 were comprised of the following (in thousands):



	Three Months Ended March 31,
	2020			2019
Interest rate swaps	$	(9,084	)	$	(1,652	)
Interest rate caps	(141		)	(814		)
Total change in fair value of interest rate derivatives	$	(9,225	)	$	(2,466	)
Comprehensive income statement presentation:
Change in fair value of interest rate derivatives	$	(1,736	)	$	(1,463	)
Unrealized cash flow hedge gains losses	(7,489		)	(1,003		)
Total change in fair value of interest rate derivatives	$	(9,225	)	$	(2,466	)

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Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
(Unaudited)
Interest rate swaps $ 124
$ 481
$ 392
$ (2,007 )
Interest rate caps (37 ) 17
(92 ) (257 )
Total change in fair value of interest rate derivatives $ 87
$ 498
$ 300
$ (2,264 )

9.10. Equity

Stockholders’ Equity

On ~~May 4, 2016,~~February 26, 2018, the Company commenced an at-the-market continuous equity offering program (the ~~“ATM Program”~~"Prior ATM Program"), which was amended on August 6, 2019, through which the Company could, from time to time, issue and sell shares of its common stock having an aggregate offering price of up to ~~$75.0~~$180.7 million. During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, the Company issued and sold ~~an aggregate of 450,690~~92,577 shares of common stock at a weighted average price of ~~$14.08~~$18.23 per share under the Prior ATM Program, receiving net proceeds after offering costs and commissions of ~~$6.2~~$1.7 million.

On ~~May 12, 2017,~~March 10, 2020, the Company ~~completed an underwritten public~~commenced a new at-the-market continuous equity offering ~~of 6.9 million~~program (the "ATM Program") through which the Company may, from time to time, issue and sell shares of its common stock ~~at a public~~and shares of its 6.75% Series A Cumulative Redeemable Perpetual Preferred Stock (the "Series A Preferred Stock") having an aggregate offering price of ~~$13.00 per share, which resulted in net proceeds after~~up to $300.0 million, to or through its sales agents and, with respect to shares of its common stock, may enter into separate forward sales agreements to or through the forward purchaser. Upon commencing the ATM Program, the Company simultaneously terminated the Prior ATM Program. During the three months ended March 31, 2020, the Company did not issue any shares under this ATM Program. Shares having an aggregate offering ~~costs~~price of $300.0 million remained unsold under the ATM Program as of May 5, 2020.

In connection with the ATM Program, on March 6, 2020, the Company filed, with the State Department of Assessments and ~~commissions~~Taxation of ~~$85.3 million.~~

Asthe State of ~~September 30, 2017~~Maryland ("MSDAT"), Articles Supplementary (the "Articles Supplementary") to the Articles of Amendment and ~~December 31, 2016,~~Restatement of the Company, designating 400,000 shares of the Company’s authorized ~~capital was 500 million~~preferred stock as shares of ~~common stock and 100 million~~Series A Preferred Stock, resulting in a total of 2,930,000 shares ~~of preferred stock.~~classified as Series A Preferred Stock. The Company had 44,936,652 and 37,490,361 shares of common stock issued and outstanding as of September 30, 2017 and December 31, 2016, respectively. No shares of preferred stock were issued and outstanding as of September 30, 2017 or December 31, 2016.Articles Supplementary became effective upon filing with MSDAT.

~~Redeemable Noncontrolling Interests~~

~~The noncontrolling interest holder of Johns Hopkins Village has the option to redeem the 20% noncontrolling interest in that entity (the "Put Option"). Currently, the Put Option may be redeemed for~~ ~~$2.0 million~~ in cash or the equivalent amount in Class A units of limited partnership interest in the Operating Partnership ("Class A Units"), which is in the holder's control. Beginning in August 2018, the Put Option may be settled for the fair value of the 20% noncontrolling interest in Johns Hopkins Village, as determined by appraised value. Because the method of the Put Option's redemption is outside of the Company's control, it has been included in temporary equity. If the Put Option is exercised for redemption in the form of Class A Units, the noncontrolling interest will be reclassified into permanent equity.

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Noncontrolling Interests

As of ~~September 30, 2017~~both March 31, 2020 and December 31, ~~2016,~~2019, the Company held a ~~71.6% and 68.1%~~72.6% common interest ~~respectively,~~ in the Operating Partnership. As of March 31, 2020, the Company also held a preferred interest in the Operating Partnership in the form of preferred units with a liquidation preference of $63.3 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 rights to absorb ~~71.6%~~72.6% 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~~Operating Partnership represent units of limited partnership interest in the Operating Partnership not held by the Company. As of March 31, 2020, there were 21,272,962 Class A units of limited partnership interest in the Operating Partnership ("Class A Units") not held by the Company. The Company's financial position and results of operations are the same as those of the Operating Partnership.

Additionally, the Operating Partnership owns a majority interest in certain non-wholly-owned operating and development properties. The noncontrolling interest for investment entities of $4.4 million relates to the ~~consolidated~~minority partners' interest in certain joint venture entities ~~under development or construction (see Note 1) was zero~~ as of ~~September 30, 2017~~March 31, 2020, including 1405 Point and Hoffler Place. The noncontrolling interest for consolidated real estate entities was $4.5 million as of December 31, ~~2016.~~2019.

~~As of September 30, 2017, there were 17,570,512 Class A Units not held by the Company.~~

As partial consideration for the acquisition of Columbus Village, the Operating Partnership issued 1,000,000 Class B Units on July 10, 2015 and issued 275,000 Class C Units on January 10, 2017. The Class B Units were automatically converted to Class A Units on July 10, 2017. Subject to the occurrence of certain events, the Class C Units will not earn or accrue distributions until January 10, 2018, at which time they automatically will convert into Class A Units.

~~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.~~

~~Common Stock~~ Dividends and ~~Class A Unit~~ Distributions

On January ~~5, 2017,~~2, 2020, the Company paid cash dividends of ~~$6.7~~$11.8 million to common stockholders, and the Operating Partnership paid cash distributions of ~~$3.0~~$4.5 million to holders of Class A Units.

On ~~April 6, 2017,~~January 15, 2020, the Company paid cash dividends of ~~$7.2~~$1.1 million to ~~common stockholders and~~ the ~~Operating Partnership paid cash distributions of $3.2 million to~~ holders of ~~Class~~the Series A ~~Units.~~Preferred Stock.

~~On July 6, 2017, the Company paid dividends of~~ ~~$8.6 million~~ ~~to common stockholders and the Operating Partnership paid cash distributions of~~ ~~$3.1 million~~ ~~to holders of Class A Units.~~

On ~~August 4, 2017,~~February 20, 2020, the Board of Directors declared a cash dividend and distribution of ~~$0.19~~$0.22 per share and unit payable on ~~October 5, 2017~~April 2, 2020 to stockholders and unitholders of record on ~~September 27, 2017.~~March 25, 2020.

~~Subsequent to September 30, 2017~~

On ~~October 2, 2017, due~~February 20, 2020, the Board of Directors declared a cash dividend of $0.421875 per share on its 6.75% Series A Cumulative Redeemable Perpetual Preferred Stock payable on April 15, 2020 to ~~the request~~stockholders of holders of Class A Units to tender an aggregate of 358,879 units for redemption by the Operating Partnership, the Company elected to satisfy the redemption requests with an aggregate cash payment of $4.9 million.record on April 1, 2020.

~~On October 5, 2017, the Company paid 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.~~

~~10.~~

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11. Stock-Based Compensation

~~On June 14, 2017, the Company's stockholders approved the Company's~~The Company’s Amended and Restated 2013 Equity Incentive Plan (the ~~"Amended~~"Equity Plan")~~, which, among~~ permits the grant of restricted stock awards, stock options, stock appreciation rights, performance units, and other ~~things, increased the number~~equity-based awards up to an aggregate of 1,700,000 shares of ~~the Company's~~ common ~~stock reserved for issuance under the Amended Plan by 1,000,000 shares, from 700,000 shares to 1,700,000 shares.~~stock. As of ~~September 30, 2017,~~March 31, 2020, there were ~~1,084,942~~769,404 shares available for issuance under the ~~Amended~~Equity Plan.

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, the Company granted an aggregate of ~~117,201~~142,247 shares of restricted stock to employees and non-employee directors with a weighted average grant date fair value of ~~$14.03~~$17.26 per share. Employee restricted stock awards generally vest over a period of two years: one-third immediately on the grant date and the remaining two-thirds in equal amounts on the first two anniversaries following the grant date, subject to continued service to the Company. Non-employee director restricted stock awards vest either immediately upon grant or over a period of one year, subject to continued service to the Company. Unvested restricted stock awards are entitled to receive dividends from their grant date.

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During the ~~nine~~three months ended ~~September 30, 2017,~~March 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.~~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.

During the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, the Company recognized ~~$0.3~~$1.3 million and ~~$0.3~~$1.1 million, respectively, of stock-based compensation ~~expense. During the nine months ended September 30, 2017 and 2016, the Company recognized $1.4 million and $1.2 million, respectively, of stock-based compensation expense.~~cost. As of ~~September 30, 2017,~~March 31, 2020, there were ~~112,838~~153,955 nonvested restricted shares outstanding; the total unrecognized compensation expense related to nonvested restricted shares was ~~$0.8~~$1.9 million, which the Company expects to recognize over the next 2324 months.

~~11.~~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—1 — quoted prices in active markets for identical assets or liabilities

Level 2—2 — observable inputs other than quoted prices in active markets for identical assets and liabilities

Level 3—3 — 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 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~~estimate the 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 long term 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 long term 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.

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The carrying amounts and fair values of the Company’s financial instruments ~~all of which are based on Level 2 inputs,~~ as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019 were as follows (in thousands):



	March 31, 2020				December 31, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
Indebtedness	$	1,006,617	$	1,009,377	$	950,537	$	958,421
Notes receivable	178,652		173,422		159,371		159,371
Interest rate swap liabilities	16,431		16,431		7,720		7,720
Interest rate swap and cap assets	143		143		25		25

September 30, 2017 December 31, 2016

Carrying
Value

Fair
Value

Carrying
Value

Fair
Value
(Unaudited)

Indebtedness $ 488,609
$ 491,026
$ 522,180
$ 527,414
Interest rate swap liabilities 447
447
829
829
Interest rate swap assets 10
10
—
—
Interest rate cap assets 707
707
259
259

~~12.~~13. Related Party Transactions

The Company provides general contracting and real estate services to certain related party entities that are ~~not~~ included in these condensed consolidated financial statements. Revenue from construction contracts with ~~related party~~these entities ~~of the Company~~ for the three months ended ~~September 30, 2017 and 2016~~March 31, 2020 was ~~less than $0.1~~$8.5 million, ~~and $6.8 million, respectively,~~ and gross profit from such contracts was $0.3 million. There was no such revenue or gross profit for the three months ended ~~September 30, 2017~~March 31, 2019. As of March 31, 2020 and ~~2016~~December 31, 2019, there was ~~less than $0.1~~$4.2 million and ~~$0.3~~$1.9 million, ~~respectively. Revenue~~respectively, outstanding from ~~construction contracts with~~ related ~~party entities~~parties of the Company for the nine months ended September 30, 2017 and 2016 was $7.4 million and $21.7 million, respectively, and gross profit from such contracts for the nine months ended September 30, 2017 and 2016 was $0.4 million and $0.8 million, respectively.

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included in net construction receivables. Real estate services fees from affiliated entities of the Company were not ~~significant~~material for any of the three ~~and nine~~ months ended ~~September 30, 2017 or 2016.~~March 31, 2020 and 2019. In addition, affiliated entities also reimburse the Company for monthly maintenance and facilities management services provided to the properties. Cost reimbursements earned by the Company from affiliated entities were not ~~significant~~material for any of the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020, and ~~2016.~~ 2019.

The general contracting services described above include contracts with an aggregate price of $79.5 million with the developer of a mixed-use project, including an apartment building, retail space, and a parking garage to be located in Virginia Beach, Virginia. The developer is owned in part by certain executives of the Company, not including the Chief Executive Officer and Chief Financial Officer. These contracts were executed in 2019 and are projected to result in aggregate gross profit of $3.0 million to the Company, representing a gross profit margin of 4.0%. As part of these contracts and per the requirements of the lender for this project, the Company issued a letter of credit for $9.5 million to secure certain performances of the Company's subsidiary construction company under the contracts, which remains outstanding as of March 31, 2020.

The Operating Partnership entered into tax protection agreements that indemnify certain directors and executive officers of the Company from their tax liabilities resulting from the potential future sale of certain of the Company’s properties within seven (or, in a limited number of cases, ten) years of the completion of the Company’s initial public offering and formation transactions completed on May 13, 2013. In addition, the tax protection agreements provide that the Operating Partnership will offer certain of the original contributors, including certain of the Company’s directors and executive officers, the opportunity to guarantee debt, or, alternatively, to enter into a deficit restoration obligation, for ten years from the closing of the Company’s initial public offering in a manner intended to provide an allocation of Operating Partnership liabilities to the partner for U.S. federal income tax purposes. Pursuant to these tax protection agreements, certain of the Company’s executive officers have guaranteed approximately $0.3 million of the Operating Partnership’s outstanding debt as of September 30, 2017.

The loan for the City Center joint venture is underwritten by a syndicate which includes Park Sterling Bank. The Chief Executive Officer of Park Sterling Bank is the Chairman of the Company’s Audit Committee.

~~13.~~14. Commitments and Contingencies

Legal Proceedings

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

The Company currently is a party to various legal ~~proceedings.~~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 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.

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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 guarantees made by the Company as of March 31, 2020 (in thousands):



Development project	Payment guarantee amount
The Residences at Annapolis Junction	$	8,300
Delray Plaza	5,180
Nexton Square	12,600
Interlock Commercial ⁽¹⁾	30,654
Total	$	56,734

(1) In May 2020, the borrower for the Interlock Commercial loan modified the senior construction loan on the project. As part of this modification, the Company agreed to increase its payment guaranty for this senior loan to $34.3 million.

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~~$4.0 million and ~~$40.5~~$4.3 million as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, respectively. In addition, as of March 31, 2020, the Company has outstanding a letter of credit for $9.5 million to secure certain performances of the Company's subsidiary construction company under a related party project.

The ~~Operating Partnership~~Company has entered into standby letters of credit using the available capacity under the ~~senior unsecured~~ credit facility. The letters of credit relate 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.

15. Subsequent Events

The Company has evaluated subsequent events through the date on which this Form 10-Q was filed, the date on which these financial statements were issued, and identified the items below for discussion.

COVID-19

The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business, including the impact on its tenants, rental revenue, business partners, and construction timelines. The Company has proactively deferred the previously announced Chronicle Mill, Southern Post, and Ten Tryon development projects in order to provide additional balance sheet flexibility until economic conditions stabilize, each of which had previously been scheduled to commence during the second quarter of 2020. The extent of the pandemic’s effect on the Company’s operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic and the duration of government measures to mitigate the pandemic, all of which are uncertain and difficult to predict. As a result of ~~September~~the pandemic, the Company could experience material impacts on its business, results of operations and cash flows in the remainder of 2020.

The Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, was enacted on March 27, 2020 in the United States. The Company continues to assess the potential impacts of this legislation, including the eligibility of the Company and its tenants for funding under programs designed to provide financial assistance to U.S. businesses. The Company has availed itself of the option to defer payment of the employer share of Social Security payroll taxes that would otherwise have been owed from the date of enactment of the CARES Act through December 31, 2020.

Leases

Due to the business disruptions and challenges severely affecting the global economy caused by the COVID-19 pandemic, the Company is working with tenants to provide rent deferrals, where warranted. See Note 2—Summary of Significant Accounting Policies for a discussion of additional guidance issued by the FASB regarding accounting for lease concessions.

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Real Estate dispositions

On April 8, 2020, the Company’s agreement to sell a portfolio of 7 retail properties for $106.5 million, as described in Note 5, was terminated.

Notes Receivable

Effective April 1, 2020, the Company placed the mezzanine loans for Delray Plaza and The Residences at Annapolis Junction on non-accrual status. These loans have accrued interest up to the point that the outstanding debt is approximately equal to the net realizable value of the underlying development projects.

In May 2020, the Company modified the Interlock Commercial loan to allow for an additional $7.0 million of loan funding for purposes of building townhome units as an additional phase of this development project. The borrower also modified the senior construction loan on the project. As part of this modification, the Company agreed to increase its payment guaranty for this senior loan to $34.3 million.

Indebtedness

In April 2020, the Company borrowed $4.9 million on its construction loans to fund development activities.

In April 2020, the Company proactively obtained a waiver from the lender for the Premier Retail/Apartments property wherein the Company will not have to meet the minimum debt service coverage requirement for the period ending June 30, ~~2017~~2020. The Company also proactively obtained a waiver from the lender for the 249 Central Park, Fountain Plaza Retail, and South Retail properties wherein the Company will not have to meet the minimum debt service coverage requirement for the periods ending June 30, 2020 and December 31, ~~2016,~~2020.

Equity

On April 2, 2020, the Company paid cash dividends of $12.4 million to common stockholders, and the Operating Partnership ~~had total outstanding letters~~paid cash distributions of ~~credit~~$4.7 million to holders of ~~$4.1~~Class A Units other than the Company.

On April 15, 2020, the Company paid cash dividends of $1.1 million to holders of shares of Series A Preferred Stock.

On April 30, 2020, the Company announced that its Board of Directors declared a cash dividend of $0.421875 per

share of Series A Preferred Stock for the second quarter of 2020. The dividend will be payable in cash on July 15, 2020

to stockholders of record on July 1, 2020.

On April 30, 2020, the Company announced that its Board of Directors suspended quarterly cash dividends on common stock and $4.1 million, respectively. The amounts outstanding at September 30, 2017 and December 31, 2016 include $2.0 million relating to construction projects and a $2.1 million letter of credit related to the guaranteecash distributions on ~~the Point Street Apartments senior construction loan.~~Class A Units.

1722

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~~Review Report of Independent Registered Public Accounting Firm~~

~~Board of Directors and Stockholders of~~

~~Armada Hoffler Properties, Inc.~~

We have reviewed the condensed consolidated balance sheet of Armada Hoffler Properties, Inc. as of September 30, 2017, and the related condensed consolidated statements of income for the three and nine-month periods ended September 30, 2017 and 2016, the condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2017 and 2016 and the condensed consolidated statement of equity for the nine-month period ended September 30, 2017. These financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Armada Hoffler Properties, Inc. as of December 31, 2016, and the related consolidated statements of comprehensive income, equity, and cash flows for the year then ended (not presented herein) and we expressed an unqualified audit opinion on those consolidated financial statements in our report dated March 1, 2017. In our opinion, the accompanying condensed consolidated balance sheet as of December 31, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

~~/s/ Ernst & Young LLP~~

~~Tysons, Virginia~~

~~November 1, 2017~~

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~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

References to ~~“we,” “our,” “us,”~~"we," "our," "us," and ~~“our company”~~"our company" refer to Armada Hoffler Properties, Inc., a Maryland corporation, together with our consolidated subsidiaries, including Armada Hoffler, L.P., a Virginia limited partnership (the ~~“Operating Partnership”~~"Operating Partnership"), of which we are the sole general partner. The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report.

Forward-Looking Statements

This report contains forward-looking statements within the meaning of the federal securities laws. We caution investors that any forward-looking statements presented in this report, or which management may make orally or in writing from time to time, are based on beliefs and assumptions made by, and information currently available to, management. When used, the words ~~“anticipate,” “believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,” “will,” “result”~~"anticipate," "believe," "expect," "intend," "may," "might," "plan," "estimate," "project," "should," "will," "result," and similar expressions, which do not relate solely to historical matters, are intended to identify forward-looking statements. Such statements are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We caution you that while forward-looking statements reflect our good faith beliefs when we make them, they are not guarantees of future performance and are impacted by actual events when they occur after we make such statements. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.

Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise, and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:

the impacts of the novel coronavirus ("COVID-19") pandemic and measures intended to prevent or mitigate its spread, and our ability to accurately assess and predict such impacts on our results of operations, financial condition, acquisition and disposition activities, and growth opportunities;


▪	our ability to commence or continue construction and development projects on the timeframes and terms currently anticipated;


▪	our ability to access funding under government programs designed to provide financial relief for U.S. businesses in light of the COVID-19 pandemic;

adverse economic or real estate developments, either nationally or in the markets in which our properties are ~~located;~~

~~our failure to develop~~located, including as a result of the ~~properties in our development pipeline successfully, on the anticipated timeline, or at the anticipated costs;~~ COVID-19 pandemic;

our failure to generate sufficient cash flows to service our outstanding indebtedness;

defaults on, early terminations of, or non-renewal of leases by tenants, including significant tenants;

bankruptcy or insolvency of a significant tenant or a substantial number of smaller tenants;

the inability of one or more mezzanine loan borrowers to repay mezzanine loans in accordance with their contractual terms;

difficulties in identifying or completing development, acquisition, or disposition opportunities;

our failure to successfully operate developed and acquired properties;

our failure to generate income in our general contracting and real estate services segment in amounts that we anticipate;

fluctuations in interest rates and increased operating costs;

our failure to obtain necessary outside financing on favorable terms or at all;

our inability to extend the maturity of or refinance existing debt or comply with the financial covenants in the agreements that govern our existing debt;

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financial market fluctuations;

risks that affect the general retail environment or the market for office properties or multifamily units;

the competitive environment in which we operate;

decreased rental rates or increased vacancy rates;

conflicts of interests with our officers and directors;

lack or insufficient amounts of insurance;

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environmental uncertainties and risks related to adverse weather conditions and natural disasters;

other factors affecting the real estate industry generally;

our failure to maintain our qualification as a real estate investment trust ~~(“REIT”~~("REIT") for U.S. federal income tax purposes;

limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our qualification as a REIT for U.S. federal income tax purposes; ~~and~~

changes in governmental regulations or interpretations thereof, such as real estate and zoning laws and increases in real property tax rates and taxation of ~~REITs.~~REITs; and

potential negative impacts from the recent changes to the U.S. tax laws.

While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events, or other changes after the date of this Quarterly Report on Form 10-Q, except as required by applicable law. We caution investors not to place undue reliance on these forward-looking statements and urge investors to carefully review the disclosures we make concerning risks and uncertainties in the sections entitled ~~“Risk Factors”~~"Risk Factors" and ~~“Management’s~~"Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations”~~Operations" in our most recent Annual Report on Form 10-K, as well as risks, uncertainties and other factors discussed in this Quarterly Report on Form 10-Q and identified in other documents that we file from time to time with the ~~U.S.~~ Securities and Exchange Commission (the ~~“SEC”~~"SEC").

Business Description

We are 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. As of ~~September 30, 2017,~~March 31, 2020, our operating property 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	%
Alexander Pointe	Retail	Salisbury, North Carolina	100	%
Apex Entertainment	Retail	Virginia Beach, Virginia*	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 ⁽¹⁾	Retail	Newport News, Virginia	65	%
Columbus Village	Retail	Virginia Beach, Virginia*	100	%
Columbus Village II	Retail	Virginia Beach, Virginia*	100	%

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Property	Segment	Location	Ownership Interest
Commerce Street Retail	Retail	Virginia Beach, Virginia*	100	%
Courthouse 7-Eleven	Retail	Virginia Beach, Virginia	~~100~~	%
~~Dick's at Town Center~~	~~Retail~~	Virginia Beach, Virginia*	100	%
Dimmock Square	Retail	Colonial Heights, Virginia	100	%
Fountain Plaza Retail	Retail	Virginia Beach, Virginia*	100	%
Gainsborough Square	Retail	Chesapeake, Virginia	100	%
Greentree Shopping Center	Retail	Chesapeake, Virginia	100	%
Hanbury Village	Retail	Chesapeake, Virginia	100	%
Harper Hill Commons	Retail	Winston-Salem, North Carolina	100	%
Harrisonburg Regal	Retail	Harrisonburg, Virginia	100	%
Indian Lakes Crossing	Retail	Virginia Beach, Virginia	100	%
Lexington Square	Retail	Lexington, South Carolina	100	%
~~Lightfoot Marketplace~~Market at Mill Creek ⁽²⁾⁽¹⁾	Retail	~~Williamsburg, Virginia~~Mount Pleasant, South Carolina	70	%

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~~Property~~Marketplace at Hilltop	~~Segment~~Retail	~~Location~~Virginia Beach, Virginia	~~Ownership Interest~~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	%
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	%
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	%
Southgate Square	Retail	Colonial Heights, Virginia	100	%
Southshore Shops	Retail	Chesterfield, Virginia	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	%
1405 Point	Multifamily	Baltimore, Maryland	79	%
Encore Apartments	Multifamily	Virginia Beach, Virginia*	100	%
Greenside Apartments	Multifamily	Charlotte, North Carolina	100	%
Hoffler Place	Multifamily	Charleston, South Carolina	93	%
Johns Hopkins Village⁽³⁾	Multifamily	Baltimore, Maryland	80100	%
Liberty Apartments	Multifamily	Newport News, Virginia	100	%
~~Smith's~~Premier Apartments	Multifamily	Virginia Beach, Virginia*	100	%
Smith’s Landing	Multifamily	Blacksburg, Virginia	100	%
The Cosmopolitan	Multifamily	Virginia Beach, Virginia*	100	%


~~(1)~~	~~We are entitled to a preferred return of 8% on our investment in Brooks Crossing.~~


~~(2)~~	~~We are entitled to a preferred return of 9% on our investment in Lightfoot Marketplace.~~


~~(3)~~	~~See discussion of redeemable noncontrolling interest in Note 9 for additional information. We are entitled to a preferred return of 9% on our investment in Johns Hopkins Village.~~

*Located in the Town Center of Virginia Beach

(1) We are entitled to a preferred return on our investment in this property.

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As of ~~September 30, 2017,~~March 31, 2020, the following properties that we consolidate for financial reporting purposes were either under development or ~~construction:~~not yet stabilized:



Property	Segment		Location		Ownership Interest
~~Town Center Phase VI~~Wills Wharf	~~Mixed-use~~Office		Baltimore, Maryland		100	%
Premier Retail	Retail		Virginia Beach, Virginia*		100	%
~~Harding~~Summit Place⁽¹⁾	~~Multifamily~~		~~Charlotte, North Carolina~~	80	%
~~595 King Street~~		Multifamily		Charleston, South Carolina	~~92.5~~	%
~~530 Meeting Street~~		~~Multifamily~~		~~Charleston, South Carolina~~	90	%

~~(1) We are entitled to a preferred return of 9% on a portion of our investment in Harding Place.~~

*Located in the Town Center of Virginia Beach

Please see Note 5 to our condensed consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q for information related to our investment in Durham City Center II, LLC, which is an unconsolidated subsidiary that we account for under the equity method of accounting.

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Acquisitions ~~and Dispositions~~

On January ~~4, 2017,~~10, 2020, we ~~acquired undeveloped~~purchased land in Charleston, South Carolina for a contract price of $7.1 million plus capitalized acquisition costs of $0.2 million. We intend to use the land for the future development of the 595 King Street property.

~~On January 20, 2017, we 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, we acquired undeveloped land in Charleston, South Carolina for a contract price of $6.7 million plus capitalized acquisition costs of $0.1 million. We intend to use the land for the future development of the 530 Meeting Street property.

On July 13, 2017, we completed the sale of two office properties leased by the Commonwealth of Virginia in Chesapeake, Virginia and Virginia Beach, Virginia. Aggregate net proceeds from the dispositions of the properties after transaction costs and repayment of the loan associated with the Chesapeake, Virginia property were $7.9 million, and the aggregate gain on the dispositions was $4.2 million.

~~On July 25, 2017, we acquired the outparcel phase of Wendover Village in Greensboro,~~Charlotte, North Carolina for a ~~contract~~purchase price of ~~$14.3~~$6.3 million ~~plus capitalized acquisition costs~~for the development of ~~$0.1 million.~~a mixed-use property.

On ~~August 10, 2017,~~March 20, 2020, we purchased land in Belmont, North Carolina for a purchase price of $2.3 million for the development of a mixed-use property.

Impact of COVID-19 on our Business

Overview

In light of the changing nature of the COVID-19 pandemic and uncertainty regarding the duration, severity, and possible resurgence of the pandemic in future periods, the impact that the COVID-19 pandemic will have on our business is currently unknown and unquantifiable. While the full extent of the COVID-19 pandemic’s impact on the U.S. economy and the U.S. real estate industry remains to be seen, the pandemic has already presented significant challenges for us and many of our tenants. In the near-term, we and many of our tenants are focusing on implementing contingency plans to manage business disruptions caused by the pandemic and related actions intended to mitigate its spread. In the long-term, REITs and other real estate companies might need to re-assess and consider modifying their operating models, underwriting criteria, and liquidity position to mitigate the impacts of future economic downturns, including as a result of the potential resurgence of the COVID-19 pandemic in future months, the timing, severity, and duration of which cannot be predicted.

We anticipate the global health crisis caused by COVID-19 and the related actions intended to mitigate its spread will continue to adversely affect business activity, particularly relating to our retail tenants, across the markets in which we operate. We have observed the impact of COVID-19 manifest in the form of business closures or significantly limited operations in our retail portfolio, with the exception of tenants operating in certain "essential" businesses, which has resulted, and may in the future result in, a decline in on-time rental payments, increased requests from tenants for temporary rental relief and potentially permanent closure of certain businesses. We expect these conditions to continue in varying duration and severity until such time when the COVID-19 pandemic is effectively contained. When COVID-19 is contained, depending on the rate and effectiveness of the containment efforts deployed by various national, state, and local governments, we anticipate a rebound in economic activity, although we are unable to predict the nature, timing, and sustainability of an economic recovery.

