Q2 2024 Armada Hoffler Properties Inc Earnings Call

August 8, 2024

good morning ladies and glemen and welcome to mmothera h second quarter two thousand and twenty four earnings conference call at this time all lines are in a liston only mode

Operator: 2024 Earnings Conference Call. At this time, all lines are in a listen-only mode.

Operator: At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. And this call is being recorded on Thursday, August 8, 2024. I would like to turn the call over to Chelsea Forrest, Vice President of Investment Relations. Please go ahead.

Operator: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. And this call is being recorded on Thursday, August 8, 2024. I would like to turn the call over to Chelsea Forrest, Vice President of Investment Relations. Please go ahead.

Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. And this call is being recorded on Thursday, August 8, 2024.

I would now like to turn the call over to Chelsea Forrest, Vice President of Investor Relations. Please go ahead.

Chelsea Forrest: Good morning, and thank you for joining Armada Hoffler's second quarter 2024 earnings conference call and webcast. On the call this morning, in addition to myself, are Lou Haddad, CEO; Matthew Barnes-Smith, CFO; and Shawn Tibbetts, President and COO. The press release announcing our second quarter earnings, along with our supplemental package, were distributed yesterday afternoon. A replay of this call will be available shortly after the conclusion of the call through September 8, 2024. The numbers to access the replay are provided in the earnings press release.

Chelsea Forrest: The press release announcing our second quarter earnings, along with our supplemental package, were distributed yesterday afternoon. A replay of this call will be available shortly after the conclusion of the call through September 8, 2024. The numbers to access the replay are provided in the earnings press release.

Speaker Change: The press release announcing our second quarter earnings, along with our supplemental package, were distributed yesterday afternoon.

a replay of this call will be available shortly after the conclusion of the call through september eeightghth two thousand and twenty four

Chelsea Forrest: For those who listened to the rebroadcast of this presentation, we remind you that the remarks made herein are as of today, August 8, 2024, and will not be updated subsequent to this initial earnings call. During this call, we may make forward-looking statements, including statements related to the future performance of our portfolio, our development pipeline, the impact of acquisitions and dispositions, our mezzanine program, our construction business, our liquidity position, our portfolio performance, and financing activities, as well as comments on our guidance and outlook.

The numbers to access the replay are provided in the earnings press release.

For those who listened to the rebroadcast of this presentation, we remind you that the remarks made herein are as of today, August 8, 2024, and will not be updated subsequent to this initial earnings call.

Chelsea Forrest: during this call we nammake forward-looking statements including statements related to the future performance of our portfolio are development pipeline the impact of acquisitions and dispositions our meing program our construction business our liquidity position our portfolio performance and financing activities as well as comments on our guidance and outlook

Chelsea Forrest: Listeners are cautioned that any forward-looking statements are based upon management's beliefs, assumptions, and expectations, taking into account information that is currently available. These beliefs, assumptions, and expectations may change as a result of possible events or factors, not all of which are known and 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 forward-looking statement disclosure in our press release that we distributed yesterday afternoon and the risk factors disclosed in the documents we have filed with or furnished to the SEC.

Chelsea Forrest: these beliefs assumptions and expectations may change as a result of the possible events or factors not all of which are known and many of which are difficult to predict and generally beyond our control

Chelsea Forrest: These risks and uncertainties can cause actual results to differ materially from our current expectations, and we advise listeners to review the forward-looking statement disclosure in our press release that we distributed yesterday afternoon and the risk factors disclosed in the documents we have filed with or furnished to the SEC.

Chelsea Forrest: 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 on our website at armadahoffler.com.

Chelsea Forrest: We will also discuss certain non-GAAP financial measures, including, but not limited to, FFO and normalized FFO.

Lou: Definitions of these non-GAP measures, as well as reconciliations to the most comparable GAP measures, are included in the quarterly supplemental package, which is available on our website at armadahoffler.com. I'll now turn the call over to Lou.

Chelsea Forrest: I'll now turn the call over to Lou.

Louis Haddad: Good morning, and thank you for joining us today. As you can see from our earnings release, it was another strong quarter here at Armada Hoffler. We continue to see our portfolio produce robust operating metrics. Tenant demand for our space is at an all-time high, and rents have never been better.

Louis Haddad: Good morning, and thank you for joining us today. It was another strong quarter here at Armada Hoffler. We continue to see our portfolio produce robust operating metrics. Tenant demand for our space is at an all-time high, and rents have never been better. These results, combined with a couple of one-time items, produced significant outperformance for the period.

