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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM
 10-Q
☑    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the quarterly period ended September 30, 2022  
or 
☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the transition period from                      to                      
Commission File Number: 001-35908
ARMADA HOFFLER PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Maryland 46-1214914
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
222 Central Park Avenue , Suite 2100
Virginia Beach , Virginia 23462
(Address of principal executive offices) (Zip Code)
 
(757) 366-4000
(Registrant’s 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.    ☒  Yes     ☐  No 
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    ☒  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 accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large Accelerated Filer
☒
 Accelerated Filer ☐
Non-Accelerated Filer ☐ Smaller Reporting Company ☐
Emerging Growth Company ☐
 
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.   ¨
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  
☐ Yes     ☒  No
As of November 4, 2022, the registrant had 67,729,839 shares of common stock, $0.01 par value per share, outstanding. In addition, as of November 4, 2022, Armada Hoffler, L.P., the registrant's operating partnership subsidiary, had 20,611,190 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, 2022
 
Table of Contents
 
  Page
 
1
 
1
1
2
3
5
7
 
 
 
 
 
 
 
 
 
 
 




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,
2022		 December 31,
2021
  (Unaudited)  
ASSETS    
Real estate investments:    
Income producing property $ 1,797,547  $ 1,658,609 
Held for development 6,294  6,294 
Construction in progress 92,357  72,535 
  1,896,198  1,737,438 
Accumulated depreciation (316,189) (285,814)
Net real estate investments 1,580,009  1,451,624 
Real estate investments held for sale —  80,751 
Cash and cash equivalents 54,700  35,247 
Restricted cash 4,865  5,196 
Accounts receivable, net 35,400  29,576 
Notes receivable, net 141,816  126,429 
Construction receivables, including retentions, net 47,865  17,865 
Construction contract costs and estimated earnings in excess of billings 232  243 
Equity method investments 64,470  12,685 
Operating lease right-of-use assets 23,416  23,493 
Finance lease right-of-use assets 46,155  46,989 
Acquired lease intangible assets 103,297  62,038 
Other assets 85,346  45,927 
Total Assets $ 2,187,571  $ 1,938,063 
LIABILITIES AND EQUITY    
Indebtedness, net $ 1,041,576  $ 917,556 
Liabilities related to assets held for sale —  41,364 
Accounts payable and accrued liabilities 24,301  29,589 
Construction payables, including retentions 63,376  31,166 
Billings in excess of construction contract costs and estimated earnings 15,736  4,881 
Operating lease liabilities 31,708  31,648 
Finance lease liabilities 46,409  46,160 
Other liabilities 53,551  55,876 
Total Liabilities 1,276,657  1,158,240 
Stockholders’ equity:    
Preferred stock, $0.01 par value, 100,000,000 shares authorized:
6.75% Series A Cumulative Redeemable Perpetual Preferred Stock, 9,980,000 shares authorized; 6,843,418 shares issued and outstanding as of September 30, 2022 and December 31, 2021
 171,085  171,085 
Common stock, $0.01 par value, 500,000,000 shares authorized; 67,730,053 and 63,011,700 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
 677  630 
Additional paid-in capital 588,707  525,030 
Distributions in excess of earnings (122,838) (141,360)
Accumulated other comprehensive gain (loss) 15,202  (33)
Total stockholders’ equity 652,833  555,352 
Noncontrolling interests in investment entities 24,187  629 
Noncontrolling interests in Operating Partnership 233,894  223,842 
Total Equity 910,914  779,823 
Total Liabilities and Equity $ 2,187,571  $ 1,938,063 

See Notes to Condensed Consolidated Financial Statements.
1

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,
  2022 2021 2022 2021
Revenues        
Rental revenues $ 53,743  $ 49,560  $ 163,602  $ 142,679 
General contracting and real estate services revenues 69,024  17,502  138,947  71,473 
Total revenues 122,767  67,062  302,549  214,152 
Expenses        
Rental expenses 12,747  12,717  38,101  34,841 
Real estate taxes 5,454  5,543  16,695  16,314 
General contracting and real estate services expenses 66,252  15,944  133,491  68,350 
Depreciation and amortization 17,527  16,886  54,865  52,237 
Amortization of right-of-use assets - finance leases 278  278  833  745 
General and administrative expenses 3,854  3,449  12,179  10,957 
Acquisition, development and other pursuit costs —  8  37  111 
Impairment charges —  —  333  3,122 
Total expenses 106,112  54,825  256,534  186,677 
Gain (loss) on real estate dispositions, net 33,931  (113) 53,424  3,604 
Operating income 50,586  12,124  99,439  31,079 
Interest income 3,490  3,766  10,410  14,628 
Interest expense (10,345) (8,827) (28,747) (25,220)
Loss on extinguishment of debt (2,123) (120) (2,899) (120)
Change in fair value of derivatives and other 782  131  7,512  838 
Unrealized credit loss release (provision) 42  617  (858) 284 
Other income (expense), net 118  15  415  201 
Income before taxes 42,550  7,706  85,272  21,690 
Income tax (provision) benefit (181) 42  140  522 
Net income 42,369  7,748  85,412  22,212 
Net income attributable to noncontrolling interests:
Investment entities (5,583) —  (5,811) — 
Operating Partnership (7,909) (1,237) (16,571) (3,477)
Net income attributable to Armada Hoffler Properties, Inc. 28,877  6,511  63,030  18,735 
Preferred stock dividends (2,887) (2,887) (8,661) (8,661)
Net income attributable to common stockholders $ 25,990  $ 3,624  $ 54,369  $ 10,074 
Net income attributable to common stockholders per share (basic and diluted) $ 0.38  $ 0.06  $ 0.81  $ 0.17 
Weighted-average common shares outstanding (basic and diluted) 67,729  61,083  67,525  60,310 
Comprehensive income:        
Net income $ 42,369  $ 7,748  $ 85,412  $ 22,212 
Unrealized cash flow hedge gains (losses) 7,108  (460) 18,780  1,347 
Realized cash flow hedge (gains) losses reclassified to net income (366) 1,123  1,287  3,304 
Comprehensive income 49,111  8,411  105,479  26,863 
Comprehensive income attributable to noncontrolling interests:
Investment entities (5,659) —  (5,987) — 
Operating Partnership (9,465) (1,406) (21,227) (4,680)
Comprehensive income attributable to Armada Hoffler Properties, Inc. $ 33,987  $ 7,005  $ 78,265  $ 22,183 

