Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - Armada Hoffler Properties, Inc. | q32018ex991earningsrelease.htm |
| 8-K - 8-K - Armada Hoffler Properties, Inc. | ahhq393020188-k.htm |
1 3Q18 | SUPPLEMENTAL FINANCIAL PACKAGE
Table of Contents 2 3 Forward Looking Statements 4 Corporate Profile 5 Highlights 6 2018 Outlook & Assumptions 7 Summary Information 8 Net Asset Value Component Data 9 Summary Balance Sheet 10 Summary Income Statement 11 FFO, Normalized FFO & Adjusted FFO 12 Outstanding Debt 13 Core Debt to Core EBITDA 14 Debt Information 15 Capitalization & Financial Ratios 16 Property Portfolio 18 Development Pipeline 19 Redevelopment and Mezzanine Investments 20 Acquisitions & Dispositions 21 Construction Business Summary 22 Same Store NOI by Segment 23 Top 10 Tenants by Annualized Base Rent 24 Office Lease Summary 25 Office Lease Expirations 26 Retail Lease Summary 27 Retail Lease Expirations 28 Appendix – Definitions & Reconciliations 32 Same Store vs Non-Same Store Properties 33 Reconciliation to Property Portfolio NOI 35 Reconciliation to GAAP Net Income
Forward Looking Statements 3 This Supplemental Financial Package should be read in conjunction with the unaudited condensed consolidated financial statements appearing in our press release dated October 30, 2018, which has been furnished as Exhibit 99.1 to our Form 8-K filed on October 30, 2018. The Company makes statements in this Supplemental financial package that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). In particular, statements pertaining to our capital resources, portfolio performance, development pipeline and results of operations contain forward-looking statements. Likewise, all of our statements regarding anticipated growth in our funds from operations, normalized funds from operations, adjusted funds from operations, and net operating income are forward-looking statements. You can identify forward- looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions. 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, estimates, data or methods, which may be incorrect or imprecise, and actual results may vary materially from those anticipated, estimated or projected. The Company does not guarantee that the transactions and events described will happen as described (or that they will happen at all). For further discussion of risk factors and other events that could impact our future results, please refer to the section entitled “Risk Factors” in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”), and the documents subsequently filed by us from time to time with the SEC.
Corporate Profile 4 Armada Hoffler Properties, Inc. (NYSE:AHH) is a full service real estate company that develops, constructs, acquires and manages institutional-grade office, retail and multifamily properties in the Mid-Atlantic and Southeastern United States. The Company also provides general contracting and development services to third-party clients, in addition to developing and building properties to be placed in its stabilized portfolio. Armada Hoffler Properties, Inc. was founded in 1979 and is headquartered in Virginia Beach, VA. The Company has elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes. Board of Directors Corporate Officers Daniel A. Hoffler Executive Chairman of Board Louis S. Haddad President and Chief Executive Officer A. Russell Kirk Vice Chairman of the Board Michael P. O’Hara Chief Financial Officer and Treasurer Louis S. Haddad Director Eric L. Smith Chief Operating Officer John W. Snow Lead Independent Director Eric E. Apperson President of Construction George F. Allen Independent Director Shelly R. Hampton President of Asset Management James A. Carroll Independent Director James C. Cherry Independent Director Investor Relations Eva S. Hardy Independent Director Michael P. O’Hara Chief Financial Officer and Treasurer (757) 366-6684 mohara@armadahoffler.com Analyst Coverage Bank of America Merrill Lynch Janney, Montgomery, & Scott LLC Raymond James & Associates Stonegate Capital Partners James Feldman Robert Stevenson Bill Crow Laura Engel (646) 855-5808 (646) 840-3217 (727) 567-2594 (214) 987-4121 james.feldman@baml.com robertstevenson@janney.com bill.crow@raymondjames.com laura@stonegateinc.com D. A. Davidson & Co. B. Riley FBR Robert W. Baird & Co. Stifel, Nicolaus & Company Inc. James O. Lykins Craig Kucera David Rodgers John Guinee (503) 603-3041 (703) 862-5249 (216) 737-7341 (443) 224-1307 jlykins@dadco.com craigkucera@fbr.com drodgers@rwbaird.com jwguinee@stifel.com
Highlights 5 • Net income of $5.7 million, or $0.09 per diluted share, for the quarter ended September 30, 2018 compared to net income of $10.5 million, or $0.17 per diluted share, for the quarter ended September 30, 2017. • Normalized Funds From Operations (“FFO”) of $15.7 million, or $0.24 per diluted share, for the quarter ended September 30, 2018 compared to Normalized FFO of $15.5 million, or $0.25 per diluted share, for the quarter ended September 30, 2017. • FFO of $15.9 million, or $0.24 per diluted share, for the quarter ended September 30, 2018 compared to FFO of $15.5 million, or $0.25 per diluted share, for the quarter ended September 30, 2017. • The Company updated 2018 full-year Normalized FFO guidance to $1.00 to $1.03 per diluted share. • Same Store Net Operating Income (“NOI”) for the quarter ended September 30, 2018 increased 2.8% on a GAAP basis and 0.8% on a cash basis compared to the quarter ended September 30, 2017. • Core operating property portfolio occupancy increased to 96.1% as of September 30, 2018 compared to 94.8% as of June 30, 2018. • Retail releasing spreads during the third quarter were positive 7.8% on a GAAP basis and positive 6.2% on a cash basis. There were no office lease renewals executed during the third quarter. • In October 2018, the Company reached an agreement to sell its at-cost purchase option to the developer of The Residences at Annapolis Junction for $5.0 million. The Company also agreed to extend the maturity of its mezzanine loan and allow the developer to refinance the project in order to realize the full potential value upon expected stabilization in 2019. The Company expects the developer to close on these transactions in the fourth quarter of 2018, at which time the Company anticipates repayment of approximately $12.0 million on its mezzanine loan in addition to the $5.0 million of option sale proceeds. • In October 2018, the Company announced its investment in Nexton Square, a new $45.0 million lifestyle center in the greater Charleston, South Carolina MSA. The Company will provide mezzanine financing and construction management/development services for the project. The Company will also have a below market option to purchase the project upon completion. • During the quarter ended September 30, 2018, the Company completed the acquisition of Lexington Square, a new 85,000 square foot Lowes Foods anchored retail center near Columbia, South Carolina for $26.8 million of total consideration, a portion of which will be paid in Operating Partnership units. • During the quarter ended September 30, 2018, the Company raised approximately $10.6 million of gross proceeds through its at-the-market equity offering program at an average price of $15.66 per share.
