# AH Realty Trust, Inc. (AHRT) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from AH Realty Trust, Inc.'s 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1569187/000156918722000008/ahh-20211231.htm
Accession: 0001569187-22-000008
Filing date: 2022-02-24
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/AHRT/
All MD&A years: /company/AHRT/mda/
Next year: /company/AHRT/mda/fy2022/ (FY 2022)

Item 7.        Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Business Description

We are a full-service real estate company with extensive experience developing, building, owning, and managing high-quality, institutional-grade office, retail, and multifamily properties in attractive markets throughout the Mid-Atlantic and Southeastern United States. As of December 31, 2021, our stabilized operating property portfolio was comprised of 37 retail properties, 7 office properties, and 11 multifamily properties. In addition to our operating property portfolio, we had 1 mixed-use property, 1 office property, and 3 multifamily properties in various stages of predevelopment, development, redevelopment, or stabilization as of December 31, 2021. We also provide general contracting services to third parties and invest in development projects through mezzanine lending arrangements.

Substantially all of our assets are held by, and all of our operations are conducted through, our Operating Partnership. We are the sole general partner of our Operating Partnership and, as of December 31, 2021, we owned, through a combination of direct and indirect interests, 75.3% of the outstanding OP units in our Operating Partnership.

We elected to be taxed as a REIT for U.S. federal income tax purposes commencing with the taxable year ended December 31, 2013.

Our principal executive office is located at 222 Central Park Avenue, Suite 2100, Virginia Beach, Virginia 23462 in the Armada Hoffler Tower at the Virginia Beach Town Center. In addition, we have a construction office located at 1300 Thames Street, Suite 30, Baltimore, Maryland 21231 in Thames Street Wharf at Harbor Point. The telephone number for our principal executive office is (757) 366-4000. We maintain a website at ArmadaHoffler.com. The information on, or accessible through, our website is not incorporated into and does not constitute a part of this report.

COVID-19 Update

See Part I, Item 1 “Business—Impact of COVID-19 on Our Business” for more information on the impact of COVID-19 on our company.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements that have been prepared in accordance with GAAP. The Company's accounting policies are more fully described in Note 2 of our consolidated financial statements in Item 8 of this Annual Report on Form 10-K. As disclosed in Note 2, the preparation of these financial statements requires us to exercise our best judgment in making estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. We evaluate our estimates on an ongoing basis, based upon current available information. Actual results could differ from these estimates.

We believe the following accounting policies and estimates are the most critical to understanding our reported financial results as their effect on our financial condition and results of operations is material.

Rental Revenues

We lease our properties under operating leases and recognize base rents on a straight-line basis over the lease term. We also recognize revenue from tenant recoveries, through which tenants reimburse us for expenses paid by us such as utilities, janitorial, repairs and maintenance, security and alarm, parking lot and grounds, general and administrative, management fees, insurance, and real estate taxes on an accrual basis. Our rental revenues are reduced by the amount of any leasing incentives on a straight-line basis over the term of the applicable lease. We include a renewal period in the lease term only if it appears at lease inception that the renewal is reasonably certain. We begin recognizing rental revenue when the tenant has the right to take possession of or controls the physical use of the property under lease.

Rental revenue is recognized subject to management’s evaluation of tenant credit risk. The extended collection period for accrued straight-line rental revenue along with our evaluation of tenant credit risk may result in the nonrecognition of all or a portion of straight-line rental revenue until the collection of substantially all such revenue for a tenant is probable.

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General Contracting and Real Estate Services Revenues

We recognize general contracting revenues as a customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services. For each construction contract, we identify the performance obligations, which typically include the delivery of a single building constructed according to the specifications of the contract. We estimate the total transaction price, which generally includes a fixed contract price and may also include variable components such as early completion bonuses, liquidated damages, or cost savings to be shared with the customer. Variable components of the contract price are included in the transaction price to the extent that it is probable that a significant reversal of revenue will not occur. We recognize the estimated transaction price as revenue as we satisfy our performance obligations; we estimate our progress in satisfying performance obligations for each contract using the input method, based on the proportion of incurred costs relative to total estimated construction costs at completion. Construction contract costs include all direct material, direct labor, subcontract costs, and overhead costs directly related to contract performance. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions and final contract settlements, are all significant judgments that may result in revisions to costs and income and are recognized in the period in which they are determined. Additionally, the estimated costs at completion are affected by management’s forecasts of anticipated costs to be incurred and contingency reserves for exposures related to unknown costs, such as design deficiencies and subcontractor defaults. The estimated variable consideration is also affected by claims and unapproved change orders, which may result from changes in the scope of the contract. Provisions for estimated losses on uncompleted contracts are recognized immediately in the period in which such losses are determined.

We recognize real estate services revenues from property development and management as we satisfy our performance obligations under these service arrangements.

We assess whether multiple contracts with a single counterparty may be combined into a single contract for the revenue recognition purposes based on factors such as the timing of the negotiation and execution of the contracts and whether the economic substance of the contracts was contemplated separately or in tandem.

Operating Property Acquisitions

Acquisitions of operating properties have been and will generally be accounted for as acquisitions of a group of assets, with costs incurred to effect an acquisition, including title, legal, accounting, brokerage commissions, and other related costs being capitalized as part of the cost of the assets acquired. In connection with operating property acquisitions, we identify and recognize all assets acquired and liabilities assumed at their relative fair values as of the acquisition date. The purchase price allocations to tangible assets, such as land, site improvements, and buildings and improvements, are presented within income producing property in the consolidated balance sheets and depreciated over their estimated useful lives. Acquired lease intangible assets are presented as a separate component of assets on the consolidated balance sheets. Acquired lease intangible liabilities are presented within other liabilities in the consolidated balance sheets. We amortize in-place lease assets as depreciation and amortization expense on a straight-line basis over the remaining term of the related leases. We amortize above-market lease assets as reductions to rental revenues on a straight-line basis over the remaining term of the related leases. We amortize below-market lease liabilities as increases to rental revenues on a straight-line basis over the remaining term of the related leases. We amortize below-market ground lease assets as increases to rental expenses on a straight-line basis over the remaining term of the related leases. We capitalize the costs related to operating property acquisitions that do not meet the definition of a business.

We value land based on a market approach, looking to recent sales of similar properties, adjusting for differences due to location, the state of entitlement, and the shape and size of the parcel. Improvements to land are valued using a replacement cost approach. The approach applies industry standard replacement costs adjusted for geographic specific considerations and reduced by estimated depreciation. The value of buildings acquired is estimated using the replacement cost approach, assuming the buildings were vacant at acquisition. The replacement cost approach considers the composition of the structures acquired, adjusted for an estimate of depreciation. The estimate of depreciation is made considering industry standard information and depreciation curves for the identified asset classes. The value of acquired lease intangible assets and liabilities considers the estimated cost of leasing the properties as if the acquired buildings were vacant, as well as the value of the current leases relative to market-rate leases. The in-place lease value is determined using an estimated total lease-up time and lost rental revenues during such time. The value of current leases relative to market-rate leases is based on market rents obtained for comparable leases. Given the significance of unobservable inputs used in the valuation of acquired real estate assets, we classify them as Level 3 inputs in the fair value hierarchy.