See Notes to Condensed Consolidated Financial Statements.
2

ARMADA HOFFLER PROPERTIES, INC.
Condensed Consolidated 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 gain (loss) Total stockholders' equity Noncontrolling interests in investment entities Noncontrolling interests in Operating Partnership Total equity
Balance, December 31, 2021 $ 171,085  $ 630  $ 525,030  $ (141,360) $ (33) $ 555,352  $ 629  $ 223,842  $ 779,823 
Net income —  —  —  9,993  —  9,993  100  2,183  12,276 
Unrealized cash flow hedge gains —  —  —  —  5,907  5,907  —  1,815  7,722 
Realized cash flow hedge losses reclassified to net income —  —  —  —  602  602  —  185  787 
Net proceeds from issuance of common stock —  45  65,149  —  —  65,194  —  —  65,194 
Noncontrolling interest in acquired real estate entity —  —  —  —  —  —  23,065  —  23,065 
Restricted stock awards, net —  —  1,064  —  —  1,064  —  —  1,064 
Acquisitions of noncontrolling interests —  —  (3,901) —  —  (3,901) —  —  (3,901)
Redemption of operating partnership units —  —  132  —  —  132  —  (132) — 
Dividends declared on preferred stock —  —  —  (2,887) —  (2,887) —  —  (2,887)
Dividends and distributions declared on common shares and units ($0.17 per share and unit)
 —  —  —  (11,433) —  (11,433) —  (3,506) (14,939)
Balance, March 31, 2022 171,085  675  587,474  (145,687) 6,476  620,023  23,794  224,387  868,204 
Net income —  —  —  24,160  —  24,160  128  6,479  30,767 
Unrealized cash flow hedge gains —  —  —  —  2,986  2,986  55  909  3,950 
Realized cash flow hedge losses reclassified to net income —  —  —  1  629  630  45  191  866 
Net proceeds from issuance of common stock —  —  (35) —  —  (35) —  —  (35)
Restricted stock awards, net —  2  573  —  —  575  —  —  575 
Distributions to noncontrolling interests —  —  —  —  —  —  (84) —  (84)
Contributions from noncontrolling interests —  —  —  —  —  —  14  —  14 
Dividends declared on preferred stock —  —  —  (2,887) —  (2,887) —  —  (2,887)
Dividends and distributions declared on common shares and units ($0.17 per share and unit)
 —  —  —  (11,529) —  (11,529) —  (3,505) (15,034)
Balance, June 30, 2022 171,085  677  588,012  (135,942) 10,091  633,923  23,952  228,461  886,336 
Net income —  —  —  28,877  —  28,877  5,583  7,909  42,369 
Unrealized cash flow hedge gains —  —  —  —  5,393  5,393  74  1,641  7,108 
Realized cash flow hedge gains reclassified to net income —  —  —  —  (282) (282) 1  (85) (366)
Restricted stock awards, net —  —  713  —  —  713  —  —  713 
Redemption of operating partnership units —  —  (18) —  —  (18) —  (112) (130)
Distributions to noncontrolling interests —  —  —  —  —  —  (5,423) —  (5,423)
Dividends declared on preferred stock —  —  —  (2,887) —  (2,887) —  —  (2,887)
Dividends and distributions declared on common shares and units ($0.19 per share and unit)
 —  —  —  (12,886) —  (12,886) —  (3,920) (16,806)
Balance, September 30, 2022 $ 171,085  $ 677  $ 588,707  $ (122,838) $ 15,202  $ 652,833  $ 24,187  $ 233,894  $ 910,914 
3

  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, 2020 $ 171,085  $ 591  $ 472,747  $ (112,356) $ (8,868) $ 523,199  $ 488  $ 233,115  $ 756,802 
Net income —  —  —  5,198  —  5,198  —  811  6,009 
Unrealized cash flow hedge gains —  —  —  —  1,685  1,685  —  591  2,276 
Realized cash flow hedge losses reclassified to net income —  —  —  —  798  798  —  280  1,078 
Net proceeds from issuance of common stock —  7  8,974  —  —  8,981  —  —  8,981 
Restricted stock awards, net —  1  631  —  —  632  —  —  632 
Redemption of operating partnership units —  —  131  —  —  131  —  (134) (3)
Dividends declared on preferred stock —  —  —  (2,887) —  (2,887) —  —  (2,887)
Dividends and distributions declared on common shares and units ($0.15 per share and unit)
 —  —  —  (9,008) —  (9,008) —  (3,128) (12,136)
Balance, March 31, 2021 171,085  599  482,483  (119,053) (6,385) 528,729  488  231,535  760,752 
Net income —  —  —  7,026  —  7,026  —  1,429  8,455 
Unrealized cash flow hedge losses —  —  —  —  (349) (349) —  (120) (469)
Realized cash flow hedge losses reclassified to net income —  —  —  —  820  820  —  283  1,103 
Net proceeds from issuance of common stock —  11  14,105  —  —  14,116  —  —  14,116 
Restricted stock awards, net —  —  473  —  —  473  —  —  473 
Acquisition of noncontrolling interest in real estate entity —  —  (950) —  —  (950) 146  —  (804)
Dividends declared on preferred stock —  —  —  (2,887) —  (2,887) —  —  (2,887)
Dividends and distributions declared on common shares and units ($0.16 per share and unit)
 —  —  —  (9,783) —  (9,783) —  (3,337) (13,120)
Balance, June 30, 2021 171,085  610  496,111  (124,697) (5,914) 537,195  634  229,790  767,619 
Net income —  —  —  6,511  —  6,511  —  1,237  7,748 
Unrealized cash flow hedge losses —  —  —  —  (343) (343) —  (117) (460)
Realized cash flow hedge losses reclassified to net income —  —  —  —  837  837  —  286  1,123 
Net proceeds from issuance of common stock —  3  4,328  —  —  4,331  —  —  4,331 
Restricted stock awards, net —  —  450  —  —  450  —  —  450 
Dividends declared on preferred stock —  —  —  (2,887) —  (2,887) —  —  (2,887)
Dividends and distributions declared on common shares and units ($0.16 per share and unit)
 —  —  —  (9,831) —  (9,831) —  (3,337) (13,168)
Balance, September 30, 2021 $ 171,085  $ 613  $ 500,889  $ (130,904) $ (5,420) $ 536,263  $ 634  $ 227,859  $ 764,756 
See Notes to Condensed Consolidated Financial Statements.
4