2018 Outlook & Assumptions 6 $ in millions, except per share data Outlook Low High Total NOI $78.7M $79.2M Construction Segment Gross Profit $5.9M $6.4M G&A expenses $10.8M $11.0M Interest income $10.1M $10.5M Interest expense $19.0M $19.2M Normalized FFO per diluted share $1.00 $1.03 Guidance Assumptions • Construction Segment Gross Profit includes a gain of $2.9M to $3.3M from the sale of the build to suit distribution center during the fourth quarter • Opportunistic sales of additional shares under the ATM program, assuming favorable market conditions • Interest expense is calculated based on the Forward LIBOR Curve, which forecasts rates rising to 2.46% by year end • Full year weighted average share count of 64.8 million
Summary Information 7 $ in thousands, except per share data Three months ended 9/30/2018 6/30/2018 3/31/2018 12/31/2017 9/30/2017 OPERATIONAL METRICS Net income $5,669 $5,945 $6,983 $5,768 $10,461 Net income per diluted share $0.09 $0.09 $0.11 $0.09 $0.17 Rental properties Net Operating Income (NOI) 18,987 19,341 19,462 18,570 17,573 General contracting and real estate services gross profit 977 567 636 641 1,824 Adjusted EBITDA(1) 20,124 19,466 19,399 18,345 19,203 Funds From Operations (FFO) 15,865 15,124 16,261 15,071 15,500 FFO per diluted share $0.24 $0.24 $0.26 $0.24 $0.25 Normalized FFO 15,650 15,242 15,376 14,525 15,493 Normalized FFO per diluted share $0.24 $0.24 $0.25 $0.23 $0.25 Annualized dividend yield 5.29% 5.37% 5.84% 4.89% 5.50% CAPITALIZATION Total common shares outstanding 49,576 48,768 45,205 44,938 44,937 Operating Partnership units outstanding 17,167 17,291 17,441 17,486 17,845 Common shares and OP units outstanding 66,743 66,059 62,646 62,424 62,782 Market price per common share $15.11 $14.90 $13.69 $15.53 $13.81 Equity market capitalization(2) $1,008,487 $984,279 $857,624 $969,445 $867,019 Total debt(3) 660,608 586,821 595,637 523,412 493,493 Total market capitalization 1,669,095 1,571,100 1,453,261 1,492,857 1,360,512 Less: cash (20,648) (15,418) (19,306) (22,916) (22,916) Total enterprise value $1,648,447 $1,555,682 $1,433,955 $1,469,941 $1,337,596 BALANCE SHEET METRICS Core Debt/enterprise value 34.9% 34.1% 38.4% 33.0% 34.2% Fixed charge coverage ratio 3.5x 3.5x 3.6x 3.5x 3.7x Core Debt/Annualized Core EBITDA 7.1x 6.8x 7.0x 6.6x 6.0x CORE PORTFOLIO OCCUPANCY Office(4) 93.8% 93.7% 92.2% 89.9% 89.2% Retail(4) 96.6% 96.7% 96.7% 96.5% 96.9% Multifamily(5) 97.1% 89.2% (6) 96.1% 92.9% 94.3% Weighted Average(7) 96.1% 94.8% 95.6% 94.2% 94.7% (1) Excludes gains on dispositions of real estate and mark-to-market adjustments on interest rate derivatives (2) Includes common shares and OP units (3) Excludes unamortized GAAP adjustments (4) Office and retail occupancy based on leased square feet as a % of respective total (5) Multifamily occupancy based on occupied units as a % of respective total (6) Includes impact of seasonality, attributed to the summer occupancy at the JHU student housing property (7) Total occupancy weighted by annualized base rent
Net Asset Value Component Data 8 In thousands Stabilized Portfolio NOI (Cash) Taxable REIT Subsidiary (TRS) Three months ended Annualized Trailing 12 Months 9/30/2018 9/30/2018 General contracting gross profit $2,821 Diversified Portfolio Office $0 $0 Retail 10,282 41,128 Non-Property Assets Multifamily 2,175 8,700 Non-Property Assets As of 9/30/2018 Total diversified portfolio NOI $12,457 $49,828 Cash and cash equivalents $17,732 Restricted cash 2,916 Virginia Beach Town Center Accounts receivable 18,224 Office(1) $2,859 $11,436 Notes receivable, including mezzanine investments 100,486 Retail(1) 2,059 8,236 Construction receivables, including retentions 21,959 Multifamily 1,475 5,900 Equity method investments (Durham City Center JV) 16,811 Total Virginia Beach Town Center NOI $6,393 $25,572 Other assets 59,474 Land held for development 2,979 Stabilized portfolio NOI - cash basis $18,850 $75,400 Total non-property assets $240,581 Signed leases not yet occupied or in free rent period $907 $3,629 Liabilities & Share Count Timing of mid-quarter transaction As of 9/30/2018 Acquisition $250 $1,000 Liabilities Disposition - - Mortgages and notes payable $653,750 Total timing mid-quarter transaction $250 $1,000 Accounts payable and accrued liabilities 15,752 Construction payables, including retentions 45,541 Total $20,007 $80,029 Other liabilities 42,679 Total liabilities $757,722 Development Pipeline 9/30/2018 Share Count Income producing property $69,000 Total common shares outstanding 49,576 Construction in progress 132,000 Total OP units outstanding 17,167 Other assets 3,000 Total common shares & OP units outstanding 66,743 Total cost to date $204,000 (1) Includes leases for space occupied by Armada Hoffler which are eliminated for GAAP purposes
Summary Balance Sheet 9 $ in thousands As of 9/30/2018 12/31/2017 Assets (Unaudited) Real estate investments: Income producing property $1,023,658 $910,686 Held for development 2,979 680 Construction in progress 139,450 83,071 Accumulated depreciation (185,831) (164,521) Net real estate investments 980,256 829,916 Cash and cash equivalents 17,732 19,959 Restricted cash 2,916 2,957 Accounts receivable, net 18,224 15,691 Notes receivable 100,486 83,058 Construction receivables, including retentions 21,959 23,933 Costs and estimated earnings in excess of billings 727 245 Equity method investments 16,811 11,411 Other assets 58,747 55,953 Total Assets $1,217,858 $1,043,123 Liabilities and Equity Indebtedness, net $653,750 $517,272 Accounts payable and accrued liabilities 15,752 15,180 Construction payables, including retentions 45,541 47,445 Billings in excess of costs and estimated earnings 1,767 3,591 Other liabilities 40,912 39,352 Total Liabilities 757,722 622,840 Total Equity 460,136 420,283 Total Liabilities and Equity $1,217,858 $1,043,123
Summary Income Statement 10 In thousands, except per share data Three months ended Nine months ended 9/30/2018 9/30/2017 9/30/2018 9/30/2017 Revenues (Unaudited) Rental revenues $28,930 $27,096 $86,227 $81,083 General contracting and real estate services 19,950 41,201 63,654 161,391 Total Revenues 48,880 68,297 149,881 242,474 Expenses Rental expenses 7,103 6,830 20,049 19,069 Real estate taxes 2,840 2,693 8,388 7,797 General contracting and real estate services 18,973 39,377 61,474 154,588 Depreciation and amortization 10,196 9,239 28,653 28,018 General and administrative 2,367 2,098 8,092 7,762 Acquisition, development & other pursuit costs 69 61 162 477 Impairment charges 3 19 101 50 Total Expenses 41,551 60,317 126,919 217,761 Operating Income 7,329 7,980 22,962 24,713 Interest income 2,545 1,910 7,152 4,966 Interest expense (4,677) (4,253) (13,547) (13,282) Loss on extinguishment of debt (11) - (11) - Gain on real estate dispositions - 4,692 - 8,087 Change in fair value of interest rate derivatives 298 87 1,256 300 Other income 65 74 233 154 Income before taxes 5,549 10,490 18,045 24,938 Income tax benefit (provision) 120 (29) 552 (781) Net Income $5,669 $10,461 $18,597 $24,157 Per Diluted Share & Unit $0.09 $0.17 $0.29 $0.41 Weighted Average Shares & Units - Diluted 66,362 62,779 64,052 59,423