Lou: thanks chely

Lou: Good morning, and thank you for joining us today.

Lou: As you can see from our earnings release, it was another strong quarter here at Armada Hoffler.

Lou: we continue to see our portfolio produce robust operating metrics

Lou: Senate demand for our space is at an all-time high, and rents have never been better.

Louis Haddad: These results, combined with a couple of one-time items, produced significant outperformance for the period. We now anticipate the year ending with earnings at the high end of our prior guidance. Before Shawn and Matt delve into the specifics of this quarter's performance, I'll take a minute to update you on our succession plan. As expected, our founder and chairman, Dan Hoffler, retired last quarter. However, he remains active on our board. I have now assumed the role of chairman and will perform the dual role until early next year when the board expects to appoint Shawn as CEO.

Lou: These results, combined with a couple of one-time items, produced significant outperformance for the period.

Louis Haddad: We now anticipate the year ending with earnings at the high end of our prior guidance. Before Shawn and Matt delve into the specifics of this quarter's performance, I'll take a minute to update you on our succession plan. As expected, our founder and chairman, Dan Hoffler, retired last quarter. He remains active on our board. I have now assumed the role of chairman and will perform the dual role until early next year when the board expects to appoint Shawn as CEO.

Lou: We now anticipate the year ending with earnings at the high end of our prior guidance.

Speaker Change: Before Shawn and Matt delve into the specifics of this quarter's performance, I'll take a minute to update you on our succession plan.

Lou: As expected, our founder and chairman, Dan Hoffler, retired last quarter.

Lou: He remains active on our board.

Speaker Change: I have now assumed the role of chairman and will perform the dual role until early next year when the board expects to appoint Shawn as CEO .

Louis Haddad: At that time, I will remain active as Executive Chair. Shawn continues to exceed my highest expectations, just as he has for the last five years. He has already assumed many of my duties and built a core team with several members from within the organization to lead the execution of our strategic vision for the company in the coming years. I could not be more enthusiastic about the future of Armada Hoffler. I'll now turn the call over to Matt to highlight some of our quarterly metrics before Shawn delivers the business update.

Speaker Change: at that time i will remain active as executive chair

Lou: Shawn continues to exceed my highest expectations.

Lou: Just as he has for the last five years.

Shawn: has already assumed many of my duties and built a core team with several members from within the organization the lead the execution of our strategic vision for the company in the coming years

Lou: I could not be more enthusiastic for the future of Armada Hoffler.

Lou: I'll now turn the call over to Matt to highlight some of our quarterly metrics before Shawn delivers the business update.

Matthew Barnes: Good morning and thank you, Lou. Once again, the team has produced another strong quarter of financial results in line with prior guidance. For the second quarter of 2024, we reported FFO of $0.25 per diluted share and normalized FFO of $0.34 per diluted share, in line with our expectations. The variance between FFO and normalized FFO can be attributed to the change in fair market value of our derivatives and the write-off of accumulated development and other pursuit costs.

Matt: Good morning, and thank you, Lou. Once again, the team has produced another strong quarter of financial results in line with prior guidance.

Matt: For the second quarter of 2024, we reported FFO at 25 cents per diluted share and normalized FFO at 34 cents per diluted share, in line with our expectations.

Shawn: variance between ffo and normalized ffo can be attributed to the change of fair market value of our derivatives and the ride-off of accumulated developments and other pursue costs

Matthew Barnes: This non-cash write-off and subsequent accounting treatment resulted in a one-time reduction of the taxable liability for our TRS and an associated increase in earnings for this quarter by $1.5 million. We expect this one-time event, coupled with a tenant termination fee that will be recorded next quarter, to guide us to the top end of our earnings range. Each of our operating segments produced a robust performance this quarter, maintaining 95% occupancy across the portfolio.

Lou: This non-cash write-off and subsequent accounting treatment resulted in a one-time reduction of the taxable liability for our TRS and an associated increase in earnings for this quarter by $1.5 million.

Lou: We expect this one-time event, coupled with a tenant termination fee, that will be recorded next quarter to guide us to the top end of our earnings range.

Shawn: Each of our operating segments produced a robust performance this quarter, maintaining 95% occupancy across the portfolio.

Speaker Change: the construction division posted four point three million dollars of gross profit the highest quorter in a ma hoffler's construction management history

Speaker Change: This feature is unique to our business model as we believe that Armada Hoffler is the only publicly traded U.S. REIT to benefit from a meaningful third-party fee-based construction business as well as to internally build to our own portfolio.

