Michael O’Hara - Chief Financial Officer Louis Haddad - President and Chief Executive Officer Eric Smith - Chief Investment Officer.

David Rodgers - Robert W. Baird & Co. Robert Stevenson - Janney Montgomery Scott LLC William Crow - Raymond James John Guinee - Stifel Nicolaus & Co., Inc. Craig Kucera - Wunderlich Securities Laura Engel - Stonegate Capital Partners Paul Puryear - Raymond James Financial.

Welcome to Armada Hoffler’s Second Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management’s prepared remarks, you will be invited to participate in a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded today, Tuesday, August 2, 2016.

I will now turn the conference call over to Mike O’Hara, Chief Financial Officer of Armada Hoffler. Please go ahead, sir..

Good morning, and thank you for joining Armada Hoffler’s second quarter 2016 earnings conference call and webcast. On the call this morning, in addition to myself, are Lou Haddad, CEO; and Eric Smith, our Chief Investment Officer, who will be available for questions.

The press release announcing our second quarter earnings, along with our quarterly supplemental package was distributed this morning. A replay of this call will be available shortly after the conclusion of the call through September 2, 2016. The numbers to access the replay are provided in the earnings press release.

For those who listen to the rebroadcast of this presentation, we remind you that remarks made herein are as of today, August 2, 2016, and will not be updated subsequent to this earnings call.

During the call, we will make forward-looking statements including statements related to the future performance of our portfolio, our development pipeline, impact of acquisitions and dispositions, our construction business, our portfolio performance and financing activities, as well as comments on our outlook.

Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond our control.

These risks and uncertainties can cause actual results to differ materially from our current expectations and we advise listeners to review the risk factors discussed in our press release this morning and in documents we have filed with or furnished to the SEC.

We will also discuss certain non-GAAP financial measures including, but not limited to FFO and normalized FFO. Definitions of these non-GAAP measures as well as reconciliations to the most comparable GAAP measures are included in the quarterly supplemental package, which is available at our website at www.armadahoffler.com.

I’d like to now turn over the call to our Chief Executive Officer, Lou Haddad.

Lou?.

Thanks, Mike. Good morning and thank you for joining us today. This morning we reported quarterly results with normalized FFO per share of $0.26, driven primarily by better-than-expected NOI growth. We are pleased with our results for the second quarter and continue to successfully execute on our strategy.

Based on our year-to-date results and the outlook for the rest of the year, we’ve raised our 2016 normalized FFO guidance range. Growing earnings and outpacing expectations are important.

However, they are ancillary to our primary goal, creating value for our shareholders by adding quality real estate to our portfolio through our development efforts and complementary strategic acquisitions. The result of this type of growth is not only size but high-quality stable NOI that demands lower cap rates.

Since our IPO in May of 2013, we’ve certainly grown in size. Our portfolio has grown by over 80%, NOI has grown by over 50%, normalized FFO has grown at a double-digit pace and our market cap has more than doubled.

Just as important, we’ve increased the overall quality of our portfolio through developing high-quality well-located projects at our target wholesale to retail profit of 20% or more, prudent asset recycling, opportunistic acquisitions, and making the right real estate decisions for the long-term benefit of the company and our shareholders.

As a result, we’ve created and delivered significant value and substantially increased our NAV over the past three years. By most any measure, we are making good on our promise to investors, and there is still a lot more to come.

With two large projects delivering this quarter, $200 million of new development underway in the Baltimore-Washington Corridor, a new flagship project under construction in Downtown Durham, another new groundbreaking in Town Center later this year, and several interesting opportunities taking shape in our predevelopment pipeline, we are poised to add significant value to our asset base and continue increasing NAV.

During the quarter, we surpassed $1 billion of enterprise value. And as long as high-quality opportunities continue to present themselves, we have every reason to believe we will maintain our current growth trajectory toward a $1 billion equity market cap.

Mike will discuss our quarterly results in more detail after I briefly touch on a few of the highlights. I’ll start with the primary growth engine of the company, our development pipeline. This quarter, we announced the planned expansion of the crown jewel of our portfolio, the Town Center of Virginia Beach.

