# AH Realty Trust, Inc. (AHRT) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from AH Realty Trust, Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1569187/000156918725000016/ahh-20241231.htm
Accession: 0001569187-25-000016
Filing date: 2025-02-28
Report date: 2024-12-31
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/
Previous year: /company/AHRT/mda/fy2023/ (FY 2023)
Next year: /company/AHRT/mda/fy2025/ (FY 2025)

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

Business Description

We are a vertically-integrated, self-managed REIT with over four decades of experience managing high-quality properties located primarily in the Mid-Atlantic and Southeastern United States. As of December 31, 2024, our stabilized operating property portfolio was comprised of 46 retail properties, 14 office properties, and 11 multifamily properties. In addition to our operating property portfolio, we had 2 retail properties, 1 office property, and 1 multifamily property in various stages of predevelopment, development, redevelopment, or stabilization as of December 31, 2024. We also provide general contracting services to third parties and invest in development projects through mezzanine lending arrangements and equity investments.

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, 2024, we owned, through a combination of direct and indirect interests, 78.6% 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 1000, 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.

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. Our 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.

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

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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 above and below-market ground lease assets as depreciation and amortization 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 the expected useful lives of the assets. 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, credit characteristics, and other terms of the arrangements, which are Level 3 inputs in the fair value hierarchy (as described in Note 13 to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K).

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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. Interest income is also accrued as earned on interest-bearing deposits.

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, and 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. We measure 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.

Segment Results of Operations

As of December 31, 2024, we operated our business in five segments: (i) retail real estate, (ii) office real estate, (iii) multifamily residential real estate, (iv) general contracting and real estate services, and (v) real estate financing. See “—Real Estate Financing Segment Data” below for additional information regarding the real estate financing segment and its introduction as a reportable segment during the year ended December 31, 2024. Our general contracting and real estate services segment is conducted through our TRS.

NOI is the primary measure used by our chief operating decision-maker to assess segment performance and allocate our resources among our segments. We calculate NOI as segment revenues less segment expenses. Segment revenues include rental revenues for our property segments, general contracting and real estate services revenues for our general contracting and real estate services segment, and interest income for our real estate financing segment. Segment expenses include rental expenses and real estate taxes for our property segments, general contracting and real estate services expenses for our general contracting and real estate services segment, and interest expense for our real estate financing segment. 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, construction, and real estate financing 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.

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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 fully or partially taken out of service for the purpose of redevelopment is no longer considered stabilized until the redevelopment activities are complete, the asset is placed back into service, and the 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.

Since our Annual Report on Form 10-K for the year ended December 31, 2023, we retrospectively reclassified certain components of mixed-use properties between the retail, office, and multifamily real estate segments in order to align the components of those properties with their tenant composition. As a result, (i) NOI for the year ended December 31, 2023 increased $1.6 million and $0.2 million for the retail and office real estate segments, respectively, and decreased $1.7 million for the multifamily real estate segment and (ii) NOI for the year ended December 31, 2022 increased $1.0 million and $0.6 million for the retail and office real estate segments, respectively, and decreased $1.6 million for the multifamily real estate segment. These reclassifications had no effect on total property NOI as previously reported. These reclassifications had no impact on our general contracting and real estate services or real estate financing segments.

This section of this Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Retail Segment Data

Retail rental revenues, property expenses, and NOI for the years ended December 31, 2024, 2023, and 2022 were as follows ($ in thousands): 

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2024","","2023","","2022"],["Rental revenues","$","103,435","","","$","99,924","","","$","87,788"],["Property expenses","27,642","","","25,572","","","23,102"],["NOI","$","75,793","","","$","74,352","","","$","64,686"],["Square feet(1)","3,824,446","","","4,123,143","","","4,011,297"],["Occupancy(1)","95.3","%","","95.2","%","","96.3","%"]]
[[/GREPCENT_TABLE]]

________________________________________

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

Rental revenues for the year ended December 31, 2024 increased $3.5 million, or 3.5%, compared to the year ended December 31, 2023. The increase in rental revenues resulted primarily due to less bad debt recognized in 2024. NOI for the year ended December 31, 2024 is materially consistent with the year ended December 31, 2023.     

Retail Same Store Results

Retail same store rental revenues, property expenses, and NOI for the comparative years ended December 31, 2024 and 2023 and December 31, 2023 and 2022 were as follows (in thousands): 

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[[GREPCENT_TABLE]]
[["","Years Ended","","","","Years Ended"],["","December 31,","","","","December 31,"],["","2024 (1)","","2023 (1)","","Change","","2023 (2)","","2022 (2)","","Change"],["Rental revenues","$","84,716","","","$","84,248","","","$","468","","","$","84,248","","","$","79,071","","","$","5,177"],["Property expenses","21,318","","","20,314","","","1,004","","","20,314","","","19,514","","","800"],["Same Store NOI","$","63,398","","","$","63,934","","","$","(536)","","","$","63,934","","","$","59,557","","","$","4,377"],["Non-Same Store NOI","12,395","","","10,418","","","1,977","","","10,418","","","5,129","","","5,289"],["Segment NOI","$","75,793","","","$","74,352","","","$","1,441","","","$","74,352","","","$","64,686","","","$","9,666"]]
[[/GREPCENT_TABLE]]

________________________________________

(1) Same store excludes Chronicle Mill Retail, Southern Post Retail, The Interlock Retail, and Columbus Village II, as well as Nexton Square and Market at Mill Creek which were disposed in the fourth quarter of 2024.

(2)Same store excludes Pembroke Square and The Interlock Retail, as well as Columbus Village II due to redevelopment.

Same store rental revenues and same store NOI for the year ended December 31, 2024 are materially consistent with the year ended December 31, 2023.

Office Segment Data

Office rental revenues, property expenses, and NOI for the years ended December 31, 2024, 2023, and 2022 were as follows ($ in thousands): 

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2024","","2023","","2022"],["Rental revenues","$","95,007","","","$","82,855","","","$","74,970"],["Property expenses","33,779","","","31,390","","","26,620"],["NOI","$","61,228","","","$","51,465","","","$","48,350"],["Square feet(1)","2,335,063","","","2,330,432","","","2,131,735"],["Occupancy(1)","97.2","%","","95.2","%","","98.0","%"]]
[[/GREPCENT_TABLE]]

________________________________________

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

Rental revenues and NOI for the year ended December 31, 2024 increased $12.2 million, or 14.7%, and $9.8 million, or 19.0%, respectively, compared to the year ended December 31, 2023. The increases in rental revenues and NOI resulted primarily due to the receipt of a termination fee from one of our tenants at Wills Wharf and the addition of new tenants at Wills Wharf, as well as the acquisition of The Interlock Office in May 2023.