In an effort to protect the health and safety of our employees, we took proactive, aggressive actions to adopt social distancing policies at our offices, properties, and construction jobsites, including: transitioning our office employees to a remote work environment, which was greatly assisted by recent enhancements to our IT systems; limiting the number of employees attending in-person meetings; implementing a company-wide ban on most travel; and ensuring all construction jobsites continue to comply with state and local social distancing and other health and safety protocols implemented by the Company.

To further strengthen our financial flexibility and efficiently manage through the uncertainty caused by COVID-19, our Board of Directors suspended the payment of quarterly cash dividends on shares of our common stock and Class A common units. In addition, Lou Haddad, our President and Chief Executive Officer, voluntarily elected to reduce his base compensation by 25%, and each of our directors, including Dan Hoffler and Russ Kirk, voluntarily elected to reduce their cash retainers and annual equity awards by 25%, in each case effective as of May 1, 2020.

From an operational perspective, we have remained in regular communication with our tenants, property managers, and vendors, and, where appropriate, have provided guidance relating to the availability of government relief programs that could support our tenants’ businesses. In response to the market and industry trends, we also have pursued, and expect to

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continue to pursue, cost-saving initiatives to align our overall cost structure, including proactively deferring previously announced development activity at several of our projects, postponing all acquisition activity for the foreseeable future, slowing down redevelopment activity at The Cosmopolitan, and suspending non-essential capital expenditures. Although we believe these measures and other measures we may implement in the future will help mitigate the financial impacts of the pandemic on our business, there can be no assurances that we will accurately forecast the impact of adverse economic conditions on our business or that we will effectively align our cost structure, capital investments, and other expenditures with our revenue and spending levels in the future.

To evaluate market trends affecting public REITs across asset classes and to assess our response to COVID-19 relative to our peers, we have been monitoring information that has been released by public REITs, summary data released by the National Association of Real Estate Investment Trusts ("Nareit") and other publicly available sources, and information obtained during our regular discussions with tenants. While we view information gathered from publicly available sources as helpful in assessing broader trends affecting the commercial real estate industry, we can provide no assurances that the estimates and assumptions used in preparing this third-party information are applicable to our business or ultimately will prove to be accurate. In addition, our asset management team, together with the rest of senior management, has dedicated significant resources to monitoring detailed portfolio performance on a real-time basis, including rent collections, requests for rent relief and uncollected payments, as well as negotiating rent deferments and other relief with certain of our tenants.

We will continue to actively monitor the implications of the COVID-19 pandemic on our and our tenants’ businesses and may take further actions to alter our business practices if we determine that such changes are in the best interests of our employees, tenants, residents, stockholders, and third-party construction customers, or as required by federal, state, or local authorities. It is not clear what the potential effects of such alterations or modifications, if any, may have on our business, including the effects on our tenants and residents and the corresponding impact on our results of operations and financial condition for the remainder of fiscal 2020 and thereafter.

The Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, was enacted on March 27, 2020 in the United States. We continue to assess the potential impacts of this legislation, including our eligibility and our tenants for funding under programs designed to provide financial assistance to U.S. businesses. We have availed ourselves of the option to defer payment of the employer share of Social Security payroll taxes that would otherwise have been owed from the date of enactment of the CARES Act through December 31, 2020.

We believe the diversification of our business across multiple asset classes (i.e., office, retail and multifamily), together with our third-party construction business, will help to mitigate the impact of the pandemic on our business to a greater extent than if our business were concentrated in a single asset class. However, as discussed in greater detail below, we expect the impact of the pandemic to continue to have a particularly adverse effect on many of our retail tenants, which will continue to adversely affect our results of operations even if the performance of our office and multifamily assets and our construction business remain close to historical levels. Furthermore, if the impacts of the pandemic continue for an extended period of time, we expect that certain office tenants and multifamily residents will experience greater financial distress, which could result in late payments, requests for rental relief, business closures, decreases in occupancy, reductions in rent, or increases in rent concessions or other accommodations, as applicable.

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Operating Property Portfolio

As of April 24, 2020, we had collected approximately 78% of expected rents under in-place leases for the month of April 2020. The chart below sets forth certain information regarding summary of overall April rent collections ($ in thousands):


(1)	WeWork at One City Center excluded. A portion of March rent was refunded and April rent was not charged due to a loss of elevator service resulting from a fire in an apartment over the office space. In May 2020, we received business interruption insurance proceeds of $456,000 to cover rent for the period from March 15, 2020 to May 31, 2020.


(2)	Immaterial $30,000 of uncollectable multifamily rent excluded.

Office Portfolio

The chart below sets forth certain information regarding the April rent collections of our office portfolio as of April 24, 2020. Data reported below relates to April rent charges and collections for office tenants through April 24, 2020, and does not correspond to the reporting segment classification of the properties as a whole ($ in thousands):


(1)	WeWork at One City Center excluded. A portion of March rent was refunded and April rent was not charged due to a loss of elevator service resulting from a fire in an apartment over the office space. In May 2020, we received business interruption insurance proceeds of $456,000 to cover rent for the period from March 15, 2020 to May 31, 2020.

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Retail Portfolio

In an effort to contain COVID-19 or slow its spread, state and local governments have enacted various measures, including orders to close all businesses not deemed essential, isolate residents to their homes or places of residence, and practice social distancing when engaging in essential activities. These government-imposed measures, coupled with customers reducing their purchasing activity in light of health concerns or personal financial distress, have resulted in significant disruptions to retail businesses around the country, including in the markets in which we own retail assets.

The chart below sets forth certain information regarding the April rent collections of our retail portfolio as of April 24, 2020. Data reported relates to April rent charges and collections for retail tenants through April 24, 2020, and does not correspond to the reporting segment classification of the properties as a whole ($ in thousands):


(1)	As a percentage of April rent and recovery charges

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The chart below sets forth certain information regarding the April rent composition of our retail portfolio as of April 24, 2020. Data reported relates to April rent charges and collections for retail tenants through April 24, 2020 and does not correspond to the reporting segment classification of the properties as a whole.


(1)	As a percentage of April rent and recovery charges

Multifamily Portfolio

The chart below sets forth certain information regarding the April rent collection of our multifamily portfolio as of April 24, 2020. Data reported relates to April rent charges and collections for multifamily tenants through April 24, 2020, and does not correspond to the reporting segment classification of the properties as a whole ($ in thousands):

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Due to recent actions taken by state governments and limited working capacity for government courts and agencies, certain properties in our multifamily portfolio are subject to increased restrictions that limit our ability evict tenants or charge late fees. Details are as follows:


•	1405 Point: State restriction prohibits evictions of tenants effected by COVID-19. Evictions cannot be processed until the state of emergency is terminated and the catastrophic health emergency is rescinded.


•	Encore Apartments: State restriction applies due to limited working capacity of the courts. Eviction paperwork can be filed electronically but will not be processed until May 17, 2020 at the earliest.


•	Greenside Apartments: State restriction applies due to limited working capacity of the courts. Eviction paperwork can be filed electronically but will not be processed until June 1, 2020 at the earliest.


•	Hoffler Place: State restriction applies due to limited working capacity of the courts. Eviction paperwork can be filed electronically but will not be processed until May 15, 2020 at the earliest.


•	Johns Hopkins Village: State restriction prohibits evictions of tenants effected by COVID-19. Evictions cannot be processed until the state of emergency is terminated and the catastrophic health emergency is rescinded.

•

Liberty Apartments: CARES Act restrictions apply. We are unable to issue a notice to vacate or institute an eviction action based on non-payment of rent or to charge fees or penalties related to such nonpayment of rent during the 120-day moratorium ending on July 25, 2020. Following that date, the landlord cannot require a tenant to vacate until at least 30 days after the landlord has issued the tenant a notice to vacate.


•	Premier Apartments: State restriction applies due to limited working capacity of courts. Eviction paperwork can be filed electronically but will not be processed until May 17, 2020 at the earliest.

•

Smith's Landing: CARES Act restrictions apply. We are unable to issue a notice to vacate or institute an eviction action based on non-payment of rent or to charge fees or penalties related to such nonpayment of rent during the 120- day moratorium ending on July 25, 2020. Following that date, the landlord cannot require a tenant to vacate until at least 30 days after the landlord has issued the tenant a notice to vacate.

•

The Cosmopolitan: CARES Act restrictions apply. We are unable to issue a notice to vacate or institute an eviction action based on non-payment of rent or to charge fees or penalties related to such nonpayment of rent during the 120- day moratorium ending on July 25, 2020. Following that date, the landlord cannot require a tenant to vacate until at least 30 days after the landlord has issued the tenant a notice to vacate.

Construction and Development Business

As of the date of this quarterly report on Form 10-Q, all of our construction jobsites remain open and operational, and we intend to continue third-party construction work unless government-imposed restrictions are implemented that prohibit or significantly restrict the continuation of construction work. As of March 31, 2020, we had a third-party construction backlog of approximately $235.6 million.

With respect to our development pipeline, we proactively deferred the Chronicle Mill, Southern Post, and Ten Tryon development projects in order to provide additional balance sheet flexibility until economic conditions stabilize, each of which had previously been scheduled to commence during the second quarter of 2020. The Summit Place and Wills Wharf developments remain on schedule for delivery in 2020 as previously disclosed with sufficient construction loan commitments to fund the remaining estimated costs to complete; however, the disruption in global supply chains and our desire to prioritize the health and safety of our workforce may cause delays.

Mezzanine Lending Program

We continue to monitor the development projects securing our five mezzanine loans:

Delray Plaza: We had previously planned to purchase this project from the developer but have opted instead to allow the developer to market and sell the project to a third party, resulting in an extended hold period for this loan. Effective April 1, 2020, we have stopped recognizing interest on this loan for accounting purposes since collection of additional interest accruals is less certain. Interest will continue to accrue on this loan and will be due and payable by the developer upon a capital event.

The Residences at Annapolis Junction: The developer of this project continues to lease up the project and market it to potential buyers. These activities have taken longer than originally anticipated and include the recent appointment of a new property management company. Effective April 1, 2020, we have stopped recognizing interest on this loan for accounting purposes since collection of additional interest accruals is less certain. Interest will continue to accrue on this loan and will be due and payable by the developer upon a capital event. The developer plans to sell the project once it is stabilized.

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Nexton Square: We plan to exercise our option to purchase Nexton Square once the project is stabilized. Development activities are nearing completion, and this purchase option still appears to be economically advantageous to us.

Solis Apartments at Interlock: This project is estimated to be completed during the second quarter of 2021. Current estimates of future operating results and projected sales proceeds from this project continue to support the full collection of our principal and interest upon sale of ~~a land outparcel~~the project.

Interlock Commercial: This project is estimated to be completed during the second quarter of 2021. In May 2020, we modified the mezzanine loan to allow for an additional $7.0 million of loan funding for purposes of building townhome units as an additional phase of this development project. Current estimates of future operating results and projected sales proceeds from this project continue to support the full collection of our principal and interest upon sale of the project.

With the exception of the additional commitment for the Interlock Commercial project, there are no remaining funding commitments for the outstanding mezzanine loans. We continue to monitor leasing activity at ~~Sandbridge Commons. Net proceeds after transaction costs~~these projects, as applicable, and ~~a partial loan paydown were $0.3 million. The gain~~will monitor the impact of COVID-19 on ~~the disposition was $0.5 million.~~leasing activity and development activity at each of these projects.

~~Third~~First Quarter ~~2017~~2020 and Recent Highlights

The following highlights our results of operations and significant transactions for the three months ended ~~September 30, 2017:~~March 31, 2020 and other recent developments:

•Net income attributable to common stockholders and OP Unit holders of ~~$10.5~~$8.2 million, or ~~$0.17~~$0.11 per diluted share, compared to ~~$7.9~~$6.5 million, or ~~$0.15~~$0.10 per diluted share, for the three months ended ~~September 30, 2016.~~ March 31, 2019.

•

Funds from operations attributable to common stockholders and OP Unit holders ("FFO") of ~~$15.5~~$22.3 million, or ~~$0.25~~$0.29 per diluted share, compared to ~~$13.1~~$16.6 million, or $0.25 per diluted share, for the three months ended ~~September 30, 2016.~~March 31, 2019. See ~~“Non-GAAP~~"Non-GAAP Financial Measures.” "

•

Normalized funds from operations (“available to common stockholders and OP Unit holders ("Normalized ~~FFO”~~FFO") of ~~$15.5~~$24.7 million, or ~~$0.25~~$0.32 per diluted share, compared to ~~$13.2~~$18.5 million, or ~~$0.26~~$0.27 per diluted share, for the three months ended ~~September 30, 2016.~~March 31, 2019. See ~~“Non-GAAP~~"Non-GAAP Financial Measures.”"

•

Core operating property portfolio occupancy at ~~94.7%~~95.6% as of ~~September 30, 2017~~March 31, 2020 compared to ~~94.2%~~96.5% as of ~~June 30, 2017.~~December 31, 2019.

•~~Property segment net operating income (“NOI”) of $17.6 million compared to $17.1 million for the three months ended September 30, 2016:~~

~~Office NOI of $2.8 million compared to $3.2 million~~

~~Retail NOI of $11.6 million compared to $10.7 million~~

~~Multifamily NOI of $3.1 million compared to $3.1 million~~

•~~Same store NOI of $13.8 million compared to $14.5 million for the three months ended September 30, 2016:~~

~~Office same store NOI of $1.9 million compared to $2.2 million~~

~~Retail same store NOI of $9.4 million compared to $9.6 million~~

~~Multifamily same store NOI of $2.4 million compared to $2.7 million~~

•~~General contracting and real estate services segment gross profit of $1.8 million compared to $1.3 million for the three months ended September 30, 2016.~~

•~~Third party~~Third-party construction backlog ~~of $76.7 million~~ as of ~~September 30, 2017.~~ March 31, 2020 was $235.6 million.

•~~Declared cash dividends~~

Reaffirmed our commitment to best-in-class corporate governance practices by waiving the option to classify our Board without stockholder approval under Maryland law, commonly referred to as MUTA.

Established a Sustainability Committee to support the Company's ongoing commitment to environmental, workplace health and safety, corporate social responsibility, corporate governance, and other sustainability matters. The Sustainability Committee's 2019 Report can be accessed through the Company's website, ArmadaHoffler.com/Sustainability.

Adopted several new corporate governance policies related to: environmental matters, human rights, vendor code of ~~$0.19 per share~~business conduct, clawback of incentive compensation, and ~~Class A unit.~~anti-hedging.

