SEC Company Response from AH Realty Trust, Inc. (AHRT, AHRT-PA) (CIK 0001569187) (AHRT) — Mar 25, 2013
AH Realty Trust, Inc. (AHRT, AHRT-PA) (CIK 0001569187)
Date: March 25, 2013 · CIK: 0001569187 · Accession: 0001193125-13-124890
AI Filing Summary & Sentiment
Reasoning
Referenced dates: March 11, 2013
Letter
VIA EDGAR United States Securities and Exchange Commission Division of Corporation Finance RE: Armada Hoffler Properties, Inc. Confidential Draft Registration Statement on Form S-11 Submitted February 12, 2013 CIK No. 0001569187
Dear Ms. Barros:
As counsel to Armada Hoffler Properties, Inc., a Maryland corporation (the “Company”), we are transmitting for filing pursuant to the Securities Act of 1933, as amended (the “Securities Act”), the Company’s Registration Statement on Form S-11 (the “Registration Statement”), together with certain exhibits, and the Company’s responses to the comments of the Staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) contained in your letter dated March 11, 2013.
For convenience of reference, each Staff comment contained in your March 11, 2013 comment letter is reprinted below in italics, numbered to correspond with the paragraph numbers assigned in your letter, and is followed by the corresponding response of the Company.
We have provided to each of you, Ms. Shannon Sobotka, Mr. Robert Telewicz and Ms. Folake Ayoola, a courtesy copy of this letter and two courtesy copies of the Registration Statement filed by the Company on the date hereof, one copy of which has been marked to reflect changes made to the confidential draft registration statement submitted confidentially by the Company to the Commission on February 12, 2013. The changes reflected in the Registration Statement have been made in response to the Staff’s comments and for the purpose of updating and revising certain information in the Registration Statement. All page references in
Ms. Sonia Barros
March 26, 2013
Page
responses are to pages of the blacklined version of the Registration Statement. Capitalized terms used and not otherwise defined in this response letter that are defined in the Registration Statement have the meanings set forth in the Registration Statement. Where requested, or as noted below, certain information will be provided supplementally.
General
1. If you intend to respond to these comments with an amended draft registration statement, please submit it and any associated correspondence in accordance with the guidance we provide in the Division’s October 11, 2012 announcement on the SEC website at http://www.sec.gov/divisions/corpfin/cfannouncements/drsfilingprocedures101512.htm.
RESPONSE: The Company has elected to file the Registration Statement rather than submit an amended draft registration statement.
2. Please keep in mind that we may publicly post filing review correspondence in accordance with our December 1, 2011 policy (http://www.sec.gov/divisions/corpfin/cfannouncements/edgarcorrespondence.htm). If you intend to use Rule 83 (17 CFR 200.83) to request confidential treatment of information in the correspondence you submit on EDGAR, please properly mark that information in each of your confidential submissions to us so we do not repeat or refer to that information in our comment letters to you.
RESPONSE: The Company acknowledges the Staff’s comment.
3. Please supplementally provide us with copies of all written communications, as defined in Rule 405 under the Securities Act, that you, or anyone authorized to do so on your behalf, present to potential investors in reliance on Section 5(d) of the Securities Act, whether or not they retain copies of the communications. Similarly, please supplementally provide us with any research reports about you that are published or distributed in reliance upon Section 2(a)(3) of the Securities Act of 1933 added by Section 105(a) of the Jumpstart Our Business Startups Act by any broker or dealer that is participating or will participate in your offering.
RESPONSE: The Company acknowledges the Staff’s comment and advises the Staff that (i) neither the Company nor any other party, including the
Ms. Sonia Barros
March 26, 2013
Page
underwriters, has used any written communications in reliance on Section 5(d) of the Securities Act to date and (ii) the Company has been advised by the underwriters that, to date, no research reports have been published or distributed in reliance upon Section 2(a)(3) of the Securities Act by any broker or dealer that will participate in the offering.
4. Prior to effectiveness, please file on EDGAR the FINRA no objection letter or have a FINRA staff member call us to confirm FINRA clearance.
RESPONSE: The Company acknowledges the Staff’s comment and confirms that, prior to effectiveness, it will either file the FINRA no objection letter on EDGAR or have a FINRA staff member call the Staff to confirm FINRA clearance.