Office Same Store Results

Office same store rental revenues, property expenses, and NOI for the comparative years ended December 31, 2024 and 2023 and December 31, 2023 and 2022 were as follows (in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended","","","","Years Ended"],["","December 31,","","","","December 31,"],["","2024 (1)","","2023 (1)","","Change","","2023 (2)","","2022 (2)","","Change"],["Rental revenues","$","81,337","","","$","76,568","","","$","4,769","","","$","76,568","","","$","74,970","","","$","1,598"],["Property expenses","29,380","","","28,342","","","1,038","","","28,342","","","25,665","","","2,677"],["Same Store NOI(3)","$","51,957","","","$","48,226","","","$","3,731","","","$","48,226","","","$","49,305","","","$","(1,079)"],["Non-Same Store NOI(3)","9,271","","","3,239","","","6,032","","","3,239","","","(955)","","","4,194"],["Segment NOI","$","61,228","","","$","51,465","","","$","9,763","","","$","51,465","","","$","48,350","","","$","3,115"]]
[[/GREPCENT_TABLE]]

________________________________________

(1)Same store excludes Chronicle Mill Office, Southern Post Office, and The Interlock Office.

(2)Same store excludes Wills Wharf and the Constellation Office.

(3)Same Store NOI for the year ended December 31, 2024 excludes a $4.0 million termination fee received from one of our tenants at the Wills Wharf property and the effect of $0.7 million of accelerated straight-line rent resulting from the termination of such tenant's lease. The impact of the same is included in Non-Same Store NOI for the year ended December 31, 2024.

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Same store rental revenues and same store NOI for the year ended December 31, 2024 increased $4.8 million, or 6.2%, and $3.7 million, or 7.7%, respectively, compared to the year ended December 31, 2023. The increases in same store rental revenues and same store NOI resulted primarily due to the receipt of a termination fee from one of our tenants at Wills Wharf and the addition of new tenants at Wills Wharf

Multifamily Segment Data

Multifamily rental revenues, property expenses, and NOI for the years ended December 31, 2024, 2023, and 2022 were as follows ($ in thousands): 

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2024","","2023","","2022"],["Rental revenues","$","58,255","","","$","56,145","","","$","56,536"],["Property expenses","24,297","","","21,899","","","23,077"],["NOI","$","33,958","","","$","34,246","","","$","33,459"],["Apartment units/beds","2,492","","","2,492","","","2,254"],["Occupancy","95.3","%","","95.5","%","","96.1","%"]]
[[/GREPCENT_TABLE]]

Rental revenues for the year ended December 31, 2024 increased $2.1 million, or 3.8%, compared to the year ended December 31, 2023. The increase in rental revenues resulted primarily due to the commencement of operations at Chandler Residences in 2024 as well as increased occupancy at Chronicle Mill and The Everly. NOI for the year ended December 31, 2024 is materially consistent with the year ended December 31, 2023.

Multifamily Same Store Results

Multifamily same store rental revenues, property expenses, and NOI for the comparative years ended December 31, 2024 and 2023 and December 31, 2023 and 2022 were as follows (in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended","","","","Years Ended"],["","December 31,","","","","December 31,"],["","2024 (1)","","2023 (1)","","Change","","2023 (2)","","2022 (2)","","Change"],["Rental revenues","$","52,522","","","$","51,589","","","$","933","","","$","51,589","","","$","47,794","","","$","3,795"],["Property expenses","21,167","","","19,725","","","1,442","","","19,725","","","18,753","","","972"],["Same Store NOI","$","31,355","","","$","31,864","","","$","(509)","","","$","31,864","","","$","29,041","","","$","2,823"],["Non-Same Store NOI","2,603","","","2,382","","","221","","","2,382","","","4,418","","","(2,036)"],["Segment NOI","$","33,958","","","$","34,246","","","$","(288)","","","$","34,246","","","$","33,459","","","$","787"]]
[[/GREPCENT_TABLE]]

________________________________________

(1)Same store excludes Chronicle Mill Apartments and Chandler Residences.

(2) Same store excludes 1305 Dock Street, Chronicle Mill Apartments, and The Everly as well as properties disposed in 2022.

Same store rental revenues and same store NOI for the year ended December 31, 2024 are materially consistent with the year ended December 31, 2023.

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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, 2024, 2023, and 2022 were as follows ($ in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2024","","2023","","2022"],["General contracting and real estate services revenues","$","433,177","","","$","413,131","","","$","234,859"],["General contracting and real estate services expenses","419,302","","","399,713","","","227,158"],["Segment gross profit","13,875","","","13,418","","","7,701"],["Operating margin (1)","3.2","%","","3.2","%","","3.3","%"]]
[[/GREPCENT_TABLE]]

________________________________________

(1)50% and 90% of gross profit attributable to our T. Rowe Price Global HQ and Allied | Harbor Point development projects, respectively, is not reflected within general contracting and real estate services revenues due to elimination. The Company is still entitled to receive cash proceeds in relation to the eliminated amounts. Prior to any gross profit eliminations attributable to these projects, operating margin for the years ended December 31, 2024, 2023, and 2022 was 3.5%, 3.7%, and 3.7%, respectively.

General contracting and real estate services segment gross profit for the year ended December 31, 2024 was materially consistent with the year ended December 31, 2023. We expect general contracting and real estate services revenues to gradually decrease over time.

The changes in third party construction backlog for each of the years ended December 31, 2024, 2023, and 2022 were as follows (in thousands):  

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2024","","2023","","2022"],["Beginning backlog","$","472,170","","","$","665,564","","","$","215,518"],["New contracts/change orders","85,883","","","221,474","","","685,754"],["Work performed","(434,269)","","","(414,868)","","","(235,708)"],["Ending backlog","$","123,784","","","$","472,170","","","$","665,564"]]
[[/GREPCENT_TABLE]]

During the year ended December 31, 2024, we executed new contracts or change orders with Beatty Development Group related to the Harbor Point developments in Baltimore totaling $29.8 million in addition to the $0.4 million with Terwilliger Pappas in connection with the development of Solis Kennesaw, and $53.4 million with Dominion Realty Partners. Ending backlog as of December 31, 2024 included $23.2 million in contracts with Beatty Development Group, $78.6 million in contracts with Dominion Realty Partners, and $15.9 million in contracts with Terwilliger Pappas.

During the year ended December 31, 2023, we executed new contracts or change orders with Beatty Development Group related to the Harbor Point development in Baltimore totaling $89.6 million in addition to $64.8 million with Terwilliger Pappas in connection with the development of Solis Kennesaw, and $49.6 million with Dominion Realty Partners. Ending backlog as of December 31, 2023 included $225.0 million in contracts with Beatty Development Group, $162.7 million in contracts with Dominion Realty Partners, and $58.3 million in contracts with Terwilliger Pappas.