ARMADA HOFFLER PROPERTIES, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)(Unaudited)
  Nine Months Ended 
September 30,
  2022 2021
OPERATING ACTIVITIES    
Net income $ 85,412  $ 22,212 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation of buildings and tenant improvements 40,770  38,521 
Amortization of leasing costs, in-place lease intangibles and below market ground rents - operating leases 14,094  13,716 
Accrued straight-line rental revenue (4,542) (4,209)
Amortization of leasing incentives and above or below-market rents (779) (794)
Amortization of right-of-use assets - finance leases 833  745 
Accrued straight-line ground rent expense 97  157 
Unrealized credit loss provision (release) 858  (284)
Adjustment for uncollectable lease accounts 441  683 
Noncash stock compensation 2,712  1,830 
Impairment charges 333  3,122 
Noncash interest expense 4,360  2,058 
Noncash loss on extinguishment of debt 2,899  120 
Gain on real estate dispositions, net (53,424) (3,604)
Change in fair value of derivatives and other (7,512) (838)
Changes in operating assets and liabilities:    
Property assets (13,430) (1,303)
Property liabilities 3,189  4,555 
Construction assets (34,971) 25,329 
Construction liabilities 42,051  (34,181)
Interest receivable (5,124) 1,387 
Net cash provided by operating activities 78,267  69,222 
INVESTING ACTIVITIES    
Development of real estate investments (62,388) (38,659)
Tenant and building improvements (11,743) (6,621)
Acquisitions of real estate investments, net of cash received (93,389) (73,569)
Dispositions of real estate investments, net of selling costs 251,492  12,583 
Notes receivable issuances (24,235) (26,230)
Notes receivable paydowns 13,239  42,301 
Leasing costs (3,814) (2,595)
Leasing incentives (51) (467)
Contributions to equity method investments (51,565) (8,096)
Net cash provided by (used for) investing activities 17,546  (101,353)
FINANCING ACTIVITIES    
Proceeds from issuance of common stock, net 65,159  27,428 
Common shares tendered for tax withholding (774) (553)
Debt issuances, credit facility and construction loan borrowings 491,514  59,942 
Debt and credit facility repayments, including principal amortization (563,435) (25,734)
Debt issuance costs (6,727) (2,463)
Acquisition of NCI in consolidated RE investments (3,901) (804)
Redemption of operating partnership units (130) — 
Distributions to noncontrolling interests (5,507) — 
Contributions from noncontrolling interests 14  — 
Dividends and distributions (52,904) (42,662)
Net cash (used for) provided by financing activities (76,691) 15,154 
Net increase (decrease) in cash, cash equivalents, and restricted cash 19,122  (16,977)
Cash, cash equivalents, and restricted cash, beginning of period 40,443  50,430 
Cash, cash equivalents, and restricted cash, end of period (1)
 $ 59,565  $ 33,453 
See Notes to Condensed Consolidated Financial Statements.
5

ARMADA HOFFLER PROPERTIES, INC.
Condensed Consolidated Statements of Cash Flows (Continued)
(In thousands)(Unaudited)
Nine Months Ended 
September 30,
2022 2021
Supplemental Disclosures (noncash transactions):
Increase in dividends and distributions payable $ 2,536  $ 4,423 
Increase (decrease) in accrued capital improvements and development costs (5,139) 5,804 
Operating Partnership units redeemed for common shares 132  131 
Debt assumed at fair value in conjunction with real estate purchases 156,071  19,989 
Noncontrolling interest in acquired real estate entity 23,065  — 
Recognition of operating lease right-of-use assets 110  — 
Recognition of operating lease liabilities 110  — 
Recognition of finance lease right-of-use assets —  24,466 
Recognition of finance lease liabilities —  27,940 

(1) The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Condensed Consolidated Statements of Cash Flows (in thousands):
  September 30, 2022 September 30, 2021
Cash and cash equivalents $ 54,700  $ 28,038 
Restricted cash (a)
 4,865  5,415 
Cash, cash equivalents, and restricted cash $ 59,565  $ 33,453 
(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.

6

ARMADA HOFFLER PROPERTIES, INC.
Notes to Condensed Consolidated Financial Statements
 (Unaudited)
 
1. Business of Organization
 
Armada Hoffler Properties, Inc. (the "Company") is a full-service real estate company with extensive experience developing, building, owning, and managing high-quality, institutional-grade office, retail, and multifamily properties in attractive markets primarily throughout the Mid-Atlantic and Southeastern United States.

The Company is a real estate investment trust ("REIT"), the sole general partner of Armada Hoffler, L.P. (the "Operating Partnership") and, as of September 30, 2022, owned 76.7% 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 thereof.
 
As of September 30, 2022, the Company's property portfolio consisted of 56 stabilized operating properties and two properties under development.

Refer to Note 5 for information related to the Company's recent acquisitions and dispositions of properties.

2. Significant Accounting Policies
 
Basis of Presentation
 
The accompanying condensed consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles ("GAAP").
 
The condensed consolidated financial statements include the financial position and results of operations of the Company and its consolidated 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.

The accompanying condensed consolidated financial statements were prepared in accordance with the requirements for interim financial information. Accordingly, these interim financial statements have not been audited and exclude certain disclosures required for annual financial statements. Also, the operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These interim financial statements should be read in conjunction with the audited consolidated financial statements of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
 
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.

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.

7

Recent Accounting Pronouncements

Accounting Standards Adopted in 2022

Reference Rate Reform

In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04 Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848), which became effective on March 12, 2020 and generally can be applied through December 31, 2022. ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. This Accounting Standards Update ("ASU") also provides optional expedients to enable companies to continue to apply hedge accounting to certain hedging relationships impacted by reference rate reform. Application of the guidance is optional and only available in certain situations. In January 2021, FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848). The amendments in this standard are elective and principally apply to entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. Similar to ASU No. 2020-04, provisions of this ASU are effective upon issuance and generally can be applied through December 31, 2022. During the nine months ended September 30, 2022, the Company elected to apply the practical expedients to modifications of qualifying contracts as continuations of the existing contracts rather than as new contracts. The adoption of the new guidance did not have a material impact on the consolidated financial statements. Management will continue to evaluate the impacts of reference rate reform.

Earnings Per Share

In August 2020, FASB issued ASU 2020-06, an update to ASC Topic 470 and ASC Topic 815, which became effective January 1, 2022. ASU 2020-06 simplifies the accounting for convertible instruments and removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception. This ASU also simplifies diluted earnings per share calculation in certain areas and provides updated disclosure requirements. The Company adopted ASU 2020-06 effective January 1, 2022 and the adoption did not have a material impact on the consolidated financial statements.