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Segment Results of Operations

As of ~~September 30, 2017,~~March 31, 2020, we operated our business in four segments: (i) office real estate, (ii) retail real estate, (iii) multifamily residential real estate, and (iv) general contracting and real estate services, which are conducted through our taxable REIT subsidiaries ~~(“TRS”~~("TRS"). Net operating income (segment revenues minus segment expenses)~~, or “NOI”,~~ ("NOI") is the measure used by management to assess segment performance and allocate our resources among our segments. NOI is not a measure of operating income or cash flows from operating activities as measured by accounting principles generally accepted in the United States ~~(“GAAP”~~("GAAP") and is not indicative of cash available to fund cash needs. As a result, NOI should not be considered an alternative to cash flows as a measure of liquidity. Not all companies calculate NOI in the same manner. We consider NOI to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the core

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operations of our real estate and construction businesses. See Note 3 to our condensed consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q for a reconciliation of NOI to net income.

We define same store properties as those properties that we owned and operated and that were stabilized for the entirety of both periods presented. ~~Same store properties exclude those that were in lease-up during either of the periods presented.~~ We generally consider a property to be ~~in lease-up until~~stabilized upon the earlier of: (i) the quarter after the property reaches 80% occupancy or (ii) the thirteenth quarter after the property receives its certificate of occupancy. Additionally, any property that is fully or partially taken out of service for the purpose of redevelopment is no longer considered stabilized until the redevelopment activities are complete, the asset is placed back into service, and the occupancy criterion above is again met. A property may also be fully or partially taken out of service as a result of a partial disposition, depending on the significance of the portion of the property disposed. Finally, any property classified as held for sale is taken out of service for the purpose of computing same store operating results.

~~Beginning with~~Office Segment Data

Office rental revenues, property expenses, and NOI for the three months ended March 31, ~~2017, our calculation of core occupancy included,~~2020 and ~~in future periods will include, the square footage from ground leases where we are the lessor. We did not retrospectively apply this new calculation methodology to prior periods. If we~~2019 were ~~to exclude these ground leases in the calculation of core occupancy, our core occupancy~~ as ~~of September 30, 2017 would have been 94.3%.~~

~~Office Segment Data~~follows (in thousands):


	Three Months Ended September 30,							Nine Months Ended September 30,
	2017		2016		Change			2017		2016		Change			Three Months Ended March 31,
	(unaudited, $ in thousands)														2020		2019		Change
Rental revenues	$	4,762	$	5,277	$	(515	)	$	14,427	$	16,097	$	(1,670	)	$	10,192	$	5,556	$	4,636
Property expenses	1,928		2,038		(110		)	5,519		5,857		(338		)	3,692		2,012		1,680
Segment NOI	$	2,834	$	3,239	$	(405	)	$	8,908	$	10,240	$	(1,332	)	$	6,500	$	3,544	$	2,956

Office segment NOI for the three ~~and nine~~ months ended ~~September 30, 2017 decreased $0.4 million and $1.3 million, respectively,~~March 31, 2020 increased 83.4%, compared to the ~~corresponding periods~~three months ended March 31, 2019. The increase relates primarily to the acquisition of One City Center in ~~2016. The decreases are due to decreased occupancy~~March 2019, the commencement of operations at ~~Armada Hoffler Tower and property dispositions. The Richmond Tower office building, which was sold~~Brooks Crossing Office in ~~the first quarter of 2016,~~April 2019, and the ~~Oyster Point office building, which was sold~~acquisition of Thames Street Wharf in the third quarter of 2016, contributed $0.2 million and $0.9 million, respectively, in office segment NOI for the three and nine months ended September 30, 2016. The Commonwealth of Virginia-Chesapeake and Commonwealth of Virginia-Virginia Beach office buildings, which contributed an aggregate of $0.2 million and $0.8 million in office segment NOI for the three and nine months ended September 30, 2016, respectively, were sold in the third quarter of 2017.June 2019.

Office Same Store Results

Office same store results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and 2019 exclude ~~new real estate development – 4525 Main~~One City Center, Brooks Crossing Office, and Thames Street – as well as the Richmond Tower and Oyster Point office buildings, which we sold in the first quarter of 2016 and the third quarter of 2016, respectively, and the Commonwealth of Virginia-Chesapeake and Commonwealth of Virginia-Virginia Beach office buildings, which were sold in the third quarter of 2017.Wharf.

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Office same store rental revenues, property expenses, and NOI for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 were as ~~follows:~~follows (in thousands):


	Three Months Ended September 30,							Nine Months Ended September 30,
	2017		2016		Change			2017		2016		Change			Three Months Ended March 31,
	(unaudited, $ in thousands)														2020		2019		Change
Rental revenues	$	3,378	$	3,595	$	(217	)	$	10,258	$	10,805	$	(547	)	$	5,303	$	5,326	$	(23	)
Property expenses	1,451		1,407		44			4,085		3,986		99			1,956		1,859		97
Same Store NOI	$	1,927	$	2,188	$	(261	)	$	6,173	$	6,819	$	(646	)	$	3,347	$	3,467	$	(120	)
Non-Same Store NOI	907		1,051		(144		)	2,735		3,421		(686		)	3,153		77		3,076
Segment NOI	$	2,834	$	3,239	$	(405	)	$	8,908	$	10,240	$	(1,332	)	$	6,500	$	3,544	$	2,956

Office same store NOI for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 decreased ~~11.9% and 9.5%~~3.5%, ~~respectively,~~ compared to ~~the corresponding periods in 2016 due to the expansion and relocation of a tenant from One Columbus to 4525 Main Street during~~ the three months ended ~~December~~March 31, ~~2016 and~~2019. The decrease relates primarily to the ~~expansion and~~ relocation of ~~another~~the Company’s construction division to space within Armada Hoffler Tower which became vacant after a tenant chose to downsize. The Company’s construction division previously occupied space at an adjacent property which is classified as retail for segment reporting purposes. Rental revenue from ~~Two Columbus to 4525 Main Street during~~the Company’s construction division is eliminated for consolidation purposes. This decrease was partially offset by increased occupancy across the rest of the same store office portfolio.

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Retail Segment Data

Retail rental revenues, property expenses, and NOI for the three months ended ~~September 30, 2017. For the three~~March 31, 2020 and nine months ended September 30, 2017, the NOI from these tenants that relocated to 4525 Main Street are included in Non-Same Store NOI. In addition, decreased occupancy at the Armada Hoffler Tower contributed to the period-over-period decreases in office same store NOI.

~~Retail Segment Data~~

2019 were as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2017		2016		Change		2017		2016		Change		Three Months Ended March 31,
	(unaudited, $ in thousands)												2020		2019		Change
Rental revenues	$	15,880	$	14,340	$	1,540	$	47,089	$	41,485	$	5,604	$	20,411	$	17,257	$	3,154
Property expenses	4,287		3,603		684		12,255		10,773		1,482		5,186		4,411		775
Segment NOI	$	11,593	$	10,737	$	856	$	34,834	$	30,712	$	4,122	$	15,225	$	12,846	$	2,379

Retail segment NOI for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 increased ~~$0.9 million and $4.1 million, respectively,~~18.5%, compared to the ~~corresponding periods in 2016.~~three months ended March 31, 2019. The ~~increases are~~increase was primarily a result of the ~~acquisitions~~commencement of ~~Southgate Square, Southshore Shops, Columbus Village II, Renaissance Square, the outparcel phase of Wendover Village,~~operations at Market at Mill Creek in April 2019 and the ~~11-property retail portfolio, together with~~acquisition of Red Mill Commons and Marketplace at Hilltop in May 2019. These increases were partially offset by the ~~completion~~disposal of Lightfooot Marketplace in August 2019 and the loss of Dick’s Sporting Goods at Town Center. As previously disclosed, Apex Entertainment will take the entire space previously occupied by Dick’s Sporting Goods after the redevelopment and buildout of the ~~Lightfoot Marketplace and Brooks Crossing developments.~~facility is completed, which is expected to occur by the end of 2020.

Retail Same Store Results

Retail same store results for the three months ended ~~September 30, 2017~~March 31, 2020 and 2019 exclude ~~the remaining nine properties of the 11-property retail portfolio, as well as Southgate Square, Lightfoot Marketplace, Southshore Shops,~~Apex Entertainment (formerly Dick’s at Town Center due to redevelopment), Brooks Crossing Retail, Premier Retail, Columbus Village ~~II, Renaissance Square, and~~(due to redevelopment), the additional outparcel phase of Wendover ~~Village.~~Village, Market at Mill Creek, Red Mill Commons, Marketplace at Hilltop (acquired in May 2019), Waynesboro Commons (disposed in April 2019), and Lightfoot Marketplace (disposed in August 2019).

Retail same store rental revenues, property expenses, and NOI for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 were as ~~follows:~~follows (in thousands):


	Three Months Ended September 30,							Nine Months Ended September 30,
	2017		2016		Change			2017		2016		Change		Three Months Ended March 31,
	(unaudited, $ in thousands)													2020		2019		Change
Rental revenues	$	13,166	$	12,989	$	177		$	28,297	$	27,846	$	451	$	15,909	$	15,587	$	322
Property expenses	3,721		3,359		362			8,107		7,717		390		3,853		3,796		57
Same Store NOI	$	9,445	$	9,630	$	(185	)	$	20,190	$	20,129	$	61	$	12,056	$	11,791	$	265
Non-Same Store NOI	2,148		1,107		1,041			14,644		10,583		4,061		3,169		1,055		2,114
Segment NOI	$	11,593	$	10,737	$	856		$	34,834	$	30,712	$	4,122	$	15,225	$	12,846	$	2,379

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Retail same store NOI ~~decreased 1.9% and increased 0.3%, respectively, for the three and nine months ended September 30, 2017 compared to the corresponding periods in 2016. The decrease~~ for the three months ended ~~September 30, 2017~~March 31, 2020 increased 2.2%, compared to the three months ended March 31, 2019. The increase was primarily the result of ~~higher administrative expense, maintenance~~increased occupancy related to tenants that opened during 2019 and ~~repair expense, and bad debt expense. The increase for~~ the ~~nine months ended September 30, 2017 was the result~~first quarter of ~~higher occupancy across the same store portfolio.~~2020.

Multifamily Segment Data

Multifamily rental revenues, property expenses, and NOI for the three months ended March 31, 2020 and 2019 were as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2017		2016		Change		2017		2016		Change		Three Months Ended March 31,
	(unaudited, $ in thousands)												2020		2019		Change
Rental revenues	$	6,454	$	5,688	$	766	$	19,567	$	15,257	$	4,310	$	11,686	$	8,096	$	3,590
Property expenses	3,308		2,549		759		9,092		6,691		2,401		4,830		3,430		1,400
Segment NOI	$	3,146	$	3,139	$	7	$	10,475	$	8,566	$	1,909	$	6,856	$	4,666	$	2,190

Multifamily segment NOI ~~did not change materially~~ for the three months ended ~~September 30, 2017 and~~March 31, 2020 increased ~~$1.9 million for the nine months ended September 30, 2017~~46.9%, compared to the ~~corresponding periods in 2016.~~three months ended March 31, 2019. The increase ~~for the nine months ended September 30, 2017~~ was primarily a result of ~~activity for~~higher occupancy at Greenside Apartments and Premier Apartments, both of which were in lease-up in Q1 2019, the acquisition of 1405 Point in April 2019, the commencement of

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operations at Hoffler Place in August 2019, higher termination fees at Johns Hopkins Village, ~~which was placed into service in the third quarter of 2016.~~and higher rental rates at Smith’s Landing.

Multifamily Same Store Results

Multifamily same store results for the three months ended March 31, 2020 and 2019 exclude ~~new real estate development – specifically Johns Hopkins Village, which was placed into service in the third quarter of 2016.~~Greenside Apartments, Premier Apartments, 1405 Point, Hoffler Place, and The Cosmopolitan (due to redevelopment).

Multifamily same store rental revenues, property expenses and NOI for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 were as ~~follows:~~ follows (in thousands):


	Three Months Ended September 30,							Nine Months Ended September 30,
	2017		2016		Change			2017		2016		Change			Three Months Ended March 31,
	(unaudited, $ in thousands)														2020		2019		Change
Rental revenues	$	4,793	$	4,872	$	(79	)	$	14,230	$	14,354	$	(124	)	$	5,620	$	5,449	$	171
Property expenses	2,356		2,206		150			6,595		6,342		253			2,093		2,086		7
Same Store NOI	$	2,437	$	2,666	$	(229	)	$	7,635	$	8,012	$	(377	)	$	3,527	$	3,363	$	164
Non-Same Store NOI	709		473		236			2,840		554		2,286			3,329		1,303		2,026
Segment NOI	$	3,146	$	3,139	$	7		$	10,475	$	8,566	$	1,909		$	6,856	$	4,666	$	2,190

Multifamily same store NOI for the three ~~and nine~~ months ended ~~September 30, 2017 decreased 8.6% and 4.7%~~March 31, 2020 increased 4.9%, ~~respectively,~~ compared to the ~~corresponding periods in 2016.~~three months ended March 31, 2019. The ~~decreases are~~increase was primarily ~~due to decreased occupancy~~the result of higher termination fees at ~~The Cosmopolitan attributed to construction activities~~Johns Hopkins Village and higher rental rates at ~~an adjacent property and the loss of retail tenants at that property.~~Smith’s Landing.

General Contracting and Real Estate Services Segment Data

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 Change 2017 2016 Change
(unaudited, $ in thousands)
Segment revenues $ 41,201
$ 38,552
$ 2,649
$ 161,391
$ 108,555
$ 52,836
Segment expenses 39,377
37,274
2,103
154,588
104,336
50,252
Segment gross profit $ 1,824
$ 1,278
$ 546
$ 6,803
$ 4,219
$ 2,584
Operating margin 4.4 % 3.3 % 1.2 % 4.2 % 3.9 % 0.3 %

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~~Segment~~General contracting and real estate services revenues, expenses, and gross profit for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and 2019 were as follows (in thousands):



	Three Months Ended March 31,
	2020			2019			Change
Segment revenues	$	47,268		$	17,036		$	30,232
Segment expenses	45,550			16,286			29,264
Segment gross profit	$	1,718		$	750		$	968
Operating margin	3.6		%	4.4		%	(0.8		)%

General contracting and real estate services segment profit for the three months ended March 31, 2020 increased ~~$0.5 million and $2.6 million, respectively,~~129.1%, compared to the ~~corresponding periods in 2016 because of several new large projects started subsequent~~three months ended March 31, 2019. The increase was primarily attributable to the ~~first quarter~~timing of ~~2016 as well as higher margins in this segment.~~commencement of new projects.

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The changes in third party construction backlog for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 were as ~~follows:~~follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			Three Months Ended March 31,
	(unaudited, $ in thousands)												2020			2019
Beginning backlog	$	116,657		$	252,318		$	217,718		$	83,433		$	242,622		$	165,863
New contracts/change orders	1,251			32,498			20,211			271,288			40,440			12,019
Work performed	(41,165		)	(38,384		)	(161,186		)	(108,289		)	(47,420		)	(17,011		)
Ending backlog	$	76,743		$	246,432		$	76,743		$	246,432		$	235,642		$	160,871

As of ~~September 30, 2017,~~March 31, 2020, we had ~~$26.2~~$65.3 million in backlog on the ~~City Center~~27^th Street project, ~~$19.0~~$40.3 million in backlog on the ~~Point Street~~Solis Apartments project, ~~and $17.9~~$33.0 million in backlog on the ~~Dinwiddie Municipal Complex~~Interlock Commercial project, $34.5 million in backlog on the Holly Springs Apartments project, and $19.9 million in backlog on Boulders Lakeside Apartments project.