FFO, Normalized FFO & Adjusted FFO(1) 11 $ in thousands, except per share data Three months ended (Unaudited) 9/30/2018 6/30/2018 3/31/2018 12/31/2017 9/30/2017 Funds From Operations Net income $5,669 $5,945 $6,983 $5,768 $10,461 Earnings per diluted share $0.09 $0.09 $0.11 $0.09 $0.17 Depreciation and amortization 10,196 9,179 9,278 9,303 9,239 Gains on dispositions of operating real estate(2) - - - - (4,200) FFO $15,865 $15,124 $16,261 $15,071 $15,500 FFO per diluted share $0.24 $0.24 $0.26 $0.24 $0.25 Normalized FFO Acquisition, development & other pursuit costs 69 9 84 171 61 Loss on extinguishment of debt 11 - - 50 - Impairment charges 3 98 - 60 19 Change in fair value of interest rate derivatives (298) 11 (969) (827) (87) Normalized FFO $15,650 $15,242 $15,376 $14,525 $15,493 Normalized FFO per diluted share $0.24 $0.24 $0.25 $0.23 $0.25 Adjusted FFO Non-cash stock compensation 252 271 555 276 215 Acquisition, development & other pursuit costs (69) (9) (84) (171) (61) Tenant improvements, leasing commissions, lease incentives (3) (899) (1,102) (1,058) (1,115) (707) Property related capital expenditures (884) (1,098) (1,321) (1,474) (1,167) Non-cash interest expense 270 231 326 334 380 Net effect of straight-line rents (709) (415) (478) (166) (159) Amortization of leasing incentives & above (below) market rents (43) (46) (56) (55) (50) AFFO $13,568 $13,074 $13,260 $12,154 $13,944 Weighted Average Common Shares Outstanding 49,194 45,928 45,132 44,937 44,934 Weighted Average Operating Partnership ("OP") Units Outstanding 17,168 17,286 17,406 17,490 17,845 Total Weighted Average Common Shares and OP Units Outstanding 66,362 63,214 62,538 62,427 62,779 (1) See definitions on pages 29-30 (2) Excludes gain on non-operating real estate of $0.5M for the three months ended 9/30/2017 (3) Excludes development, redevelopment, and first generation space
Outstanding Debt 12 Debt Maturities & Principal Payments $ in thousands Effective Rate as of Outstanding as of Debt Stated Rate 9/30/2018 Maturity Date 2018 2019 2020 2021 2022 Thereafter 9/30/2018 Secured Notes Payable - Core Debt Lightfoot Marketplace (1) L+1.75% 4.01% 11/14/2018 $10,500 $10,500 North Point Center Note 1 6.45% 6.45% 2/5/2019 56 9,352 9,408 Southgate Square L+1.60% 3.86% 4/29/2021 220 880 880 19,682 21,662 Encore Apartments 3.25% 3.25% 9/10/2021 124 504 24,338 24,966 4525 Main Street 3.25% 3.25% 9/10/2021 158 646 31,230 32,034 Hanbury Village 3.78% 3.78% 8/15/2022 123 504 522 544 17,449 19,142 Socastee Commons 4.57% 4.57% 1/6/2023 25 105 109 115 120 4,223 4,697 Sandbridge Commons L+1.75% 4.01% 1/17/2023 58 238 247 257 268 7,247 8,315 249 Central Park Retail L+1.60% 3.86% 8/10/2023 52 217 230 245 260 16,093 17,097 South Retail L+1.60% 3.86% 8/10/2023 23 95 101 107 114 7,066 7,506 Fountain Plaza Retail L+1.60% 3.86% 8/10/2023 32 131 139 147 156 9,684 10,289 Johns Hopkins Village L+1.25% 4.19% (2) 8/7/2025 222 908 941 988 1,031 48,840 52,930 North Point Center Note 2 7.25% 7.25% 9/15/2025 29 121 130 140 151 1,804 2,375 Lexington Square 4.50% 4.50% 9/1/2028 39 245 256 268 280 13,892 14,980 Smith's Landing 4.05% 4.05% 6/1/2035 200 822 856 892 928 15,486 19,184 Liberty Apartments 5.66% 5.66% 11/1/2043 63 260 273 291 308 13,307 14,502 The Cosmopolitan 3.35% 3.35% 7/1/2051 188 766 792 819 847 41,244 44,656 Total - Secured Core Debt $11,830 $14,926 $6,626 $80,063 $21,912 $178,886 314,243 Secured Notes Payable - Development Pipeline River City L+1.50% 3.76% 5/31/2019 5,587 5,587 Greenside L+2.95% 5.21% 2/24/2020 23,371 23,371 Premier L+3.50% 5.76% 6/29/2020 16,669 16,669 Summit Place L+3.24% 5.50% 1/1/2021 6,259 6,259 Hoffler Place L+3.24% 5.50% 1/1/2021 5,797 5,797 Market at Mill Creek L+1.55% 3.81% 7/12/2025 3,976 3,976 Brooks Crossing Office L+1.60% 3.86% 7/1/2025 2,706 2,706 Total - Development Pipeline - 5,587 40,040 12,056 - 6,682 64,365 Total Secured Notes Payable $11,830 $20,513 $46,666 $92,119 $21,912 $185,568 $378,608 Unsecured Core Debt Senior unsecured line of credit L+1.40% - 2.00% 3.81% 10/26/2021 102,000 102,000 Senior unsecured term loan L+1.35% - 1.95% 3.76% 10/26/2022 80,000 80,000 Senior unsecured term loan L+1.35% - 1.95% 3.50% (2) 10/26/2022 50,000 50,000 Senior unsecured term loan L+1.35% - 1.95% 4.28% (2) 10/26/2022 50,000 50,000 Total - Unsecured Core Debt - - - 102,000 180,000 - 282,000 Total Notes Payable excluding GAAP Adjustments $11,830 $20,513 $46,666 $194,119 $201,912 $185,568 $660,608 Weighted Average Interest Rate 4.0% 5.1% 5.2% 3.8% 3.8% 4.1% 4.0% Balloon Payments 10,500 14,920 40,040 188,298 197,109 110,074 560,941 Principal amortization 1,330 5,593 6,626 5,821 4,803 75,494 99,667 Total Consolidated Debt $11,830 $20,513 $46,666 $194,119 $201,912 $185,568 $660,608 Fixed-rate Debt(3) 945 13,365 5,029 59,625 121,114 138,796 338,874 Variable-rate Debt(4) 10,885 7,148 41,637 134,494 80,798 46,772 321,734 Total Consolidated Debt $11,830 $20,513 $46,666 $194,119 $201,912 $185,568 $660,608 GAAP Adjustments (6,858) Total Notes Payable $653,750 (1) In October 2018, the Company refinanced the loan secured by Lightfoot. The new $10.5 million floating-rate note has a 5-year term and bears an interest rate of LIBOR +1.75% (drops to 1.60% upon stabilization). The Company simultaneously entered into an interest rate swap agreement that fixed the LIBOR rate at 3.017%. 30 Day LIBOR as of (2) Subject to an interest rate swap lock 2.261% (3) Includes debt subject to interest rate swap locks 9/30/2018 (4) Excludes debt subject to interest rate swap locks
Core Debt to Core EBITDA(1) 13 $ in thousands Three months ended 9/30/2018 6/30/2018 3/31/2018 12/31/2017 9/30/2017 Net Income $5,669 $5,945 $6,983 $5,768 $10,461 Excluding: Interest expense 4,677 4,497 4,373 4,157 4,253 Income tax provision (benefit) (120) (166) (266) (56) 29 Depreciation and amortization 10,196 9,179 9,278 9,303 9,239 (Gain) Loss on real estate dispositions - - - - (4,692) Change in fair value of interest rate derivatives (298) 11 (969) (827) (87) Adjusted EBITDA $20,124 $19,466 $19,399 $18,345 $19,203 Other adjustments: Loss on extinguishment of debt 11 - - 50 - Non-cash stock compensation 252 271 555 276 215 Development Pipeline (94) (106) (219) (339) (301) Total Other Adjustments 169 165 336 (13) (86) Core EBITDA $20,293 $19,631 $19,735 $18,332 $19,117 Total Debt(2) $660,608 $586,821 $595,637 $523,412 $493,493 Adjustments to Debt: (Less) Development Pipeline(2) (64,365) (40,232) (25,377) (15,879) (12,894) (Less) Cash & restricted cash (20,648) (15,418) (19,306) (22,916) (22,916) Core Debt $575,595 $531,171 $550,954 $484,617 $457,683 Core Debt/Annualized Core EBITDA 7.1x 6.8x 7.0x 6.6x 6.0x (1) See definitions on page 31 (2) Excludes GAAP Adjustments