Other Accounting Policies

See the Company's Annual Report on Form 10-K for the year ended December 31, 2021 for a description of other accounting principles upon which basis the accompanying consolidated financial statements were prepared.

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.

8

Net operating income of the Company’s reportable segments for the three and nine months ended September 30, 2022 and 2021 was as follows (in thousands): 
  Three Months Ended September 30, Nine Months Ended September 30,
  2022 2021 2022 2021
Office real estate    
Rental revenues $ 18,687  $ 11,933  $ 54,024  $ 35,324 
Rental expenses 4,886  3,409  13,626  9,222 
Real estate taxes 2,044  1,547  5,583  4,318 
Segment net operating income 11,757  6,977  34,815  21,784 
Retail real estate    
Rental revenues 21,223  20,223  64,197  57,682 
Rental expenses 3,420  3,270  10,254  9,119 
Real estate taxes 2,206  2,100  6,715  6,307 
Segment net operating income 15,597  14,853  47,228  42,256 
Multifamily residential real estate    
Rental revenues 13,833  17,404  45,381  49,673 
Rental expenses 4,441  6,038  14,221  16,500 
Real estate taxes 1,204  1,896  4,397  5,689 
Segment net operating income 8,188  9,470  26,763  27,484 
General contracting and real estate services    
Segment revenues 69,024  17,502  138,947  71,473 
Segment expenses 66,252  15,944  133,491  68,350 
Segment gross profit 2,772  1,558  5,456  3,123 
Net operating income $ 38,314  $ 32,858  $ 114,262  $ 94,647 
 
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, 2022 and 2021 exclude revenue related to intercompany construction contracts of $20.8 million and $8.6 million, respectively, as it is eliminated in consolidation. General contracting and real estate services revenues for the nine months ended September 30, 2022 and 2021 exclude revenue related to intercompany construction contracts of $43.6 million and $16.0 million, respectively, as it is eliminated in consolidation.

General contracting and real estate services expenses for the three months ended September 30, 2022 and 2021 exclude expenses related to intercompany construction contracts of $20.6 million and $8.6 million, respectively. General contracting and real estate services expenses for the nine months ended September 30, 2022 and 2021 exclude expenses related to intercompany construction contracts of $43.1 million and $16.0 million, respectively, as it is eliminated in consolidation.


9

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, 2022 and 2021 (in thousands): 
  Three Months Ended September 30, Nine Months Ended September 30,
  2022 2021 2022 2021
Net operating income $ 38,314  $ 32,858  $ 114,262  $ 94,647 
Depreciation and amortization (17,527) (16,886) (54,865) (52,237)
Amortization of right-of-use assets - finance leases (278) (278) (833) (745)
General and administrative expenses (3,854) (3,449) (12,179) (10,957)
Acquisition, development and other pursuit costs —  (8) (37) (111)
Impairment charges —  —  (333) (3,122)
Gain (loss) on real estate dispositions, net 33,931  (113) 53,424  3,604 
Interest income 3,490  3,766  10,410  14,628 
Interest expense (10,345) (8,827) (28,747) (25,220)
Loss on extinguishment of debt (2,123) (120) (2,899) (120)
Change in fair value of derivatives and other 782  131  7,512  838 
Unrealized credit loss release (provision) 42  617  (858) 284 
Other income (expense), net 118  15  415  201 
Income tax (provision) benefit (181) 42  140  522 
Net income $ 42,369  $ 7,748  $ 85,412  $ 22,212 
 
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. These costs include corporate office personnel compensation and benefits, bank fees, accounting fees, legal fees, and other corporate office expenses.

4. Leases

Lessee Disclosures

As a lessee, the Company has eight ground leases on seven properties. These ground leases have maximum lease terms (including renewal options) that expire between 2074 and 2117. 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. Five of these leases have been classified as operating leases and three 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.

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 one or more options to renew, with renewal terms that can extend the lease term from one to 25 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.

10

Rental revenue for the three and nine months ended September 30, 2022 and 2021 comprised the following (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
  2022 2021 2022 2021
Base rent and tenant charges $ 51,978  $ 48,391  $ 158,281  $ 137,675 
Accrued straight-line rental adjustment 1,506  883  4,542  4,210 
Lease incentive amortization (171) (167) (517) (485)
Above/below market lease amortization 430  453  1,296  1,279 
Total rental revenue $ 53,743  $ 49,560  $ 163,602  $ 142,679 

5. Real Estate Investment
 
Property Acquisitions

Constellation Energy Building

On January 14, 2022, the Company acquired a 79% membership interest and an additional 11% economic interest in the partnership that owns the Constellation Energy Building (previously referred to as the "Exelon Building") for a purchase price of approximately $92.2 million in cash and a loan to the seller of $12.8 million. The Constellation Energy Building is a mixed-use structure located in Baltimore's Harbor Point and is comprised of an office building, the Constellation Office, that serves as the headquarters for Constellation Energy Corp., which was spun-off from Exelon, a Fortune 100 energy company, in February 2022, as well as a multifamily component, 1305 Dock Street. The Constellation Office includes a parking garage and retail space. The Constellation Energy Building was subject to a $156.1 million loan, which the Company immediately refinanced following the acquisition with a new $175.0 million loan. The new loan bears interest at a rate of the Bloomberg Short-Term Bank Yield Index ("BSBY") plus a spread of 1.50% and will mature on November 1, 2026. This loan is hedged by an interest rate cap corridor of 1.00% and 3.00% as well as an interest rate cap of 4.00%. See Note 9 for further details.

The following table summarizes the purchase price allocation (including acquisition costs) based on the relative fair value of the assets acquired for the two operating properties purchased during the nine months ended September 30, 2022 (in thousands):
Constellation Energy Building
Land $ 23,317 
Site improvements 141 
Building 194,916 
In-place leases 53,705 
Above-market leases 306 
Net assets acquired $ 272,385 

Ten Tryon

On January 14, 2022, the Company acquired the remaining 20% ownership interest in the entity that is developing the Ten Tryon project in Charlotte, North Carolina for a cash payment of $3.9 million. The Company recorded the amount as an adjustment to additional paid-in-capital.

The Residences at Annapolis Junction

On April 11, 2022, the Company exercised its option to acquire an additional 16% of the partnership that owns The Residences at Annapolis Junction, increasing its ownership to 95%. In exchange for this increased partnership interest, the terms of the partnership waterfall calculation in the event of a capital event were modified.