We value debt assumed in connection with operating property acquisitions based on a discounted cash flow analysis of the expected cash flows of the debt. Such analysis considers the contractual terms of the debt, including the period to maturity,

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credit characteristics, and other terms of the arrangements, which are Level 3 inputs in the fair value hierarchy (as described in Note 12 to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K).

Real Estate Project Costs

We capitalize direct and certain indirect costs clearly associated with the development, redevelopment, construction, leasing, or expansion of our real estate assets. Capitalized project costs include direct material, labor, subcontract costs, real estate taxes, insurance, utilities, ground rent, interest on borrowing obligations, and salaries and related personnel costs.

We capitalize direct and indirect project costs associated with the initial construction or redevelopment of a property up to the time the property is substantially complete and ready for its intended use.

We also capitalize direct and indirect costs, including interest costs, on vacant space during extended lease-up periods after construction of the building shell has been completed if costs are being incurred to prepare the vacant space for its intended use. If costs and activities incurred to prepare the vacant space for its intended use cease, then cost capitalization is also discontinued until such activities are resumed. Once necessary work has been completed on a vacant space, project costs are no longer capitalized. In addition, all leasing commissions paid to third parties for new leases or lease renewals are capitalized.

We depreciate buildings on a straight-line basis over 39 years and tenant improvements over the shorter of their estimated useful lives or the term of the related lease.

Real Estate Impairment

We evaluate our real estate assets for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If such an evaluation is necessary, we compare the carrying amount of any such real estate asset with the undiscounted expected future cash flows that are directly associated with, and that are expected to arise as a direct result of, its use and eventual disposition. Our estimate of the expected future cash flows attributable to a real estate asset is based upon, among other things, our estimates regarding future market conditions, rental rates, occupancy levels, tenant improvements, leasing commissions, tenant concessions, and assumptions regarding the residual value of our properties. If the carrying amount of a real estate asset exceeds its associated undiscounted expected future cash flows, we recognize an impairment loss to reduce the carrying amount of the real estate asset to its fair value based on marketplace participant assumptions.

Interest Income

Interest income on notes receivable is accrued based on the contractual terms of the loans and when, in the opinion of management, it is deemed collectible. Many loans provide for accrual of interest that will not be paid until maturity of the loan. Interest is recognized on these loans at the accrual rate subject to management's determination that accrued interest is ultimately collectible, based on the underlying collateral and the status of development activities, as applicable. If management cannot make this determination, recognition of interest income may be fully or partially deferred until it is ultimately paid.

Expected credit losses

We evaluate the collectability of both the interest on and principal of each of our notes receivable based primarily upon the value of the underlying development project. We consider factors such as the progress of development activities, including leasing activities, projected development costs, current and projected loan balances. We also consider historical industry data, such as loan defaults and losses experienced on loans secured by other development projects, and current economic conditions that may affect the collectability of the remaining cash flows. At the end of each reporting period, the Company measures expected credit losses to be incurred over the remaining contractual term based on the risk rating of each loan. See Note 2 to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for details on risk rating determination. If a loan is rated as substandard, we then estimate expected credit losses as the difference between the amortized cost basis of the outstanding loan and the estimated projected sales proceeds of the underlying collateral.

Recent Accounting Pronouncements

For a summary of recent accounting pronouncements and the anticipated effects on our consolidated financial statements see Note 2 to our consolidated financial statements included in Item 8 of this Form 10-K.

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Segment Results of Operations

As of December 31, 2021, we operated our business in four segments: (i) office real estate, (ii) retail real estate, (iii) multifamily residential real estate, and (iv) general contracting and real estate services that are conducted through our TRSs. NOI (segment revenues minus segment expenses) is the measure used by management to assess segment performance and allocate our resources among our segments. NOI is not a measure of operating income or cash flows from operating activities as measured by GAAP and is not indicative of cash available to fund cash needs. As a result, NOI should not be considered an alternative to cash flows as a measure of liquidity. Not all companies calculate NOI in the same manner. We consider NOI to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the core operations of our real estate and construction businesses. See Note 3 to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for a reconciliation of NOI to net income, the most directly comparable GAAP measure.

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

This section of this Form 10-K generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 that are not included in this Form 10-K can be found in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Office Segment Data

Office rental revenues, property expenses, and NOI for the years ended December 31, 2021, 2020 and 2019 were as follows ($ in thousands): 

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2021","","2020","","2019"],["Rental revenues","$","47,363","","","$","43,494","","","$","33,269"],["Property expenses","18,524","","","15,910","","","12,193"],["NOI","$","28,839","","","$","27,584","","","$","21,076"],["Square feet(1)","1,301,319","","","1,305,933","","","1,307,255"],["Occupancy(1)","96.8","%","","97.0","%","","96.6","%"]]
[[/GREPCENT_TABLE]]

________________________________________

(1)Stabilized properties as of the end of the periods presented.

Rental revenues for the year ended December 31, 2021 increased $3.9 million, or 8.9%, compared to the year ended December 31, 2020. NOI for the year ended December 31, 2021 increased $1.3 million, or 4.5%, compared to the year ended December 31, 2020. The increases in rental revenues and NOI resulted primarily from the commencement of operations at Wills Wharf in June 2020.

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Office Same Store Results

Office same store rental revenues, property expenses, and NOI for the comparative years ended December 31, 2021 and 2020 and December 31, 2020 and 2019 were as follows (in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended","","","","Years Ended"],["","December 31,","","","","December 31,"],["","2021 (1)","","2020(1)","","Change","","2020 (2)","","2019 (2)","","Change"],["Rental revenues","$","40,965","","","$","40,420","","","$","545","","","$","21,044","","","$","21,239","","","$","(195)"],["Property expenses","14,513","","","14,060","","","453","","","7,771","","","7,735","","","36"],["Same Store NOI","$","26,452","","","$","26,360","","","$","92","","","$","13,273","","","$","13,504","","","$","(231)"],["Non-Same Store NOI","2,387","","","1,224","","","1,163","","","14,311","","","7,572","","","6,739"],["Segment NOI","$","28,839","","","$","27,584","","","$","1,255","","","$","27,584","","","$","21,076","","","$","6,508"]]
[[/GREPCENT_TABLE]]

________________________________________

(1)Same store excludes Wills Wharf.

(2)Same store excludes One City Center, Brooks Crossing Office, Thames Street Wharf, and Wills Wharf.

Same store rental revenues for the year ended December 31, 2021 increased compared to the year ended December 31, 2020 due to an increase in recoverable expenses at the Thames Street Wharf. Same store NOI for the year ended December 31, 2021 was materially consistent with the year ended December 31, 2020.

Retail Segment Data

Retail rental revenues, property expenses, and NOI for the years ended December 31, 2021, 2020 and 2019 were as follows ($ in thousands): 

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2021","","2020","","2019"],["Rental revenues","$","78,572","","","$","73,032","","","$","77,593"],["Property expenses","20,928","","","18,813","","","19,572"],["NOI","$","57,644","","","$","54,219","","","$","58,021"],["Square feet(1)","4,067,355","","","3,651,213","","","4,169,784"],["Occupancy(1)","96.0","%","","94.7","%","","96.9","%"]]
[[/GREPCENT_TABLE]]

________________________________________

(1)Stabilized properties as of the end of the periods presented.