Debt Information 14 $ in thousands Total Debt Composition Weighted Average Percent of Debt Interest Rate Maturity Unencumbered Summary Secured vs. Unsecured Debt Unsecured Debt 42.7% 3.8% 3.7 Yrs 9/30/2018 Secured Debt 57.3% 4.2% 8.8 Yrs % of Total Properties 67.2% Variable vs. Fixed-rate Debt % of Annualized Base Rent 54.1% Variable-rate Debt(1) 48.7% 4.1% 3.2 Yrs Fixed-rate Debt(2)(3) 51.3% 4.0% 9.9 Yrs Fixed-rate and Hedged Debt(2)(3) 96.7% Total 4.0% 6.6 Yrs Interest Rate Cap Agreements $250,000 Debt Maturities Effective Date Maturity Date Strike Rate Notional Amount $200,000 February 7, 2017 March 1, 2019 1.50% $50,000 June 23, 2017 July 1, 2019 1.50% 50,000 $150,000 September 18, 2017 October 1, 2019 1.50% 50,000 November 28, 2017 December 1, 2019 1.50% 50,000 $100,000 March 7, 2018 April 1, 2020 2.25% 50,000 July 16, 2018 August 1, 2020 2.50% 50,000 Total Interest Rate Caps 300,000 $50,000 (2)(3) $0 Fixed-rate Debt 338,874 2018 2019 2020 2021 2022 2023 and Fixed-rate and Hedged Debt $638,874 thereafter % of Total(3) 96.7% (1) Excludes debt subject to interest rate swap locks (2) Includes debt subject to interest rate swap locks (3) Excludes GAAP adjustments
Capitalization & Financial Ratios 15 $ in thousands Capitalization as of September 30, 2018 Capital Structure as of September 30, 2018 Debt % of Total Carrying Value Unsecured credit facility 15% $102,000 Unsecured term loans 27% 180,000 Mortgages payable 58% 378,608 Debt Total debt $660,608 Equity 40% 60% Equity % of Total Shares/Units Stock Price Market Value Common stock (NYSE: AHH) 74% 49,576 $15.11 $749,093 Common units 26% 17,167 $15.11 259,393 Equity market capitalization 66,743 $1,008,487 Total market capitalization $1,669,095 Debt/Market capitalization 39.6% Dividend Data Liquidity as of September 30, 2018 Trailing 12 Months Common dividends and distributions $49,362 Cash on hand $20,648 AFFO 52,056 Availability under credit facility 45,900 AFFO payout ratio 94.8% Availability under construction loan 107,957 $174,505
Property Portfolio 16 As of September 30, 2018 Net Rentable Square Feet (RSF)(1) Town Unencumbered Core Development Core Development ABR per Property Anchor Tenant(s) Location Center ABR Year Built Properties Properties Total Occupancy(2) Leased(2) ABR(3) Leased SF(3) Retail Properties Cheesecake Factory, Brooks Brothers, ✓ 249 Central Park Retail (4) Virginia Beach, VA - 2004 92,710 - 92,710 98.0% - $2,597,674 $28.58 Gordon Biersch Alexander Pointe Harris Teeter Salisbury, NC 100% 1997 57,710 - 57,710 97.6% - 654,843 11.63 Bermuda Crossroads (6) Food Lion, OfficeMax Chester, VA 100% 2001 122,566 - 122,566 100.0% - 1,756,053 14.33 Broad Creek Shopping Center(6)(9) Home Depot, Food Lion, PetSmart Norfolk, VA 100% 1997/2001 251,504 - 251,504 99.0% - 3,835,098 15.40 Broadmoor Plaza Kroger, Staples, Jo-Ann Fabrics South Bend, IN 100% 1980 115,059 - 115,059 96.5% - 1,354,501 12.20 Brooks Crossing Various Small Shops Newport News, VA 100% 2016 - 18,349 18,349 - 66.3% 169,380 13.92 Columbus Village Barnes & Noble, Shake Shack Virginia Beach, VA ✓ 100% 1980/2013 62,362 - 62,362 100.0% - 1,373,679 22.03 Columbus Village II Regal Cinemas, BB&B Virginia Beach, VA ✓ 100% 1995/1996 92,061 - 92,061 96.7% - 1,595,334 17.92 ✓ Commerce Street Retail (5) Yard House Virginia Beach, VA 100% 2008 19,173 - 19,173 100.0% - 863,739 45.05 Courthouse 7-Eleven 7-Eleven Virginia Beach, VA 100% 2011 3,177 - 3,177 100.0% - 139,311 43.85 Dick's at Town Center Dick's Sporting Goods, USI Virginia Beach, VA ✓ 100% 2002 103,335 - 103,335 100.0% - 1,251,255 12.11 Dimmock Square Best Buy, Old Navy Colonial Heights, VA 100% 1998 106,166 - 106,166 97.2% - 1,765,873 17.12 Fountain Plaza Retail Ruth's Chris, Ann Taylor Virginia Beach, VA ✓ - 2004 35,961 - 35,961 100.0% - 1,019,366 28.35 Gainsborough Square Food Lion, Rite Aid Chesapeake, VA 100% 1999 88,862 - 88,862 92.5% - 1,255,214 15.28 Greentree Shopping Center Various Small Shops Chesapeake, VA 100% 2014 15,719 - 15,719 92.6% - 294,752 20.25 Hanbury Village(6) Harris Teeter, Walgreens Chesapeake, VA 32% 2006/2009 116,635 - 116,635 98.6% - 2,486,153 21.61 Harper Hill Commons (6) Harris Teeter Winston-Salem, NC 100% 2004 96,914 - 96,914 83.3% - 921,910 11.42 Harrisonburg Regal Regal Cinemas Harrisonburg, VA 100% 1999 49,000 - 49,000 100.0% - 683,550 13.95 Indian Lakes Crossing(6) Harris Teeter Virginia Beach, VA 100% 2008 64,973 - 64,973 95.0% - 837,232 13.57 Lexington Square Lowes Foods Lexington, SC - 2017 85,531 - 85,531 96.1% - 1,773,182 21.57 Lightfoot Marketplace(6) Harris Teeter, CHKD Williamsburg, VA - 2016 124,735 - 124,735 85.6% - 1,816,987 17.01 North Hampton Market PetSmart, Hobby Lobby Taylors, SC 100% 2004 114,935 - 114,935 100.0% - 1,472,733 12.81 Harris Teeter, PetSmart, Home Depot, North Point Center(6) Durham, NC 67% 1998/2009 496,246 - 496,246 99.7% - 3,810,131 7.70 Costco Oakland Marketplace(6) Kroger Oakland, TN 100% 2004 64,600 - 64,600 97.8% - 460,000 7.28 Parkway Centre Publix Moultrie, GA 100% 2017 61,200 - 61,200 92.2% - 746,016 13.23 Parkway Marketplace Rite Aid Virginia Beach, VA 100% 1998 37,804 - 37,804 100.0% - 767,645 20.31 Patterson Place BB&B, PetSmart, DSW, AC Moore Durham, NC 100% 2004 160,942 - 160,942 94.6% - 2,381,604 15.65 Perry Hall Marketplace Safeway Perry Hall, MD 100% 2001 74,256 - 74,256 100.0% - 1,261,436 16.99 Premier Retail Williams Sonoma, Pottery Barn Virginia Beach, VA ✓ - 2018 - 38,586 38,586 - 63.9% 829,126 33.64 Providence Plaza Cranfill, Sumner & Hartzog, Chipotle Charlotte, NC 100% 2007/2008 103,118 - 103,118 97.5% - 2,684,367 26.71 Renaissance Square Harris Teeter Davidson, NC 100% 2008 80,467 - 80,467 90.4% - 1,263,119 17.37 Sandbridge Commons(6) Harris Teeter Virginia Beach, VA - 2015 69,417 - 69,417 100.0% - 914,707 13.18 Socastee Commons Bi-Lo Myrtle Beach, SC - 2000/2014 57,273 - 57,273 96.7% - 629,821 11.37 Southgate Square Burlington, PetSmart, Michaels Colonial Heights, VA - 1991/2016 220,131 - 220,131 89.7% - 2,693,889 13.65 South Retail lululemon, free people, CPK Virginia Beach, VA ✓ - 2002 38,515 - 38,515 100.0% - 974,087 25.29 South Square(6) Ross, Petco, Office Depot Durham, NC 100% 1977/2005 109,590 - 109,590 97.3% - 1,842,619 17.29 Southshore Shops Buffalo Wild Wings Chesterfield, VA 100% 2006 40,333 - 40,333 93.2% - 772,286 20.54 Stone House Square(6) Weis Markets Hagerstown, MD 100% 2008 112,274 - 112,274 93.1% - 1,807,921 17.30 Studio 56 Retail McCormick & Schmick's Virginia Beach, VA ✓ 100% 2007 11,594 - 11,594 100.0% - 419,296 36.16 Tyre Neck Harris Teeter(9) Harris Teeter Portsmouth, VA 100% 2011 48,859 - 48,859 100.0% - 533,052 10.91 Waynesboro Commons Kroger Waynesboro, VA 100% 1993 52,415 - 52,415 100.0% - 435,072 8.30 Wendover Village BB&B, T.J. Maxx, Petco Greensboro, NC 100% 2004 171,653 - 171,653 100.0% - 3,157,814 18.40 Total / Weighted Avg Retail Portfolio 72% 3,829,775 56,935 3,886,710 96.6% 64.7% $58,301,827 $15.61