Phase VI of this public-private partnership is a new $35 million, mixed-use project that will include approximately 39,000 square feet of retail space, as well as 120 luxury apartments.

In addition, Zeiders American Dream Theater has committed to invest $8 million in a new 17,000 square foot performing arts theatre and the City of Virginia Beach will contribute $3 million in public infrastructure, including an open-air public plaza and pedestrian bridge, connecting to the adjacent parking garage at the Cosmopolitan Apartments.

18,000 square feet of retail space has already been pre-leased to national name brand tenants that will complement and enhance an already impressive Town Center roster that includes, amongst others, Anthropologie, Lululemon, West Elm, Brooks Brothers and Free People, further solidifying Town Center as an upscale retail destination in the region.

We expect to break ground on Phase VI of Town Centre later this year. This represents just the latest chapter in our successful ongoing multi-decade public-private partnership with the City of Virginia Beach, one that has created a vibrant downtown central business district in the largest city in Virginia.

For those who have recently begun to follow our company, Town Centre spans 25 acres across 17 blocks and is home to 110 commercial tenants, 412 hotel rooms and 804 residential units, including five high-rise buildings, one of which is the tallest building in the Commonwealth of Virginia.

In addition to 800,000 square feet of office space Town Center boasts 23 restaurants, a 1300-seat performing arts theatre and 30,000 square feet of conference space.

With over half of the tenants in Town Center new to Virginia Beach and almost a third of them new to the Coastal Virginia MSA, this signature project continues to serve as an economic catalyst for both the city and the broader region.

In addition, to drawing new businesses to the area, Town Center provides already established tenants, the ability to either relocate to or expand within the most exclusive address in the market.

For example, just last month, we agreed to lease 14,000 square feet of office space at 4525 Main to an existing Town Center tenant at One Columbus looking to expand their footprint by almost by 40%.

With the additional capacity we designed and built at 4525 Main, we are able to accommodate this particular tenant’s needs and are in discussions with a second long-term tenant looking at a similar relocation and expansion.

As a result, not only will we increase occupancy at 4525 Main, but also create capacity and opportunity for tenants, looking to relocate to Town Center at a lower entry point. Moving beyond Town Center to the remaining projects we have slated for delivery this year.

Last month the anchored Harris Teeter stores at Lightfoot Marketplace in Williamsburg, Virginia opened for business. As of today, the project stands at over 70% leased and we expect the initial small shop tenants to take occupancy later this quarter.

We remain on track to deliver Johns Hopkins Village later this month and opened with approximately three-fourths of the residential units leased and approximately two-thirds of the retail space leased or under LOI. We look forward to building upon this solid opening and expect to reach full stabilization next year.

With respect to our 2017 and 2018 deliveries, our progress on Point Street Apartments in Baltimore’s Inner Harbor, One City Center in Downtown Durham and The Residences at Annapolis Junction Town Center continues as expected with construction well underway at each site.

We expect to announce at least one more development project by the end of current quarter. Moving from our development pipeline to acquisitions and dispositions, this quarter we closed on our acquisition of Southgate Square, a retail center located in Colonial Heights, Virginia, just south of Richmond.

This 220,000 square foot center is anchored by brand new Burlington store as well as Michaels and PetSmart. We acquired the asset for a combination of $21 million of debt, and $1.6 million operating partnership units.

The opportunity to acquire Southgate Square arose from the same longstanding relationship that led to our acquisition of Dimmock Square two years ago, and our pending acquisition of Southshore Shops, which we expect to close later this week. Southshore is a 40,000 square foot retail center also located in the greater Richmond market.

While this is a relatively small asset for us, approximately $9 million, it’s significant in that it will be our third OP unit transaction with this particular partner and our fifth deal involving either stock or OP units.

For those of you who follow our company, it should come as no surprise that each of these new partners have been pleased with the significant returns they realized on their investment in us, leading to repeat business and further interest in our OP unit program.