Real Estate Financing Segment Data

Real estate financing interest income, interest expense, and gross profit for the years ended December 31, 2024, 2023, and 2022 were as follows (in thousands):

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["","","2024","","2023","","2022"],["Interest income","","$","16,077","","","$","14,176","","","$","16,461"],["Interest expense","","6,588","","","3,667","","","3,497"],["Segment gross profit","","$","9,489","","","$","10,509","","","$","12,964"],["Operating margin","","59.0","%","","74.1","%","","78.8","%"]]
[[/GREPCENT_TABLE]]

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Real estate financing gross profit for the year ended December 31, 2024 decreased 9.7% compared to the year ended December 31, 2023, primarily due to the effect of increased funded balances and the increase to allocated interest expense in connection therewith, partially offset by an increase in recognized interest income.

Consolidated Results of Operations

The following table summarizes our results of operations for the years ended December 31, 2024, 2023, and 2022 (in thousands): 

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","2024","","2023"],["","2024","","2023","","2022","","Change","","Change"],["Revenues"],["Rental revenues","$","256,697","","","$","238,924","","","$","219,294","","","$","17,773","","","$","19,630"],["General contracting and real estate services revenues","433,177","","","413,131","","","234,859","","","20,046","","","178,272"],["Interest income","18,596","","","15,103","","","16,978","","","3,493","","","(1,875)"],["Total revenues","708,470","","","667,158","","","471,131","","","41,312","","","196,027"],["Expenses"],["Rental expenses","62,410","","","56,419","","","50,742","","","5,991","","","5,677"],["Real estate taxes","23,308","","","22,442","","","22,057","","","866","","","385"],["General contracting and real estate services expenses","419,302","","","399,713","","","227,158","","","19,589","","","172,555"],["Depreciation and amortization","90,962","","","97,427","","","74,084","","","(6,465)","","","23,343"],["General and administrative expenses","20,225","","","18,122","","","15,691","","","2,103","","","2,431"],["Acquisition, development, and other pursuit costs","5,531","","","84","","","37","","","5,447","","","47"],["Impairment charges","1,494","","","102","","","416","","","1,392","","","(314)"],["Total expenses","623,232","","","594,309","","","390,185","","","28,923","","","204,124"],["Gain on real estate dispositions, net","21,305","","","738","","","53,466","","","20,567","","","(52,728)"],["Operating income","106,543","","","73,587","","","134,412","","","32,956","","","(60,825)"],["Interest expense","(78,965)","","","(57,810)","","","(39,680)","","","(21,155)","","","(18,130)"],["Loss on extinguishment of debt","(247)","","","\u2014","","","(3,374)","","","(247)","","","3,374"],["Equity in income of unconsolidated real estate entities","245","","","\u2014","","","\u2014","","","245","","","\u2014"],["Change in fair value of derivatives and other","14,251","","","(6,242)","","","8,698","","","20,493","","","(14,940)"],["Unrealized credit loss (provision)","(156)","","","(574)","","","(626)","","","418","","","52"],["Other income, net","209","","","31","","","378","","","178","","","(347)"],["Income before taxes","41,880","","","8,992","","","99,808","","","32,888","","","(90,816)"],["Income tax benefit (provision)","614","","","(1,329)","","","145","","","1,943","","","(1,474)"],["Net income","42,494","","","7,663","","","99,953","","","34,831","","","(92,290)"],["Net income attributable to noncontrolling interests in investment entities","(43)","","","(605)","","","(5,948)","","","562","","","5,343"],["Preferred stock dividends","(11,548)","","","(11,548)","","","(11,548)","","","\u2014","","","\u2014"],["Net income (loss) attributable to common stockholders and OP Unitholders","$","30,903","","","$","(4,490)","","","$","82,457","","","$","35,393","","","$","(86,947)"]]
[[/GREPCENT_TABLE]]

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Rental revenues by segment for the years ended December 31, 2024, 2023, and 2022 were as follows (in thousands): 

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","2024","","2023"],["","2024","","2023","","2022","","Change","","Change"],["Retail","$","103,435","","","$","99,924","","","$","87,788","","","$","3,511","","","$","12,136"],["Office","95,007","","","82,855","","","74,970","","","12,152","","","7,885"],["Multifamily","58,255","","","56,145","","","56,536","","","2,110","","","(391)"],["","$","256,697","","","$","238,924","","","$","219,294","","","$","17,773","","","$","19,630"]]
[[/GREPCENT_TABLE]]

Rental revenues increased $17.8 million, or 7.4%, during the year ended December 31, 2024 compared to the year ended December 31, 2023.

Retail rental revenues for the year ended December 31, 2024 increased 3.5% compared to the year ended December 31, 2023, primarily as a result of less bad debt recognized in 2024.

Office rental revenues for the year ended December 31, 2024 increased 14.7% compared to the year ended December 31, 2023, primarily as a result of the receipt of termination fees from one of our tenants at Wills Wharf and the addition of new tenants at Wills Wharf.

Multifamily rental revenues for the year ended December 31, 2024 increased 3.8% compared to the year ended December 31, 2023, primarily due to the commencement of operations at Chandler Residences in 2024 as well as increased occupancy at Chronicle Mill and The Everly.

General contracting and real estate services revenues for the year ended December 31, 2024 increased $20.0 million, or 4.9%, compared to the year ended December 31, 2023, due to the execution of our backlog and the recognition of savings from unused contingencies for certain contracts.

Interest income for the year ended December 31, 2024 increased $3.5 million, or 23.1%, compared to the year ended December 31, 2023, due to higher outstanding principal balances on our real estate financing investments, interest earned on unused commitments on real estate financing investments, and higher interest bearing cash deposits.

Rental expenses by segment for each of the years ended December 31, 2024, 2023, and 2022 were as follows (in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","2024","","2023"],["","2024","","2023","","2022","","Change","","Change"],["Retail","$","18,221","","","$","16,470","","","$","13,980","","","$","1,751","","","$","2,490"],["Office","25,048","","","22,708","","","19,003","","","2,340","","","3,705"],["Multifamily","19,141","","","17,241","","","17,759","","","1,900","","","(518)"],["","$","62,410","","","$","56,419","","","$","50,742","","","$","5,991","","","$","5,677"]]
[[/GREPCENT_TABLE]]

Rental expenses increased $6.0 million, or 10.6%, during the year ended December 31, 2024 compared to the year ended December 31, 2023.

Retail rental expenses for the year ended December 31, 2024 increased 10.6% compared to the year ended December 31, 2023, primarily as a result of The Interlock acquisition in May 2023, the commencement of operations for Southern Post Retail in 2024, and increased costs for contracted property services, utilities, and repairs and maintenance.