Property Portfolio - Continued 17 As of September 30, 2018 Net Rentable Square Feet (RSF)(1) Town Unencumbered Core Development Core Development ABR per Leased Property Anchor Tenant Location Center ABR Year Built Properties Properties Total Occupancy(2) Leased(2) ABR(3) SF(3) Office Properties 4525 Main Street Clark Nexsen, Anthropologie, Mythics Virginia Beach, VA ✓ - 2014 237,893 - 237,893 94.8% - $6,434,782 $28.53 ✓ Armada Hoffler Tower(4)(5) AHH, Troutman Sanders, Williams Mullen Virginia Beach, VA 100% 2002 324,247 - 324,247 93.4% - 8,762,085 28.92 ✓ One Columbus(5) BB&T, HBA Virginia Beach, VA 100% 1984 128,876 - 128,876 92.2% - 2,917,377 24.54 Two Columbus The Art Institute Virginia Beach, VA ✓ 100% 2009 108,448 - 108,448 94.2% - 2,671,582 26.16 Total / Weighted Average Office Portfolio 69% 799,464 - 799,464 93.8% - $20,785,827 $27.73 Units Development/ Development/ Town Unencumbered Core Redevelopment Core Redevelopment Monthly Rent per Multifamily Location Center ABR Year Built Properties Properties Total Occupancy (2) Occupancy(2) ABR (7) Occupied Unit Encore Apartments Virginia Beach, VA ✓ - 2014 286 - 286 94.8% - $4,253,904 $1,308.09 Greenside Apartments Charlotte, NC - 2018 - 225 225 - 19.6% 831,108 1,574.07 Johns Hopkins Village(8)(9) Baltimore, MD - 2016 157 - 157 99.8% - 7,663,920 1,126.38 (10) Liberty Apartments(8)(9) Newport News, VA - 2013 239 - 239 94.8% - 2,339,064 860.58 Premier Apartments Virginia Beach, VA ✓ - 2018 - 131 131 - 29.0% 619,002 1,357.46 Smith's Landing(9) Blacksburg, VA - 2009 284 - 284 100.0% - 4,063,008 1,192.20 The Cosmopolitan(8)(11) Virginia Beach, VA ✓ - 2006 - 306 306 - 93.8% 5,440,896 1,579.82 Total / Weighted Avg Multifamily Portfolio - 966 662 1,628 97.1% 55.7% $25,210,902 $1,253.64 Square Footage Number of Leased Pursuant to Properties Subject to Ground Lease Ground Leases Ground Leases ABR (1) The net rentable square footage for each of our retail & office properties is the sum of (a) the square footage of Bermuda Crossroads 2 11,000 $179,685 existing leases, plus (b) for available space, management’s estimate of net rentable square footage based, in Broad Creek Shopping Center 6 23,825 632,401 part, on past leases. The net rentable square footage included in office leases is generally consistent with the Hanbury Village 2 55,586 1,082,118 Building Owners and Managers Association, or BOMA, 1996 measurement guidelines. Harper Hill Commons 1 41,520 373,680 (2) Occupancy for each of our retail & office properties is calculated as (a) square footage under executed leases as Indian Lakes 1 50,311 592,385 of September 30, 2018, divided by (b) net rentable square feet, expressed as a percentage. Occupancy for our Lightfoot Marketplace 3 60,442 660,375 multifamily properties is calculated as (a) total units occupied as of September 30, 2018, divided by (b) total North Point Center 4 280,556 1,136,923 units available, expressed as a percentage. Oakland Marketplace 1 45,000 186,300 (3) For the properties in our office and retail portfolios, annualized base rent, or ABR, is calculated by multiplying (a) Sandbridge Commons 1 53,288 583,000 monthly base rent (defined as cash base rent, before contractual tenant concessions and abatements, and South Square 1 1,778 60,000 excluding tenant reimbursements for expenses paid by us) as of September 30, 2018 for in-place leases as of Stone House Square 1 3,650 181,500 Tyre Neck Harris Teeter 1 48,859 533,052 such date by (b) 12, and does not give effect to periodic contractual rent increases or contingent rental revenue Total / Weighted Avg 24 675,815 $6,201,420 (e.g., percentage rent based on tenant sales thresholds). ABR per leased square foot is calculated by dividing (a) ABR by (b) square footage under in-place leases as of September 30, 2018. In the case of triple net or modified (7) For the properties in our multifamily portfolio, ABR is calculated by multiplying (a) base rental payments for the gross leases, our calculation of ABR does not include tenant reimbursements for real estate taxes, insurance, month ended September 30, 2018 by (b) 12. common area or other operating expenses. (8) The ABR for Liberty, Cosmopolitan, and Johns Hopkins Village excludes $290K, $791K and $1.2M from ground (4) As of September 30, 2018, the Company occupied 41,103 square feet at these two properties at an ABR of floor retail leases, respectively. $1.3M, or $30.95 per leased square foot, which amounts are reflected in this table. The rent paid by us is (9) The Company leases the land underlying this property pursuant to a ground lease. eliminated in accordance with GAAP in the consolidated financial statements. (10) Monthly rent per occupied unit is calculated by dividing total base rental payments for the month ended (5) Includes ABR pursuant to a rooftop lease. September 30, 2018 by the number of occupied beds. (6) Net rentable square feet at certain of our retail properties includes pad sites leased pursuant to the ground (11) Excludes 36 units offline for redevelopment. leases in the table to the right:
Development Pipeline 18 $ in thousands Schedule(1) Property % Leased Construction Initial Stabilized Estimated Construction Loan Cost to AHH Development, Not Delivered Type Estimated(1) or LOI Start Occupancy Operation(2) Cost(1) Commitment Date Ownership % Anchor Tenants & Other Notes Lightfoot Outparcel Retail NA 100% 1Q18 3Q18 1Q19 $ 4,000 $ - $ 3,000 70%(3) Panera Williamsburg, VA Summit Place (Meeting Street) Multifamily 114 units NA 3Q17 3Q19 3Q19 53,000 34,750 30,000 90% NA Charleston, SC Hoffler Place (King Street) Multifamily 74 units NA 3Q17 3Q19 3Q19 48,000 31,750 28,500 93% NA Charleston, SC Market at Mill Creek Retail 73,000 SF 90% 1Q18 1Q19 2Q19 23,000 16,185 14,000 70%(3) Lowes Foods Mt. Pleasant, SC Brooks Crossing Office 100,000 sf 100% 1Q18 1Q19 2Q19 20,000 15,625 9,000 65%(3) Huntington Ingalls Industries Newport News, VA Wills Wharf Office 325,000 sf 60% 3Q18 1Q20 3Q20 117,000 TBD 11,000 100% WeWork, Canopy by Hilton Baltimore, MD Total Development, Not Delivered 265,000 98,310 95,500 Development, Delivered Not Stabilized Brooks Crossing Retail 18,000 sf 66% 3Q15 3Q16 2Q19 3,000 - 3,000 65%(3) Misc. small shops Newport News, VA Greenside (Harding Place) Multifamily 225 Units 31% 3Q16 3Q18 3Q19 47,000 29,750 46,000 80%(3) NA Charlotte, NC Premier Apartments (Town Center Phase VI) Multifamily 131 Units 50% 4Q16 3Q18 2Q19 29,000 18,622 28,500 100% NA Virginia Beach, VA Premier Retail (Town Center Phase VI) Retail 39,000 sf 75% 4Q16 3Q18 3Q19 14,500 9,311 11,500 100% Williams Sonoma, Pottery Barn Virginia Beach, VA Total Development, Delivered Not Stabilized 93,500 57,683 89,000 Total $358,500 $155,993 $184,500 Construction Loan Equity Joint Ventures - Minority Partner Project Cost Commitment Investment One City Center - 37% JV Office 153,000 sf 86% 1Q16 3Q18 4Q18 $45,500 $25,250 $20,250 100% Duke University , WeWork Durham, NC Q3 2018 YTD Capitalized Interest $1,463 $3,517 Capitalized Overhead $907 $2,626 (1) Represents estimates that may change as the development process proceeds (2) First full stabilized quarter Premier Summit Place One City Center (3) AHH earns a preferred return on equity prior to any distributions to JV Partners