Rental revenues for the year ended December 31, 2021 increased $5.5 million, or 7.6%, compared to the year ended December 31, 2020. NOI for the year ended December 31, 2021 increased $3.4 million, or 6.3%, compared to the year ended December 31, 2020. The increases in rental revenues and NOI resulted primarily from the acquisition of Delray Beach Plaza, Overlook Village, Greenbrier Square, Nexton Square, and the commencement of operations at Apex Entertainment after the redevelopment was completed in September 2020. These increases were partially offset by the disposition of the seven-property retail portfolio in May 2020 as well as the disposition of Oakland Marketplace and Socastee Commons.

Retail Same Store Results

Retail same store rental revenues, property expenses, and NOI for the comparative years ended December 31, 2021 and 2020 and December 31, 2020 and 2019 were as follows (in thousands): 

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[[GREPCENT_TABLE]]
[["","Years Ended","","","","Years Ended"],["","December 31,","","","","December 31,"],["","2021 (1)","","2020 (1)","","Change","","2020 (2)","","2019 (2)","","Change"],["Rental revenues","$","64,006","","","$","63,147","","","$","859","","","$","49,171","","","$","51,970","","","$","(2,799)"],["Property expenses","15,898","","","15,469","","","429","","","12,327","","","12,681","","","(354)"],["Same Store NOI","$","48,108","","","$","47,678","","","$","430","","","$","36,844","","","$","39,289","","","$","(2,445)"],["Non-Same Store NOI","9,536","","","6,541","","","2,995","","","17,375","","","18,732","","","(1,357)"],["Segment NOI","$","57,644","","","$","54,219","","","$","3,425","","","$","54,219","","","$","58,021","","","$","(3,802)"]]
[[/GREPCENT_TABLE]]

________________________________________

(1)Same store excludes Apex Entertainment, Delray Beach Plaza, Greenbrier Square, Nexton Square, Overlook Village, and Premier Retail. In addition, same store excludes the seven-property retail portfolio that was disposed in May 2020 (Alexander Pointe, Bermuda Crossroads, Gainsborough Square, Harper Hill Commons, Indian Lakes Crossing, Renaissance Square, and Stone House Square) as well as Oakland Marketplace, Socastee Commons, and Courthouse 7-Eleven, each of which were disposed in 2021.

(2)Same store excludes Apex Entertainment, Brooks Crossing Retail, Columbus Village (due to redevelopment), Lightfoot Marketplace (disposed in August 2019), Market at Mill Creek, Marketplace at Hilltop and Red Mill Commons (acquired in May 2019), Nexton Square (acquired in September 2020), Premier Retail, Waynesboro Commons (disposed in April 2019), the additional outparcel phase of Wendover Village (acquired in February 2019), and the seven-property retail portfolio that was disposed in May 2020 (Alexander Pointe, Bermuda Crossroads, Gainsborough Square, Harper Hill Commons, Indian Lakes Crossing, Renaissance Square, and Stone House Square).

Same store rental revenues and NOI for the year ended December 31, 2021 increased compared to the year ended December 31, 2020 primarily as a result of higher rental revenue received from Regal Cinemas at the Harrisonburg location as well as increased occupancy and less bad debt reserves for various properties in the same store portfolio.

Multifamily Segment Data

Multifamily rental revenues, property expenses, and NOI for the years ended December 31, 2021, 2020 and 2019 were as follows ($ in thousands): 

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2021","","2020","","2019"],["Rental revenues","$","66,205","","","$","49,962","","","$","40,477"],["Property expenses","28,894","","","22,373","","","17,528"],["NOI","$","37,311","","","$","27,589","","","$","22,949"],["Apartment units/beds","2,959","","","3,527","","","2,238"],["Occupancy","97.4","%","","92.5","%","","95.6","%"]]
[[/GREPCENT_TABLE]]

Rental revenues for the year ended December 31, 2021 increased $16.2 million, or 32.5%, compared to the year ended December 31, 2020. NOI increased $9.7 million, or 35.2%, compared to the year ended December 31, 2020. The increases in rental revenues and NOI resulted primarily from the acquisition of Edison Apartments and The Residences at Annapolis Junction, the delivery of Summit Place, and higher occupancy and rental rates at multiple properties. The increases were partially offset by the disposition of Johns Hopkins Village in November 2021.

Multifamily Same Store Results

Multifamily same store rental revenues, property expenses, and NOI for the comparative years ended December 31, 2021 and 2020 and December 31, 2020 and 2019 were as follows (in thousands):

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[[GREPCENT_TABLE]]
[["","Years Ended","","","","Years Ended"],["","December 31,","","","","December 31,"],["","2021 (1)","","2020 (1)","","Change","","2020 (2)","","2019 (2)","","Change"],["Rental revenues","$","28,727","","","$","26,834","","","$","1,893","","","$","21,542","","","$","21,849","","","$","(307)"],["Property expenses","11,188","","","11,021","","","167","","","9,157","","","8,666","","","491"],["Same Store NOI","$","17,539","","","$","15,813","","","$","1,726","","","$","12,385","","","$","13,183","","","$","(798)"],["Non-Same Store NOI","19,772","","","11,776","","","7,996","","","15,204","","","9,766","","","5,438"],["Segment NOI","$","37,311","","","$","27,589","","","$","9,722","","","$","27,589","","","$","22,949","","","$","4,640"]]
[[/GREPCENT_TABLE]]

________________________________________

(1)Same store excludes The Residences at Annapolis Junction, Edison Apartments, Hoffler Place, Summit Place, Johns Hopkins Village, and The Cosmopolitan.

(2)Same store excludes 1405 Point, The Residences at Annapolis Junction, and Edison Apartments (acquired in October 2020), Greenside Apartments, Hoffler Place, Premier Apartments, Summit Place, and The Cosmopolitan (due to redevelopment).

Same store rental revenues and NOI for the year ended December 31, 2021 increased compared to the year ended December 31, 2020 primarily as a result of higher occupancy and rental rates at multiple properties.

General Contracting and Real Estate Services Segment Data

General contracting and real estate services revenues, expenses, and gross profit for the years ended December 31, 2021, 2020 and 2019 were as follows ($ in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2021","","2020","","2019"],["Segment revenues","$","91,936","","","$","217,146","","","$","105,859"],["Gross profit","$","3,836","","","$","7,674","","","$","4,321"],["Operating margin","4.2","%","","3.5","%","","4.1","%"],["Construction backlog","$","215,519","","","$","71,258","","","$","242,622"]]
[[/GREPCENT_TABLE]]

Segment revenues for the year ended December 31, 2021 decreased $125.2 million compared to the year ended December 31, 2020. Gross profit for the year ended December 31, 2021 decreased $3.8 million compared to the year ended December 31, 2020. The decrease in segment revenues resulted primarily from a lower volume of projects during the year ended December 31, 2021 due to COVID-related factors. By contrast, operating margin for the year ended December 31, 2021 increased 0.7% compared to the year ended December 31, 2020 primarily due to the recognition of project savings.