Property Dispositions

On April 1, 2022, the Company completed the sale of Hoffler Place for a sale price of $43.1 million. The loss recognized upon sale was $0.8 million.

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On April 25, 2022, the Company completed the sale of Summit Place for a sale price of $37.8 million. The loss recognized upon sale was $0.5 million.

In addition to the losses recognized on the sales of the Hoffler Place and Summit Place student-housing properties during the three months ended September 30, 2022 described above, the Company recognized impairment of real estate of $18.3 million to record these properties at their fair values during the three months ended December 31, 2021.

On June 29, 2022, the Company completed the sale of the Home Depot and Costco outparcels at North Pointe for a sale price of $23.9 million. The gain on disposition was $20.9 million.

On July 22, 2022, the Company completed the sale of The Residences at Annapolis Junction for a sale price of $150.0 million. The gain recognized on disposition was $31.5 million, $5.4 million of which was allocated to the Company's noncontrolling interest partner.

On July 26, 2022, the Company completed the sale of the AutoZone and Valvoline outparcels at Sandbridge Commons for a sale price of $3.5 million. The gain recognized on disposition was $2.4 million.

Equity Method Investments

Harbor Point Parcel 3

The Company owns a 50% interest in Harbor Point Parcel 3, a joint venture with Beatty Development Group, for purposes of developing T. Rowe Price's new global headquarters office building in Baltimore, Maryland. The Company is a noncontrolling partner in the joint venture and will serve as the project's general contractor. During the nine months ended September 30, 2022, the Company invested $29.4 million in Harbor Point Parcel 3. The Company has an estimated equity commitment of up to $38.6 million relating to this project. As of September 30, 2022 and December 31, 2021, the carrying value of the Company's investment in Harbor Point Parcel 3 was $42.1 million and $12.7 million, respectively. For the nine months ended September 30, 2022, Harbor Point Parcel 3 had no operating activity, and therefore the Company received no allocated income.

Based on the terms of the operating agreement, the Company has concluded that Harbor Point Parcel 3 is a VIE and that the Company holds a variable interest. The Company has significant influence over the project due to its 50% ownership; however, the Company does not have the power to direct the activities of the project that most significantly impact its performance. This includes activity as the managing member of the entity, which is a power that is retained by the Company's joint venture partner. Accordingly, the Company is not the project's primary beneficiary and, therefore, does not consolidate Harbor Point Parcel 3 in its consolidated financial statements. The Company's investment in the project is recorded as an equity method investment in the consolidated balance sheets.

Harbor Point Parcel 4

On April 1, 2022, the Company acquired a 78% interest in Harbor Point Parcel 4, a real estate venture with Beatty Development Group, for purposes of developing a mixed-use project, which is planned to include multifamily units, retail space, and a parking garage. The Company holds an option to increase its ownership to 90%. The Company is a noncontrolling partner in the real estate venture and will serve as the project's general contractor. During the nine months ended September 30, 2022, the Company invested $22.9 million in Harbor Point Parcel 4. The Company has an estimated equity commitment of up to $99.7 million relating to this project. As of September 30, 2022, the carrying value of the Company's investment in Harbor Point Parcel 4 was $22.9 million. For the nine months ended September 30, 2022, Harbor Point Parcel 4 had no operating activity, and therefore the Company received no allocated income.

Based on the terms of the operating agreement, the Company has concluded that Harbor Point Parcel 4 is a VIE and that the Company holds a variable interest. The Company has significant influence over the project due to its 78% ownership; however, the Company does not have the power to direct the activities of the project that most significantly impact its performance. This includes activity as the managing member of the entity, which is a power that is retained by the Company's partner. Accordingly, the Company is not the project's primary beneficiary and, therefore, does not consolidate Harbor Point Parcel 4 in its consolidated financial statements. The Company's investment in the project is recorded as an equity method investment in the consolidated balance sheets.

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6. Notes Receivable and Current Expected Credit Losses

Notes Receivable

The Company had the following notes receivable outstanding as of September 30, 2022 and December 31, 2021 ($ in thousands):
Outstanding loan amount (a)
 Interest compounding
Development Project September 30,
2022		 December 31,
2021		 Maximum loan commitment Interest rate
City Park 2 $ 11,749  $ —  $ 20,594  13.0  % Annually
Interlock Commercial 84,615  95,379  107,000 
(b)
 15.0  % None
Nexton Multifamily 25,532  23,567  22,315  11.0  % Annually
Total mezzanine & preferred equity 121,896  118,946  $ 149,909 
Constellation Energy Building note receivable 12,834  — 
Other notes receivable 7,570  7,234 
Notes receivable guarantee premium 1,024  1,243 
Allowance for credit losses (1,508)
(c)
 (994)
Total notes receivable $ 141,816  $ 126,429 
________________________________________
(a) Outstanding loan amounts include any accrued and unpaid interest, as applicable.
(b) This amount includes interest reserves.
(c) The amount excludes $0.4 million of Current Expected Credit Losses ("CECL") allowance that relates to the unfunded commitments, which was recorded as a liability under Other liabilities in the consolidated balance sheet.

Interest on the notes receivable 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 generally added to the loan receivable balances. The Company recognized interest income for the three and nine months ended September 30, 2022 and 2021 as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
Development Project 2022 2021 2022 2021
City Park 2 $ 329 
(a)
 $ —  $ 554 
(a)
 $ — 
Interlock Commercial 2,363 
(a)
 3,260 
(a)
 7,550 
(a)
 9,644 
(a)
Nexton Multifamily 680  397  1,966  658 
Solis Apartments at Interlock —  —  —  4,005 
(b)
Total mezzanine 3,372  3,657  10,070  14,307 
Other interest income 118  109  340  321 
Total interest income $ 3,490  $ 3,766  $ 10,410  $ 14,628 
________________________________________
(a) Includes recognition of interest income related to fee amortization.
(b) Includes prepayment premium of $2.4 million from early payoff of the loan.

City Park 2

On March 23, 2022, the Company entered into a $20.6 million preferred equity investment for the development of a multifamily property located in Charlotte, North Carolina. The investment has economic terms consistent with a note receivable, including a mandatory redemption or maturity on April 28, 2026, and it is accounted for as a note receivable. The Company's investment bears interest at a rate of 13%, compounded annually.