Redevelopment and Mezzanine Investments 19 $ in thousands Schedule(1) Property Units Out of % Leased Construction Anticipated Same-Store Estimated Cost to Redevelopment Type Service or LOI Start Completion Sales Cost(1) Date The Cosmopolitan Multifamily 36 units 94% 1Q18 4Q19 1Q21 $10,000 $616 Virginia Beach, VA Property % Leased Initial Option to Loan Mezzanine Mezzanine Investments Type Estimated(1) or LOI Occupancy Loan Maturity Interest Rate Purchase Balance Interest QTD The Residences at Annapolis Junction (2) Multifamily 416 units 65% 3Q17 2Q20 10% $106,000 $46,500 $1,166 Annapolis Junction, MD 1405 Point (Point Street Apartments) Multifamily 289 units 82% 1Q18 3Q21 8% 99,000 28,000 547 Baltimore, MD North Decatur Square (Whole Foods) Retail 86,000 sf 100% 4Q18 2Q22 15% - 15,500 569 Decatur, GA Nexton Square (3) Retail 120,000 sf 78% 2Q19 1Q19 10% TBD 2,000 19 Summerville, SC Delray Plaza (Whole Foods) Retail 83,000 sf 92% 3Q19 4Q20 15% - 7,000 228 Delray Beach, FL Total Mezzanine Investment $205,000 $99,000 $2,529 (1) Represents estimates that may change as the development process proceeds (2) Reached an agreement to sell our at-cost purchase option to the developer of Annapolis Junction 1405 Point North Decatur Square Wills Wharf (3) Represents a $2M bridge loan entered during the quarter
Acquisitions & Dispositions 20 $ in thousands ACQUISITIONS Reinvested $ Value of Cash Cap Properties Location Square Feet Purchase Price(1) 1031 Proceeds OP Units/Stock(2) Rate Purchase Date Anchor Tenants Lexington Square Lexington, SC 85,531 $26,758 - $2,624 6.7% 3Q18 Lowes Foods Parkway Centre Moultrie, GA 61,200 11,200 - 1,624 6.4% 1Q18 Publix Indian Lakes Virginia Beach, VA 71,020 14,700 - - 7.1% 1Q18 Harris Teeter, Wawa Wendover Village Outparcel Greensboro, NC 35,895 14,300 7,900 - 7.7% 3Q17 Panera, Rooms to Go Kids Renaissance Square Davidson, NC 80,468 17,085 - - 7.1% 4Q16 Harris Teeter Columbus Village II Virginia Beach, VA 92,061 26,200 - 26,200 5.6% 4Q16 Regal, Bed Bath & Beyond Southshore Shops Midlothian, VA 40,333 9,160 - 2,475 7.8% 3Q16 Buffalo Wild Wings Southgate Square Colonial Heights, VA 220,131 38,585 - 17,485 7.3% 2Q16 PetSmart, Michael's, Burlington Retail Portfolio (11 properties) Mid-Atlantic 1,082,681 170,500 87,000 - 7.2% 1Q16 Harris Teeter, Bed Bath & Beyond Providence Plaza Charlotte, NC 103,118 26,200 14,000 - 7.3% 3Q15 Chipotle Socastee Commons Myrtle Beach, SC 57,573 8,600 3,600 - 7.3% 3Q15 BiLo Columbus Village Virginia Beach, VA 65,746 21,025 - 14,025 6.4% 3Q15 Barnes & Noble Perry Hall Marketplace & Maryland 182,949 39,555 15,200 4,155 7.4% 2Q15 Safeway & Weis Markets Stone House Square Dimmock Square Colonial Heights, VA 106,166 19,662 - 9,662 7.3% 3Q14 Old Navy, Best Buy, Pier 1 Total/Weighted Average 2,284,872 $443,530 $127,700 $78,250 7.1% DISPOSITIONS Square Cash Cap Properties Location Feet/Units Sale Price Cash Proceeds Gain on Sale Rate Disposition Date Anchor Tenants Indian Lakes Wawa Virginia Beach, VA 6,047 $4,400 $4,400 $0 5.4% 2Q18 Wawa Commonwealth of VA Buildings Virginia Beach & Chesapeake, VA 47,366 13,150 8,000 4,194 6.8% 3Q17 Commonwealth of VA Greentree Wawa Chesapeake, VA 5,088 4,600 4,400 3,396 5.0% 1Q17 Wawa Oyster Point(3) Newport News, VA 100,139 6,500 - 3,793 16.4% 3Q16 GSA Non-Core Retail Portfolio Various 174,758 12,850 12,600 (27) 7.1% 2Q16 - 3Q16 Kroger, Family Dollar Richmond Tower Richmond, VA 206,969 78,000 77,000 26,674 7.9% 1Q16 Williams Mullen Oceaneering Chesapeake, VA 154,000 30,000 10,000 4,987 6.7% 4Q15 Oceaneering International Whetstone Apartments Durham, NC 203 units 35,625 17,600 7,210 5.7% 2Q15 NA Sentara Williamsburg Williamsburg, VA 49,200 15,450 15,200 6,197 6.3% 1Q15 Sentara Virginia Natural Gas Virginia Beach, VA 31,000 8,900 7,400 2,211 6.3% 4Q14 Virginia Natural Gas Total/Weighted Average 774,567 sf/ $209,475 $156,600 $58,635 7.2% 203 units (1) Contractual purchase price (2) Value of OP Units/Stock at issuance (3) Anchor tenant vacated 12/31/16, which would represent a 2.5% Cash Cap Rate
Construction Business Summary 21 $ in thousands Total Contract Work in Place as Estimated Date Location Value of 9/30/2018 Backlog of Completion Highlighted Projects One City Center Durham, NC $67,712 $63,418 $4,294 1Q 2019 Dinwiddie Municipal Complex Dinwiddie, VA 24,225 21,547 2,678 2Q 2019 Sub Total 91,937 84,965 6,972 All Other Projects 560,097 541,889 18,208 Total $652,034 $626,854 $25,180 Gross Profit Summary Trailing 12 Q3 2018 Months (Unaudited) Revenue $19,950 $96,297 Expense (18,973) (93,476) Gross Profit $977 $2,821
Same Store NOI by Segment 22 $ in thousands (Reconciliation to GAAP located in appendix on pg. 35) Three months ended Nine months ended 9/30/2018 9/30/2017 $ Change % Change 9/30/2018 9/30/2017 $ Change % Change Office(1) (Unaudited) (Unaudited) Revenue $5,149 $4,673 $476 10.2% $10,624 $10,258 $366 3.6% Expenses(2) 1,972 1,833 139 7.6% 4,175 3,903 272 7.0% Net Operating Income 3,177 2,840 337 11.9% 6,449 6,355 94 1.5% Retail(1) Revenue 15,261 15,264 (3) 0.0% 45,978 45,685 293 0.6% Expenses(2) 3,836 3,892 (56) -1.4% 11,293 11,091 202 1.8% Net Operating Income 11,425 11,372 53 0.5% 34,685 34,594 91 0.3% Multifamily(1) Revenue 3,027 2,922 105 3.6% 8,800 8,619 181 2.1% Expenses(2) 1,321 1,263 58 4.6% 3,704 3,621 83 2.3% Net Operating Income 1,706 1,659 47 2.8% 5,096 4,998 98 2.0% Same Store Net Operating Income (NOI) $16,308 $15,871 $437 2.8% $46,230 $45,947 $283 0.6% Net effect of straight-line rents ($421) (115) (306) 143 187 (44) Amortization of lease incentives and above (below) market rents ($53) (49) (4) (315) (301) (14) Same store portfolio NOI, cash basis $15,834 $15,707 $127 0.8% $46,058 $45,833 $225 0.5% NOI, Cash Basis: Office $2,724 $2,863 ($139) -4.9% $6,420 $6,900 ($480) -7.0% Retail 11,393 11,173 220 2.0% 34,507 33,899 608 1.8% Multifamily 1,717 1,671 46 2.8% 5,131 5,034 97 1.9% $15,834 $15,707 $127 0.8% $46,058 $45,833 $225 0.5% NOI: Office $3,177 $2,840 $337 11.9% $6,449 $6,355 $94 1.5% Retail 11,425 11,372 53 0.5% 34,685 34,594 91 0.3% Multifamily 1,706 1,659 47 2.8% 5,096 4,998 98 2.0% $16,308 $15,871 $437 2.8% $46,230 $45,947 $283 0.6% (1) See page 32 for Same Store vs. Non – Same Store Properties (2) Excludes expenses associated with the Company’s in house asset management division of $493K and $499K for the 3 months ended 9/30/18 & 9/30/17, respectively, as well as $1.5M and $1.4M for 9 months ended 9/30/18 & 9/30/17, respectively