The changes in construction backlog for each of the years ended December 31, 2021, 2020 and 2019 were as follows (in thousands):  

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2021","","2020","","2019"],["Beginning backlog","$","71,258","","","$","242,622","","","$","165,863"],["New contracts/change orders","236,077","","","45,882","","","182,495"],["Work performed","(91,816)","","","(217,246)","","","(105,736)"],["Ending backlog","$","215,519","","","$","71,258","","","$","242,622"]]
[[/GREPCENT_TABLE]]

During the year ended December 31, 2021, we executed new contracts for the Boulders Lakeview Apartments, Adams Hill Apartments, Fox Crossing Apartments, and Innsbrook Apartments & Townhomes projects at contract prices of $37.2 million, $52.4 million, $38.1 million and $54.0 million.

During the year ended December 31, 2020, we performed work on several significant projects, including 27th Street Apartments, Interlock Commercial, and Solis Apartments at Interlock, which used $52.2 million, $43.8 million, and $46.0 million, respectively, of the backlog as of December 31, 2020.

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Consolidated Results of Operations

The following table summarizes our results of operations for the years ended December 31, 2021, 2020, and 2019 (in thousands): 

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","2021","","2020"],["","2021","","2020","","2019","","Change","","Change"],["Revenues"],["Rental revenues","$","192,140","","","$","166,488","","","$","151,339","","","$","25,652","","","$","15,149"],["General contracting and real estate services revenues","91,936","","","217,146","","","105,859","","","(125,210)","","","111,287"],["Total revenues","284,076","","","383,634","","","257,198","","","(99,558)","","","126,436"],["Expenses"],["Rental expenses","46,494","","","38,960","","","34,332","","","7,534","","","4,628"],["Real estate taxes","21,852","","","18,136","","","14,961","","","3,716","","","3,175"],["General contracting and real estate services expenses","88,100","","","209,472","","","101,538","","","(121,372)","","","107,934"],["Depreciation and amortization","68,853","","","59,972","","","54,564","","","8,881","","","5,408"],["Amortization of right-of-use assets - finance leases","1,022","","","586","","","377","","","436","","","209"],["General and administrative expenses","14,610","","","12,905","","","12,392","","","1,705","","","513"],["Acquisition, development and other pursuit costs","112","","","584","","","844","","","(472)","","","(260)"],["Impairment charges","21,378","","","666","","","252","","","20,712","","","414"],["Total expenses","262,421","","","341,281","","","219,260","","","(78,860)","","","122,021"],["Gain on real estate dispositions","19,040","","","6,388","","","4,699","","","12,652","","","1,689"],["Operating income","40,695","","","48,741","","","42,637","","","(8,046)","","","6,104"],["Interest income","18,457","","","19,841","","","23,215","","","(1,384)","","","(3,374)"],["Interest expense","(33,905)","","","(31,035)","","","(31,344)","","","(2,870)","","","309"],["Loss on extinguishment of debt","(3,810)","","","\u2014","","","(30)","","","(3,810)","","","30"],["Equity in income of unconsolidated real estate entities","\u2014","","","\u2014","","","273","","","\u2014","","","(273)"],["Change in fair value of derivatives and other","2,182","","","(1,130)","","","(3,599)","","","3,312","","","2,469"],["Unrealized credit loss release (provision)","792","","","(256)","","","\u2014","","","1,048","","","(256)"],["Other income (expense), net","302","","","515","","","615","","","(213)","","","(100)"],["Income before taxes","24,713","","","36,676","","","31,767","","","(11,963)","","","4,909"],["Income tax benefit","742","","","283","","","491","","","459","","","(208)"],["Net income","25,455","","","36,959","","","32,258","","","(11,504)","","","4,701"],["Net (income) loss attributable to noncontrolling interests in investment entities","5","","","230","","","(213)","","","(225)","","","443"],["Preferred stock dividends","(11,548)","","","(7,349)","","","(2,455)","","","(4,199)","","","(4,894)"],["Net income attributable to common stockholders and OP Unitholders","$","13,912","","","$","29,840","","","$","29,590","","","$","(15,928)","","","$","250"]]
[[/GREPCENT_TABLE]]

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Rental revenues. Rental revenues by segment for the years ended December 31, 2021, 2020, and 2019 were as follows (in thousands): 

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","2021","","2020"],["","2021","","2020","","2019","","Change","","Change"],["Office","$","47,363","","","$","43,494","","","$","33,269","","","$","3,869","","","$","10,225"],["Retail","78,572","","","73,032","","","77,593","","","5,540","","","(4,561)"],["Multifamily","66,205","","","49,962","","","40,477","","","16,243","","","9,485"],["","$","192,140","","","$","166,488","","","$","151,339","","","$","25,652","","","$","15,149"]]
[[/GREPCENT_TABLE]]

Rental revenues increased $25.7 million during the year ended December 31, 2021 compared to the year ended December 31, 2020. The increase in office rental revenues resulted primarily from the commencement of operations at Wills Wharf in June 2020 and an increase in recoverable expenses at Thames Street Wharf. The increase in retail rental revenues resulted primarily from the acquisitions of Nexton Square, Delray Beach Plaza, Overlook Village, and Greenbrier Square along with the completion of the redevelopment at Apex Entertainment. Additionally, rental revenue has increased for Harrisonburg Regal due to higher rental revenue received from Regal Cinemas. These increases were partially offset by the disposition of the seven-property retail portfolio in May 2020 as well as the dispositions of Oakland Marketplace and Socastee Commons. The increase in multifamily rental revenues resulted primarily from the acquisition of Edison Apartments and The Residences at Annapolis Junction, the delivery of Summit Place, and higher occupancy and rental rates at multiple properties. These increases were partially offset by the disposition of Johns Hopkins Village in November 2021.

General contracting and real estate services revenues. General contracting and real estate services revenues decreased $125.2 million during the year ended December 31, 2021 compared to the year ended December 31, 2020. The decrease resulted primarily from a lower volume of projects during the year ended December 31, 2021.

Rental expenses. Rental expenses by segment for each of the three years ended December 31, 2021 were as follows (in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","2021","","2020"],["","2021","","2020","","2019","","Change","","Change"],["Office","$","12,412","","","$","10,799","","","$","8,722","","","$","1,613","","","$","2,077"],["Retail","12,512","","","11,029","","","11,656","","","1,483","","","(627)"],["Multifamily","21,570","","","17,132","","","13,954","","","4,438","","","3,178"],["","$","46,494","","","$","38,960","","","$","34,332","","","$","7,534","","","$","4,628"]]
[[/GREPCENT_TABLE]]

Rental expenses increased $7.5 million during the year ended December 31, 2021 compared to the year ended December 31, 2020. Office rental expenses increased primarily as a result of the Wills Wharf property being placed into service beginning in June 2020 as well as higher recoverable utility costs due to tenants returning to work in their offices. Retail rental expenses increased primarily as a result of the acquisitions of Nexton Square, Delray Beach Plaza, Overlook Village, and Greenbrier Square along with the completion of the redevelopment at Apex Entertainment. These increases were partially offset by the disposition of the seven-property retail portfolio in May 2020 as well as the dispositions of Oakland Marketplace and Socastee Commons. Multifamily rental expenses increased primarily as a result of the acquisition of Edison Apartments and The Residences at Annapolis Junction as well as the delivery of Summit Place. The increase was partially offset by the disposition of Johns Hopkins Village in November 2021.