Management has concluded that this entity is a VIE. Because the other investor in the project, TP City Park 2 LLC, is the developer of City Park 2 Multifamily, 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 does not consolidate the project in its consolidated financial statements.
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Interlock Commercial

During February 2022, the Company received $13.5 million as a partial repayment of the Interlock Commercial mezzanine loan, which consisted of $11.1 million of principal and $2.4 million of interest. During September 2022, the Company received $2.7 million as an additional repayment, which consisted of $1.0 million of principal and $1.7 million of interest.

Allowance for Loan Losses

The Company is exposed to credit losses primarily through its mezzanine lending activities and preferred equity investments. As of September 30, 2022, the Company had three mezzanine loans (including the Nexton Multifamily and City Park 2 preferred equity investments that are accounted for as notes receivable), each of which are financing development projects in various stages of completion or lease-up. Each of these projects is subject to a loan that is senior to the Company’s mezzanine loan. Interest on these loans is paid in kind and is generally not expected to be paid until a sale of the project after completion of the development.

The Company's management performs a quarterly analysis of the loan portfolio to determine the risk of credit loss based on the progress of development activities, including leasing activities, projected development costs, and current and projected mezzanine and senior construction loan 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 Company's underwriting assumptions.
•Special Mention: loans in this category show signs that the economic performance of the project may suffer as a result of slower-than-expected leasing activity or an extended development or marketing timeline. Loans in this category warrant increased monitoring by management.
•Substandard: loans in this category may not be fully collected by the Company 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 will also consider placing the loan on nonaccrual 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 as of September 30, 2022 and obtained industry loan loss data relative to these risk ratings. Each of the outstanding loans as of September 30, 2022 was "Pass" rated.

At December 31, 2021, the Company reported $126.4 million of notes receivable, net of allowances of $1.0 million. At September 30, 2022, the Company reported $141.8 million of notes receivable, net of allowances of $1.5 million. Changes in the allowance for the three and nine months ended September 30, 2022 and 2021 were as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
  2022 2021 2022 2021
Beginning balance $ 1,894  $ 2,129  $ 994  $ 2,584 
Unrealized credit loss provision (release) (42) (617) 858  (284)
Extinguishment due to acquisition —  —  —  (788)
Ending balance (a)
 $ 1,852  $ 1,512  $ 1,852  $ 1,512 
________________________________________
(a) The amounts as of September 30, 2022 and 2021 include $0.4 million and $0.1 million, respectively, of allowance related to the unfunded commitments, which were recorded as Other liabilities on the consolidated balance sheet.

The Company places loans on non-accrual status when the loan balance, together with the balance of any senior loan, approximately equals the estimated realizable value of the underlying development project. As of September 30, 2022, the Company had the Constellation Energy Building note, which bears interest at 3% per annum, on non-accrual status. The principal balance of the note receivable is adequately secured by the seller's partnership interest. As of September 30, 2022 and December 31, 2021, there were no other loans on non-accrual status.

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7. Construction Contracts

Construction contract costs and estimated earnings in excess of billings represent reimbursable costs and amounts earned under contracts in progress as of the balance sheet date. Such amounts become billable according to contract terms, which usually consider the passage of time, achievement of certain milestones, or completion of the project. The Company expects to bill and collect substantially all construction contract costs and estimated earnings in excess of billings as of September 30, 2022 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 nine months ended September 30, 2022 and 2021 (in thousands):
Nine Months Ended 
September 30, 2022		 Nine Months Ended 
September 30, 2021
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 $ 243  $ 4,881  $ 138  $ 6,088 
Revenue recognized that was included in the balance at the beginning of the period —  (4,881) —  (6,088)
Increases due to new billings, excluding amounts recognized as revenue during the period —  16,312  —  3,791 
Transferred to receivables (478) —  (665) — 
Construction contract costs and estimated earnings not billed during the period 232  —  370  — 
Changes due to cumulative catch-up adjustment arising from changes in the estimate of the stage of completion 235  (576) 527  (1,117)
Ending balance $ 232  $ 15,736  $ 370  $ 2,674 

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 $1.3 million and $2.2 million were deferred as of September 30, 2022 and December 31, 2021, respectively. Amortization of pre-contract costs for the nine months ended September 30, 2022 and 2021 was $0.8 million and $0.2 million, respectively.
 
Construction receivables and payables include retentions, which are amounts that are generally withheld until the completion of the contract or the satisfaction of certain restrictive conditions such as fulfillment guarantees. As of September 30, 2022 and December 31, 2021, construction receivables included retentions of $8.2 million and $3.1 million, respectively. The Company expects to collect substantially all construction receivables outstanding as of September 30, 2022 during the next twelve months. As of September 30, 2022 and December 31, 2021, construction payables included retentions of $16.2 million and $4.2 million, respectively. The Company expects to pay substantially all construction payables outstanding as of September 30, 2022 during the next twelve months.



15

The Company’s net position on uncompleted construction contracts comprised the following as of September 30, 2022 and December 31, 2021 (in thousands):
  September 30, 2022 December 31, 2021
Costs incurred on uncompleted construction contracts $ 477,799  $ 379,993 
Estimated earnings 19,423  15,115 
Billings (512,726) (399,746)
Net position $ (15,504) $ (4,638)
Construction contract costs and estimated earnings in excess of billings $ 232  $ 243 
Billings in excess of construction contract costs and estimated earnings (15,736) (4,881)
Net position $ (15,504) $ (4,638)
The above table reflects the net effect of projects closed as of September 30, 2022 and December 31, 2021, respectively.

The Company’s balances and changes in construction contract price allocated to unsatisfied performance obligations (backlog) as of September 30, 2022 and 2021 were as follows (in thousands):
  Three Months Ended September 30, Nine Months Ended September 30,
  2022 2021 2022 2021
Beginning backlog $ 541,214  $ 70,219  $ 215,518  $ 71,258 
New contracts/change orders 53,966  53,590  449,712  106,992 
Work performed (69,251) (16,944) (139,301) (71,385)
Ending backlog $ 525,929  $ 106,865  $ 525,929  $ 106,865 

The Company expects to complete a majority of the uncompleted contracts in place as of September 30, 2022 during the next 12 to 24 months.