Top 10 Tenants by Annualized Base Rent 23 $ in thousands As of September 30, 2018 Office Portfolio Number Lease Annualized % of Office Portfolio % of Total Portfolio Tenant of Leases Expiration Base Rent Annualized Base Rent Annualized Base Rent Clark Nexsen 1 2029 $ 2,537 12.2% 2.4% Mythics 1 2030 1,160 5.6% 1.1% Hampton University 2 2023 - 2024 1,054 5.1% 1.0% Pender & Coward 1 2030 882 4.2% 0.8% Kimley-Horn 1 2027 859 4.1% 0.8% Troutman Sanders 1 2025 855 4.1% 0.8% The Art Institute 1 2019 852 4.1% 0.8% City of Va Beach Development Authority 1 2024 722 3.5% 0.7% Cherry Bekaert 1 2022 708 3.4% 0.7% Williams Mullen 1 2028 655 3.2% 0.6% Top 10 Total $ 10,284 49.5% 9.7% Retail Portfolio Number Lease Annualized % of Retail Portfolio % of Total Portfolio Tenant of Leases Expiration Base Rent Annualized Base Rent Annualized Base Rent Kroger/Harris Teeter 12 2018 - 2036 $ 6,423 11.0% 6.2% Home Depot 2 2019 - 2023 2,236 3.8% 2.1% Regal Cinemas 2 2019 - 2022 1,679 2.9% 1.6% Bed, Bath, & Beyond 4 2020 - 2024 1,677 2.9% 1.6% PetSmart 5 2020 - 2022 1,438 2.5% 1.4% Food Lion 3 2019 - 2022 1,291 2.2% 1.2% Dick's Sporting Goods 1 2020 840 1.4% 0.8% Safeway 2 2021 821 1.4% 0.8% Weis Markets 1 2028 802 1.4% 0.8% Ross Dress for Less 2 2020 - 2022 762 1.3% 0.7% Top 10 Total $ 17,969 30.8% 17.2%
Office Lease Summary 24 Renewal Lease Summary GAAP Cash Number of Weighted Leases Net rentable Leases Net rentable Contractual Prior Rent Releasing Contractual Prior Rent Releasing Average Lease TI & LC Quarter Signed SF Signed Expiring SF Expiring Rent per SF per SF Spread Rent per SF per SF Spread Term (yrs) TI & LC per SF Q3 2018 - - 1 9,337 $ - $ - 0.0% $ - $ - 0.0% - $ - $ - Q2 2018 3 28,910 6 13,225 28.88 28.41 1.7% 27.68 30.86 -10.3% 8.77 2,169,711 75.05 Q1 2018 1 1,400 - - 27.22 23.99 13.5% 27.24 26.45 3.0% 3.00 2,428 1.73 Q4 2017 6 38,387 2 2,582 24.87 23.93 3.9% 24.38 25.88 -5.8% 4.90 617,475 16.09 New Lease Summary(1) Number of Cash Weighted Leases Net rentable Contractual Average Lease TI & LC Quarter Signed SF Signed Rent per SF Term (yrs) TI & LC per SF Q3 2018 1 1,806 $ 26.00 5.00 $ 14,958 $ 8.28 Q2 2018 4 20,899 23.22 7.18 853,977 40.86 Q1 2018 3 17,668 23.59 8.28 930,376 52.66 Q4 2017 2 7,676 24.86 4.60 278,339 36.26 (1) Excludes new leases from properties in development
Office Lease Expirations 25 As of September 30, 2018 Square Footage % Portfolio % of Portfolio Annualized Base Number of Leases of Leases Net Rentable Annualized Base Annualized Rent per Leased Year of Lease Expiration Expiring Expiring(1) Square Feet Rent Base Rent Square Foot Available - 73,502 7.7% $ - - $ - M-T-M 3 633 0.1% 20,400 0.1% 32.23 2018 2 10,114 1.1% 275,609 1.1% 27.25 2019 16 76,996 8.1% 1,978,031 7.9% 25.69 2020 7 26,537 2.8% 763,603 3.1% 28.78 2021 8 46,798 4.9% 1,327,389 5.3% 28.36 2022 9 73,394 7.7% 2,067,671 8.3% 28.17 2023 10 62,199 6.5% 1,780,649 7.1% 28.63 2024 7 102,931 10.8% 2,786,392 11.2% 27.07 2025 6 66,487 7.0% 1,836,480 7.4% 27.62 2026 4 17,084 1.8% 385,885 1.5% 22.59 2027 3 49,081 5.1% 1,416,099 5.7% 28.85 2028 6 63,319 6.6% 1,717,717 6.9% 27.13 Thereafter 9 284,195 29.8% 8,572,007 34.4% 30.16 Total / Weighted Average 90 953,270 100.0% $ 24,927,932 100.0% $ 28.33 300,000 40.0% 35.0% 250,000 Square Feet Under % of Portfolio 30.0% Lease ABR 200,000 25.0% 2,500 or less 3.6% 2,501-10,000 16.3% 150,000 20.0% 10,001-20,000 24.4% 15.0% 100,000 20,001-40,000 25.5% 10.0% 40,001-100,000 30.2% 50,000 5.0% Office Portfolio Total 100.0% - 0.0% Leased Square Feet % ABR of Office Portfolio (1) Includes new leases from properties in development
Retail Lease Summary 26 Renewal Lease Summary GAAP Cash Number of Leases Net rentable Leases Net rentable Contractual Prior Rent Releasing Contractual Prior Rent Releasing Weighted Average TI & LC Quarter Signed SF Signed Expiring SF Expiring Rent per SF per SF Spread Rent per SF per SF Spread Lease Term (yrs) TI & LC per SF Q3 2018 10 28,101 11 19,775 $ 29.36 $ 27.23 7.8% $ 29.95 $ 28.19 6.2% 5.23 $ 115,732 $ 4.12 Q2 2018 19 64,064 1 1,900 19.55 18.71 4.5% 19.33 19.13 1.0% 5.60 261,455 4.08 Q1 2018 19 61,029 3 9,700 21.14 19.65 7.6% 20.47 19.88 3.0% 6.33 433,976 7.11 Q4 2017 16 109,639 13 35,575 13.88 13.31 4.3% 13.70 13.63 0.5% 3.81 64,673 0.59 New Lease Summary(1) Number of Cash Weighted Leases Net rentable Contractual Average Lease TI & LC Quarter Signed SF Signed Rent per SF Term (yrs) TI & LC per SF Q3 2018 7 10,444 $ 19.60 5.95 $ 366,032 $ 35.05 Q2 2018 9 29,646 25.08 8.63 1,041,670 35.14 Q1 2018 5 14,196 15.57 5.10 223,542 15.75 Q4 2017 4 12,533 17.02 8.33 181,649 14.49 (1) Excludes new leases from properties in development
Retail Lease Expirations 27 As of September 30, 2018 Square Footage % Portfolio % of Portfolio Annualized Base Number of Leases of Leases Net Rentable Annualized Base Annualized Rent per Leased Year of Lease Expiration Expiring Expiring(1) Square Feet Rent Base Rent Square Foot Available - 150,938 3.9% $ - - $ - M-T-M 2 2,600 0.1% 48,470 0.1% 18.64 2018 20 79,312 2.0% 1,099,381 1.9% 13.86 2019 81 565,905 14.6% 9,239,353 15.8% 16.33 2020 74 577,959 14.9% 8,101,156 13.9% 14.02 2021 65 294,511 7.6% 5,330,308 9.1% 18.10 2022 56 417,182 10.7% 6,882,975 11.8% 16.50 2023 56 424,881 10.9% 6,448,285 11.1% 15.18 2024 31 208,859 5.4% 3,477,358 6.0% 16.65 2025 20 235,282 6.1% 2,637,902 4.5% 11.21 2026 20 169,355 4.4% 2,930,571 5.0% 17.30 2027 18 118,786 3.1% 2,541,690 4.4% 21.40 2028 25 269,325 6.9% 3,865,069 6.6% 14.35 Thereafter 19 371,815 9.7% 5,699,310 9.9% 15.33 Total / Weighted Average 487 3,886,710 100.0% $ 58,301,828 100.0% $15.61 700,000 18.0% 600,000 16.0% 14.0% Square Feet % of Portfolio 500,000 12.0% Under Lease ABR 2,500 or less 13.4% 400,000 10.0% 2,501-10,000 28.4% 300,000 8.0% 10,001-20,000 15.2% 6.0% 20,001-40,000 14.7% 200,000 4.0% 40,001-100,000 23.7% Greater than 100,000 4.6% 100,000 2.0% Retail Portfolio Total 100.0% - 0.0% Leased Square Feet % ABR of Retail Portfolio (1) Includes new leases from properties in development
28 Appendix Definitions & Reconciliations
Definitions 29 Net Operating Income: We calculate Net Operating Income (“NOI”) as property revenues (base rent, expense reimbursements and other revenue) less property expenses (rental expenses and real estate taxes). Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to such other REITs’ NOI. NOI 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, NOI should not be considered an alternative to cash flows as a measure of liquidity. We consider NOI to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the core operations of our real estate business. To calculate NOI on a cash basis, we adjust NOI to exclude the net effects of straight-line rent and the amortization of lease incentives and above/below market rents. Funds From Operations: We calculate Funds From Operations (“FFO”) in accordance with the standards established by the National Association of Real Estate Investment Trusts (“Nareit”). Nareit defines FFO as net income (loss) (calculated in accordance with accounting principles generally accepted in the United States (“GAAP”)), excluding gains (or losses) from sales of depreciable operating property, real estate related depreciation and amortization (excluding amortization of deferred financing costs) 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 it believes 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 period-over-period, captures trends in occupancy rates, rental rates and operating costs. Other equity REITs may not calculate FFO in accordance with the Nareit definition as we do, and, accordingly, our FFO may not be comparable to such other REITs’ FFO.