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Consolidated Results of Operations

The following table summarizes the results of operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016:~~2019:


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended March 31,
	2017			2016			Change			2017			2016			Change			2020			2019			Change
	(unaudited, $ in thousands)																		(unaudited, in thousands)
Revenues
Rental revenues	$	27,096		$	25,305		$	1,791		$	81,083		$	72,839		$	8,244		$	42,289		$	30,909		$	11,380
General contracting and real estate services revenues	41,201			38,552			2,649			161,391			108,555			52,836			47,268			17,036			30,232
Total revenues	68,297			63,857			4,440			242,474			181,394			61,080			89,557			47,945			41,612

Expenses
Rental expenses	6,830			5,834			996			19,069			16,234			2,835			9,375			6,725			2,650
Real estate taxes	2,693			2,356			337			7,797			7,087			710			4,333			3,128			1,205
General contracting and real estate services expenses	39,377			37,274			2,103			154,588			104,336			50,252			45,550			16,286			29,264
Depreciation and amortization	9,239			8,885			354			28,018			25,636			2,382			14,279			9,904			4,375
Amortization of right-of-use assets - finance leases																			147			—			147
General and administrative expenses	2,098			2,156			(58		)	7,762			6,864			898			3,793			3,401			392
Acquisition, development and other pursuit costs	61			345			(284		)	477			1,486			(1,009		)	27			400			(373		)
Impairment charges	19			149			(130		)	50			184			(134		)	158			—			158
Total expenses	60,317			56,999			3,318			217,761			161,827			55,934			77,662			39,844			37,818
Operating income	7,980			6,858			1,122			24,713			19,567			5,146			11,895			8,101			3,794
Interest income	1,910			1,024			886			4,966			1,928			3,038			7,226			5,319			1,907
Interest expense	(4,253		)	(4,124		)	(129		)	(13,282		)	(11,893		)	(1,389		)
Loss on extinguishment of debt	—			(82		)	82			—			(82		)	82
Gain on real estate dispositions	4,692			3,753			939			8,087			30,440			(22,353		)
Interest expense on indebtedness																			(7,959		)	(5,886		)	(2,073		)
Interest expense on finance leases																			(229		)	—			(229		)
Equity in income of unconsolidated real estate entities																			—			273			(273		)
Change in fair value of interest rate derivatives	87			498			(411		)	300			(2,264		)	2,564			(1,736		)	(1,463		)	(273		)
Other income	74			35			39			154			154			—
Provision for unrealized credit losses																			(377		)	—			(377		)
Other income (expense), net																			58			60			(2		)
Income before taxes	10,490			7,962			2,528			24,938			37,850			(12,912		)	8,878			6,404			2,474
Income tax provision	(29		)	(16		)	(13		)	(781		)	(240		)	(541		)
Income tax benefit																			257			110			147
Net income	$	10,461		$	7,946		$	2,515		$	24,157		$	37,610		$	(13,453	)	9,135			6,514			2,621
Net loss attributable to noncontrolling interests in investment entities																			92			—			92
Preferred stock dividends																			(1,067		)	—			(1,067		)
Net income attributable to common stockholders and OP Unit holders																			$	8,160		$	6,514		$	1,646

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Rental revenues for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 increased ~~$1.8~~$11.4 million ~~and $8.2 million, respectively,~~ compared to the ~~corresponding periods in 2016,~~three months ended March 31, 2019 as ~~follows:~~follows (in thousands):


	Three Months Ended September 30,							Nine Months Ended September 30,
	2017		2016		Change			2017		2016		Change			Three Months Ended March 31,
	(unaudited, $ in thousands)														2020		2019		Change
Office	$	4,762	$	5,277	$	(515	)	$	14,427	$	16,097	$	(1,670	)	$	10,192	$	5,556	$	4,636
Retail	15,880		14,340		1,540			47,089		41,485		5,604			20,411		17,257		3,154
Multifamily	6,454		5,688		766			19,567		15,257		4,310			11,686		8,096		3,590
	$	27,096	$	25,305	$	1,791		$	81,083	$	72,839	$	8,244		$	42,289	$	30,909	$	11,380

Office rental revenues for the three ~~and nine~~ months ended ~~September 30, 2017 decreased 9.8% and 10.4%, respectively,~~March 31, 2020 increased 83.4% compared to the ~~corresponding periods in 2016~~three months ended March 31, 2019 primarily as a result of ~~decreased occupancy~~the acquisition of One City Center in March 2019, the commencement of operations at ~~Armada Hoffler Tower~~Brooks Crossing Office in April 2019, and ~~as a result~~the acquisition of ~~the sales~~Thames Street Wharf in June 2019.

Table of the Richmond Tower, Oyster Point, Commonwealth of Virginia-Chesapeake and Commonwealth of Virginia-Virginia Beach office buildings, which contributed an aggregate of $0.4 million and $1.4 million in office rental revenues for the three and nine months ended September 30, 2016, respectively. Contents

Retail rental revenues for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 increased ~~10.7% and 13.5%, respectively,~~18.3% compared to the ~~corresponding periods in 2016~~three months ended March 31, 2019 primarily as a result of ~~property acquisitions. The acquisitions~~the commencement of ~~the remaining nine properties of the 11-property retail portfolio, Southgate Square, Southshore Shops, Columbus Village II, Renaissance Square,~~operations at Market at Mill Creek in April 2019 and the ~~outparcel phase~~acquisition of ~~Wendover Village, together with the completion of Brooks Crossing~~Red Mill Commons and ~~Lightfoot~~ Marketplace ~~developments, contributed an aggregate of $1.5 million and $4.7 million~~at Hilltop in ~~increased retail rental revenues for the three and nine months ended September 30, 2017, respectively, which was~~May 2019. These increases were partially offset by ~~dispositions.~~the disposal of Lightfoot Marketplace in August 2019 and the loss of Dick’s Sporting Goods at Town Center.

Multifamily rental revenues for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 increased ~~13.5% and 28.2%, respectively,~~44.3% compared to the ~~corresponding periods in 2016~~three months ended March 31, 2019 primarily as a result of higher occupancy at Greenside Apartments and Premier Apartments, both of which were in lease-up in first quarter of 2019, the ~~completion~~acquisition of 1405 Point in April 2019, the commencement of operations at Hoffler Place in August 2019, higher termination fees at Johns Hopkins Village, ~~development, which was placed into service in the third quarter of 2016,~~ and higher ~~occupancy~~rental rates at ~~Encore Apartments and Smith's~~Smith’s Landing.

General contracting and real estate services revenues for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 increased ~~6.9% and 48.7%, respectively,~~177.5% compared to the ~~corresponding periods in 2016 because of several new large projects started subsequent~~three months ended March 31, 2019, due to the ~~first quarter~~timing of ~~2016.~~commencement of new projects.

Rental expenses for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 increased ~~$1.0~~$2.7 million ~~and $2.8 million, respectively,~~ compared to the ~~corresponding periods in 2016,~~three months ended March 31, 2019 as ~~follows:~~follows (in thousands):


	Three Months Ended September 30,							Nine Months Ended September 30,
	2017		2016		Change			2017		2016		Change			Three Months Ended March 31,
	(unaudited, $ in thousands)														2020		2019		Change
Office	$	1,447	$	1,553	$	(106	)	$	4,138	$	4,307	$	(169	)	$	2,546	$	1,486	$	1,060
Retail	2,699		2,264		435			7,698		6,820		878			3,020		2,600		420
Multifamily	2,684		2,017		667			7,233		5,107		2,126			3,809		2,639		1,170
	$	6,830	$	5,834	$	996		$	19,069	$	16,234	$	2,835		$	9,375	$	6,725	$	2,650

Office rental expenses for the three ~~and nine~~ months ended ~~September 30, 2017 decreased 6.8% and 3.9%, respectively,~~March 31, 2020 increased 71.3% compared to the ~~corresponding periods in 2016 due to the sales~~three months ended March 31, 2019 primarily as a result of the ~~Richmond Tower, Oyster Point, Commonwealth~~acquisition of ~~Virginia-Chesapeake~~One city Center in March 2019, the commencement of operations at Brooks Crossing Office in April 2019, and ~~Commonwealth~~the acquisition of ~~Virginia-Virginia Beach office buildings.~~ Thames Street Wharf in June 2019.

Retail rental expenses for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 increased ~~19.2% and 12.9%~~16.2% compared to the ~~respective periods in 2016~~three months ended March 31, 2019 primarily as a result of ~~property acquisitions~~the commencement of operations at Market at Mill Creek in April 2019 and the ~~completion~~acquisition of ~~development projects that~~Red Mill Commons and Marketplace at Hilltop in May 2019. These increases were ~~placed into service subsequent to~~partially offset by the ~~first quarter~~disposal of ~~2016 as well as increased bad debt expenses.~~ Lightfooot Marketplace in August 2019 and the loss of Dick’s Sporting Goods at Town Center.

Multifamily rental expenses for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 increased ~~33.1% and 41.6%~~44.3% compared to the ~~respective periods~~three months ended March 31, 2019 primarily as a result of higher occupancy at Greenside Apartments and Premier Apartments, the acquisition of 1405 Point in ~~2016 primarily due to placing Johns Hopkins Village into service.~~April 2019, and the commencement of operations at Hoffler Place in August 2019.

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Real estate taxes for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 increased ~~$0.3~~$1.2 million ~~and $0.7 million, respectively,~~ compared to the ~~corresponding periods in 2016,~~three months ended March 31, 2019 as ~~follows:~~follows (in thousands):


	Three Months Ended September 30,							Nine Months Ended September 30,
	2017		2016		Change			2017		2016		Change			Three Months Ended March 31,
	(unaudited, $ in thousands)														2020		2019		Change
Office	$	481	$	485	$	(4	)	$	1,381	$	1,550	$	(169	)	$	1,146	$	526	$	620
Retail	1,588		1,339		249			4,557		3,953		604			2,166		1,811		355
Multifamily	624		532		92			1,859		1,584		275			1,021		791		230
	$	2,693	$	2,356	$	337		$	7,797	$	7,087	$	710		$	4,333	$	3,128	$	1,205

Office real estate taxes for the three ~~and nine~~ months ended ~~September 30, 2017 decreased 0.8% and 10.9%~~March 31, 2020 increased 117.9% compared to the ~~respective periods in 2016~~three months ended March 31, 2019 primarily due to the ~~sales~~acquisition of One City Center in March 2019, the ~~Richmond Tower, Oyster Point, Commonwealth~~commencement of ~~Virginia-Chesapeake,~~operations at Brooks Crossing Office in April 2019, and ~~Commonwealth~~the acquisition of ~~Virginia-Virginia Beach office buildings.~~ Thames Street Wharf in June 2019.

Retail ~~and multifamily~~ real estate taxes for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 increased 19.6% compared to the ~~corresponding periods~~three months ended March 31, 2019 primarily due to the commencement of operations at Market at Mill Creek in ~~2016~~April 2019 and the acquisition of Red Mill Commons and Marketplace at Hilltop in May 2019. These increases were partially offset by the disposal of Lightfooot Marketplace in August 2019.

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Multifamily real estate taxes for the three months ended March 31, 2020 increased 29.1% compared to the three months ended March 31, 2019 primarily as a result of ~~acquisitions, completion~~the acquisition of ~~development projects that were placed into service subsequent to~~1405 Point in April 2019 and the ~~first quarter~~commencement of ~~2016 and increases from new tax assessments.~~operations at Hoffler Place in August 2019.

General contracting and real estate services expenses for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 increased ~~5.6% and 48.2%, respectively,~~179.7% compared to the ~~corresponding periods in 2016 as a result of several new large projects started subsequent~~three months ended March 31, 2019 due to the ~~first quarter~~timing of ~~2016.~~commencement of new projects.

Depreciation and amortization for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 increased ~~4.0% and 9.3%, respectively,~~44.2% compared to the ~~corresponding periods in 2016~~three months ended March 31, 2019 as a result of ~~property~~development properties placed in service and acquisitions ~~and completion~~ of ~~development projects that were placed into service subsequent to the first quarter of 2016.~~operating properties.

Amortization of right-of-use assets - finance leases relates to new ground leases acquired since March 31, 2019 for which the Company is the lessee, which are classified as finance leases.

General and administrative expenses for the three months ended ~~September 30, 2017 decreased 2.7%~~March 31, 2020 increased 11.5% compared to the three months ended September 30, 2016 due to a reduction in franchise fees. General and administrative expenses for the nine months ended September 30, 2017 increased 13.1% compared to the nine months ended September 30, 2016March 31, 2019 primarily as a result of higher ~~regulatory and compliance costs and higher~~ compensation expense and benefit costs from increased employee headcount.

Acquisition, development and other pursuit costs for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 decreased $0.4 million compared to the ~~corresponding periods in 2016.~~three months ended March 31, 2019. The costs incurred in the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2019 were primarily related to ~~the acquisition of the 11-property retail portfolio in January 2016.~~a potential development project that was abandoned.

Impairment charges for the three ~~and nine~~ months ended ~~September 30, 2017 and 2016 were primarily due~~March 31, 2020 relate to tenants that vacated prior to their lease ~~terminations.~~expiration.

Interest income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 increased 35.9% compared to the ~~corresponding periods in 2016~~three months ended March 31, 2019 due to higher notes receivable balances ~~including the Decatur mezzanine~~due to increased loan ~~originated in May 2017.~~funding.

Interest expense on indebtedness for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 increased ~~3.1% and 11.7%, respectively,~~35.2% compared to the ~~corresponding periods~~three months ended March 31, 2019 primarily due to increased borrowings on the corporate credit facility and additional borrowings on the property loans.

Interest expense on finance leases relates to new ground leases acquired since March 31, 2019 for which the Company is the lessee, which are classified as finance leases.

Equity in ~~2016 primarily as a result~~income of ~~higher interest rates.~~

~~The loss on extinguishment of debt~~unconsolidated real estate entities for the three ~~and nine~~ months ended ~~September 30, 2016~~March 31, 2019 relates to our investment in One City Center from January 1, 2019 to March 14, 2019, which was ~~due to unamortized debt issuance costs associated with repaid mortgages as well as costs associated with modifying our credit facility.~~an unconsolidated real estate investment during this period.