Office rental expenses for the year ended December 31, 2024 increased 10.3% compared to the year ended December 31, 2023, primarily as a result of The Interlock acquisition in May 2023, the commencement of operations for Southern Post Office in 2024, and increased costs for contracted property services.

Multifamily rental expenses for the year ended December 31, 2024 increased 11.0% compared to the year ended December 31, 2023, primarily as a result of the commencement of operations at Chandler Residences, as well as higher costs for contracted property services, utilities, compensation, and repairs and maintenance.

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Real estate taxes by segment for the years ended December 31, 2024, 2023, and 2022 were as follows (in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","2024","","2023"],["","2024","","2023","","2022","","Change","","Change"],["Retail","$","9,421","","","$","9,102","","","$","9,122","","","$","319","","","$","(20)"],["Office","8,731","","","8,682","","","7,617","","","49","","","1,065"],["Multifamily","5,156","","","4,658","","","5,318","","","498","","","(660)"],["","$","23,308","","","$","22,442","","","$","22,057","","","$","866","","","$","385"]]
[[/GREPCENT_TABLE]]

Real estate taxes increased $0.9 million, or 3.9%, during the year ended December 31, 2024 compared to the year ended December 31, 2023.

Retail real estate taxes for the year ended December 31, 2024 increased 3.5% compared to the year ended December 31, 2023, primarily as a result of the commencement of operations for Southern Post Retail and the acquisition of The Interlock in May 2023.

Office real estate taxes for the year ended December 31, 2024 increased 0.6%, and therefore was materially consistent compared to the year ended December 31, 2023.

Multifamily real estate taxes for the year ended December 31, 2024 increased 10.7% compared to the year ended December 31, 2023, primarily as a result of increased rate assessments across the portfolio, particularly Greenside Apartments and The Edison Apartments, as well as commencement of operations for Chandler Residences.

General contracting and real estate services expenses for the year ended December 31, 2024 increased $19.6 million, or 4.9%, compared to the year ended December 31, 2023, primarily due to an increase in work performed in the execution of our backlog. 

Depreciation and amortization for the year ended December 31, 2024 decreased $6.5 million, or 6.6%, compared to the year ended December 31, 2023. The decrease was primarily attributable to accelerated amortization of intangible lease assets in 2023 recognized in connection with the termination of leases at One City Center and The Interlock. This was partially offset by increased depreciation in 2024 related to the commencement of operations for Southern Post Office, Southern Post Retail, and Chandler Residences, and the acquisition of The Interlock Office and The Interlock Retail in May 2023.

General and administrative expenses for the year ended December 31, 2024 increased $2.1 million, or 11.6%, compared to the year ended December 31, 2023. The increase resulted primarily due to increased salaries and compensation and severance costs.

Acquisition, development, and other pursuit costs for the year ended December 31, 2024 related to the write off of development costs related to an undeveloped land parcel in predevelopment located in Charlotte, North Carolina. Refer to Note 5 to our condensed consolidated financial statements of this Annual Report on Form 10-K for more information. Acquisition, development, and other pursuit costs for the year ended December 31, 2023 were immaterial.

Impairment charges during the year ended December 31, 2024 relate to the impairment of an undeveloped land parcel in predevelopment located in Charlotte, North Carolina. Refer to Note 5 in our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for more information. Impairment charges during the year ended December 31, 2023 were immaterial.

Gain on real estate dispositions, net for the year ended December 31, 2024 were due to the disposition of the Nexton Square and Market at Mill Creek retail properties.

Interest expense for the year ended December 31, 2024 increased $21.2 million, or 36.6%, compared to the year ended December 31, 2023 primarily due to higher levels of indebtedness throughout the year in connection with the funding of development projects and real estate financing investments, as well as the expiration of derivatives designated as cash flow hedges.

The loss on extinguishment of debt for the year ended December 31, 2024 was due to the payoff of the loans secured by the Chronicle Mill, Premier Retail and Apartments, Market at Mill Creek, Nexton Square, and Southgate Square properties. There was no loss on extinguishment of debt for the year ended December 31, 2023.

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Change in fair value of derivatives and other for the year ended December 31, 2024 includes an increase in interest receipts for non-designated derivatives due to an increase in the amount of non-designated derivatives, and a decrease in the fair value of our derivative instruments due to decreases in forward SOFR (the Secured Overnight Financing Rate).

Changes in unrealized credit loss provision for the year ended December 31, 2024 were primarily the result of the release of the provision related to the Solis City Park II real estate financing investment, which was partially offset by increases in note receivable balances for the real estate financing investments and the closing of the Solis North Creek real estate financing investment.

Changes in other income (expense), net for the year ended December 31, 2024 were immaterial.

The income tax benefit for the year ended December 31, 2024 was primarily attributable to the impairment of real estate of $1.5 million and development costs of $5.5 million that were recognized during the period related to undeveloped land under predevelopment, which had an attributable income tax benefit of $1.6 million. The income tax provision that we recognized during the years ended December 31, 2024 and 2023, which for the year ended December 31, 2024 partially offset the income tax benefit discussed above, were attributable to the taxable profits and losses of our development and construction businesses that we operate through our TRS.

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 amended credit facility, and net proceeds from the opportunistic 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, the issuance of equity and debt securities, and the opportunistic disposition of non-core properties. We also may fund property development and acquisitions and capital improvements using our credit facility pending long-term financing.

As of December 31, 2024, we had unrestricted cash and cash equivalents of $70.6 million available for both current liquidity needs as well as development and redevelopment activities. As of December 31, 2024, we also had restricted cash in escrow of $1.6 million, some of which is available for capital expenditures and certain operating expenses at our operating properties. As of December 31, 2024, we had $113.0 million of available borrowings under our revolving credit facility to meet our short-term liquidity requirements and $13.4 million of available borrowings under our construction loans to fund development activities. During the three months ended December 31, 2024, we decreased outstanding borrowings on our revolving credit facility by $19.0 million. The funds used to pay down the debt were procured through the closing of a loan secured by the Premier mixed-use retail and multifamily property and through the disposition of the Market at Mill Creek and Nexton Square retail properties.

During the year ended December 31, 2022, we began to implement a strategic transformation of the composition of borrowings by refinancing secured property debt with unsecured property debt in order to increase the flexibility of our financing cash flows. We continued to implement this transformation during the year ended December 31, 2024 and intend to continue to implement the transformation during the year ended December 31, 2025. As of December 31, 2024, unsecured debt represented 55.9% of our total borrowings compared to 54.4% as of December 31, 2023.

ATM Program

On March 10, 2020, we commenced the ATM Program through which we may, from time to time, issue and sell shares of our common stock and 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 one or more forward purchasers.