Matthew Barnes: Looking specifically at the portfolio performance, all three segments posted positive release spreads. The retail segment achieved a 5.8% gap spread, with the office segment achieving a 24.3% gap spread. These results were 2.9% and 4.4% on a cash basis, respectively. Additionally, our multifamily portfolio reported a combined trade-out spread of 2% for the quarter, accelerating to 3.4% for the month of July. We have seen significant improvement in new lease trade-outs, increasing from negative 4.8% in the fourth quarter of 2023 to essentially flat in the second quarter of 2024, turning positive in July at 2.3%. Renewal spreads on apartment leases remain strong at 4.3% for the second quarter, improving to 4.4% for the month of July.

Matthew Barnes: Looking specifically at the portfolio performance, all three segments posted positive release spreads. The retail segment achieved a 5.8% gap spread, with the office segment achieving a 24.3% gap spread. These results were 2.9% and 4.4% on a cash basis, respectively. Additionally, our Multifamily Portfolio reported a combined tradeout spread of 2% for the quarter, accelerating to 3.4% for the month of July. We have seen significant improvement in new lease tradeouts, increasing from negative 4.8% in the fourth quarter of 2023 to essentially flat in the second quarter of 2024, turning positive in July at 2.3%. Renewal spreads on apartment leases remain strong at 4.3% for the second quarter, improving to 4.4% for the month of July.

Speaker Change: looking specifically at the portfolio performance all three segments posted positive releasing spreads

Lou: the retail segment achieved a five point eight percent gap spread with the office segment achieving a twenty four point three percent gap spread these results were two point nine percent of four point four percent on a cash basis respectively

Lou: a mulifamily portfolio reported a combined tradeoutspread of two percent for the quarter accelerating to three point four percent to the month of july

Speaker Change: We have seen significant improvement in new lease trade-outs, increasing from negative 4.8% in the fourth quarter of 2023 to essentially flat in the second quarter of 2024, turning positive in July at 2.3%.

Speaker Change: Renewal spreads on apartment leases remain strong at 4.3% for the second quarter, improving to 4.4% for the month of July. All these metrics demonstrate our performance of our Pearset, the value of high quality assets and the strength of our submarkets.

Matthew Barnes: All these metrics demonstrate our performance in our Pearset, the value of high-quality assets, and the strength of our sub-market. For our portfolio, same store NOI growth was positive at 0.6% on a gap basis and 1.8% on a cash basis. The office segment was the standout performer this quarter, posting 9% gap and 7.7% cash same-store growth. We believe this performance is unmatched in the REIT sector and once again indicates that even in a challenging market, high-quality assets in great locations remain full and in high demand.

Matthew Barnes: All these metrics demonstrate our performance in our Pearset, the value of high-quality assets, and the strength of our sub-market. For our portfolio, same store NOI growth was positive at 0.6% on a gap basis and 1.8% on a cash basis. The office segment was the standout performer this quarter, posting 9% gap and 7.7% cash same-store growth. We believe this performance is unmatched in the REIT sector and once again indicates that even in a challenging market, high quality assets in great locations remain full and in high demand.

Speaker Change: our portfolio same-store nnoi growth was positive at point six percent on a gaap basis and one point eight percent on a cash basis

Speaker Change: The office segment was the standout performer this quarter, posting 9% GAAP and 7.7% cash same-store growth.

Speaker Change: we believe this performance is unmatched in the reseptor and once again indicating that even in a challenging market high-quality assets in great locations remain full and in h ermark

Matthew Barnes: Shawn will cover the leasing components of these metrics later on in the call. On the balance sheet side, we executed on $85 million worth of term loans this quarter, paying down more expensive debt and continuing our balance sheet transition. This will not affect total leverage as we exchange debt one for one. We intend to maintain our investment grade credit rating and will continue to monitor the market for opportunities to execute on a creative balance sheet transaction. We also, opportunistically, issued approximately $9 million on the ATM through early July as we took advantage of the wider market rotation into rate-sensitive sectors and the especially strong bid for retail.

Matthew Barnes: Shawn will cover the leasing components of these metrics later on in the call. On the balance sheet side, we executed on $85 million worth of term loans this quarter, paying down more expensive debt and continuing our balance sheet transition. This will not affect total leverage as we exchange debt one for one. We intend to maintain our investment grade credit rating and will continue to monitor the market for opportunities to execute on a creative balance sheet transaction. We also opportunistically issued approximately $9 million on the ATM through early July as we took advantage of the wider market rotation into rate-sensitive sectors and the especially strong demand for REITs.