Real estate taxes. Real estate taxes by segment for the years ended December 31, 2021, 2020, and 2019 were as follows (in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","2021","","2020"],["","2021","","2020","","2019","","Change","","Change"],["Office","$","6,112","","","$","5,111","","","$","3,471","","","$","1,001","","","$","1,640"],["Retail","8,416","","","7,784","","","7,916","","","632","","","(132)"],["Multifamily","7,324","","","5,241","","","3,574","","","2,083","","","1,667"],["","$","21,852","","","$","18,136","","","$","14,961","","","$","3,716","","","$","3,175"]]
[[/GREPCENT_TABLE]]

Real estate taxes increased $3.7 million during the year ended December 31, 2021 compared to the year ended December 31, 2020. Office real estate taxes increased primarily as a result of Wills Wharf being placed into service as well as

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an increased assessment at Thames Street Wharf. Retail real estate taxes increased primarily as a result of the acquisitions of Nexton Square, Delray Beach Plaza, Overlook Village, and Greenbrier Square. These increases were partially offset by the disposition of the seven-property retail portfolio in May 2020 as well as the dispositions of Oakland Marketplace and Socastee Commons. Multifamily real estate taxes increased primarily as a result of the acquisition of Edison Apartments and The Residences at Annapolis Junction, the delivery of Summit Place, and expiring real estate tax credits at Johns Hopkins Village.

General contracting and real estate services expenses for the year ended December 31, 2021 decreased $121.4 million compared to the year ended December 31, 2020. The decrease resulted primarily from a lower volume of projects during the year ended December 31, 2021.

Depreciation and amortization for the year ended December 31, 2021 increased $8.9 million compared to the year ended December 31, 2020. The increase was attributable to property acquisitions and development deliveries. The increases were partially offset by dispositions in 2020 and 2021, and certain assets that became fully depreciated.

Amortization of right-of-use assets - finance leases for the year ended December 31, 2021 increased $0.4 million compared to the year ended December 31, 2020. The increase was primarily due to the acquisition of Delray Beach Plaza shopping center, which has a ground lease classified as a finance lease.

General and administrative expenses for the year ended December 31, 2021 increased $1.7 million compared to the year ended December 31, 2020. The increase resulted from increased business insurance expense and higher compensation cost due to increased investment in human capital and sustainability initiatives.

Acquisition, development and other pursuit costs for the year ended December 31, 2021 decreased $0.5 million compared to the year ended December 31, 2020. The decrease was due to a higher write off of costs for the year ended December 31, 2020 relating to certain development projects and acquisitions that were abandoned.

Impairment charges during the year ended December 31, 2021 totaled $21.4 million and related to impairment charges recognized on Socastee Commons, which was disposed in August 2021, and the two student housing properties in Charleston, South Carolina, which were classified as held for sale as of December 31, 2021.

Gain on real estate dispositions for the year ended December 31, 2021 totaled $19.0 million and related to the dispositions of Hanbury 7-Eleven, Oakland Marketplace, Courthouse 7-Eleven, and Johns Hopkins Village. During the year ended December 31, 2020, we recognized gains on real estate dispositions of $6.4 million, related to the sale of a portfolio of seven retail properties in May 2020 and the sale of Walgreens at Hanbury Village in August 2020.

Interest income for the year ended December 31, 2021 decreased $1.4 million compared to the year ended December 31, 2020, primarily as a result of the lower notes receivable balance in the current period due to the repayment of mezzanine loans for The Residences at Annapolis Junction, Delray Beach Plaza, and Nexton Square. As of December 31, 2021 and 2020, our outstanding mezzanine loan balances were $118.9 million and $128.6 million, respectively.

Interest expense for the year ended December 31, 2021 increased $2.9 million compared to the year ended December 31, 2020 primarily due to the loans obtained and assumed in connection with acquisitions.

Loss on extinguishment of debt increased $3.8 million compared to the year ended December 31, 2020 primarily due to the disposition of Johns Hopkins Village and the termination of the related interest rate swap.

Change in fair value of derivatives and other for the year ended December 31, 2021 was a gain of $2.2 million, which arose from fair value increases for our derivative instruments due to increases in forward LIBOR. During the year ended December 31, 2020, we recognized losses on changes in fair value of interest rate derivatives of $1.1 million due to significant decreases in forward LIBOR during 2020.

Unrealized credit loss release relates to a release in the allowance for the Interlock Commercial mezzanine loan due to the progression of the development project, which was partially offset by the reserve recorded for the Nexton Multifamily investment.

Other income (expense), net for the years ended December 31, 2021 and 2020 was materially consistent.

The income tax benefit recognized during the years ended December 31, 2021 and 2020 is attributable to the taxable profits and losses of our development and construction businesses that we operate through our TRS.

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Liquidity and Capital Resources

Overview

We believe our primary short-term liquidity requirements consist of general contractor expenses, operating expenses, and other expenditures associated with our properties, including tenant improvements, leasing commissions and leasing incentives, dividend payments to our stockholders required to maintain our REIT qualification, debt service, capital expenditures, new real estate development projects, mezzanine loan funding requirements, and strategic acquisitions. We expect to meet our short-term liquidity requirements through net cash provided by operations, reserves established from existing cash, borrowings under construction loans to fund new real estate development and construction, borrowings available under our credit facility, and net proceeds from the sale of common stock through our at-the-market continuous equity offering program (the "ATM Program"), which is discussed below.

Our long-term liquidity needs consist primarily of funds necessary for the repayment of debt at or prior to maturity, general contracting expenses, property development and acquisitions, tenant improvements, and capital improvements. We expect to meet our long-term liquidity requirements with net cash from operations, long-term secured and unsecured indebtedness, and the issuance of equity and debt securities. We also may fund property development and acquisitions and capital improvements using our credit facility pending long-term financing.

As of December 31, 2021, we had unrestricted cash and cash equivalents of $35.2 million available for both current liquidity needs as well as development activities. As of December 31, 2021, we also had restricted cash in escrow of $5.2 million, some of which is available for capital expenditures at our operating properties. As of December 31, 2021, we had $110 million available under our credit facility to meet our short-term liquidity requirements and $60.1 million available under construction loans to fund development activities.

ATM Program

On March 10, 2020, we commenced a new ATM Program through which we may, from time to time, issue and sell shares of our common stock and shares of our Series A Preferred Stock having an aggregate offering price of up to $300.0 million, to or through our sales agents and, with respect to shares of our common stock, may enter into separate forward sales agreements to or through the forward purchaser.

During the year ended December 31, 2021, we issued and sold 3,801,731 shares of common stock at a weighted average price of $13.87 per share under the ATM Program, receiving net proceeds, after offering costs and commissions, of $51.7 million. During the year ended December 31, 2021, we did not issue any shares of Series A Preferred Stock under the ATM Program.

As of December 31, 2021, we had $212.2 million in availability under the ATM Program.

Recent Common Equity Offering

On January 11, 2022, we completed an underwritten public offering of 4,025,000 shares of common stock, which were purchased from us at a purchase price of $14.45 per share of common stock, which resulted in net proceeds after offering costs of $58.0 million.