Our Competitive Strengths, page 2
5. We note your disclosure on page 3 where you discussed your completed projects. In an appropriate section of the prospectus, please revise to provide the development costs per square foot, clarifying whether leasing costs are included.
RESPONSE: The Company advises the Staff that projects described on pages 3 and 4 under the bullet point entitled “Extensive Experience with Construction and Development” are projects that the Predecessor built for third party clients on a fee basis and the disclosure under this heading is intended to provide information regarding the types of third party construction activities that the Predecessor has undertaken historically. The Company does not believe that development costs per square foot or leasing cost information for these projects, which are neither owned by the Predecessor nor will be owned by the Company upon completion of the formation transactions and the offering, is relevant to an investor in the common stock of the Company. These projects illustrate the Company’s third party construction capabilities.
Ms. Sonia Barros
March 26, 2013
Page
Initial Portfolio, page 5
6. We note that you have included properties in this table that you rent and for which the rent paid by you is eliminated from your revenues in consolidation. Please consider presenting these properties separately and removing them from the weighted average subtotals.
RESPONSE: In response to the Staff’s comment, the Company has added the following additional disclosure in the Registration Statement:
•
On pages 8 and 131, the Company has revised the lead-in language to the property overview tables to call attention to the three properties in which Armada Hoffler leased space as of December 31, 2012 and the fact that the rent paid by Armada Hoffler for such space will be eliminated in consolidation as a result of the formation transactions; and
•
On pages 8, 9, 131 and 132, the Company has inserted footnotes to the subtotal/weighted average disclosures (footnotes 8 and 11 to the tables) to clarify that the numbers in the table reflect square footage and annual rent for space leased by the Company. In such footnotes, the Company also has disclosed what the net rentable square feet, percentage leased, annualized base rent and annualized base rent per leased square foot would be if space leased by the Company were excluded from the tables.
The Company believes that such additional disclosure is balanced and provides appropriate information to prospective investors regarding the properties in which the Company occupies space, including the impact of such space on certain of the Company’s financial and operating data.
Our Identified Development Pipeline, page 7
7. Please revise to provide the costs incurred to date for each of the projects, as applicable. This comment also applies to your disclosure in the business section, starting on page 150.
RESPONSE: The Company has added disclosure regarding costs incurred as of December 31, 2012 in the tables on pages 10, 81 and 174 in response to the Staff’s comment.
Formation Transactions, page 9
8. Please tell us why you have not included the purchase agreement to acquire the Apprentice School Apartments and the representation, warranty and indemnity agreement between you and Mr. Hoffler in the exhibit list. Refer to Item 601(b)(10) of Regulation S-K.
RESPONSE: The Company acknowledges the Staff’s comment and advises the Staff that it will file the referenced agreements as exhibits with a future pre-effective amendment to the Registration Statement and has added the agreements to the exhibit index.
Ms. Sonia Barros
March 26, 2013
Page
9. Please include the severance plan as an exhibit to the registration statement or advise. Refer to Item 601(b)(10) of Regulation S-K.
RESPONSE: The Company acknowledges the Staff’s comment and advises the Staff that it will file the severance plan as an exhibit with a future pre-effective amendment to the Registration Statement and has added the severance plan to the exhibit index.
Summary Selected Financial Data
Distribution Policy, page 57
10. We note that approximately half of your revenue as of September 30, 2012 is derived from general contracting and real estate services. Please explain to us how you determined it would be appropriate to present cash flows available for distribution and an expected dividend given the unpredictable nature of these cash flows.
RESPONSE: The Company believes that it is appropriate to include expected cash flows from general contracting and real estate services in determining estimated cash available for distribution for the year ending December 31, 2013. The Company acknowledges that, over time, revenues and cash flows from general contracting and real estate services may be less predictable than rental income, rental expenses and real estate taxes. However, the Company believes that expected general contractor and real estate revenue and general contractor expenses for the year ending December 31, 2013 relating to signed construction contracts, including both work in progress as well as contracts entered into after December 31, 2012, can be reasonably estimated based on the Company’s recent historical experience. The Company has revised the disclosure on page 66 to clarify that, in determining estimated initial cash available for distribution for the 12 months ending December 31, 2013, the Company has eliminated 2012 actual general contracting and real estate services segment profit and is utilizing estimated revenues and segment profit expected to be recognized during the year ending December 31, 2013 from general contracting and real estate services relating to executed construction contracts. In addition, in estimating segment profit on general contracting and real estate services revenues for the year ending December 31, 2013, the Company is utilizing a segment profit margin based on the most recent three year average for the Predecessor.