Turning to dispositions, you will remember that as part of the capital stack for our 11 asset portfolio acquisition that we completed in January, we had originally identified five non-core retail assets as disposition candidates. And as of today, we completed the sale of two of those assets.

We had been under contract to sell another two assets to a single off-market buyer. However, both fell out of contract from the last day of due diligence, when the purchaser attempted to significantly re-trade the transaction. As these assets had not been fully marketed, we got no pressure to negotiate the price.

We’re comfortable holding all three Kroger-anchored centers for an extended period of time. Our intent is to fully market some combination of these assets later this year. Shifting to the foundation of our company, our core portfolio, at the end of the quarter our occupancy stood at just over 95%.

Occupancy across all product types at the end of the quarter remained in the mid-90s. Even with these consistently high occupancy levels, our core portfolio continues to deliver organic upside as demonstrated by our eighth consecutive quarter of Same Store NOI growth.

Turning to our third-party construction business, year-to-date we’ve added over $240 million to backlog. And since the end of the quarter have been verbally awarded additional contracts of approximately $30 million.

With over a $0.25 billion of work in the pipeline, we expect our construction business to continue to generate profits towards the higher end of our historical range for the rest of the year and through 2017. Before I turn the call over to Mike, I should mention our new $75 million ATM equity offering program that we entered into this quarter.

As you might expect, we took advantage of favorable market conditions and accelerated our use of the additional capacity created by this program in order to strengthen our balance sheet in anticipation of the future growth I discussed earlier. With that, I’ll turn the call over to Mike for more details..

the Southshore acquisition is accretive, increases in occupancy, and third-party construction gross profit. Another factor is the delay in selling three of the non-core retail assets that we purchased in January. As Lou discussed, the buyer attempted to renegotiate the sales amount, we decided not to sell these properties.

The proceeds from these sales were to be used for balance sheet purposes, but due to increased proceeds from the ATM program, we can hold these assets and stay within our target debt metrics.

The updated average share that’s outstanding takes into account the OP units to be issued in Southshore transaction as well as increased use of the ATM program during the year as I mentioned earlier. I’ll now turn the call back to Lou..

Thank you, Mike. And thank you for your time this morning and your interest in Armada Hoffler. Operator, we would like to begin the question-and-answer session..

Thank you, ladies and gentlemen. [Operator Instructions] Thank you. Our first question this morning comes from Dave Rodgers with Baird. Please proceed with your question..

Yes, good morning, guys. Nice quarter obviously. Just wanted to, I guess, quickly touch on a couple of different things. I guess the first would be on the office side, particularly around Town Center, I guess, where the remaining portion of your office is.

Not a lot leasing activity in the quarter, but it seem like your commentary in the prepared comments was a little bit more positive in terms of maybe moving people over to the Main Street Tower and kind of seeing some backfill activity at One or Two Columbus.

So can you extrapolate on that a little bit?.

Sure, Dave. If you recall, one of the main reasons to build 4525 Main and the size that we built it was to allow just this type of activity. And so, it really does us - it’s really pleasant to see that we are starting to get that organic growth. That traditionally has been a big driver for us here at Town Center.

In the couple of years it kind of flattened out. So it’s good to see that moving out again. The two firms that we’re talking about are long-term tenants, one being a brokerage firm, the other being an engineering firm..

Okay. Good. Yes, that’s helpful. And then, interest in the Town Center from kind of outside of the Town Center and kind of the timing around that.

I know, that there are some bigger expirations coming, how do you feel about those still in the current market?.

Still I’m very positive about it, Dave. We’re seeing an increase in activity, lot more tours coming through and people looking for offers. So I feel really good about that for the first time in a while. So hopefully that’s a trend that’s going to continue..

Great. On the new development, you said you had announced a new development this quarter.

Can you kind of just talk about what kind of those conversations look like and whether that might be office or multifamily, and kind of how you’re looking at kind of the major positive development opportunities for you guys going forward?.