Credit Facility

We have a senior credit facility that was amended and restated on October 3, 2019, which provides for a $355.0 million credit facility comprised of a $150.0 million senior unsecured revolving credit facility (the "revolving credit facility") and a $205.0 million senior unsecured term loan facility (the "term loan facility" and, together with the revolving credit facility, the "credit facility"), with a syndicate of banks. We intend to use future borrowings under the credit facility for general corporate purposes, including funding acquisitions, mezzanine lending, development and redevelopment of properties in our portfolio, and for working capital. Our unencumbered borrowing pool supports revolving borrowings of up to $130 million as of December 31, 2021.

The credit facility includes an accordion feature that allows the total commitments to be increased to $700.0 million, subject to certain conditions, including obtaining commitments from any one or more lenders. The revolving credit facility has

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a scheduled maturity date of January 24, 2024, with two six-month extension options, subject to certain conditions, including payment of a 0.075% extension fee at each extension. The term loan facility has a scheduled maturity date of January 24, 2025.

The revolving credit facility bears interest at LIBOR (the London Inter-Bank Offered Rate) plus a margin ranging from 1.30% to 1.85%, and the term loan facility bears interest at LIBOR plus a margin ranging from 1.25% to 1.80%, in each case depending on our total leverage. We are also obligated to pay an unused commitment fee of 15 or 25 basis points on the unused portions of the commitments under the revolving credit facility, depending on the amount of borrowings under the credit facility. As of December 31, 2021, the interest rates on the revolving credit facility and the term loan facility were 1.70% and 1.65%, respectively. If we attain investment grade credit ratings from Standard and Poor's or Moody's Investor Service, we may elect to have borrowings become subject to interest rates based on such credit ratings. In the future, our interest will no longer be calculated based on LIBOR, and the interest to be paid on credit facility borrowings will instead use an alternative benchmark interest rate. The alternative rate we will use will most likely be SOFR, and the exact transition date is yet to be determined.

The Operating Partnership is the borrower under the credit facility, and its obligations under the credit facility are guaranteed by us and certain of its subsidiaries that are not otherwise prohibited from providing such guaranty.

The credit agreement contains customary representations and warranties and financial and other affirmative and negative covenants. Our ability to borrow under the credit facility is subject to our ongoing compliance with a number of financial covenants, affirmative covenants and other restrictions, including the following:

•Total leverage ratio of not more than 60% (or 65% for the two consecutive quarters following any acquisition with a purchase price of at least up to $100.0 million, but only up to two times during the term of the credit facility);

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

•Tangible net worth of not less than the sum of $567,106,000 and amount equal to 75% of the net equity proceeds received after June 30, 2019;

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

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

•Total unsecured leverage ratio of not more than 60% (or 65% for the two consecutive quarters following any acquisition with a purchase price of at least up to $100.0 million, but only up to two times during the term of the credit facility);

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

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

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

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

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

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

The credit agreement includes customary events of default, in certain cases subject to customary periods to cure. The occurrence of an event of default, following the applicable cure period, would permit the lenders to, among other things, declare the unpaid principal, accrued and unpaid interest, and all other amounts payable under the credit facility to be immediately due and payable.

On January 7, 2021, we entered into a $15.0 million standby letter of credit using the available capacity under the credit facility to guarantee the funding of our investment in the Harbor Point Parcel 3 joint venture, which is the developer of

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T. Rowe Price's new global headquarters. This letter of credit was available for draw down on the revolving credit facility in the event we did not perform. This letter of credit expired on January 4, 2022 and was not required to be renewed.

We are currently in compliance with all covenants under the credit agreement.

Consolidated Indebtedness

The following table sets forth our consolidated indebtedness as of December 31, 2021 ($ in thousands):

[[GREPCENT_TABLE]]
[["Secured Debt","","Amount Outstanding","","Interest Rate (a)","","Effective Rate for Variable-Rate Debt","","Maturity Date","","Balance at Maturity"],["Red Mill West","","$","10,386","","","","4.23%","","","","June 1, 2022","","$","10,187"],["Marketplace at Hilltop","","9,706","","","","4.42%","","","","October 1, 2022","","9,383"],["1405 Point","","52,286","","","LIBOR+","2.25%","","2.35","%","","January 1, 2023","","51,532"],["Nexton Square","","20,107","","","LIBOR+","2.25%","","2.50","%","","February 1, 2023","","20,107"],["Wills Wharf","","64,288","","","LIBOR+","2.25%","","2.35","%","","June 26, 2023","","64,288"],["249 Central Park Retail(b)","","16,352","","","LIBOR+","1.60%","","3.85","%","(c)","August 10, 2023","","15,935"],["Fountain Plaza Retail(b)","","9,841","","","LIBOR+","1.60%","","3.85","%","(c)","August 10, 2023","","9,589"],["South Retail(b)","","7,179","","","LIBOR+","1.60%","","3.85","%","(c)","August 10, 2023","","6,996"],["Hoffler Place(d)(e)","","18,400","","","LIBOR+","2.60%","","3.00","%","","January 1, 2024","","18,143"],["Summit Place(d)(e)","","23,100","","","LIBOR+","2.60%","","3.00","%","","January 1, 2024","","22,789"],["One City Center","","24,084","","","LIBOR+","1.85%","","1.95","%","","April 1, 2024","","22,559"],["Chronicle Mill(f)","","\u2014","","","LIBOR+","3.00%","","3.25","%","","May 5, 2024","","\u2014"],["Red Mill Central","","2,188","","","","4.80%","","","","June 17, 2024","","1,765"],["Gainesville Apartments","","18,114","","","LIBOR+","3.00%","","3.75","%","","August 31, 2024","","18,114"],["Premier Apartments(g)","","16,508","","","LIBOR+","1.55%","","1.65","%","","October 31, 2024","","15,848"],["Premier Retail(g)","","8,131","","","LIBOR+","1.55%","","1.65","%","","October 31, 2024","","7,806"],["Red Mill South","","5,518","","","","3.57%","","","","May 1, 2025","","4,383"],["Brooks Crossing Office","","14,882","","","LIBOR+","1.60%","","1.70","%","","July 1, 2025","","13,043"],["Market at Mill Creek","","13,142","","","LIBOR+","1.55%","","1.65","%","","July 12, 2025","","10,876"],["North Point Center Note 2","","1,942","","","","7.25%","","","","September 15, 2025","","1,328"],["Encore Apartments(h)","","24,523","","","","2.93%","","","","February 10, 2026","","22,214"],["4525 Main Street(h)","","31,476","","","","2.93%","","","","February 10, 2026","","28,512"],["Delray Beach Plaza","","14,039","","","LIBOR+","3.00%","","3.10","%","","March 8, 2026","","11,627"],["Thames Street Wharf","","70,761","","","BSBY+","1.30%","","2.35","%","(c)","September 30, 2026","","60,839"],["Southgate Square","","27,060","","","LIBOR+","1.90%","","2.10","%","","December 21, 2026","","22,811"],["Greenbrier Square","","20,000","","","","3.74%","","","","October 10, 2027","","18,049"],["Lexington Square","","14,172","","","","4.50%","","","","September 1, 2028","","12,044"],["Red Mill North","","4,189","","","","4.73%","","","","December 31, 2028","","3,295"],["Greenside Apartments","","32,598","","","","3.17%","","","","December 15, 2029","","26,095"],["The Residences at Annapolis Junction","","84,375","","","SOFR+","2.66%","","2.71","%","","November 1, 2030","","71,183"],["Smith's Landing","","16,452","","","","4.05%","","","","June 1, 2035","","384"],["Liberty Apartments","","13,572","","","","5.66%","","","","November 1, 2043","","90"],["Edison Apartments","","15,926","","","","5.30%","","","","December 1, 2044","","100"],["The Cosmopolitan","","42,090","","","","3.35%","","","","July 1, 2051","","187"],["Total secured debt","","$","747,387","","","","","","","","","","$","602,101"],["Unsecured debt"],["Senior unsecured revolving credit facility","","$","5,000","","","LIBOR+","1.30%-1.85%","","1.70","%","","January 24, 2024","","$","5,000"],["Senior unsecured term loan","","19,500","","","LIBOR+","1.25%-1.80%","","1.65","%","","January 24, 2025","","19,500"],["Senior unsecured term loan","","185,500","","","LIBOR+","1.25%-1.80%","","2.05%-4.57%","(c)","January 24, 2025","","185,500"],["Total unsecured debt","","210,000","","","","","","","","","","210,000"],["Total principal balances","","957,387","","","","","","","","","","$","812,101"],["Other notes payable(i)","","10,144"],["Unamortized GAAP adjustments","","(8,621)"],["Loans reclassified to liabilities related to assets held for sale, net","","(41,354)"],["Indebtedness, net","","$","917,556"]]
[[/GREPCENT_TABLE]]