Ms. Sonia Barros
March 26, 2013
Page
11. The above comment notwithstanding, explain to us how you have adjusted your cash flows available for distribution for construction contracts expected to be completed during 2012 and 2013.
RESPONSE: As noted in the response to Comment 10 above, the Company is not utilizing historical 2012 cash flows from the general contracting and real estate services segment and has eliminated 2012 actual general contracting and real estate services profit, but rather is utilizing expected cash flows relating to signed construction contracts expected to be recognized for the year ending December 31, 2013 and utilizing a segment profit margin for the revenues from such contracts based on the most recent three year average for the Predecessor.
12. We note your adjustment to cash flows used in financing activities for long-term lease obligations. Please provide more detail as to the nature of these obligations. In your response tell us when the agreement was signed and the significant lease terms.
RESPONSE: The Company has added disclosure on page 64 and in footnote 15 on page 68 to clarify that the long-term lease obligations referenced on page 64 represent obligations under ground leases under which subsidiaries of the Company will be lessees. The Company advises the Staff that the long-term lease obligations referred to in the adjustment to cash flows relate to a contractual rent increase pursuant to the terms of the ground lease for the Broad Creek Shopping Center property, which increase is expected to be approximately $37,000 in 2013 when compared to 2012. We refer the Staff to the discussion of the material terms of the Broad Creek Shopping Center ground lease on page 155 under the heading “Business and Properties—Broad Creek Shopping Center Ground Leases.”
13. Please refer to footnote 11. Please tell us how the total weighted average general improvements presented in this footnote compares to the general improvements projected to be made for the year ended December 31, 2013.
RESPONSE: The Company advises the Staff that, at this time, it has no significant capital expenditures relating to general improvements (excluding tenant and leasing commission costs) and believes the estimated provision for general improvements (excluding tenant and leasing commission costs) for the year ending December 31, 2013, based on the average annual general improvement expenditures (excluding tenant and leasing commission costs) per square foot incurred during the years ended December 31, 2010, 2011 and 2012, accurately reflects the general improvements projected to be made for the year ending December 31, 2013. The Company further advises the Staff that it has included provisions for contractually obligated tenant improvements and leasing commission cost for 2013 in footnote 11 on page 67.
Ms. Sonia Barros
March 26, 2013
Page
14. Please also revise footnote 11 to define what “recurring capital expenditures” means and provide examples of “general improvements.”
RESPONSE: The Company has revised the disclosure on pages 64 and 68 to conform terminology and define “general improvements” in response to the Staff’s comment.
15. Please revise footnote 12 to indicate, if true, that you will not be refinancing the applicable mortgage loan.
RESPONSE: The Company advises the Staff that it is in the process of extending the maturity of all of the loans that were scheduled to mature in 2013. The Company has revised the disclosure on pages 97 and 98 to reflect the extensions received to date and will further revise the disclosure to reflect the additional extensions in a future pre-effective amendment to the Registration Statement.
Dilution, page 64
16. Please provide the relative contribution disclosure required by the first sentence of Item 506 of Regulation S-K.
RESPONSE: The Company acknowledges the Staff’s comment and advises the Staff that it does not believe that it is appropriate to include the disclosure described in the first sentence of Item 506 of Regulation S-K. The first sentence of Item 506 of Regulation S-K provides that: “[w]here common equity securities are being registered and there is substantial disparity between the public offering price and the effective cash costs to officers, directors, promoters and affiliated persons of common equity acquired by them in transactions during the past five years, or which they have the right to acquire, and the registrant is not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act immediately prior to the filing of the registration statement, there shall be included a comparison of the public contribution under the proposed public offering and the effective cash contribution of such persons.”