Definitions 30 Normalized Funds From Operations: We calculate Normalized Funds From Operations (“Normalized FFO") as FFO calculated in accordance with the standards established by Nareit, adjusted for acquisition, development and other pursuit costs, gains or losses from the early extinguishment of debt, impairment charges, mark-to-market adjustments on interest rate derivatives and other non-comparable items. Management believes that the computation of FFO in accordance to Nareit’s definition includes certain items that are not indicative of the results provided by the Company’s operating portfolio and affect the comparability of the Company’s period-over-period performance. Our calculation of Normalized FFO differs from Nareit's definition of FFO. Other equity REITs may not calculate Normalized FFO in the same manner as us, and, accordingly, our Normalized FFO may not be comparable to other REITs' Normalized FFO. Adjusted Funds From Operations: We calculate Adjusted Funds From Operations (“AFFO”) as Normalized FFO adjusted for the impact of non-cash stock compensation, tenant improvement, leasing commission and leasing incentive costs associated with second generation rental space, capital expenditures, non-cash interest expense, straight-line rents, the amortization of leasing incentives and above (below) market rents and proceeds from government development grants. Management believes that AFFO provides useful supplemental information to investors regarding our operating performance as it provides a consistent comparison of our operating performance across time periods and allows investors to more easily compare our operating results with other REITs. However, other REITs may use different methodologies for calculating AFFO or similarly entitled FFO measures and, accordingly, our AFFO may not always be comparable to AFFO or other similarly entitled FFO measures of other REITs.
Definitions 31 Adjusted EBITDA: We calculate Adjusted EBITDA as net income (loss) (calculated in accordance with GAAP), excluding interest expense, income taxes, depreciation and amortization, gains (or losses) from sales of depreciable operating property and mark- to-market adjustments on interest rate derivates. Management believes Adjusted EBITDA is useful to investors in evaluating and facilitating comparisons of our operating performance between periods and between REITs by removing the impact of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from our operating results along with other non-comparable items. Core EBITDA: We calculate Core EBITDA as EBITDA, excluding certain items, including, but not limited to, debt extinguishment losses, mark-to-market adjustments on interest rate derivatives, non-cash stock compensation and the impact of development pipeline projects that are still in lease-up. We generally consider a property to be in lease-up until the earlier of (i) the quarter after which the property reaches 80% occupancy or (ii) the thirteenth quarter after the property receives its certificate of occupancy. Management believes that Core EBITDA provides useful supplemental information to investors regarding our ongoing operating performance as it provides a consistent comparison of our operating performance across time periods and allows investors to more easily compare our operating results with other REITs. However, other REITs may use different methodologies for calculating Core EBITDA or similarly entitled measures and, accordingly, our Core EBITDA may not always be comparable to Core EBITDA or other similarly entitled measures of other REITs. Core Debt: We calculate Core Debt as our total debt, excluding loans associated with our development pipeline, cash & cash equivalents, and restricted cash. Same Store Portfolio: We define same store properties as those that we owned and operated for the entirety of the comparative periods presented. We generally consider a property to be in lease-up until the earlier of (i) the quarter after which 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 and the assets are placed back into service. The following table shows the properties included in the same store and non-same store portfolio for the comparative periods presented.
Same Store vs. Non-Same Store Properties 32 Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended 9/30/2018 to 2017 9/30/2018 to 2017 9/30/2018 to 2017 9/30/2018 to 2017 Same Non-Same Same Non-Same Same Non-Same Same Non-Same Store Store Store Store Store Store Store Store Retail Properties Retail Properties (Continued) 249 Central Park Retail X X Providence Plaza X X Alexander Pointe X X Renaissance Square X X Bermuda Crossroads X X Sandbridge Commons X X Broad Creek Shopping Center X X Socastee Commons X X Brooks Crossing (Retail) X X South Retail X X Broadmoor Plaza X X South Square X X Columbus Village X X Southgate Square X X Columbus Village II X X Southshore Shops X X Commerce Street Retail X X Stone House Square X X Courthouse 7-Eleven X X Studio 56 Retail X X Dick’s at Town Center X X Tyre Neck Harris Teeter X X Dimmock Square X X Waynesboro Commons X X Greentree Shopping Center X X Wendover Village X X Fountain Plaza Retail X X Wendover Village Outparcel X X Gainsborough Square X X Office Properties Hanbury Village X X 4525 Main Street X X Harper Hill Commons X X Armada Hoffler Tower X X Harrisonburg Regal X X Commonwealth of VA - Chesapeake X X Indian Lakes X X Commonwealth of VA - Virginia Beach X X Lexington Square X X One Columbus X X Lightfoot Marketplace X X Two Columbus X X North Hampton Market X X Multifamily Properties North Point Center X X Encore Apartments X X Oakland Marketplace X X Greenside Apartments X X Parkway Centre X X Liberty Apartments X X Parkway Marketplace X X Premier Apartments X X Patterson Place X X Smith’s Landing X X Perry Hall Marketplace X X The Cosmopolitan X X Premier Retail X X Johns Hopkins Village X X
Reconciliation to Property Portfolio NOI 33 $ in thousands Three months ended 9/30 Nine months ended 9/30 2018 2017 2018 2017 Office Same Store(1) Rental revenues $5,149 $4,673 $10,624 $10,258 Property expenses 1,972 1,833 4,175 3,903 NOI 3,177 2,840 6,449 6,355 Non-Same Store NOI(2) (94) (10) 3,134 2,547 Segment NOI $3,083 $2,830 $9,583 $8,902 Retail Same Store(1) Rental revenues $15,261 $15,264 $45,978 $45,685 Property expenses 3,836 3,892 11,293 11,091 NOI 11,425 11,372 34,685 34,594 Non-Same Store NOI(2) 1,043 226 2,551 246 Segment NOI $12,468 $11,598 $37,236 $34,840 Multifamily Same Store(1) Rental revenues $3,027 $2,922 $8,800 $8,619 Property expenses 1,321 1,263 3,704 3,621 NOI 1,706 1,659 5,096 4,998 Non-Same Store NOI(2) 1,730 1,486 5,875 5,477 Segment NOI $3,436 $3,145 $10,971 $10,475 Total Property Portfolio NOI $18,987 $17,573 $57,790 $54,217 (1) See page 32 for the Same Store vs. Non-Same Store properties (2) Includes expenses associated with the company’s in house asset management division.
Reconciliation to Property Portfolio NOI 34 $ in thousands Three months ended 9/30/2018 Diversified Portfolio Office Retail Multifamily Total NOI - Cash Basis ($0) $10,282 $2,175 $12,457 Net effect of straight-line rents - 3 (169) (166) Amortization of lease incentives and (above) below market rents - 180 (13) 167 NOI ($0) $10,465 $1,993 $12,458 Town Center of Virginia Beach Office Retail Multifamily Total NOI - Cash Basis $2,859 $2,059 $1,475 $6,393 Net effect of straight-line rents 524 (59) 12 477 Amortization of lease incentives and (above) below market rents (71) (52) - (123) Elimination of AHH rent (222) (99) - (321) NOI $3,090 $1,849 $1,487 $6,426 NOI Office Retail Multifamily Total Diversified Portfolio ($0) $10,465 $1,993 $12,458 Town Center of Virginia Beach 3,090 1,849 1,487 6,426 Unstabilized Properties (7) 154 (44) 103 Total Property Portfolio NOI $3,083 $12,468 $3,436 $18,987
Reconciliation to GAAP Net Income 35 $ in thousands Three months ended 9/30/2018 Total Rental General Contracting & Real Office Retail Multifamily Properties Estate Services Total Segment revenues $ 5,149 $ 16,932 $ 6,849 $ 28,930 $ 19,950 $ 48,880 Segment expenses 2,066 4,464 3,413 9,943 18,973 28,916 Net operating income $ 3,083 $ 12,468 $ 3,436 $ 18,987 $ 977 $ 19,964 Depreciation and amortization (10,196) General and administrative expenses (2,367) Acquisition, development and other pursuit costs (69) Impairment charges (3) Interest income 2,545 Interest expense (4,677) Loss on extinguishment of debt (11) Change in fair value of interest rate derivatives 298 Other income (loss) benefit 65 Income tax benefit (provision) 120 Net income $ 5,669 Nine months ended 9/30/2018 Total Rental General Contracting & Real Office Retail Multifamily Properties Estate Services Total Segment revenues $ 15,537 $ 50,251 $ 20,439 $ 86,227 $ 63,654 $ 149,881 Segment expenses 5,954 13,015 9,468 28,437 61,474 89,911 Net operating income $ 9,583 $ 37,236 $ 10,971 $ 57,790 $ 2,180 $ 59,970 Depreciation and amortization (28,653) General and administrative expenses (8,092) Acquisition, development and other pursuit costs (162) Impairment charges (101) Interest income 7,152 Interest expense (13,547) Loss on extinguishment of debt (11) Change in fair value of interest rate derivatives 1,256 Other income 233 Income tax benefit (provision) 552 Net income $ 18,597