Sure. As we alluded to on the last call - actually last couple of calls - we’re really focusing our development efforts in that Baltimore-Washington Corridor as well as in the Raleigh-Durham area, as well as Charlotte. I think, most probably, these new announcements will come from there. It’s really - it’s kind of a horse race.

In the pipeline right now we have office opportunities, multifamily opportunities as well as retail opportunities. I wouldn’t handicap what wins, but I can tell you that they’re really exciting opportunities, that I think our groups is going to be very happy to perform..

And, I guess, should we expect that these would be more traditional equity owned developments or will we expect to see continued kind of the mezz program expand a little further as you think about multifamily maybe?.

Yes. I don’t believe you’ll see that taking the form of the mezz program. And I want to - and I appreciate you bringing that up. I want to make sure we iterate. We are a traditional developer. We like doing joint ventures and we also obviously go at a loan.

The mezz program was created specifically for larger volume multiyear commitments of multifamily, typically because we things take a couple of years to build and then some amount of time, after that the lease-up. And that’s the kind of size that we are talking with the two that are underway, basically being $100 million projects.

The stress on our balance sheet just isn’t tenable and hence the mezz program, but that’s not a natural way of doing business for us..

Okay. That’s fair. Last question for me and I can jump back in. But you did the ATM in the quarter about $20 million. I think at $12.30 per share, with the stock up closer to $15. It doesn’t seem like you have a large amount of equity issuance built under your guidance in terms of the underlying share count.

But, I guess, talk about these large projects in relation to the ability to go get equity at a much more attractive price now and how you think about that?.

Yes, Mike?.

Good morning, Dave. So, obviously with the stock trading at $15 our cost of capital has got low, which is terrific. So it just helps our returns on our development spreads versus the retail and return on cost versus our cost of equity.

And I think I maybe just like to spend a couple minutes on the development pipeline and just kind of go through the requirements and just kind of tell you how our balance sheet is set up, so on page 17 of the supplemental kind of lays out our development pipeline.

And what’s been - what’s underdeveloped right now, underdevelopment and not delivered, we’ve got about $55 million to fund out the remaining part of that pipeline, of which $33 million of that is the Town Center Phase VI also not began until this fall. So majority of that funding is going to be in 2017 and 2018.

And of the remaining $14 million, it’s finishing out JQ [ph] and Lightfoot, of which we have construction loans to fund those out. 4525 Main Street, we have approximately - we’re estimating $6 million to complete that which is TI and leasing commissions. And that will get obviously spent out as we lease the space.

On the Durham City Center joint venture, we’ve funded a 100% of our equity requirement. Our equity requirement of $10 million has been funded. The remaining of that will be funded through the construction loan that the joint venture has.

And then upon completion in the second quarter of 2018, we will bring it on to our balance sheet at that point in time. And the last piece of the mezz loans, we’ve got $26 million to fund under our mezzanine program. And that will go out over the next six months.

You can see that what’s happening with the ATM program and what’s in our development pipeline right now, we are situated real well to fund these out..

Okay, great. Thanks for the color..

Thank you. Our next question comes from Rob Stevenson with Janney. Please proceed with your question..

Good morning, guys.

Lou, can you talk a little bit about, like when you take a look at the portfolio today other than the Kroger assets, what - and obviously what’s your point, I mean, what else from your standpoint or how sizable if you do want to identify projects specifically, how sizable is the pool of properties that beyond that that you think about likely gets recycled over the next 12 to 18 months in the portfolio?.

Sure. Thanks, Rob. Good question. As you mentioned, we’ve got the three Krogers that we intend to market later on this fall, and the SunTrust building is already under contract. And I believe that closes - beginning in the fourth quarter. With regard to the rest of the portfolio, we don’t have the obvious candidates that we did a couple of years ago.

We told you that we don’t like to hold on to suburban office space and we don’t like single tenant buildings. We pretty much gotten rid of those in the portfolio.

That being said, we are constantly evaluating what’s going on within the portfolio and really looking hard at what the tenant makeup is as well as the sales of those tenants in the case of the retail. So it’s hard to put a number on it.