During the nine months ended September 30, 2017, we recognized a gain of $3.4 million on our sale of the Greentree Wawa outparcel, a gain of $4.2 million on our sale of the Commonwealth of Virginia-Chesapeake and Commonwealth of Virginia-Virginia Beach office buildings and a gain of $0.5 million on our sale of the land outparcel at Sandbridge Commons. During the nine months ended September 30, 2016, we recognized gains of $30.4 million on our sales of the Richmond Tower office building and the Newport News Economic Authority building.

The change in fair value of interest rate derivatives for the three months ended ~~September 30, 2017 was an increase of $0.1 million~~March 31, 2020 experienced significant decreases compared to ~~an increase of $0.5 million for~~ the ~~corresponding period in 2016~~three months ended March 31, 2019 due to ~~less dramatic changes~~significant decreases in forward LIBOR (the London Inter-Bank Offered Rate). ~~The change in fair value of interest rate derivatives~~

Provision for ~~the nine months~~

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~~ended September 30, 2017 was an increase of $0.3 million compared~~unrealized credit losses relates to ~~a decrease of $2.3 million for the corresponding period in 2016. The expense for the nine months ended September 30, 2016 was~~increased expected loan losses due to ~~dedesignation~~changes in economic conditions and changes in the status of development projects that secure our ~~hedge accounting.~~ mezzanine loans. The adoption of the new credit loss standard on January 1, 2020 generally has the effect of requiring us to recognized expected loan losses sooner than under the previous standard.

Other income remained fairly consistent.

Income tax ~~provisions~~benefit that we recognized during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 were attributable to to the taxable profits and losses of our development and construction businesses that we operate through our TRS.

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Liquidity and Capital Resources

Overview

~~We believe~~In response to the COVID-19 pandemic, we have implemented various measures to preserve our ~~primary~~ short-term liquidity position and manage our cash flow, as described below under "Responses to COVID-19." In the short-term, our liquidity requirements are expected to consist of ~~general contractor expenses,~~ operating expenses, ~~and other~~required capital expenditures, ~~associated with our properties, including tenant improvements, leasing commissions and leasing incentives,~~ dividend payments to holders of our ~~stockholders required to maintain our REIT qualification,~~

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Series A Preferred Stock, debt service, ~~capital expenditures, new real estate~~and funding commitments relating to certain development ~~projects and strategic acquisitions.~~projects. We expect to meet our short-term liquidity requirements through net cash provided by operations, reserves established from existing cash, borrowings under construction loans, ~~to fund new real estate development~~ and ~~construction, borrowings available under our senior unsecured credit facility and~~if market conditions permit, net proceeds from the sale of common ~~stock.~~stock or preferred stock through our at-the-market continuous equity offering program, which is discussed below.

Our long-term liquidity needs consist primarily of funds necessary for the repayment of debt at or prior to maturity, general contracting expenses, property development and acquisitions, tenant improvements, capital improvements, and mezzanine loan funding requirements. As discussed below, we have proactively deferred previously announced development activity at several of our projects, postponed all acquisition activity for the foreseeable future, and suspended non-essential capital ~~improvements.~~expenditures. We expect to meet our long-term liquidity requirements with net cash from operations, long-term secured and unsecured indebtedness, sales of operating real estate properties, and the issuance of equity and debt securities. ~~We also~~In the future, subject to available borrowing capacity, we may fund property development and acquisitions and capital improvements using our ~~senior unsecured~~ credit facility pending long-term financing.

As of ~~September 30, 2017,~~March 31, 2020, we had unrestricted cash and cash equivalents of ~~$19.7~~$48.1 million available for both current liquidity needs as well as development and redevelopment activities. We also had restricted cash in escrow of ~~$3.2~~$4.7 million, some of which is available for ~~property improvements and required maintenance.~~capital expenditures at our operating properties. As of ~~September 30, 2017,~~March 31, 2020, we ~~had $92.0 million of available borrowings under~~were fully drawn on our credit facility and had $40.4 million available under our construction loans to ~~meet our short-term liquidity requirements.~~fund development activities (of this amount, $4.9 million was borrowed in April 2020 to fund March 2020 development costs and $5.8 million will be drawn to pay outstanding retainage when due).

We have no loans scheduled to mature during the remainder of 2020.

Responses to COVID-19

In March, 2020, as a precautionary measure to maximize our liquidity and to increase our available cash on hand, we drew down the remaining $15.0 million of availability on our senior unsecured revolving credit facility. The proceeds will be available to be used for working capital, general corporate or other purposes.

On April 28, 2020, our Board of Directors reviewed the Company’s dividend policy and determined that it would be in the best interest of the Company, its stockholders, and its OP unitholders to suspend the payment of quarterly cash dividends to common stockholders and quarterly distributions to holders of Class A common units as a measure to preserve liquidity in light of the uncertainty resulting from COVID-19. The Company expects to resume cash dividends to common stockholders and cash distributions to holders of Class A common units, subject to the earnings and financial condition of the Company and other relevant factors, but the Company can provide no timetable for the resumption of dividends and distributions and no assurances that dividends and distributions paid per share of common stock and per Class A unit, respectively, will be in an amount equal to the dividends and distributions paid for the quarter ended March 31, 2020. We will monitor our projected taxable income for 2020 and plan to distribute sufficient dividends to maintain our status as a REIT. The Board of Directors did not suspend the payment of dividends on shares of our Series A Preferred Stock.

In addition, in an effort to strengthen our financial flexibility and efficiently manage through the uncertainty caused by COVID-19, Lou Haddad, our President and Chief Executive Officer, voluntarily elected to reduce his base salary by 25%, and each of our directors, including Dan Hoffler and Russ Kirk, voluntarily elected to reduce their cash retainers and the value of their annual equity awards by 25%, in each case effective as of May 1, 2020.

The payment of dividends and the amount of such dividends depends upon matters deemed relevant by our Board of Directors on a quarterly basis, such as our results of operations, financial condition, cash requirements, future prospects, any limitations imposed by law, agreements governing our indebtedness or senior securities, including our Series A Preferred Stock, and other factors deemed relevant and appropriate. Notwithstanding the Board of Director’s decision to suspend dividends, we expect to pay dividends on our common stock in future periods to the extent necessary to maintain our REIT qualification.

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We proactively deferred the Chronicle Mill, Southern Post, and Ten Tryon development projects in order to provide additional balance sheet flexibility until economic conditions stabilize. We have also slowed down redevelopment activities at The Cosmopolitan. The chart below sets forth certain information regarding cash requirements to complete current development and redevelpment work through 2020 as of April 24, 2020.

ATM Program

On February 26, 2018, we commenced an at-the-market continuous equity offering program (the "Prior ATM Program"), which was amended on August 6, 2019, through which we could, from time to time, issue and sell shares of our common stock having an aggregate offering price of up to $180.7 million. During the three months ended March 31, 2020, we issued and sold 92,577 shares of common stock at a weighted average price of $18.23 per share under the Prior ATM Program, receiving net proceeds after offering costs and commissions of $1.7 million.

On March 10, 2020, we commenced a new at-the-market continuous equity offering program (the "ATM Program") through which we may, from time to time, issue and sell shares of our common stock and shares of our 6.75% Series A Cumulative Redeemable Perpetual Preferred Stock (the "Series A Preferred Stock") having an aggregate offering price of up to $300.0 million, to or through our sales agents and, with respect to shares of our common stock, may enter into separate forward sales agreements to or through the forward purchaser. Upon commencing the ATM Program, we simultaneously terminated the Prior ATM Program. During the three months ended March 31, 2020, we did not issue any shares under this ATM Program. Shares having an aggregate offering price of $300.0 million remained unsold under the ATM Program as of May 5, 2020.

Credit Facility

~~On October 26, 2017, we entered into an~~We have a senior credit facility that was amended and restated ~~credit agreement (the “amended credit agreement”), which provides for a $300.0~~on October 3, 2019. The total commitments are $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 ~~Bank~~a syndicate of America, N.A., as administrative agent, swing line lender and L/C issuer, Regions Bank and PNC Bank, National Association, as syndication agents, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Regions Capital Markets and PNC Capital Markets LLC, as joint lead arrangers, Merrill Lynch, Pierce, Fenner & Smith Incorporated as sole bookrunner and the other lenders party thereto. The amended credit facility replaces our prior $150.0 million revolving credit facility, which was scheduledbanks. Subject to ~~mature on February 20, 2019, and our prior $125.0 million term loan facility, which was scheduled to mature on February 20, 2021. We~~available borrowing capacity, we intend to use future borrowings under the credit facility for general corporate purposes, including funding acquisitions, mezzanine lending, and development and redevelopment of properties in our portfolio, and for working capital.

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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 two six-month extension options, subject to certain conditions, including payment of a 0.075% extension fee at each extension. The term loan facility has a scheduled maturity date of ~~October 26, 2022.~~January 24, 2025.

The revolving credit facility bears interest at LIBOR 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 our total leverage. We are 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 revolving credit facility. If we attain investment grade credit ratings from S&P ~~and~~or Moody’s, we may elect to have borrowings become subject to interest rates based on our credit ratings. We 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 us and certain of ~~its~~our 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. Our ability to borrow under the credit facility is subject to our ongoing compliance with a number of financial covenants, affirmative covenants and other restrictions, including the following:

Total leverage ratio of not more than 60% (or 65% for the two consecutive quarters following any acquisition ~~that is equal~~with a purchase price of at least up to ~~or greater than 10% of our total asset value (as defined in the credit agreement),~~$100.0 million, but only up to two times during the term of the credit facility);

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Ratio of adjusted EBITDA (as defined in the credit agreement) to fixed charges of not less than 1.50 to 1.0;

Tangible net worth of not less than the sum of ~~75% of tangible net worth (as defined in the credit agreement) as of September 30, 2017~~$567,106,000 and amount equal to 75% of the net equity proceeds received after June 30, ~~2017;~~2019;

Ratio of secured indebtedness to total asset value of not more than 40%;

Ratio of secured recourse debt to total asset value of not more than 20%;

Total unsecured leverage ratio of not more than 60% (or 65% for the two consecutive quarters following any acquisition ~~that is equal~~with a purchase price of at least up to ~~or greater than 10% of our total asset value,~~$100.0 million, but only up to two times during the term of the credit facility);

Unencumbered interest coverage ratio (as defined in the credit agreement) of not less than 1.75 to 1.0;

~~Ratio of unencumbered NOI (as defined in the credit agreement) to all unsecured debt of not less than 12%;~~

Maintenance of a minimum of at least 15 unencumbered properties (as defined in the credit agreement) with an unencumbered asset value (as defined in the credit agreement) of not less than $300.0 million at any time; ~~and~~

Minimum occupancy rate (as defined in the credit agreement) for all unencumbered properties of not less than 80% at any ~~time.~~time; and

Maximum aggregate rental revenue from any single tenant of not more than 30% of rental revenues with respect to all leases of unencumbered properties (as defined in the credit agreement).

The credit ~~facility~~agreement limits our ability to pay cash dividends. However, so long as no default or event of default exists, the credit agreement allows us to pay cash dividends with respect to any 12-month period in an amount not to exceed the greater of: (i) 95% of adjusted funds from operations (as defined in the credit agreement) or (ii) the amount required for us (a) to maintain our status as a REIT and (b) to avoid income or excise tax under the ~~Internal Revenue Code of 1986, as amended.~~Code. If certain defaults or events of default exist, we may pay cash dividends with respect to any 12-month period to the extent necessary to maintain our status as a REIT. The credit ~~facility~~agreement also restricts the amount of capital that we can invest in specific categories of assets, such as unimproved land holdings, development properties, notes receivable, mortgages, mezzanine loans and unconsolidated affiliates, and restricts the amount of stock and OPOperating Partnership units that we may repurchase during the term of the credit facility.

We may, at any time, voluntarily prepay any loan under the credit facility in whole or in part without premium or ~~penalty.~~penalty, except for those portions subject to an interest rate swap agreement.

The credit agreement includes customary events of default, in certain cases subject to customary periods to cure. The occurrence of an event of default, following 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.

We are currently in compliance with all covenants under the credit ~~facility.~~agreement. In light of the adverse effects of the COVID-19 pandemic on our business, we proactively engaged with the lenders under our credit facility to discuss our potential options should we need to obtain a waiver or modification of certain financial covenants to avoid non-compliance in future periods.

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Consolidated Indebtedness

The following table sets forth our consolidated indebtedness as of ~~September 30, 2017~~March 31, 2020 ($ in thousands):