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During the year ended December 31, 2024, we issued and sold 2,288,541 shares of common stock at a weighted average price of $11.58 per share under the ATM Program, receiving net proceeds, after offering costs and commissions, of $26.1 million. During the year ended December 31, 2024, we did not issue any shares of Series A Preferred Stock under the ATM Program. Shares having an aggregate offering price of $178.5 million remained unsold under the ATM Program as of February 21, 2025.

Recent Common Stock Offering

On September 27, 2024, we completed an underwritten public offering of 9.00 million shares of common stock at a public offering price of $10.50 per share, which resulted in gross proceeds of $94.5 million. We granted the underwriters an option to purchase 1.35 million shares of common stock at a public offering price of $10.50 per share, which was exercised in full, resulting in additional gross proceeds of $14.2 million. We received net proceeds, after deducting the underwriting discount and offering expenses, of approximately $103.5 million.

Share Repurchase Program

On June 15, 2023, our board of directors authorized the $50.0 million Share Repurchase Program. Under the Share Repurchase Program, we may repurchase shares of our common stock and Series A Preferred Stock from time to time in the open market, in block purchases, through privately negotiated transactions, the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, or other means permitted. The Share Repurchase Program does not obligate us to acquire any specific number of shares or acquire shares over any specific period of time. The Share Repurchase Program may be suspended or discontinued at any time by us and does not have an expiration date.

During the year ended December 31, 2024, we did not repurchase any shares of common stock or Series A Preferred Stock. As of December 31, 2024, $37.4 million remained available for repurchases under the Share Repurchase Program.

Credit Facility

On August 23, 2022, we 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 "credit facility"), with a syndicate of banks. Subject to available borrowing capacity, we intend to use future borrowings under the credit facility for general corporate purposes, including funding acquisitions, mezzanine lending, and development and redevelopment of properties in our portfolio, and for working capital.

The credit facility includes an accordion feature that allows the total commitments to be increased up 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 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.

On August 29, 2023, we increased the capacity of the revolving credit facility by $105.0 million by exercising the accordion feature in part, bringing the revolving credit facility capacity to $355.0 million and the total credit facility capacity to $655.0 million.

On June 14, 2024, the term loan facility commitment increased to $350.0 million as a result of an existing lender increasing its outstanding commitment.

The revolving credit facility bears interest at SOFR plus a margin ranging from 1.30% to 1.85% and a credit spread adjustment of 0.10%, and the term loan facility bears interest at SOFR plus a margin ranging from 1.25% to 1.80% and a credit spread adjustment of 0.10%, in each case depending on our total leverage. We also are 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., we may elect to have borrowings become subject to interest rates based on such credit ratings. Our unencumbered borrowing pool will support revolving borrowings of up to $258.0 million, as of December 31, 2024.

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

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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 $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 (i) $825.2 million and (ii) an amount equal to 75% of the net equity proceeds received by us after June 30, 2022;

•Ratio of secured indebtedness (excluding the credit facility if it becomes secured indebtedness) to total asset value of not more than 40%;

•Ratio of secured recourse debt (excluding the credit facility if it becomes secured indebtedness) 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 $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 $500.0 million at any time; and

•Minimum occupancy rate (as defined in the Credit Agreement) for all unencumbered properties of not less than 80% at any time.

The Credit Agreement limits our ability to pay cash dividends if a default has occurred and is continuing or would result therefrom. However, if certain defaults or events of default exist, we may pay cash dividends to the extent necessary to (i) maintain our status as a REIT and (ii) avoid federal or state income excise taxes. 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 our ability to repurchase stock and units of limited partnership interest in the Operating Partnership 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 significant 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.

We are currently in compliance with all covenants under the Credit Agreement.

M&T Term Loan Facility

On December 6, 2022, we entered into a term loan agreement (the "M&T term loan agreement") with Manufacturers and Traders Trust Company, which provides a $100.0 million senior unsecured term loan facility (the "M&T term loan facility"), with the option to increase the total capacity to $200.0 million, subject to our satisfaction of certain conditions. The M&T term loan facility has a scheduled maturity date of March 8, 2027, with a one-year extension option, subject to our satisfaction of certain conditions, including payment of a 0.075% extension fee.

On June 21, 2024, the M&T term loan facility commitment increased to $135.0 million as a result of adding a new lender to the facility.

The M&T term loan facility bears interest at a rate elected by us based on term SOFR, Daily Simple SOFR, or the Base Rate (as defined below), and in each case plus a margin. A term SOFR or Daily Simple SOFR loan is also subject to a credit spread adjustment of 0.10%. The margin under each interest rate election depends on our total leverage. The "Base Rate" is equal to the highest of: (a) the rate of interest in effect for such day as publicly announced from time to time by M&T Bank as its “prime rate” for such day, (b) the Federal Funds Rate for such day, plus 0.50%, (c) one month term SOFR for such day plus 100 basis points and (d) 1.00%. We have elected for the loan to bear interest at term SOFR plus margin. If we attain investment grade credit ratings from both S&P Global Ratings and Moody's Investor Service, Inc., we may elect to have borrowings become subject to interest rates based on such credit ratings.

The Operating Partnership is the borrower under the M&T term loan facility, and its obligations under the M&T term

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loan facility are guaranteed by us and certain of its subsidiaries that are not otherwise prohibited from providing such guaranty.

The M&T term loan agreement contains customary representations and warranties and financial and other affirmative and negative covenants. Our ability to borrow under the M&T term loan facility is subject to 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 $100.0 million, but only up to two times during the term of the M&T term loan facility);

•Ratio of adjusted EBITDA (as defined in the M&T term loan agreement) to fixed charges of not less than 1.50 to 1.0;

•Tangible net worth of not less than the sum of (i) $825.2 million and (ii) an amount equal to 75% of the net equity proceeds received by us after June 30, 2022;

•Ratio of secured indebtedness (excluding the M&T term loan facility if it becomes secured indebtedness) to total asset value of not more than 40%;

•Ratio of secured recourse debt (excluding the M&T term loan facility if it becomes secured indebtedness) 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 $100.0 million, but only up to two times during the term of the M&T term loan facility);

•Unencumbered interest coverage ratio (as defined in the M&T term loan agreement) of not less than 1.75 to 1.0;

•Maintenance of a minimum of at least 15 unencumbered properties (as defined in the M&T term loan agreement) with an unencumbered asset value (as defined in the M&T term loan agreement) of not less than $500.0 million at any time; and

•Minimum occupancy rate (as defined in the M&T term loan agreement) for all unencumbered properties of not less than 80% at any time.

The M&T term loan agreement limits our ability to pay cash dividends if a default has occurred and is continuing or would result therefrom. However, if certain defaults or events of default exist, we may pay cash dividends to the extent necessary to (i) maintain our status as a REIT and (ii) avoid federal or state income excise taxes. The M&T term loan 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 our ability to repurchase stock and units of limited partnership interest in the Operating Partnership during the term of the M&T term loan facility.