8. Indebtedness
 
Amended Credit Facility

On August 23, 2022, the Company, as parent guarantor, and the Operating Partnership, as borrower, entered into an amended and restated credit agreement (the "Credit Agreement"), which provides for a $550.0 million credit facility comprised of a $250.0 million senior unsecured revolving credit facility (the "revolving credit facility") and a $300.0 million senior unsecured term loan facility (the "term loan facility" and, together with the revolving credit facility, the "amended credit facility"), with a syndicate of banks. The amended credit facility replaces the prior $150.0 million revolving credit facility, which was scheduled to mature on January 24, 2024, and the prior $205.0 million term loan facility, which was scheduled to mature on January 24, 2025.

The amended credit facility includes an accordion feature that allows the total commitments to be increased to $1.0 billion, subject to certain conditions, including obtaining commitments from any one or more lenders. The revolving credit facility has a scheduled maturity date of January 22, 2027, with two six-month extension options, subject to our satisfaction of certain conditions, including payment of a 0.075% extension fee at each extension. The term loan facility has a scheduled maturity date of January 21, 2028.

The revolving credit facility bears interest at Secured Overnight Financing Rate ("SOFR") plus a margin ranging from 1.30% to 1.85%, and the term loan facility bears interest at SOFR plus a margin ranging from 1.25% to 1.80%, in each case depending on the Company's total leverage. The Company is also obligated to pay an unused commitment fee of 15 or 25 basis points on the unused portions of the commitments under the revolving credit facility, depending on the amount of borrowings under the revolving credit facility. If the Company or the Operating Partnership attains investment grade credit ratings from both S&P Global Ratings and Moody’s Investors Service, Inc., the Operating Partnership may elect to have borrowings become subject to interest rates based on such credit ratings.

As of September 30, 2022 and December 31, 2021, the outstanding balance on the revolving credit facility was $36.0 million and $5.0 million, respectively. The outstanding balance on the term loan facility was $300.0 million and $205.0 million as of September 30, 2022 and December 31, 2021, respectively. As of September 30, 2022, the effective
16

interest rates on the revolving credit facility and the term loan facility, before giving effect to interest rate caps and swaps, were 4.54% and 4.49%, respectively. The Operating Partnership may, at any time, voluntarily prepay any loan under the amended credit facility in whole or in part without premium or penalty.

The Operating Partnership is the borrower, and its obligations under the amended credit facility are guaranteed by the Company and certain of its subsidiaries that are not otherwise prohibited from providing such guaranty. The Credit Agreement contains customary representations and warranties and financial and other affirmative and negative covenants. The Company's ability to borrow under the amended credit facility is subject to ongoing compliance with a number of financial covenants, affirmative covenants, and other restrictions. The Credit Agreement includes customary events of default, in certain cases subject to customary cure periods. The occurrence of an event of default, if not cured within the applicable cure period, would permit the lenders to, among other things, declare the unpaid principal, accrued and unpaid interest, and all other amounts payable under the amended credit facility to be immediately due and payable.

The Company is currently in compliance with all covenants governing the amended credit facility.

Other 2022 Financing Activity

On January 5, 2022, the Company contributed $2.6 million to the Harbor Point Parcel 3 joint venture in order to meet the lender's equity funding requirement since a $15.0 million standby letter of credit, which was available for draw down on the revolving credit facility in the event the Company did not meet its equity requirement, expired on January 4, 2022.

On January 14, 2022, the Company acquired a 79% membership interest and an additional 11% economic interest in the partnership that owns the mixed-use property known as the Constellation Energy Building. The property was subject to a $156.1 million loan, which the Company immediately refinanced following the acquisition with a new $175.0 million loan. The new loan bears interest at a rate of BSBY plus a spread of 1.50% and will mature on November 1, 2026.

On January 19, 2022, the Company paid off the $14.1 million balance of the loan secured by the Delray Beach Plaza shopping center.

On March 3, 2022, the Company paid off the $10.3 million balance of the loan secured by the Red Mill West Commons shopping center.

On April 25, 2022, Harbor Point Parcel 3, a joint venture to which the Company is party, entered into a construction loan agreement for $161.5 million.

On April 25, 2022, Harbor Point Parcel 4, a real estate venture to which the Company is party, entered into a construction loan agreement for $109.7 million.

On June 29, 2022, the Company paid off the $1.9 million loan balance associated with North Pointe Phase II in conjunction with the sale of the property leased and occupied by Costco.

On June 30, 2022, the Company refinanced the $20.1 million loan secured by Nexton Square. The new $22.5 million loan bears interest at a rate of SOFR plus a spread of 1.95% (SOFR has a 0.30% floor) and will mature on June 30, 2027.

On July 22, 2022, the Company paid off the $84.4 million loan secured by The Residences at Annapolis Junction in conjunction with the sale of the property.

On August 15, 2022, the Company paid off the $9.4 million balance of the loan secured by the Marketplace at Hilltop shopping center.

On August 25, 2022, the Company paid off the $51.8 million, $14.6 million, and $23.6 million balances of the loans secured by the 1405 Point, Brooks Crossing Office, and One City Center properties, respectively.

On August 25, 2022, the Company entered into a $73.6 million construction loan agreement for the Southern Post development project. The loan bears interest at a rate of SOFR plus a spread of 2.25%. The loan matures on August 25, 2026 and has two 12-month extension options. There was no balance outstanding on the loan as of September 30, 2022.

On September 27, 2022, the Company refinanced the $13.4 million loan secured by Liberty Apartments. The new $21.0 million loan bears interest at a rate of SOFR plus a spread of 1.50% and will mature on September 27, 2027.
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During the nine months ended September 30, 2022, the Company borrowed $34.5 million under its existing construction loans to fund new development and construction.

9. Derivative Financial Instruments
 
The Company 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 gain or loss is reported as a component of other comprehensive income (loss) and reclassified into earnings in the periods during which the hedged forecasted transaction affects earnings.