	Amount Outstanding				Interest Rate(a)		Effective Rate for Variable Debt			Maturity Date		Balance at Maturity		Amount Outstanding			Interest Rate ^(a)		Effective Rate for Variable Debt			Maturity Date	Balance at Maturity
Secured Debt
Lightfoot Marketplace	$	12,894			LIBOR+1.90%		3.13	%		November 14, 2017		$	12,894
Hoffler Place ^(b)														$	29,589		LIBOR + 3.24%		4.23	%		January 1, 2021	$	29,589
Summit Place ^(b)														30,135			LIBOR + 3.24%		4.23	%		January 1, 2021	30,135
Southgate Square														20,342			LIBOR + 1.60%		2.59	%		April 29, 2021	19,462
Encore Apartments ^(c)														24,717			3.25	%				September 10, 2021	23,993
4525 Main Street ^(c)														31,717			3.25	%				September 10, 2021	30,787
Red Mill West														11,187			4.23	%				June 1, 2022	10,187
Thames Street Wharf														70,000			LIBOR + 1.30%		1.81	%	^(d)	June 26, 2022	70,000
Hanbury Village														18,385			3.78	%				August 15, 2022	17,454
Marketplace at Hilltop														10,419			4.42	%				October 1, 2022	9,383
1405 Point														53,000			LIBOR + 2.25%		3.24	%		January 1, 2023	51,532
Socastee Commons														4,540			4.57	%				January 6, 2023	4,223
Sandbridge Commons	8,530				LIBOR+1.85%		3.08	%		January 17, 2018		8,045		7,959			LIBOR + 1.75%		2.74	%		January 17, 2023	7,247
Columbus Village Note 1	6,124				LIBOR+2.00%		3.05	%	(b)	April 5, 2018		6,033
Columbus Village Note 2	2,232				LIBOR+2.00%		3.23	%		April 5, 2018		2,108
Wills Wharf														45,759			LIBOR + 2.25%		3.24	%		June 26, 2023	45,759
249 Central Park ^(e)														16,772			LIBOR + 1.60%		3.85	%	^(d)	August 10, 2023	15,935
Fountain Plaza Retail ^(e)														10,093			LIBOR + 1.60%		3.85	%	^(d)	August 10, 2023	9,590
South Retail ^(e)														7,363			LIBOR + 1.60%		3.85	%	^(d)	August 10, 2023	6,996
One City Center														25,159			LIBOR + 1.85%		2.84	%		April 1, 2024	22,559
Red Mill Central														2,494			4.80	%				June 17, 2024	1,765
Premier Apartments ^(f)														16,750			LIBOR + 1.55%		2.54	%		October 31, 2024	15,848
Premier Retail ^(f)														8,250			LIBOR + 1.55%		2.54	%		October 31, 2024	7,806
Red Mill South														6,062			3.57	%				May 1, 2025	4,383
Brooks Crossing Office														14,411			LIBOR + 1.60%		2.59	%		July 1, 2025	10,653
Market at Mill Creek														14,034			LIBOR + 1.55%		2.54	%		July 12, 2025	10,635
Johns Hopkins Village	46,698				LIBOR+1.90%		3.13	%		July 30, 2018		46,698		51,566			LIBOR + 1.25%		4.19	%	^(d)	August 7, 2025	45,967
North Point Note 1	9,623				6.45	%				February 5, 2019		9,333
Southgate Square	20,871				LIBOR+2.00%		3.23	%		April 29, 2021		18,925
249 Central Park Retail	16,910			(c)	LIBOR+1.95%		3.18	%		August 8, 2021		15,959
South Retail	7,420			(c)	LIBOR+1.95%		3.18	%		August 8, 2021		7,002
Fountain Plaza Retail	10,180			(c)	LIBOR+1.95%		3.18	%		August 8, 2021		9,608
4525 Main Street	32,034			(d)	3.25	%				September 10, 2021		30,774
Encore Apartments	24,966			(d)	3.25	%				September 10, 2021		24,006
Hanbury Village	19,622				3.78	%				August 15, 2022		17,109
Socastee Commons	4,796			(e)	4.57	%				January 6, 2023		4,223
North Point Note 2	2,486				7.25	%				September 15, 2025		1,344
North Point Center-Phase II														2,193			7.25	%				September 15, 2025	1,344
Lexington Square														14,633			4.50	%				September 1, 2028	12,044
Red Mill North														4,370			4.73	%				December 31, 2028	3,295
Greenside Apartments														33,828			3.17	%				December 15, 2029	26,250
Smith's Landing	19,954				4.05	%				June 1, 2035		—		17,966			4.05	%				June 1, 2035	384
Liberty Apartments	19,763			(e)	5.66	%				November 1, 2043		—		14,094			5.66	%				November 1, 2043	—
The Cosmopolitan	45,390				3.35	%				July 1, 2051		—		43,506			3.35	%				July 1, 2051	—
Harding Place	—				LIBOR+2.95%					February 24, 2020		—
Town Center Phase VI	—				LIBOR+3.50%					June 29, 2020		—
Total secured debt	$	310,493										$	214,061	$	661,293								$	545,205
Unsecured Debt
Senior unsecured revolving credit facility	58,000				LIBOR+1.40% to 2.00%		2.78	%		February 20, 2019	(f)	58,000		$	150,000		LIBOR+1.30%-1.85%		2.49	%		January 24, 2024	$	150,000
Senior unsecured term loan	75,000				LIBOR+1.35% to 1.95%		2.73	%		February 20, 2020	(f)	75,000		19,500			LIBOR+1.25%-1.80%		2.44	%	^(g)	January 24, 2025	19,500
Senior unsecured term loan	50,000				LIBOR+1.35% to 1.95%		3.50	%	(b)	February 20, 2020	(f)	50,000		185,500			LIBOR+1.25%-1.80%		1.95%-4.47%		^(d)	January 24, 2025	185,500
Total unsecured debt	$	183,000										$	183,000	$	355,000								$	355,000
Total principal balances	493,493											397,061		1,016,293									900,205
Unamortized GAAP adjustments	(4,884		)									—		(9,676		)							—
Indebtedness, net	$	488,609										$	397,061	$	1,006,617								$	900,205

(a) LIBOR rate is determined by individual lenders.

(b) ~~Subject to an interest rate swap agreement.~~Cross collateralized.

(d) Includes debt subject to interest rate swap locks.

(e) Cross collateralized.

~~(e) Principal balance excluding fair value adjustments.~~


~~(f)~~	As described above, following an amendment and restatement of the credit agreement on October 26, 2017, the revolving credit facility has a scheduled maturity date of October 26, 2021, with a one-year extension option, subject to certain conditions, and the term loan facility has a scheduled maturity date of October 26, 2022.

(f) Cross collateralized.

(g) Includes debt subject to interest rate swap locks as of April 1, 2020.

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We are currently in compliance with all covenants on our outstanding indebtedness. In April 2020, we proactively obtained a waiver from the lender for the Premier Retail/Apartments property wherein we will not have to meet the minimum debt service coverage requirement for the period ending June 30, 2020. We also proactively obtained a waiver from the lender for the 249 Central Park, Fountain Plaza Retail, and South Retail properties wherein we will not have to meet the minimum debt service coverage requirement for the periods ending June 30, 2020 and December 31, 2020.

We have contacted our lender for Johns Hopkins Village to discuss potential options in the event that we are not able to meet certain loan covenants in future periods.

As of ~~September 30, 2017,~~March 31, 2020, our principal payments during the following years are as follows ($ in thousands):

Year⁽¹⁾

Amount Due

Percentage of Total
2017 $ 13,948
3 %
2018 67,263
14 %
2019 71,376
15 %
2020 130,057
26 %
2021 110,458
22 %
Thereafter 100,391
20 %
$ 493,493
100 %



Year⁽¹⁾	Amount Due		Percentage of Total
2020 (excluding three months ended March 31, 2020)	$	7,537	1	%
2021	144,980		14	%
2022	116,807		11	%
2023	149,140		15	%
2024	205,066		20	%
Thereafter	392,763		39	%
Total	$	1,016,293	100	%

(1) Does not reflect the effect of any maturity extension options.

~~On February 1, 2017, we paid off the North Point Center Note 5 in full for $0.6 million.~~

~~On April 7, 2017, we paid off the Harrisonburg Regal note in full for $3.2 million.~~

~~On April 19, 2017, we entered into a second amendment to the credit agreement for the Lightfoot Marketplace loan, which amended certain definitions and covenant requirements.~~

~~On July 13, 2017, we paid off the remaining balance of $4.9 million for the note secured by the Commonwealth of Virginia building in Chesapeake, Virginia in conjunction with the sale of this property.~~

~~On August 9, 2017, we 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, we 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, we entered into a modification of The Cosmopolitan note, which reduced the annual interest rate from 3.75% to 3.35%.~~

~~On October 13, 2017, we paid off $5.0 million of the Liberty Apartments note.~~

Interest Rate Derivatives

~~On February 20, 2015, we entered into a $50.0 million floating-to-fixed~~As of March 31, 2020, the Company held the following interest rate swap attributable to one-month LIBOR indexed interest payments. The $50.0 million interest rate swap has a fixed rate of 2.00%, an effective date of March 1, 2016 and a maturity date of February 20, 2020. We entered into this interest rate swap agreementagreements ($ 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 our total leverage.~~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	51,566		1-month LIBOR	2.94	%	4.19	%	8/7/2018	8/7/2025
Senior unsecured term loan	10,500		1-month LIBOR	3.02	%	4.47	%	10/12/2018	10/12/2023
249 Central Park Retail, South Retail, and Fountain Plaza Retail	34,228		1-month LIBOR	2.25	%	3.85	%	4/1/2019	8/10/2023
Senior unsecured term loan	50,000		1-month LIBOR	2.26	%	3.71	%	4/1/2019	10/26/2022
Thames Street Wharf	70,000		1-month LIBOR	0.51	%	1.81	%	3/26/2020	6/26/2024
Senior unsecured term loan	25,000		1-month LIBOR	0.50	%	1.95	%	4/1/2020	4/1/2024
Senior unsecured term loan	25,000		1-month LIBOR	0.50	%	1.95	%	4/1/2020	4/1/2024
Senior unsecured term loan	25,000		1-month LIBOR	0.55	%	2.00	%	4/1/2020	4/1/2024
Total	$	341,294

On July 13, 2015, we entered into a $6.5 million floating-to-fixed interest rate swap attributable to one-month LIBOR indexed interest payments. The $6.5 million 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.

On February 7, 2017, we 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 March 1, 2019.

On June 23, 2017, we 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, we 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.

As of ~~September 30, 2017,~~March 31, 2020, we were party to the following LIBOR interest rate cap agreements ($ in thousands):



Effective Date	Maturity Date	Strike Rate		Notional Amount
3/7/2018	4/1/2020	2.25	%	$	50,000
7/16/2018	8/1/2020	2.50	%	50,000
12/11/2018	1/1/2021	2.75	%	50,000
5/15/2019	6/1/2022	2.50	%	100,000
1/10/2020	2/1/2022	1.75	%	50,000
1/28/2020	2/1/2022	1.75	%	50,000
2/28/2020	3/1/2022	1.50	%	100,000
Total				$	450,000

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Effective Date Maturity Date Strike Rate Notional Amount
October 26, 2015 October 15, 2017 1.25 % 75,000
February 25, 2016 March 1, 2018 1.50 % 75,000
June 17, 2016 June 17, 2018 1.00 % 70,000
February 7, 2017 March 1, 2019 1.50 % 50,000
June 23, 2017 July 1, 2019 1.50 % 50,000
September 18, 2017 October 1, 2019 1.50 % 50,000
Total $ 370,000

Off-Balance Sheet Arrangements

WeIn connection with our mezzanine lending activities, we have ~~entered into standby letters~~guaranteed payment of ~~credit using~~portions of certain senior loans of third parties associated with the ~~available capacity under~~development projects. The following table summarizes the ~~credit facility. Letters~~guarantees we made as of ~~credit generally are available~~March 31, 2020 (in thousands):



Development project	Payment guarantee amount
The Residences at Annapolis Junction	$	8,300
Delray Plaza	5,180
Nexton Square	12,600
Interlock Commercial ⁽¹⁾	30,654
Total	$	56,734

(1) In May 2020, the borrower for ~~draw down in~~ the event we do not perform. As of September 30, 2017, we had aggregate outstanding standby letters of credit totaling $4.1 million that expire during 2017. However, any of our standby letters of credit may be renewed for additional periods until completion ofInterlock Commercial loan modified the ~~related~~senior construction ~~contracts. The amounts outstanding at September 30, 2017 include $2.0 million relating to construction projects and a $2.1 million letter of credit related to the guarantee~~loan on the ~~Point Street Apartments~~project. As part of this modification, the Company agreed to increase its payment guaranty for this senior ~~construction loan.~~loan to $34.3 million.

Cash Flows


	Nine Months Ended September 30,									Three Months Ended March 31,
	2017			2016			Change			2020			2019			Change
	($ in thousands)									(in thousands)
Operating Activities	$	36,598		$	38,782		$	(2,184	)	$	20,307		$	16,079		$	4,228
Investing Activities	(69,485		)	(187,681		)	118,196			(49,170		)	(79,803		)	30,633
Financing Activities	30,666			145,800			(115,134		)	38,072			58,632			(20,560		)
Net Increase (Decrease)	$	(2,221	)	$	(3,099	)	$	878
Cash and Cash Equivalents, Beginning of Period	$	21,942		$	26,989
Cash and Cash Equivalents, End of Period	$	19,721		$	23,890
Net Increase (decrease)										$	9,209		$	(5,092	)	$	14,301
Cash, Cash Equivalents, and Restricted Cash, Beginning of Period										$	43,579		$	24,051
Cash, Cash Equivalents, and Restricted Cash, End of Period										$	52,788		$	18,959

Net cash provided by operating activities during the ~~nine~~three months ended ~~September 30, 2017 decreased 5.6%~~March 31, 2020 increased $4.2 million compared to the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2019 primarily as a result of timing differences in operating assets and ~~liabilities.~~liabilities as well as increased net operating income from the property portfolio.

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, we invested ~~63.0%~~$30.6 million less in cash compared to the ~~nine~~three months ended ~~September 30, 2016. The primary component of~~March 31, 2019 due to decreased development activity and less cash invested in the ~~2016 investments was our~~ acquisition of ~~the 11-property retail portfolio.~~operating properties, which was partially offset by more funding of notes receivable.

Net cash provided by financing activities during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 decreased ~~79.0%~~$20.6 million compared to ~~the nine~~three months ended ~~September 30, 2016,~~March 31, 2019 primarily as a result of ~~debt and credit facility repayments during~~ the ~~2017 period, partially offset by increased~~decreased net proceeds from equity issuances.

Non-GAAP Financial Measures

We calculate FFO in accordance with the standards established by ~~the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT~~Nareit. Nareit defines FFO as net income (loss) (calculated in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, real estate related depreciation and amortization (excluding amortization of deferred financing costs), impairment of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures.

FFO is a supplemental non-GAAP financial measure. Management uses FFO as a supplemental performance measure because we believe that FFO is beneficial to investors as a starting point in measuring our operational performance. Specifically, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, which do not relate to or are not indicative of operating performance, FFO provides a performance measure that, when compared year-over-year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs.

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However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effects and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. In addition, other equity REITs may not calculate FFO in accordance with the ~~NAREIT~~Nareit definition as we do, and, accordingly, our calculation of FFO may not be comparable to such other REITs’ calculation of FFO. Accordingly, FFO should be considered only as a supplement to net income as a measure of our performance. FFO should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or service indebtedness. Also, FFO should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP.

We also believe that the computation of FFO in accordance with ~~NAREIT’s~~Nareit’s definition includes certain items that are not indicative of the results provided by our operating property portfolio and affect the comparability of our year-over-year performance. Accordingly, management believes that Normalized FFO is a more useful performance measure that excludes certain items, including but not limited to, debt extinguishment losses and prepayment penalties, impairment of intangible assets and liabilities, property acquisition, development and other pursuit costs, mark-to-market adjustments for interest rate derivatives, provision for unrealized credit losses, amortization of right-of-use assets attributable to finance leases, severance related costs, and other non-comparable items.

The following table sets forth a reconciliation of FFO and Normalized FFO for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 to net income, the most directly comparable GAAP measure:

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(unaudited, $ in thousands)
Net income $ 10,461
$ 7,946
$ 24,157
$ 37,610
Depreciation and amortization 9,239
8,885
28,018
25,636
Gain on operating real estate dispositions (4,200 ) (3,753 ) (7,595 ) (30,010 )
Funds from operations $ 15,500
$ 13,078
$ 44,580
$ 33,236
Acquisition, development and other pursuit costs 61
345
477
1,486
Impairment charges 19
149
50
184
Loss on extinguishment of debt —
82
—
82
Change in fair value of interest rate derivatives (87 ) (498 ) (300 ) 2,264
Normalized funds from operations $ 15,493
$ 13,156
$ 44,807
$ 37,252
Net income per diluted share and unit $ 0.17
$ 0.15
$ 0.41
$ 0.77
FFO per diluted share and unit $ 0.25
$ 0.25
$ 0.75
$ 0.68
Normalized FFO per diluted share and unit $ 0.25
$ 0.26
$ 0.75
$ 0.76
Weighted average common shares and units - diluted 62,779
51,512
59,423
48,869



	Three Months Ended March 31,
	2020		2019
	(in thousands, except per share and unit amounts)
Net income attributable to common stockholders and OP Unit holders	$	8,160	$	6,514
Depreciation and amortization⁽¹⁾	14,092		10,129
FFO attributable to common stockholders and OP Unit holders	22,252		16,643
Acquisition, development and other pursuit costs	27		400
Impairment of intangible assets and liabilities	158		—
Provision for unrealized credit losses	377		—
Amortization of right-of-use assets - finance leases	147		—
Change in fair value of interest rate derivatives	1,736		1,463
Normalized FFO available to common stockholders and OP Unit holders	$	24,697	$	18,506
Net income attributable to common stockholders and OP Unit holders per diluted share and unit	$	0.11	$	0.10
FFO per diluted share and unit attributable to common stockholders and OP Unit holders	$	0.29	$	0.25
Normalized FFO per diluted share and unit attributable to common stockholders and OP Unit holders	$	0.32	$	0.27
Weighted average common shares and units - diluted	77,671		67,919

(1) The adjustment for depreciation and amortization for the three months ended March 31, 2020 excludes $0.2 million of depreciation attributable to the Company's joint venture partners. The adjustment for depreciation and amortization for the three months ended March 31, 2019 includes $0.2 million of depreciation attributable to the Company's investment in One City Center from January 1, 2019 to March 14, 2019, which was an unconsolidated real estate investment during this period.