We may, at any time, voluntarily prepay the M&T term loan facility in whole or in part without premium or penalty, provided certain conditions are met.

The M&T term loan 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 M&T term loan facility to be immediately due and payable. A default under the Credit Agreement would also constitute a default under M&T term loan agreement.

We are currently in compliance with all covenants under the M&T term loan agreement.

TD Term Loan Facility

On May 19, 2023, we entered into a term loan agreement (the "TD term loan agreement") with Toronto Dominion (Texas) LLC, as administrative agent, and TD Bank, N.A. as lender, which provides a $75.0 million senior unsecured term loan facility (the "TD term loan facility"), with the option to increase the total capacity to $150.0 million, subject to our satisfaction of certain conditions. The TD term loan facility has a scheduled maturity date of May 19, 2025, with a one-year extension option, subject to our satisfaction of certain conditions, including an extension fee payment of 0.15% of the outstanding amount of the loan as of such date.

The TD term loan facility bears interest at a rate elected by us based on term SOFR, Daily Simple SOFR, or the Base Rate (as defined below), and in each case plus a margin. A term SOFR or Daily Simple SOFR loan is also subject to a credit spread adjustment of 0.10%. The margin under each interest rate election depends on our total leverage. The "Base Rate" is equal to the highest of: (a) the Federal Funds Rate for such day, plus 0.50% (b) the rate of interest in effect for such day as

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publicly announced from time to time by the administrative agent as its “prime rate” for such day, (c) one month term SOFR for such day plus 0.01 basis points and (d) 1.00%. We have elected for the loan to bear interest at term SOFR plus margin. If we attain investment grade credit ratings from both S&P Global Ratings and Moody's Investor Service, Inc., we may elect to have borrowings become subject to interest rates based on such credit ratings.

On June 29, 2023, the TD term loan facility commitment increased to $95.0 million as a result of the addition of a second lender to the facility.

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

The TD term loan agreement contains customary representations and warranties and financial and other affirmative and negative covenants. Our ability to borrow under the TD term loan facility is subject to 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 $100.0 million, but only up to two times during the term of the TD term loan facility);

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

•Tangible net worth of not less than the sum of (i) $825.2 million and (ii) an amount equal to 75% of the net equity proceeds received by us after June 30, 2022;

•Ratio of secured indebtedness (excluding the TD term loan facility if it becomes secured indebtedness) to total asset value of not more than 40%;

•Ratio of secured recourse debt (excluding the TD term loan facility if it becomes secured indebtedness) 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 $100.0 million, but only up to two times during the term of the TD term loan facility);

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

•Maintenance of a minimum of at least 15 unencumbered properties (as defined in the TD term loan agreement) with an unencumbered asset value (as defined in the TD term loan agreement) of not less than $500.0 million at any time; and

•Minimum occupancy rate (as defined in the TD term loan agreement) for all unencumbered properties of not less than 80% at any time.

The TD term loan agreement limits our ability to pay cash dividends if a default has occurred and is continuing or would result therefrom. However, if certain defaults or events of default exist, we may pay cash dividends to the extent necessary to (i) maintain our status as a REIT and (ii) avoid federal or state income excise taxes. The TD term loan 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 our ability to repurchase stock and units of limited partnership interest in the Operating Partnership during the term of the TD term loan facility.

We may, at any time, voluntarily prepay the TD term loan facility in whole or in part without premium or penalty, provided certain conditions are met.

The TD term loan 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 TD term loan facility to be immediately due and payable. A default under the Credit Agreement would also constitute a default under the TD term loan agreement.

We are currently in compliance with all covenants under the TD term loan agreement.

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Consolidated Indebtedness

The following table sets forth our consolidated indebtedness as of December 31, 2024 ($ in thousands):

[[GREPCENT_TABLE]]
[["","","Amount Outstanding","","Interest Rate (a)","","Effective Rate for Variable-Rate Debt","","Maturity Date (b)","Balance at Maturity"],["Secured Debt"],["Red Mill South","","$","4,502","","","","3.57","%","","3.57","%","","May 1, 2025","","$","4,383"],["The Everly","","30,000","","SOFR+","1.50","%","","5.83","%","","December 20, 2025","","30,000"],["Encore Apartments & 4525 Main Street","","52,187","","","2.93","%","","2.93","%","","February 10, 2026","","50,726"],["Southern Post","","60,244","","SOFR+","2.25","%","","6.58","%","","August 25, 2026","","60,244"],["Thames Street Wharf","","66,461","","SOFR+","1.30","%","","2.33","%","(c)","September 30, 2026","","64,072"],["Constellation Energy Building","","175,000","","SOFR+","1.50","%","","5.95","%","","November 1, 2026","","175,000"],["Liberty","","20,242","","SOFR+","1.50","%","","4.93","%","(c)","September 27, 2027","","19,230"],["Greenbrier Square","","19,184","","","3.74","%","","3.74","%","","October 10, 2027","","18,049"],["Lexington Square","","13,293","","","4.50","%","","4.50","%","","September 1, 2028","","12,044"],["Red Mill North","","3,842","","","4.73","%","","4.73","%","","December 31, 2028","","3,295"],["Premier Apartments and Retail","","29,415","","","5.53","%","","5.53","%","","December 1, 2029","","29,415"],["Greenside Apartments","","30,321","","","3.17","%","","3.17","%","","December 15, 2029","","26,095"],["Smith's Landing","","13,584","","","4.05","%","","4.05","%","","June 1, 2035","","384"],["The Edison","","14,774","","","5.30","%","","5.30","%","","December 1, 2044","","100"],["The Cosmopolitan","","39,461","","","3.35","%","","3.35","%","","July 1, 2051","","187"],["Total Secured Debt","","$","572,510","","","","","","","","","","$","493,224"],["Unsecured Debt"],["TD Unsecured Term Loan","","$","95,000","","","SOFR+","1.35%-1.90%","","4.85","%","(c)","May 19, 2025","","$","95,000"],["Senior Unsecured Revolving Credit Facility","","140,000","","","SOFR+","1.30%-1.85%","","6.42","%","","January 22, 2027","","140,000"],["Senior Unsecured Revolving Credit Facility (Fixed)","","5,000","","","SOFR+","1.30%-1.85%","","4.80","%","(c)","January 22, 2027","","5,000"],["M&T Unsecured Term Loan","","35,000","","","SOFR+","1.25%-1.80%","","6.22","%","","March 8, 2027","","35,000"],["M&T Unsecured Term Loan (Fixed)","","100,000","","","SOFR+","1.25%-1.80%","","4.90","%","(c)","March 8, 2027","","100,000"],["Senior Unsecured Term Loan","","271,000","","","SOFR+","1.25%-1.80%","","6.22","%","","January 21, 2028","","271,000"],["Senior Unsecured Term Loan (Fixed)","","79,000","","","SOFR+","1.25%-1.80%","","4.83","%","(c)","January 21, 2028","","79,000"],["Total Unsecured Debt","","725,000","","","","","","","","","","725,000"],["Total Principal Balances","","$","1,297,510","","","","","","","","","","$","1,218,224"],["Other notes payable(d)","","6,121"],["Unamortized GAAP Adjustments","","(8,072)"],["Indebtedness, Net","","$","1,295,559"]]
[[/GREPCENT_TABLE]]

_______________________________________

(a) SOFR is determined by individual lenders.