As of September 30, 2022, the Company had the following London Inter-Bank Offered Rate (“LIBOR"), SOFR, and BSBY interest rate caps ($ in thousands):
Effective Date Maturity Date Notional Amount Strike Rate Premium Paid
11/1/2020 11/1/2023 $ 84,375 
(a)
1.84% (SOFR)
 $ 91 
2/2/2021 2/1/2023 100,000 
0.50% (LIBOR)
 45 
3/4/2021 4/1/2023 14,479 
2.50% (LIBOR)
 4 
1/11/2022 2/1/2024 175,000 
4.00% (BSBY)
 154 
4/7/2022 2/1/2024 175,000 
(a)
1.00%-3.00% (BSBY)
(b)
 3,595 
7/1/2022 3/1/2024 200,000 
(a)
1.00%-3.00% (SOFR)
(b)
 352 
(c)
7/5/2022 1/1/2024 50,000 
(a)
1.00%-3.00% (SOFR)
(b)
 143 
(c)
7/5/2022 1/1/2024 35,100 
(a)
1.00%-3.00% (SOFR)
(b)
 120 
(c)
9/1/2022 9/1/2024 73,562 
(a)(d)
1.00%-3.00% (SOFR)
(b)
 1,370 
Total $ 907,516  $ 5,874 
________________________________________
(a) Designated as a cash flow hedge.
(b) The Company purchased interest rate caps at 1.00% and sold interest rate caps at 3.00%, resulting in interest rate cap corridors of 1.00% and 3.00%. The intended goal of these corridors is to provide a level of protection from the effect of rising interest rates and reduce the all-in cost of the derivative instrument.
(c) This amount represents the sum of the premiums paid on the original instruments. The caps were blended and extended during the three months ended September 30, 2022.
(d) The notional amount represents the maximum notional amount that will eventually be in effect. The notional amount is scheduled to increase over the term of the corridor in accordance with projected borrowings on the associated loan.

As of September 30, 2022, 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 
(a)
 1-month LIBOR 2.26  % 3.71  % 4/1/2019 10/26/2022
Senior unsecured term loan 50,000  1-month LIBOR 2.78  % 4.23  % 5/1/2018 5/1/2023
249 Central Park Retail, South Retail, and Fountain Plaza Retail 32,979 
(a)
 1-month LIBOR 2.25  % 3.85  % 4/1/2019 8/10/2023
Senior unsecured term loan 10,500 
(a)
 1-month LIBOR 3.02  % 4.47  % 10/12/2018 10/12/2023
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
Thames Street Wharf 69,686 
(a)
 1-month BSBY 1.05  % 2.35  % 9/30/2021 9/30/2026
Total $ 288,165 
________________________________________
(a) Designated as a cash flow hedge.
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For the interest rate swaps and caps 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 counterparty. During the next 12 months, the Company anticipates recognizing approximately $10.4 million of net hedging gains as reductions to interest expense. These amounts will be reclassified from accumulated other comprehensive gain into earnings to offset the variability of the hedged items during this period.

The Company’s derivatives were comprised of the following as of September 30, 2022 and December 31, 2021 (in thousands): 
  September 30, 2022 December 31, 2021
  Notional
Amount		 Fair Value Notional
Amount		 Fair Value
  Asset Liability   Asset Liability
Derivatives not designated as accounting hedges
Interest rate swaps $ 50,000  $ 390  $ —  $ 50,000  $ —  $ (1,454)
Interest rate caps 289,479  2,726  —  399,579  1,019  — 
Total derivatives not designated as accounting hedges 339,479  3,116  —  449,579  1,019  (1,454)
Derivatives designated as accounting hedges
Interest rate swaps 238,165  11,960  —  239,633  1,317  (2,013)
Interest rate caps 545,572  15,354  —  384,375  590  — 
Total derivatives $ 1,123,216  $ 30,430  $ —  $ 1,073,587  $ 2,926  $ (3,467)

The changes in the fair value of the Company’s derivatives during the three and nine months ended September 30, 2022 and 2021 were comprised of the following (in thousands): 
  Three Months Ended September 30, Nine Months Ended September 30,
  2022 2021 2022 2021
Interest rate swaps $ 4,330  $ (60) $ 13,894  $ 2,315 
Interest rate caps 3,587  (234) 12,586  (27)
Total change in fair value of interest rate derivatives $ 7,917  $ (294) $ 26,480  $ 2,288 
Comprehensive income statement presentation:
Change in fair value of derivatives and other $ 809  $ 166  $ 7,700  $ 941 
Unrealized cash flow hedge gains (losses) 7,108  (460) 18,780  1,347 
Total change in fair value of interest rate derivatives $ 7,917  $ (294) $ 26,480  $ 2,288 

10. Equity
 
Stockholders’ Equity

On March 10, 2020, the Company commenced an at-the-market continuous equity offering program (the "ATM Program") through which the Company may, from time to time, issue and sell shares of its common stock and shares of its 6.75% Series A Cumulative Redeemable Perpetual Preferred Stock (the "Series A Preferred Stock") having an aggregate offering price of up to $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.

During the nine months ended September 30, 2022, the Company issued and sold 475,074 shares of common stock at a weighted average price of $15.21 per share under the ATM Program, receiving net proceeds, after offering costs and commissions, of $7.1 million. During the nine months ended September 30, 2022, the Company did not issue any shares of Series A Preferred Stock under the ATM Program. Shares having an aggregate offering price of $205.0 million remained unsold under the ATM Program as of November 4, 2022.

On January 11, 2022, the Company completed an underwritten public offering of 4,025,000 shares of common stock,
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which were pre-purchased from the Company by the underwriter at a purchase price of $14.45 per share of common stock including fees, resulting in net proceeds after offering costs of $58.0 million.

Noncontrolling Interests
 
As of September 30, 2022 and December 31, 2021, the Company held a 76.7% and 75.3% common interest in the Operating Partnership, respectively. As of September 30, 2022, the Company also held a preferred interest in the Operating Partnership in the form of preferred units with a liquidation preference of $171.1 million. The Company is the primary beneficiary of the Operating Partnership as it has the power to direct the activities of the Operating Partnership and the rights to absorb 76.7% 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 Operating Partnership represent units of limited partnership interest in the Operating Partnership not held by the Company. As of September 30, 2022, there were 20,611,190 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 $24.2 million relates to the minority partners' interest in certain joint venture entities as of September 30, 2022, including $23.5 million for minority partners’ interest in the Constellation Energy Building. The noncontrolling interest for consolidated real estate entities was $0.6 million as of December 31, 2021.

On January 1, 2022, due to holders of Class A Units tendering an aggregate of 12,149 Class A Units for redemption by the Operating Partnership, the Company elected to satisfy the redemption requests through the issuance of an equal number of shares of common stock.

On July 1, 2022, in connection with the tender by a limited partner in the Operating Partnership of 10,146 Class A Units for redemption by the Operating Partnership, the Company elected to satisfy the redemption request with a cash payment of $0.1 million.

Dividends and Distributions

During the nine months ended September 30, 2022, the following dividends/distributions were declared or paid:
Equity type Declaration Date Record Date Payment Date Dividends per Share/Unit Aggregate Dividends/Distributions on Stock and Units (in thousands)
Common Stock/Class A Units