The Company is a newly-organized Maryland corporation with no operating history. The only common equity of the Company to be acquired by affili
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CORRESP 1 filename1.htm SEC COVER LETTER HUNTON & WILLIAMS LLP RIVERFRONT PLAZA, EAST TOWER 951 EAST BYRD STREET RICHMOND, VIRGINIA 23219-4074 TEL 804 • 788 • 8200 FAX 804 • 788 • 8218 March 26, 2013 VIA EDGAR Ms. Sonia Barros United States Securities and Exchange Commission Division of Corporation Finance 100 F Street, N.E. Washington, D.C. 20549 RE: Armada Hoffler Properties, Inc. Confidential Draft Registration Statement on Form S-11 Submitted February 12, 2013 CIK No. 0001569187 Dear Ms. Barros: As counsel to Armada Hoffler Properties, Inc., a Maryland corporation (the “Company”), we are transmitting for filing pursuant to the Securities Act of 1933, as amended (the “Securities Act”), the Company’s Registration Statement on Form S-11 (the “Registration Statement”), together with certain exhibits, and the Company’s responses to the comments of the Staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) contained in your letter dated March 11, 2013. For convenience of reference, each Staff comment contained in your March 11, 2013 comment letter is reprinted below in italics, numbered to correspond with the paragraph numbers assigned in your letter, and is followed by the corresponding response of the Company. We have provided to each of you, Ms. Shannon Sobotka, Mr. Robert Telewicz and Ms. Folake Ayoola, a courtesy copy of this letter and two courtesy copies of the Registration Statement filed by the Company on the date hereof, one copy of which has been marked to reflect changes made to the confidential draft registration statement submitted confidentially by the Company to the Commission on February 12, 2013. The changes reflected in the Registration Statement have been made in response to the Staff’s comments and for the purpose of updating and revising certain information in the Registration Statement. All page references in Ms. Sonia Barros March 26, 2013 Page 2 responses are to pages of the blacklined version of the Registration Statement. Capitalized terms used and not otherwise defined in this response letter that are defined in the Registration Statement have the meanings set forth in the Registration Statement. Where requested, or as noted below, certain information will be provided supplementally. General 1. If you intend to respond to these comments with an amended draft registration statement, please submit it and any associated correspondence in accordance with the guidance we provide in the Division’s October 11, 2012 announcement on the SEC website at http://www.sec.gov/divisions/corpfin/cfannouncements/drsfilingprocedures101512.htm. RESPONSE: The Company has elected to file the Registration Statement rather than submit an amended draft registration statement. 2. Please keep in mind that we may publicly post filing review correspondence in accordance with our December 1, 2011 policy (http://www.sec.gov/divisions/corpfin/cfannouncements/edgarcorrespondence.htm). If you intend to use Rule 83 (17 CFR 200.83) to request confidential treatment of information in the correspondence you submit on EDGAR, please properly mark that information in each of your confidential submissions to us so we do not repeat or refer to that information in our comment letters to you. RESPONSE: The Company acknowledges the Staff’s comment. 3. Please supplementally provide us with copies of all written communications, as defined in Rule 405 under the Securities Act, that you, or anyone authorized to do so on your behalf, present to potential investors in reliance on Section 5(d) of the Securities Act, whether or not they retain copies of the communications. Similarly, please supplementally provide us with any research reports about you that are published or distributed in reliance upon Section 2(a)(3) of the Securities Act of 1933 added by Section 105(a) of the Jumpstart Our Business Startups Act by any broker or dealer that is participating or will participate in your offering. RESPONSE: The Company acknowledges the Staff’s comment and advises the Staff that (i) neither the Company nor any other party, including the Ms. Sonia Barros March 26, 2013 Page 3 underwriters, has used any written communications in reliance on Section 5(d) of the Securities Act to date and (ii) the Company has been advised by the underwriters that, to date, no research reports have been published or distributed in reliance upon Section 2(a)(3) of the Securities Act by any broker or dealer that will participate in the offering. 