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

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

(d) Represents the fair value of additional ground lease payments at 1405 Point over the approximately 38-year remaining lease term.

As of December 31, 2024, we were in compliance with all loan covenants on our outstanding indebtedness.

As of December 31, 2024, our scheduled principal repayments and maturities during each of the next five years and thereafter were as follows ($ in thousands):

[[GREPCENT_TABLE]]
[["Year(1)(2)(3)","Amount Due","","Percentage of Total"],["2025","","$","136,701","","","11","%"],["2026","","355,710","","","27","%"],["2027","","321,819","","","25","%"],["2028","","369,322","","","28","%"],["2029","","59,167","","","5","%"],["Thereafter","","54,791","","","4","%"],["Total","","$","1,297,510","","","100","%"]]
[[/GREPCENT_TABLE]]

________________________________________

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

(2) Includes debt incurred in connection with the development of properties.

(3) Debt principal payments and maturities exclude increased ground lease payments at 1405 Point which are classified as a note payable in our consolidated balance sheets.

Interest Rate Derivatives

As of December 31, 2024, the Company held the following interest rate swap agreements ($ in thousands):

[[GREPCENT_TABLE]]
[["Related Debt","","Notional Amount","","","Index","","Swap Fixed Rate","","Debt Effective Rate","","Effective Date","","Expiration Date"],["Harbor Point Parcel 3 senior construction loan","","$","90,000","","","(a)","1-month SOFR","","2.75","%","","4.82","%","","10/2/2023","","10/1/2025"],["Floating rate pool of loans","","330,000","","","(b)","1-month SOFR","","2.75","%","","4.33","%","","10/1/2023","","10/1/2025"],["Harbor Point Parcel 4 senior construction loan","","100,000","","","(c)","1-month SOFR","","2.75","%","","5.12","%","","11/01/2023","","11/01/2025"],["Floating rate pool of loans","","300,000","","","(d)","1-month SOFR","","2.75","%","","4.33","%","","12/01/2023","","12/01/2025"],["Revolving credit facility and TD unsecured term loan","","100,000","","","(e)","Daily SOFR","","3.20","%","","4.70","%","","05/19/2023","","5/19/2026"],["Thames Street Wharf loan","","66,057","","","(f)","Daily SOFR","","0.93","%","","2.33","%","","09/30/2021","","9/30/2026"],["M&T unsecured term loan","","100,000","","","(f)","1-month SOFR","","3.50","%","","4.90","%","","12/06/2022","","12/06/2027"],["Liberty Retail & Apartments loan","","21,000","","","(g)","1-month SOFR","","3.43","%","","4.93","%","","12/13/2022","","1/21/2028"],["Senior unsecured term loan","","79,000","","","(g)","1-month SOFR","","3.43","%","","4.83","%","","12/13/2022","","1/21/2028"],["Total","","$","1,186,057"]]
[[/GREPCENT_TABLE]]

(a) This interest rate swap agreement reduces our interest rate exposure on the $180.4 million senior construction loan secured by our Harbor Point Parcel 3 equity method investment. As such, the loan is not reflected on our consolidated balance sheets. We also paid $3.6 million to reduce the swap fixed rate on September 8, 2023.

(b) We paid $13.3 million to reduce the swap fixed rate on September 8, 2023.

(c) This interest rate swap agreement reduces our interest rate exposure on the $109.7 million senior construction loan secured by our Harbor Point Parcel 4 equity method investment. As such, the loan is not reflected on our consolidated balance sheets. We also paid $3.9 million to reduce the swap fixed rate on October 13, 2023.

(d) We paid $10.5 million to reduce the swap fixed rate on November 16, 2023.

(e) Subject to cancellation by the counterparty beginning on May 1, 2025 and the first day of each month thereafter.

(f) Designated as a cash flow hedge.

(g) We novated an existing 3.43% fixed rate swap with a $100.0 million notional and assigned (A) $11.1 million notional to the loan secured by Market at Mill Creek, effective April 17, 2024, and (B) $21.0 million to the loan secured by Liberty Retail & Apartments, effective February 1, 2024. Once the Market at Mill Creek loan was repaid, the $67.9 million swap on the senior unsecured loan increased to $79.0 million.

Contractual Obligations

The following table summarizes the future payments for known contractual obligations as of December 31, 2024 (in thousands):

[[GREPCENT_TABLE]]
[["","","Payments due by period"],["","","Less than","","More than"],["Contractual Obligations","","1 year","","1 year","","Total"],["Principal payments and maturities of long-term indebtedness","","$","136,701","","","$","1,160,809","","","$","1,297,510"],["Interest payments on long-term indebtedness (1) (2)","","57,482","","","104,995","","","162,477"],["Ground and other operating leases","","5,473","","","455,617","","","461,090"],["Tenant-related and other commitments","","24,112","","","\u2014","","","24,112"],["Total (3) (4)","","$","223,768","","","$","1,721,421","","","$","1,945,189"]]
[[/GREPCENT_TABLE]]

________________________________________

(1)For long-term debt that bears interest at variable rates, we estimated future interest payments using the SOFR forward curve as of December 31, 2024. As of December 31, 2024, SOFR was 4.32%.

(2)Assumes the $145.0 million revolving credit facility balance outstanding as of December 31, 2024 remains constant through maturity of the facility. Amounts also include unused credit facility fees assuming the balance outstanding as of December 31, 2024 remains constant through maturity of our revolving credit facility.

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(3)Contractual obligations above do not include funding obligations to non-wholly owned development projects as well as unfunded real estate financing investment 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 real estate financing investments.

(4)Contractual obligations above exclude increased ground lease payments at 1405 Point, which is classified as a note payable in the consolidated balance sheets.

Off-Balance Sheet Arrangements

In connection with certain of our real estate financing activities and equity method investments, we have provided guarantees to pay portions of certain senior loans of third parties associated with the development projects. As of December 31, 2024, we had an outstanding guarantee liability of $0.1 million related to the $32.9 million guarantee of the senior loan secured by Harbor Point Parcel 4.