_______________________________________

(a) LIBOR, SOFR, and BSBY rates are determined by individual lenders.

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(b) Cross collateralized.

(c) Includes debt subject to interest rate swap agreements.

(d) Cross collateralized.

(e) Held for sale as of December 31, 2021.

(f) No funding on the construction loan as of December 31, 2021.

(g) Cross collateralized.

(h) Cross collateralized.

(i) Represents the fair value of additional ground lease payments at 1405 Point over the approximately 42-year remaining lease term and an earn-out liability for the Gainesville development project.

Certain loans require us to comply with various financial and other covenants, including the maintenance of minimum debt coverage ratios. As of December 31, 2021, we were in compliance with all loan covenants.

In September 2021, the loan covenants for the syndicated loan secured by Wills Wharf were modified to extend the deadline for the Company to meet a lease-up requirement included in the loan agreement from October 1, 2021 to February 1, 2022. At February 1, 2022, it was determined that we did not meet the lease-up requirement stipulated. The covenant requires the property to be 75% leased, and the property was 70% leased as of that date. This was not an event of default but did trigger an appraisal for the property.

As of December 31, 2021, our scheduled principal repayments and maturities during each of the next five years and thereafter were as follows ($ in thousands):

[[GREPCENT_TABLE]]
[["Year (1)","","Amount Due","","Percentage of Total"],["2022","","$","31,889","","","3","%"],["2023","","180,595","","","19","%"],["2024","","125,017","","","13","%"],["2025","","247,574","","","26","%"],["2026","","155,553","","","16","%"],["Thereafter","","216,759","","","23","%"],["Total","","$","957,387","","","100","%"]]
[[/GREPCENT_TABLE]]

________________________________________

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

Interest Rate Derivatives

As of December 31, 2021, we were party to the following LIBOR and SOFR interest rate cap agreements ($ in thousands):  

[[GREPCENT_TABLE]]
[["Effective Date","","Maturity Date","","Strike Rate","","Notional Amount"],["5/15/2019","","6/1/2022","","2.50% (LIBOR)","","$","100,000"],["1/10/2020","","2/1/2022","","1.75% (LIBOR)","","50,000"],["1/28/2020","","2/1/2022","","1.75% (LIBOR)","","50,000"],["3/2/2020","","3/1/2022","","1.50% (LIBOR)","","100,000"],["7/1/2020","","7/1/2023","","0.50% (LIBOR)","","100,000"],["11/1/2020","","11/1/2023","","1.84% (SOFR)","(a)","84,375"],["2/2/2021","","2/1/2023","","0.50% (LIBOR)","","100,000"],["3/4/2021","","4/1/2023","","2.50% (LIBOR)","","14,479"],["5/5/2021","","5/1/2023","","0.50% (LIBOR)","","50,000"],["5/5/2021","","5/1/2023","","0.50% (LIBOR)","","35,100"],["6/16/2021","","7/1/2023","","0.50% (LIBOR)","","100,000"],["Total","","","","","","$","783,954"]]
[[/GREPCENT_TABLE]]

(a) This interest rate swap is subject to SOFR, which has been identified as an alternative to LIBOR. LIBOR will be phased out beginning December 31, 2021.

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As of December 31, 2021, the Company held the following floating-to-fixed interest rate swaps ($ in thousands):

[[GREPCENT_TABLE]]
[["Related Debt","","Notional Amount","","","Index","","Swap Fixed Rate","","Debt effective rate","","Effective Date","","Expiration Date"],["Senior unsecured term loan","","$","50,000","","","","1-month LIBOR","","2.78","%","","4.33","%","","5/1/2018","","5/1/2023"],["Senior unsecured term loan","","10,500","","","","1-month LIBOR","","3.02","%","","4.57","%","","10/12/2018","","10/12/2023"],["249 Central Park Retail, South Retail, and Fountain Plaza Retail","","33,372","","","","1-month LIBOR","","2.25","%","","3.85","%","","4/1/2019","","8/10/2023"],["Senior unsecured term loan","","50,000","","","","1-month LIBOR","","2.26","%","","3.81","%","","4/1/2019","","10/26/2022"],["Senior unsecured term loan","","25,000","","","","1-month LIBOR","","0.50","%","","2.05","%","","4/1/2020","","4/1/2024"],["Senior unsecured term loan","","25,000","","","","1-month LIBOR","","0.50","%","","2.05","%","","4/1/2020","","4/1/2024"],["Senior unsecured term loan","","25,000","","","","1-month LIBOR","","0.55","%","","2.10","%","","4/1/2020","","4/1/2024"],["Thames Street Wharf","","70,761","","","","1-month BSBY","(a)","1.05","%","","2.35","%","","9/30/2021","","9/30/2026"],["Total","","$","289,633"]]
[[/GREPCENT_TABLE]]

___________________________________

(a) This interest rate is subject to BSBY, which has been identified as an alternative to LIBOR. LIBOR will be phased out beginning December 31, 2021.

Contractual Obligations

The following table summarizes the future payments for known contractual obligations as of December 31, 2021 (in thousands):

[[GREPCENT_TABLE]]
[["","","","","Payments due by period"],["","","","","Less than","","1 \u2013 3","","3 \u2013 5","","More than"],["Contractual Obligations","","Total","","1 year","","years","","years","","5 years"],["Principal payments and maturities of long-term indebtedness","","$","957,387","","","$","31,889","","","$","305,612","","","$","403,127","","","$","216,759"],["Ground and other operating leases","","215,949","","","4,006","","","8,363","","","8,510","","","195,070"],["Interest payments on long-term debt\u2014fixed interest","","105,682","","","18,023","","","32,362","","","16,772","","","38,525"],["Interest payments on long-term debt\u2014variable interest(1)(2)","","37,303","","","10,193","","","12,823","","","6,201","","","8,086"],["Tenant-related and other commitments","","10,898","","","9,740","","","1,158","","","\u2014","","","\u2014"],["Total (3) (4)","","$","1,327,219","","","$","73,851","","","$","360,318","","","$","434,610","","","$","458,440"]]
[[/GREPCENT_TABLE]]

________________________________________

(1)For long-term debt that bears interest at variable rates, we estimated future interest payments using the indexed rates as of December 31, 2021. LIBOR as of December 31, 2021 was 10 basis points. SOFR as of December 31, 2021 was 5 basis points. BSBY as of December 31, 2021 was 8 basis points.