4. Prior to effectiveness, please file on EDGAR the FINRA no objection letter or have a FINRA staff member call us to confirm FINRA clearance. RESPONSE: The Company acknowledges the Staff’s comment and confirms that, prior to effectiveness, it will either file the FINRA no objection letter on EDGAR or have a FINRA staff member call the Staff to confirm FINRA clearance. Our Competitive Strengths, page 2 5. We note your disclosure on page 3 where you discussed your completed projects. In an appropriate section of the prospectus, please revise to provide the development costs per square foot, clarifying whether leasing costs are included. RESPONSE: The Company advises the Staff that projects described on pages 3 and 4 under the bullet point entitled “Extensive Experience with Construction and Development” are projects that the Predecessor built for third party clients on a fee basis and the disclosure under this heading is intended to provide information regarding the types of third party construction activities that the Predecessor has undertaken historically. The Company does not believe that development costs per square foot or leasing cost information for these projects, which are neither owned by the Predecessor nor will be owned by the Company upon completion of the formation transactions and the offering, is relevant to an investor in the common stock of the Company. These projects illustrate the Company’s third party construction capabilities. Ms. Sonia Barros March 26, 2013 Page 4 Initial Portfolio, page 5 6. We note that you have included properties in this table that you rent and for which the rent paid by you is eliminated from your revenues in consolidation. Please consider presenting these properties separately and removing them from the weighted average subtotals. RESPONSE: In response to the Staff’s comment, the Company has added the following additional disclosure in the Registration Statement: • On pages 8 and 131, the Company has revised the lead-in language to the property overview tables to call attention to the three properties in which Armada Hoffler leased space as of December 31, 2012 and the fact that the rent paid by Armada Hoffler for such space will be eliminated in consolidation as a result of the formation transactions; and • On pages 8, 9, 131 and 132, the Company has inserted footnotes to the subtotal/weighted average disclosures (footnotes 8 and 11 to the tables) to clarify that the numbers in the table reflect square footage and annual rent for space leased by the Company. In such footnotes, the Company also has disclosed what the net rentable square feet, percentage leased, annualized base rent and annualized base rent per leased square foot would be if space leased by the Company were excluded from the tables. The Company believes that such additional disclosure is balanced and provides appropriate information to prospective investors regarding the properties in which the Company occupies space, including the impact of such space on certain of the Company’s financial and operating data. Our Identified Development Pipeline, page 7 7. Please revise to provide the costs incurred to date for each of the projects, as applicable. This comment also applies to your disclosure in the business section, starting on page 150. RESPONSE: The Company has added disclosure regarding costs incurred as of December 31, 2012 in the tables on pages 10, 81 and 174 in response to the Staff’s comment. Formation Transactions, page 9 8. Please tell us why you have not included the purchase agreement to acquire the Apprentice School Apartments and the representation, warranty and indemnity agreement between you and Mr. Hoffler in the exhibit list. Refer to Item 601(b)(10) of Regulation S-K. RESPONSE: The Company acknowledges the Staff’s comment and advises the Staff that it will file the referenced agreements as exhibits with a future pre-effective amendment to the Registration Statement and has added the agreements to the exhibit index. Ms. Sonia Barros March 26, 2013 Page 5 9. Please include the severance plan as an exhibit to the registration statement or advise. Refer to Item 601(b)(10) of Regulation S-K. RESPONSE: The Company acknowledges the Staff’s comment and advises the Staff that it will file the severance plan as an exhibit with a future pre-effective amendment to the Registration Statement and has added the severance plan to the exhibit index. Summary Selected Financial Data Distribution Policy, page 57 10. We note that approximately half of your revenue as of September 30, 2012 is derived from general contracting and real estate services. Please explain to us how you determined it would be appropriate to present cash flows available for distribution and an expected dividend given the unpredictable nature of these cash flows. RESPONSE: The Company believes that it is appropriate to include expected cash flows from general contracting and real estate services in determining estimated cash available for distribution for the year ending December 31, 2013. The Company acknowledges that, over time, revenues and cash flows from general contracting and real estate services may be less predictable than rental income, rental expenses and real estate taxes. However, the Company believes that expected general contractor and real estate revenue and general contractor expenses for the year ending December 31, 2013 relating to signed construction contracts, including both work in progress as well as contracts entered into after December 31, 2012, can be reasonably estimated based on the Company’s recent historical experience. The Company has revised the disclosure on page 66 to clarify that, in determining estimated initial cash available for distribution for the 12 months ending December 31, 2013, the Company has eliminated 2012 actual general contracting and real estate services segment profit and is utilizing estimated revenues and