We are going to continue to be opportunistic with recycling capital, but there aren’t any obvious candidates at this minute..

Well, actually, Lou, we have the two come-off [ph] Virginia buildings, the combined rates kind of 12 - but which we were waiting to hold until we get to the - past the two-year holding point on those, which will be coming up next spring?.

Okay.

And then, within the retail portfolio, I mean, what’s the opportunity set for you guys in the near-term to get occupancy up in couple of the Kroger assets and at the Harper Hill, Harris Teeter location to boost occupancy in a couple of assets that are sort of sub-optimally occupied in the retail portfolio today?.

This is Eric. I appreciate the question. As you may recall from our conversation last quarter, there has been some the meaningful lease-up activity across the core portion of that 11 asset portfolio we purchased and we talked about kind of going in cap rates.

You may recall that due to the efforts of our asset management team, we had increased that check [ph] going-in cap rate from the high 6s to the low 7s with some near-term lease-up activity post-acquisition. And so we’re pleased that that were some near-term wins there. There still are some challenges in the Center.

You mentioned particularly, it has a little bit of challenging space given the layout of the Center, the changes in elevations and some other challenges that we are working through. We continue to have a positive outlook on being able to lease-up that particular center beyond.

I think it’s in the high-60s right now with some prospects we’re talking to. But that is a Center, we are particularly focused on either in finding the lease-up opportunities or looking at some other creative ways to think about that Center in the way to create some value-add opportunities. So we are mindful of that particular Center and working hard.

But overall on that core portfolio throughout the Carolina’s we’re pleased with some of the leasing activity we’ve had today..

Okay. Thanks, guys..

Thanks, Rob..

Thank you. Our next question comes from Bill Crow with Raymond James. Please proceed with your question..

Hey, good morning, guys.

A question on just - if you can give us the 30,000-foot picture of the local economy in Virginia Beach, any progress towards light-rail that may be helpful for you guys? And in particular, kind of what are the fundamentals like on the multifamily side, since you’ve decided to go ahead with another development project in that sector?.

Okay. I’ll take the first question or the first part of your question. I think we’re progressing well here in Virginia Beach on a number of fronts. The city has several initiatives that are well underway. They look to crystallize a deal for a new 17,000-seat arena here at the Ocean front, here in I think this quarter.

They are also making all of the necessary predevelopment expenditures towards the light-rail expansion to Town Center. I don’t think it will be crystallized till after the November election. There will be a - there is a referendum, a nonbinding referendum, but a referendum nonetheless on the issue that’s going to be on the ballot.

As far as the local economy, we’re continuing to see some fairly robust growth. There have been a number of announcements here recently, particularly in Downtown Norfolk, that has backfilled some of those older office buildings that’s going to help the entire region.

The port continues to grow by leaps and bounds, its status as the only Panamax-ready port on the East Coast. It’s bearing dividends. So we’re very optimistic about what’s going in here and hence launching another phase of Town Center as well as the acquisition next door that we had last year.

Multifamily specifically is doing extremely well here at Town Center. As of today, the Encore apartments are approaching 97% leased, Cosmo continues to be strong.

We are forecasting, once we start construction much like happened couple years ago when we were building 4525 Main, we are forecasting a little bit of a swoon at Cosmo when that construction thoughts on that phase of the building. But again, it’s a temporary blip..

Okay. That’s helpful. A follow-up, you did mention the Panamax on the ports.

Are they actually - is the port actually experiencing heavier traffic now that the canal is open?.

We have actually welcomed the first two 12,000 unit and you’re testing my knowledge. A shift that have come through and they were greeted with much fanfare here a couple of weeks ago..

Okay. And then, finally for me, Turner Construction Cost which we look at is showing that the construction costs are up almost 5% year-over-year.

Is that consistent with what you guys are seeing?.

Yes. We are seeing some fairly healthy increases, mainly on the labor side, as you know commodities remain pretty cheap and of course the oil swoon has helped out as well. But labor-wise, prices are going up, particularly in large complex and really when you get into high-rises it’s harder and harder to find subcontractors..