In connection with our Harbor Point Parcel 3 unconsolidated joint venture, we are responsible for providing a completion guarantee to the lender for this project.

Unfunded Loan Commitments

We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our borrowers. These commitments are not reflected on the consolidated balance sheet. As of December 31, 2024, our off-balance sheet arrangements consisted of $32.7 million of unfunded commitments of our notes receivable. These unfunded commitments consist of $24.2 million of unfunded principal and $8.5 million of unfunded contingency. We consider the probability of contingency funding to be remote. We have recorded a $0.5 million credit loss reserve in conjunction with the total unfunded commitments. Such commitments are subject to our borrowers’ satisfaction of certain financial and nonfinancial covenants and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The commitments may or may not be funded depending on a variety of circumstances including timing, credit metric hurdles, and other nonfinancial events occurring.

Cash Flows

[[GREPCENT_TABLE]]
[["","Years Ended"],["","December 31,"],["","2024","","2023","","Change"],["","($ in thousands)"],["Operating Activities","$","112,020","","","$","93,314","","","$","18,706"],["Investing Activities","(26,701)","","","(237,266)","","","210,565"],["Financing Activities","(43,262)","","","122,253","","","(165,515)"],["Net increase (decrease) in cash, cash equivalents, and restricted cash","$","42,057","","","$","(21,699)","","","$","63,756"],["Cash, cash equivalents, and restricted cash, beginning of period","$","30,166","","","$","51,865"],["Cash, cash equivalents, and restricted cash, end of period","$","72,223","","","$","30,166"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Years Ended"],["","December 31,"],["","2023","","2022","","Change"],["","($ in thousands)"],["Operating Activities","$","93,314","","","$","116,858","","","$","(23,544)"],["Investing Activities","(237,266)","","","(33,242)","","","(204,024)"],["Financing Activities","122,253","","","(72,194)","","","194,447"],["Net (decrease) increase in cash, cash equivalents, and restricted cash","$","(21,699)","","","$","11,422","","","$","(33,121)"],["Cash, cash equivalents, and restricted cash, beginning of period","$","51,865","","","$","40,443"],["Cash, cash equivalents, and restricted cash, end of period","$","30,166","","","$","51,865"]]
[[/GREPCENT_TABLE]]

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Net cash provided by operating activities for the year ended December 31, 2024 increased by $18.7 million compared to the year ended December 31, 2023. The change was primarily attributable to an increase in portfolio NOI and timing of receipts and payables for the construction business.

Net cash used for investing activities for the year ended December 31, 2024 decreased by $210.6 million compared to the year ended December 31, 2023. The change was primarily attributable to the dispositions of the Nexton Square and Market at Mill Creek retail properties, the payoff of the real estate financing investment secured by the Solis City Park II property, a decrease in contributions to equity method investments, a decrease in payments made to purchase interest rate derivatives, and a reduction to spending related to investments of real estate and building improvements.

Net cash provided by (used for) financing activities during the year ended December 31, 2024 decreased by $165.5 million compared to the year ended December 31, 2023. The change was primarily attributable to increases of cash paid to extinguish debt, partially offset by the cash proceeds from the issuance of common stock throughout the year.

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 depreciation and amortization related to real estate, gains or losses from the sales of certain real estate assets, gains or losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.

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 period-over-period, captures trends in occupancy rates, rental rates, and operating costs.

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’ calculations 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 period-over-period 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 and accelerated amortization of intangible assets and liabilities, property acquisition, development, and other pursuit costs, mark-to-market adjustments for interest rate derivatives not designated as cash flow hedges, amortization of payments made to purchase interest rate caps and swaps designated as cash flow hedges, 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. Other equity REITs may not calculate Normalized FFO in the same manner as we do, and, accordingly, our Normalized FFO may not be comparable to such other REITs' Normalized FFO.

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The following table sets forth a reconciliation of FFO and Normalized FFO for each of the years ended December 31, 2024, 2023, and 2022 to net income, the most directly comparable GAAP measure:  

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2024","","2023","","2022"],["","(in thousands, except per share and unit amounts)"],["Net income (loss) attributable to common stockholders and OP Unitholders","$","30,903","","","$","(4,490)","","","$","82,457"],["Depreciation and amortization, net(1)","88,754","","","95,208","","","71,971"],["Gain on operating real estate dispositions, net(2)","(21,305)","","","\u2014","","","(47,984)"],["Impairment of real estate assets","1,494","","","\u2014","","","201"],["FFO attributable to common stockholders and OP Unitholders","99,846","","","90,718","","","106,645"],["Acquisition, development, and other pursuit costs","5,531","","","84","","","37"],["Accelerated amortization of intangible assets and liabilities","(5)","","","(653)","","","215"],["Loss on extinguishment of debt","247","","","\u2014","","","3,374"],["Unrealized credit loss provision (release)","156","","","574","","","626"],["Amortization of right-of-use assets - finance leases","1,578","","","1,349","","","1,110"],["Increase (decrease) in fair value of derivatives not designated as cash flow hedges","9,612","","","14,185","","","(8,698)"],["Amortization of interest rate derivatives on designated cash flow hedges","422","","","4,210","","","3,849"],["Severance related costs","1,506","","","\u2014","","","\u2014"],["Normalized FFO available to common stockholders and OP Unitholders","$","118,893","","","$","110,467","","","$","107,158"],["Net income (loss) attributable to common stockholders and OP Unitholders per diluted share and unit","$","0.33","","","$","(0.05)","","","$","0.93"],["FFO attributable to common stockholders and OP Unitholders per diluted share and unit","$","1.08","","","$","1.02","","","$","1.21"],["Normalized FFO attributable to common stockholders and OP Unitholders per diluted share and unit","$","1.29","","","$","1.24","","","$","1.22"],["Weighted average common shares and units - diluted","92,326","","","88,864","","","88,192"]]
[[/GREPCENT_TABLE]]

________________________________________

[[GREPCENT_TABLE]]
[["(1) The adjustment for depreciation and amortization excludes amortization of above and below-market ground lease assets. The adjustment for depreciation and amortization for the years ended December 31, 2024, 2023, and 2022 excludes $0.9 million, $0.9 million and $1.0 million, respectively, of depreciation attributable to our partners."],["(2) The adjustment for gain on operating real estate dispositions for the year ended December 31, 2023 excludes $0.7 million for the gains on the dispositions of non-operating parcels at the Market at Mill Creek and adjacent to Brooks Crossing Retail. The adjustment for gain on real estate dispositions for the year ended December 31, 2022 excludes $5.4 million for the gain on the sale of The Residences at Annapolis Junction that was allocated to our joint venture partner."]]
[[/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 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 and sustained escalation in costs could have a negative impact on our residents and their ability to absorb rent increases.