segment profit expected to be recognized during the year ending December 31, 2013 from general contracting and real estate services relating to executed construction contracts. In addition, in estimating segment profit on general contracting and real estate services revenues for the year ending December 31, 2013, the Company is utilizing a segment profit margin based on the most recent three year average for the Predecessor. Ms. Sonia Barros March 26, 2013 Page 6 11. The above comment notwithstanding, explain to us how you have adjusted your cash flows available for distribution for construction contracts expected to be completed during 2012 and 2013. RESPONSE: As noted in the response to Comment 10 above, the Company is not utilizing historical 2012 cash flows from the general contracting and real estate services segment and has eliminated 2012 actual general contracting and real estate services profit, but rather is utilizing expected cash flows relating to signed construction contracts expected to be recognized for the year ending December 31, 2013 and utilizing a segment profit margin for the revenues from such contracts based on the most recent three year average for the Predecessor. 12. We note your adjustment to cash flows used in financing activities for long-term lease obligations. Please provide more detail as to the nature of these obligations. In your response tell us when the agreement was signed and the significant lease terms. RESPONSE: The Company has added disclosure on page 64 and in footnote 15 on page 68 to clarify that the long-term lease obligations referenced on page 64 represent obligations under ground leases under which subsidiaries of the Company will be lessees. The Company advises the Staff that the long-term lease obligations referred to in the adjustment to cash flows relate to a contractual rent increase pursuant to the terms of the ground lease for the Broad Creek Shopping Center property, which increase is expected to be approximately $37,000 in 2013 when compared to 2012. We refer the Staff to the discussion of the material terms of the Broad Creek Shopping Center ground lease on page 155 under the heading “Business and Properties—Broad Creek Shopping Center Ground Leases.” 13. Please refer to footnote 11. Please tell us how the total weighted average general improvements presented in this footnote compares to the general improvements projected to be made for the year ended December 31, 2013. RESPONSE: The Company advises the Staff that, at this time, it has no significant capital expenditures relating to general improvements (excluding tenant and leasing commission costs) and believes the estimated provision for general improvements (excluding tenant and leasing commission costs) for the year ending December 31, 2013, based on the average annual general improvement expenditures (excluding tenant and leasing commission costs) per square foot incurred during the years ended December 31, 2010, 2011 and 2012, accurately reflects the general improvements projected to be made for the year ending December 31, 2013. The Company further advises the Staff that it has included provisions for contractually obligated tenant improvements and leasing commission cost for 2013 in footnote 11 on page 67. Ms. Sonia Barros March 26, 2013 Page 7 14. Please also revise footnote 11 to define what “recurring capital expenditures” means and provide examples of “general improvements.” RESPONSE: The Company has revised the disclosure on pages 64 and 68 to conform terminology and define “general improvements” in response to the Staff’s comment. 15. Please revise footnote 12 to indicate, if true, that you will not be refinancing the applicable mortgage loan. RESPONSE: The Company advises the Staff that it is in the process of extending the maturity of all of the loans that were scheduled to mature in 2013. The Company has revised the disclosure on pages 97 and 98 to reflect the extensions received to date and will further revise the disclosure to reflect the additional extensions in a future pre-effective amendment to the Registration Statement. Dilution, page 64 16. Please provide the relative contribution disclosure required by the first sentence of Item 506 of Regulation S-K. RESPONSE: The Company acknowledges the Staff’s comment and advises the Staff that it does not believe that it is appropriate to include the disclosure described in the first sentence of Item 506 of Regulation S-K. The first sentence of Item 506 of Regulation S-K provides that: “[w]here common equity securities are being registered and there is substantial disparity between the public offering price and the effective cash costs to officers, directors, promoters and affiliated persons of common equity acquired by them in transactions during the past five years, or which they have the right to acquire, and the registrant is not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act immediately prior to the filing of the registration statement, there shall be included a comparison of the public contribution under the proposed public offering and the effective cash contribution of such persons.” The Company is a newly-organized Maryland corporation with no operating history. The only common equity of the Company to be acquired by affili