Great. That’s it for me. Thank you..

Our next question comes from John Guinee with Stifel. Please proceed with your question..

Great, okay, just a few easy ones, you guys love developing all types of product, particularly the complicated deals. I was in Durham by the way. That’s a ginormous hole you have in the ground there..

Thank you..

And by the way, it looks like you guys have a lot of work to do to get Hopkins opened in the third quarter.

Are they really going to make it for the students coming back in a few weeks?.

They will make it. Yes..

Seems like you - but you like to own retail. And candidly, you’re buying a lot of commodity retail, Kroger’s, Burlington Coat factory, PetSmart’s, Michaels.

Is that the sweet-spot right now when you’re looking at all types of products in the Mid-Atlantic, that you like this commodity retail the best and why?.

John, I’m going to turn that over to Eric to answer more specifically, but I can answer it from a 33-year perspective. Over those decades, we’ve been through four recessions. We’ve been through booms. We’ve been through busts in the Mid-Atlantic.

And I can tell you consistently, we’d always survived and thrived at commodity retail, particularly well-located grocery anchored high-volume retail. Those are lessons that were hard won over a long period of time. And so we’re sticking with that axiom.

Eric?.

Thanks, Louis. Yes, John, just a little more color, because your - I think your comment is a fair one.

Some color into our process and the number of opportunities that we are looking at relative to the transaction volume, the folks on the investment team here, I would suggest, are seeing almost all, if not, very close to all of the opportunities, certainly the on-market opportunities in the Mid-Atlantic within our geographical footprint and per our history a number of off-market opportunities as well.

And most of those that we’re looking at on the retail side, after we utilize our relationships and contacts and sources to check on the activity at the Center, have the conversation behind the scenes with the tenants themselves on how the stores are doing and how those particular stores that the various centers were looking at fit into the long-term strategy of that particular retailer.

We are turning down many, many of those retail opportunities. So the ones that actually make it through the filter and on to this call and our disclosure, and into our portfolio, are the ones that made it through a fairly thorough and robust analysis of the tenant quality at that particular center, in that particular sub-market.

So I think that’s an important point that well on the surface these centers may look a little bit more commoditized. A great deal of diligence has gone into the strength of those particular tenants, those particular centers within the overall plan of the retailers in question..

Okay. And then, let me just ask - I think, Dave Rodgers have asked a question. But let me just rephrase the same question. You’ve been up and complete at, I think it’s 4265 at Virginia Beach Town Center for two years now, sort of sitting in the mid-60s.

Is it because the economy is just a very defense-oriented economy, really a far suburb of Washington D.C.; two, Virginia Beach Town Center is just too pricey relative to alternatives or is that because whether it’s Virginia Beach proper or Downtown Norfolk or some office park there are now more competitive, more attractive office alternatives in your part of the world?.

I don’t know, yes and no..

Okay..

So John, we start reiterating for….

That’s good - those are good. I got the answer. Thanks. That’s what you need, all you need, thanks a lot..

I would appreciate the question, John. I want to make sure that we reiterate this properly. For the first 11 years of the existence of Town Center, we effectively had - did not have any space to lease.

We had been at 99% occupancy on the office side for going on a decade, and basically had to say no to every 50,000-foot tenant or expansion opportunity that came along. When we built 4525 Main, the idea was to oversize it and have some flexibility for some times to come.

We frankly had expected that some time to come would have come a little faster than it has, but we’re very comfortable having that space to lease. The second part of John’s question, is it too pricey for the market. That’s a nuance question. It is intended to be the most expensive address in the region, a region of 1.8 million people.

And so, therefore, naturally some 80%, 85% of the tenants in the market are not coming to Town Center. It takes those tenants that are willing to pay that premium in order to have that address, be it for recruitment, or clients or what have you. So it’s by design not going to be filled with the natural growth in the market.

And thirdly, the other note to that piece of the puzzle is that there is not a competing product in the region. There are products that offer 20%, 30% cheaper rent. We can’t compete with that nor are we interested in, but that’s about it..