The adjustment for gain on operating real estate dispositions excludes the gain recognized in the three months ended March 31, 2016 on the Newport News Economic Authority building because this building was sold before being placed in service. Additionally, the adjustment for gain on operating real estate dispositions excludes the gain recognized in the three months ended September 30, 2017 on the land outparcel at Sandbridge Commons because this was a non-operating parcel.

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Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements that have been prepared in accordance with GAAP. The preparation of these financial statements requires us to exercise our best judgment in making estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. We evaluate our estimates on an ongoing basis, based upon then-currently available information. Actual results could differ from these estimates. We discuss the accounting policies and estimates that are most critical to understanding our reported financial results in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

We adopted the new standard on January 1, 2020, using the modified retrospective transition method and recorded a noncash cumulative effect adjustment to retained earnings of $3.0 million, $2.8 million of which relates to our mezzanine loans and $0.2 million of which relates to our construction accounts receivable. See Note 6—Notes Receivable and Current Expected Credit Losses, for more information.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The primary market risk to which we are exposed is interest rate risk. Our primary interest rate exposure is LIBOR. We primarily use fixed interest rate financing to manage our exposure to fluctuations in interest rates. On a limited basis, we

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also use derivative financial instruments to manage interest rate risk. We do not use these derivatives for trading or other speculative purposes.

At ~~September 30, 2017,~~March 31, 2020 and excluding unamortized GAAP adjustments, approximately ~~$234.8~~$581.4 million, or ~~47.6%~~57.2%, of our debt had fixed interest rates and approximately ~~$258.7~~$434.9 million, or ~~52.4%~~42.8%, had variable interest rates. At ~~September 30, 2017,~~March 31, 2020, LIBOR was approximately ~~123~~99 basis points. Assuming no increase in the level of our variable rate debt, if LIBOR increased by 100 basis points, our cash flow would ~~increase~~decrease by ~~approximately $0.5~~$3.6 million per year as a result of the interest rate caps. Assuming no increase in the level of our variable rate debt, if LIBOR decreased by 100 basis points, our cash flow would increase by ~~approximately $2.4~~$4.3 million per year.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the rules and regulations of the SEC and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

We have carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of our disclosure controls and procedures as of ~~September 30, 2017,~~March 31, 2020, the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer have concluded, as of ~~September 30, 2017,~~March 31, 2020, that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in reports filed or submitted under the Exchange Act: (i) is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.

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There have been no changes to our internal control over financial reporting during the ~~period covered by this report~~quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

We are not currently a party, as plaintiff or defendant, to any legal proceedings that we believe to be material or which, individually or in the aggregate, would be expected to have a material effect on our business, financial condition, or results of operations if determined adversely to us. We may be subject to ongoing litigation relating to our portfolio and the properties comprising our portfolio, and we expect to otherwise be party from time to time to various lawsuits, claims, and other legal proceedings that arise in the ordinary course of our business.

Item 1A. Risk Factors

~~There~~Except as set forth below, there have been no material changes from the risk factors disclosed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

The ongoing COVID-19 pandemic and measures intended to prevent its spread could have a material adverse effect on our business, results of operations, cash flows and financial condition.

Since being first reported in December 2019, COVID-19 has spread globally, including to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The pandemic has led governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders. All of our properties and our headquarters are located in areas that are or have been subject to shelter-in-place orders and restrictions on the types of businesses that may continue to operate.

The impact of the COVID-19 pandemic and measures to prevent its spread could materially and adversely affect our businesses in a number of ways. Our rental revenue and operating results depend significantly on the occupancy levels at our properties and the ability of our tenants to meet their rent and other obligations to us. The government-imposed measures in response to the pandemic, coupled with customers reducing their purchasing activity in light of health concerns or personal financial distress, have resulted in significant disruptions to retail businesses around the country, including in the markets in which we own retail assets, which has resulted, and could continue to result in, tenants being unwilling or unable to pay rent in full on a timely basis or at all. For example, as of April 24, 2020, we had collected 57% of April rent from our retail tenants and agreed to defer 43% of April rent from our retail tenants. If the impacts of the pandemic continue for an extended period of time, we expect that certain office tenants and multifamily residents will experience greater financial distress, which could result in late payments, requests for rental relief, business closures, decreases in occupancy, reductions in rent, or increases in rent concessions or other accommodations, as applicable. In some cases, we may have to restructure tenants’ long-term rent obligations and may not be able to do so on terms that are as favorable to us as those currently in place. Certain of our office and retail tenants also may incur significant costs or losses responding to the COVID-19 pandemic, lose business due to any interruption in the operations of our properties or incur other losses or liabilities related to shelter-in-place orders, quarantines, infection or other related factors. In addition, numerous state, local, federal and industry-initiated efforts may affect our ability to collect rent or enforce remedies for the failure to pay rent, particularly with respect to our multifamily properties. Our development and construction projects also could be adversely affected, including as a result of disruptions in supply chains and government restrictions on the types of projects that may continue during the pandemic. Additionally, borrowers under our mezzanine loan program may be unable to satisfy their obligations to us as a result of the deterioration of their businesses as a result of the pandemic. In addition, a significant number of our retail tenants have been forced to close temporarily or operate on a limited basis as a result of COVID-19 and related government actions, which could result in delays in rent payments, rent concessions, early lease terminations or tenant bankruptcies. For example, as of April 24, 2020, based on a percentage of April rent that was due, 34% of our retail tenants were open, 27% were operating on a limited basis, and 39% were closed.

Further, our management team is focused on mitigating the impacts of COVID-19, which has required and will continue to require, a large investment of time and resources across our business. Additionally, many of our employees are currently working remotely. An extended period of remote work arrangements could strain our business continuity plans, introduce operational risk, including but not limited to cybersecurity risks, and impair our ability to manage our business.

The COVID-19 pandemic has also caused, and is likely to continue to cause, severe economic, market and other disruptions worldwide. We may be impacted by stock market volatility and illiquid market conditions, global economic uncertainty, and the perceived prospect for capital appreciation in real estate. We cannot assure you that conditions in the bank lending, capital and other financial markets will not continue to deteriorate as a result of the pandemic, or that our access to

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capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings, renewals or refinancings. In addition, the deterioration of global economic conditions as a result of the pandemic may ultimately decrease occupancy levels and rents across our portfolio as tenants and residents reduce or defer their spending, which could adversely affect the value of our properties.

The extent of the COVID-19 pandemic’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic and the duration of government measures to mitigate the pandemic, all of which are uncertain and difficult to predict. Due to the speed with which the situation is developing, we are not able at this time to estimate the effect of these factors on our business, but the adverse impact on our business, results of operations, financial condition and cash flows could be material.

Changes to the U.S. federal income tax laws, including the enactment of certain tax reform measures, could have an adverse impact on our business and financial results.

In recent years, numerous legislative, judicial and administrative changes have been made to the U.S. federal income tax laws applicable to investments in real estate and REITs, including the passage of the Tax Cuts and Jobs Act of 2017. Federal legislation intended to ameliorate the economic impact of the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, has been enacted that makes technical corrections to, or modifies on a temporary basis, certain of the provisions of the Tax Cut and Jobs Act of 2017, and it is possible that additional such legislation may be enacted in the future. Section 2303(b) of the CARES Act amended the Internal Revenue Code section 172(b)(1) to provide for a carryback of any net operating loss (NOL) arising in a taxable year beginning after December 31, 2017 and before January 1, 2021 (carryback years) to each of the five taxable years preceding the taxable year in which the loss arises (carryback period). We plan to avail ourselves of this provision for any NOLs incurred by our Taxable REIT Subsidiary during the carryback years to claim any tax refunds available in the carryback period.

The full impact of the Tax Cuts and Jobs Act of 2017 and the CARES Act may not become evident for some period of time. In addition, there can be no assurance that future changes to the U.S. federal income tax laws or regulatory changes will not be proposed or enacted that could impact our business and financial results. The REIT rules are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department, which may result in revisions to regulations and interpretations in addition to statutory changes. If enacted, certain of such changes could have an adverse impact on our business and financial results.

We cannot predict whether, when, or to what extent any new U.S. federal tax laws, regulations, interpretations, or rulings will impact the real estate investment industry or REITs. Prospective investors are urged to consult their tax advisors regarding the effect of potential future changes to the federal tax laws on an investment in our shares.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None.

Issuer Purchases of Equity Securities

~~None.~~During the three months ended March 31, 2020, certain of our employees surrendered shares of common stock owned by them to satisfy their minimum statutory federal and state tax obligations associated with the vesting of restricted shares of common stock issued under our Amended and Restated 2013 Equity Incentive Plan (the "Amended Plan"). The following table summarizes all of these repurchases during the three months ended March 31, 2020.

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Period	Total Number of Shares Purchased⁽¹⁾	Average Price Paid for Shares⁽¹⁾		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs
January 1, 2020 through January 31, 2020	—	$	—	N/A	N/A
February 1, 2020 through February 29, 2020	—	—		N/A	N/A
March 1, 2020 through March 31, 2020	27,060	17.30		N/A	N/A
Total	27,060	$	17.30


(1)	The number of shares purchased represents shares of common stock surrendered by certain of our employees to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted shares of common stock issued under the Amended Plan. With respect to these shares, the price paid per share is based on the fair value at the time of surrender.

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Item 3. Defaults on Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

The description of the credit facility under "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Credit Facility" is incorporated by reference in this Item 5.None.

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Item 6. Exhibits

The exhibits listed in the accompanying Exhibit Index are filed, furnished or incorporated by reference (as applicable) as part of this Quarterly Report on Form 10-Q.

~~Exhibit Index~~



Exhibit No.		Description
~~10.1~~3.1		~~Amended~~Articles of Amendment and ~~Restated Credit Agreement, dated as~~Restatement of ~~October 26, 2017, among Armada Hoffler, L.P., as Borrower,~~ Armada Hoffler Properties, Inc.~~, as Parent, Bank of America, N.A., as Administrative Agent, and~~ (Incorporated by reference to Exhibit 4.1 to the ~~other agents and Lenders party thereto.~~Company’s Registration Statement on Form S-3, filed on June 2, 2014)

~~10.2~~3.2		Amended and Restated ~~Guaranty Agreement, dated as of October 26, 2017, among certain subsidiaries~~Bylaws of Armada Hoffler ~~L.P. named therein~~Properties, Inc. (Incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the ~~benefit of the Administrative Agent and the Lenders named in the Amended and Restated Credit Agreement.~~

~~15.1~~		~~Acknowledgment of Ernst & Young LLP, Independent Registered Public Accounting Firm~~fiscal year ended December 31, 2017, filed on February 23, 2018)

~~31.1~~3.3		Articles Supplementary Designating the Rights and Preferences of the 6.75% Series A Cumulative Redeemable Perpetual Preferred Stock (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on June 17, 2019).

3.4		Articles Supplementary relating to Section 3-802(c) of the Maryland General Corporation Law (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on February 24, 2020).

31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

~~31.2~~31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

~~32.1~~32.1**		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~32.2~~32.2**		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~101.INS~~101*		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, were formatted in Inline XBRL ~~Instance Document~~(Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheet, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Statements of Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed 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 Document~~tags are embedded within the Inline XBRL.

~~101.CAL~~*		~~XBRL Taxonomy Extension Calculation Linkbase Document~~Filed herewith

~~101.LAB~~**		~~XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~

~~101.DEF~~		~~XBRL Definition Linkbase~~Furnished herewith

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Signatures

Pursuant to the requirements 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.




	ARMADA HOFFLER PROPERTIES, INC.

Date: ~~November 1, 2017~~May 5, 2020	/s/ ~~LOUIS~~Louis S. ~~HADDAD~~Haddad
	Louis S. Haddad
	President and Chief Executive Officer
	(Principal Executive Officer)

Date: ~~November 1, 2017~~May 5, 2020	/s/ ~~MICHAEL~~Michael P. ~~O’HARA~~O’Hara
	Michael P. O’Hara
	Chief Financial Officer, Treasurer and ~~Treasurer~~Secretary
	(Principal Accounting and Financial Officer)

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	Shares of common stock		Common Stock		Additional paid-in capital			Distributions in excess of earnings			Total stockholders' equity			Noncontrolling interests			Total Equity
Balance, January 1, 2017	37,490,361		$	374	$	197,114		$	(49,345	)	$	148,143		$	200,835		$	348,978
Net income	—		—		—			16,895			16,895			7,262			24,157
Net proceeds from sales of common stock	7,350,690		74		91,307			—			91,381			—			91,381
Restricted stock awards	116,704		1		1,381			—			1,382			—			1,382
Restricted stock award forfeitures	(21,103	)	—		(289		)	—			(289		)	—			(289		)
Issuance of common units for acquisition of interest in real estate investment	—		—		(987		)	—			(987		)	982			(5		)
Redemption of operating partnership units	—		—		(41		)	—			(41		)	(188		)	(229		)
Dividends and distributions declared	—		—		—			(24,305		)	(24,305		)	(9,637		)	(33,942		)
Balance, September 30, 2017	44,936,652		$	449	$	288,485		$	(56,755	)	$	232,179		$	199,254		$	431,433



Land	$	5,550
Site improvements	232
Building and improvements	6,975
In-place leases	1,382
Above-market leases	327
Below-market leases	(50		)
Net assets acquired	$	14,416



	September 30, 2017							December 31, 2016
	(Unaudited)
	Notional Amount		Fair Value					Notional Amount		Fair Value
			Asset		Liability					Asset		Liability
Interest rate swaps	$	56,124	$	10	$	(447	)	$	56,901	$	—	$	(829	)
Interest rate caps	370,000		707		—			270,000		259		—
Total	$	426,124	$	717	$	(447	)	$	326,901	$	259	$	(829	)