(2)Assumes the balance outstanding of $5.0 million and the weighted average interest rate of 1.70% in effect at December 31, 2021 remain in effect until maturity of our secured revolving credit facility. Amounts also include unused credit facility fees assuming the balance outstanding at December 31, 2021 remains outstanding through maturity of our secured revolving credit facility.

(3)Contractual obligations above do not include funding obligations to non-wholly owned development projects as well as unfunded mezzanine loan commitments due to the uncertainty of the timing and amounts of certain of these obligations. Refer to "Item 1. Business" for information about our development projects and mezzanine loans.

(4)Contractual Obligations above exclude increased ground lease payments at 1405 Point and accrued earn-out payments to our joint venture partner at Gainesville, each of which is classified as notes payable in the consolidated balance sheets.

Off-Balance Sheet Arrangements

In connection with our mezzanine lending activities, we have guaranteed payment of portions of certain senior loans of third parties associated with the development projects. As of December 31, 2021, we had an outstanding payment guarantee amount on Interlock Commercial for $37.5 million. We have recorded a $1.2 million liability and corresponding addition to notes receivable relating to the value of this guarantee.

In connection with our Harbor Point Parcel 3 unconsolidated joint venture, we will be responsible for providing a completion guarantee to the lender for this project when a construction loan is obtained.

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Cash Flows

[[GREPCENT_TABLE]]
[["","Years Ended"],["","December 31,"],["","2021","","2020","","Change"],["","($ in thousands)"],["Operating Activities","$","91,184","","","$","91,179","","","$","5"],["Investing Activities","(57,629)","","","(26,227)","","","(31,402)"],["Financing Activities","(43,542)","","","(58,101)","","","14,559"],["Net Increase/(decrease)","$","(9,987)","","","$","6,851","","","$","(16,838)"],["Cash, Cash Equivalents, and Restricted Cash, Beginning of Period","$","50,430","","","$","43,579"],["Cash, Cash Equivalents, and Restricted Cash, End of Period","$","40,443","","","$","50,430"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Years Ended"],["","December 31,"],["","2020","","2019","","Change"],["","($ in thousands)"],["Operating Activities","$","91,179","","","$","67,729","","","$","23,450"],["Investing Activities","(26,227)","","","(295,063)","","","268,836"],["Financing Activities","(58,101)","","","246,862","","","(304,963)"],["Net Increase","$","6,851","","","$","19,528","","","$","(12,677)"],["Cash, Cash Equivalents, and Restricted Cash, Beginning of Period","$","43,579","","","$","24,051"],["Cash, Cash Equivalents, and Restricted Cash, End of Period","$","50,430","","","$","43,579"]]
[[/GREPCENT_TABLE]]

Net cash provided by operating activities for the year ended December 31, 2021 was materially consistent with the year ended December 31, 2020.

Net cash used for investing activities for the year ended December 31, 2021 increased by $31.4 million compared to the year ended December 31, 2020 primarily due to increased acquisition activity and decreased disposition activity, offset partially by the pay-down of the Solis Apartments note receivable.

Net cash used for financing activities during the year ended December 31, 2021 decreased by $14.6 million compared to the year ended December 31, 2020 primarily as a result of a decrease in debt repayments, partially offset by a decrease in net proceeds from equity issuances and an increase in dividends and distributions paid.

Non-GAAP Financial Measures

FFO and Normalized FFO

We calculate 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 GAAP), excluding gains (or losses) from sales of depreciable operating property, real estate related depreciation and amortization (excluding amortization of deferred financing costs), impairment of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures.

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

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

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

The following table sets forth a reconciliation of FFO and Normalized FFO for each of the years ended December 31, 2021, 2020 and 2019 to net income, the most directly comparable GAAP measure:  

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2021","","2020","","2019"],["","(in thousands, except per share and unit amounts)"],["Net income attributable to common stockholders and OP Unitholders","$","13,912","","","$","29,840","","","$","29,590"],["Depreciation and amortization (1)","68,853","","","59,545","","","53,616"],["Gain on operating real estate dispositions (2)","(18,793)","","","(6,388)","","","(3,220)"],["Impairment of real estate assets","21,378","","","\u2014","","","\u2014"],["FFO attributable to common stockholders and OP Unitholders","85,350","","","82,997","","","79,986"],["Acquisition, development and other pursuit costs","112","","","584","","","844"],["Impairment of intangible assets and liabilities","\u2014","","","666","","","252"],["Loss on extinguishment of debt","3,810","","","\u2014","","","30"],["Unrealized credit loss (release) provision","(792)","","","256","","","\u2014"],["Amortization of right-of-use assets - finance leases","1,022","","","586","","","377"],["Change in fair value of derivatives and other","(2,182)","","","1,130","","","3,599"],["Normalized FFO available to common stockholders and OP Unitholders","$","87,320","","","$","86,219","","","$","85,088"],["Net income attributable to common stockholders and OP Unitholders per diluted share and unit","$","0.17","","","$","0.38","","","$","0.41"],["FFO attributable to common stockholders and OP Unitholders per diluted share and unit","$","1.05","","","$","1.06","","","$","1.10"],["Normalized FFO attributable to common stockholders and OP Unitholders per diluted share and unit","$","1.07","","","$","1.10","","","$","1.17"],["Weighted-average common shares and units - diluted","81,445","","","78,309","","","72,644"]]
[[/GREPCENT_TABLE]]

________________________________________

[[GREPCENT_TABLE]]
[["(1) The adjustment for depreciation and amortization for the years ended December 31, 2020 and 2019 exclude $0.4 million and $1.2 million, respectively, of depreciation attributable to the Company's joint venture partners. Additionally, the adjustment for depreciation and amortization for the year ended December 31, 2019 includes $0.2 million of depreciation attributable to the Company's investment in One City Center, which was an unconsolidated real estate investment until March 14, 2019."],["(2) The adjustment for gain on real estate dispositions for the year ended December 31, 2021 excludes the gain on sale of easement rights on a non-operating parcel and the loss on sale of a non-operating parcel. The adjustment for gain on operating real estate dispositions for the year ended December 31, 2019 excludes the portion of the gain on Lightfoot Marketplace that was allocated to our joint venture partner and excludes the gain on sale of a non-operating land parcel."]]
[[/GREPCENT_TABLE]]

Inflation

Substantially all of our office and retail leases provide for the recovery of increases in real estate taxes and operating expenses. In addition, substantially all of the leases provide for annual rent increases. We believe that inflationary increases may be offset in part by the contractual rent increases and expense escalations previously described. In addition, our

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multifamily leases generally have lease terms ranging from 7 to 15 months with a majority having 12-month lease terms allowing negotiation of rental rates at term end, which we believe reduces our exposure to the effects of inflation, although

an extreme escalation in costs could have a negative impact on our residents and their ability to absorb rent increases.