Great, thank you..

Thank you..

Thank you. Our next question comes from Craig Kucera with Wunderlich. Please proceed with your question..

Hey, good morning, guys. I appreciate the guidance update that I noted that the NOI guidance was up about $1.3 million on both the bottom and the top.

Is that purely a function of hanging on to the three extra Krogers or are there some other moving parts?.

Yes. Good morning, Craig. It’s a combination of a couple items. One is, yes, holding on to those three properties through yearend. The other is the addition of the Southshore’s acquisition..

Got it..

And on top of that with our NOI has performed - or I would say our properties have performed really well on the first six months, it’s added to that as well..

[Multiple Speakers] guidance on the construction company as well..

Right, right, getting to the Same Store, I think last year the cash Same Store was running at maybe 5.5% first quarter was just inside, for this quarter things slowed down a bit.

Do you think that you’re going to see a pickup back to maybe the 4% to 5% range in the back half of this year or do you feel like to a large extent the portfolio is settling down to 2%, which I think is maybe closer to your longer-term average?.

Yes, we had some nice cash pickups last year. Part of it has to do with the re-tenanting. Here at the Town Center we had the big law firm there. If you remember they took the 15-year space and all, that we had some free rent in moving periods and all that had a straight line rent adjustment.

So we really started picking up some cash there in the retail re-tenanting we did here. But we’re not out giving guidance on Same Store NOI, but we certainly hope to see it back at that level..

Okay, great..

And make that - again, for those of you on the phone, Mike and I’ve been telling people for a very long time. Again, having that 33-year window, what goes on in our portfolio, our long-term Same Store growth is in the 2% range. We’ve enjoyed significantly higher gains than that over the last couple years.

But we would expect that that would return to the center line over the long haul. Again, what’s been added to that is there are lease-up opportunities now within the portfolio that would augment that. But that’s traditionally what happens in our markets..

Got it, you know in the past you had some success pricing OP unit deals actually above the stock price, but maybe at a discount to NAV, so here we stand today with you guys trading on the $15 range.

Can you comment on where this next tranche of Southshore is pricing?.

This is Eric. I appreciate the question. That trend is intact and going strong. If it works for the robust movement of the stock in a very short time period, so a little bit of history with the - we meet with the group that we’re buying Southshore’s from is appropriate for a second.

You’ll recall, we have engaged acquiring Dimmock Square from this group. And that OP unit deal, if my memory serves me correctly, it was priced at a high 9 handle. The stock quickly traded down thereafter to the low $9s and those folks obviously questioned, which they no longer question.

They more obviously - only the return is due, the next deal with Southgate. And I believe we did that one at a lower 11 handle. When we actually came to closing that deal at a low 11 handle, the stock had traded up into the high 11s approaching 12.

And so, when we negotiated the Southshore’s deal, we not only went out with an offer cap rate that we weren’t going to budget off of, but we definitively said that those shares needed to be - those OP units needed to be priced at $12.50, a good $0.60 at the time, $0.60 or $0.65 above the current trading share price, only to negotiate the deal and see the stock price takeoff to the $15 range.

Given the relationship with this seller and the success that they had experienced over their first two deals, we actually came out and we’re able to negotiate a pricing of those OP units at $13 at the end of the day, which was I think a fair negotiation on both sides, given the success of that relationship in the previous deals for both parties.

But certainly, any deals we’re now discussing are certainly the 15 handle is where the conversation is beginning..

Got it.

One last one for me, Lou, with the cost of equity capital so much lower today than it’s been the past, are you more inclined to maybe push harder on looking at acquisitions, maybe more so in the retail space today than you were maybe six to nine months ago or development still in the near-term probably the way to go?.

It’s an interesting question. It does open up more opportunities to acquire higher quality products. But we are really reticent to change our strategy for a short-term - which could be short-term. The development pipeline is going to continue to be our main engine.

I think where you would see, which you are speaking of manifest itself more, as Mike alluded to, was using that ATM even more robustly to allow for further development opportunities..

Okay, great. Thanks, guys..

Thank you. Our next question will come from Laura Engel from Stonegate Capital. Please proceed with your question..

Good morning, and thanks for all the information as always and a good quarter. Lot of my questions has obviously been answered. But I wonder just if you could just give us, you talked a lot about the sale of the non-core centers, especially the Kroger centers.

What’s kind of the best or worst case scenario going forward for those properties and at what point will you all reconsider pricing given performance?.

This is Eric, I appreciate the question. So just for a refresher a couple of stats on the three centers in question, the center in South Bend has a Kroger lease going out to 2020 and is in the mid-90% occupancy. The center in the Memphis MSA is a Kroger, so 2028 with 96% occupancy.

And then, the one in Waynesboro Virginia has a shorter term on Kroger, till 2018. But again there is only about 15,000 square feet of small shops that Kroger dominates that lower portion of the Minneapolis MSA, that’s 100% occupied. And so we feel good about the centers.

We feel good about the Kroger anchors and we feel good about the term left and the likelihood for renewals. So, yes, the worst reasonable case is for reasons that we’re unaware that we sit here on this call, that pricing doesn’t come in where we need, where we’d like it to be during our marketing effort later this year. And we opt to hold these.

I guess that’s our reasonable case. That’s certainly not our plan..

Right..

And best case, I really don’t want to get into pricing here on the call of the individual centers and are asking prices and negotiating it ourselves publically.

But obviously, best case is we hear pricing that puts the all-in sale of all these at a seven handle, collectively across these non-core assets that we would have sold and we would dispose the remaining - some subset of those remaining three by the end of the year, as Lou mentioned..

Right, okay, and then we talked a lot about the development pipeline, but just with three significant projects seen initial occupancy coming up. These estimates for stabilization and I haven’t ever tracked it historically, estimated versus the final.

Would you say these are conservative as we factor these into estimates within the next 12 to 24 months? How would you characterize these estimates as far as stabilization for several of them coming online mid-2017?.

I’d say they are reasonably conservative. It’s certainly not worst case. But we try here on being a little bit more conservative than our goals..

Well, I appreciate it, and I’ll get back in the queue. Thank you..

Thank you. Our next question comes from Paul Puryear with Raymond James Financial. Please proceed with your question..

Hey, good morning..

Good morning, Paul..

Thanks. Lou, just one more question from us on the apartment side, we’re seeing a lot of new supply at the A level in the apartment space.

Are you not seeing that in that region? Are you still getting rent increases there at Town Center?.

We’re still getting rent increases. But we are seeing a lot more supply come on. And that’s not just the Town Center. As you suggested, Paul, we’re seeing it in our markets and Carolina’s as well as that Baltimore-Washington Corridor. So obviously, location becomes more and more important. So we’re still eking up here.

Again, just to reiterate, the A locations are going to stand the test of time and weather any storm that might be coming. The rate of increase might slow.

But I feel that they will and this is for here, for the Baltimore’s Inner Harbor, for Fort Meade area, and Washington, where we are - I think they’re going to continue to grow, albeit at a slower pace until that new supply gets absorbed.

But at Town Center, again, just this morning, coming in to work listening on the radio, heard an advertisement for yet another apartment project that is one mile east of Town Center. And my guess is it’s a couple of hundred bucks a month cheaper than being in Town Center. That’s going to continue to happen and probably accelerate.

But we don’t really feel a lot of that pressure..

So are you expecting different yields in your apartments versus your retail and office in the expansion?.

Yes, on the retail side, again, we look for that 20% spread, between wholesale and retail. And obviously, that’s different for retail than it is for apartments. And that continue to - it’s going to continue to hold true here..

All right. Thank you..

Thank you, Paul..

Thank you, at this time. I would like to turn the call back over to management for closing comments..

Thank you for your time this morning. And thank you for your interest in Armada Hoffler. We look forward to updating you again soon. Have a good day..

Thank you. This concludes today’s teleconference. Thank you for your participation and you may disconnect your lines at this time..