Speaker Change: Shawn will cover the leasing components of these metrics later on the call.

Shawn: On the balance sheet side, we executed on $85 million worth of term loans this quarter, paying down more expensive debt and continuing our balance sheet transition.

Speaker Change: this will not affect total leverage as we exchange debt one for one we intend to maintain our investment grade credit rate team and will'll continue to monitor the market for opportunities to execute on a creative balance sheet transactions

Speaker Change: we also opportunistically issued approximately nine million on the atm through early july as we took advantage of the wider market rotation into rate sensitive sectors and the especially strong bid for rates

Shawn Tibbetts: I will now pass the call over to Shawn.

Shawn Tibbetts: Thank you, Matt. And thank you, Lou, for your confidence in my ability to lead our company into the future. Additionally, we appreciate all of you for joining us to review the impressive results that our team was able to produce during the second quarter. I will walk through the high-level components and add color to the material Matt has just reviewed.

Shawn Tibbetts: Thank you, Matt. Additionally, we appreciate all of you for joining us to review the impressive results that our team was able to produce during the second quarter. I will walk through the high-level components and add color to the material Matt has just reviewed. We presented the components underpinning our 2024 guidance during our first quarter call. In terms of operating performance, occupancy across the portfolio is 95%. Let's spend some time walking through our fundamentals across the sector while maintaining an overall commercial occupancy of 95% through the second quarter. Harbor Point is now firmly entrenched as the destination of choice for financial services, but that is simply not the case at Armada Hoffler. In fact, the opposite is true.

Speaker Change: I will now pass the call over to Shawn.

Shawn: Thank you, Matt, and thank you, Lou, for your confidence in my ability to lead our company into the future.

Shawn: Additionally, we appreciate all of you for joining us to review the impressive results that our team was able to produce during the second quarter. I will walk through the high-level components and add color to the material Matt has just reviewed.

Shawn Tibbetts: We presented the components underpinning our 2024 guidance during the first quarter call, suggesting a range of $1.21 to $1.27. Given the earnings outperformance this quarter, I will reiterate my comments made last call regarding the front-loaded nature of our earnings this year. If you recall my remarks... the combination of higher construction profit in the first half of the year. The reduction in interest income as a result of our partners selling Solis City Park and the carry cost of Southern Post and Allied Harbor Point through stabilization materially contributed to the lumpiness of earnings over the four quarters.

Shawn: we presented the components underpin our two thousand and twenty-four guidance during the first quarter call

Matt: suggesting a range of one dollar twenty-one cents to one dollar twenty seven cents

Speaker Change: Given the earnings outperformance this quarter, I will reiterate my comments made last call regarding the front-loaded nature of our earnings this year.

Shawn: if you recall my remarks

Shawn: The combination of higher construction profit in the first half of the year

Shawn: the reduction of interest income as a result of our partnerers selling solar city parkand the carry cost of southern poasts and allied harbor point through stabilization materially contribute to the lumpiness of earnings over the four quarters

Shawn Tibbetts: However, we do expect to hit the high end of the range due to strong performance and a couple of one-time items. In terms of operating performance, occupancy across the portfolio is 95%, slightly ahead of the first quarter.

Shawn: However, we do expect to hit the high end of the range due to strong performance and a couple of one-time items.

Shawn: in terms of operating performance occupancy across the portfolio is ninety-five percent

Shawn Tibbetts: The combination of high occupancy and NOI consistent with the previous quarter demonstrates our strong leasing and operating execution across the portfolio. Our assets are strategically positioned in attractive markets, and the properties are typically the newest and best located in the respective sub-markets. Our properties and communities feature top-tier amenities that attract investment-grade tenants who consistently choose them over competitors in the market. Let's spend some time walking through our fundamentals across the sector.

Shawn: lightly ahead of the first quarter

Shawn: the combination of high occupancy and noi consistent with the previous quarter demonstrates our strong leasing and operating execution across the portfolio

Shawn: Our assets are strategically positioned in attractive markets.

Shawn: and the properties are typically the newest and best located in the respective submarket

Shawn: Our properties and communities feature top-tier amenities that attract investment-grade tenants who consistently choose them over competitors in the market.

Shawn Tibbetts: In our retail and office properties, value creation is realized through consistent leasing activity, relocating space, and increasing rent. In addition to the daily management of over 700 tenants, we executed 32 commercial leases for a total of approximately 250,000 square feet.

Speaker Change: Let's spend some time walking through our fundamentals across the sectors.

Speaker Change: In our retail and office properties, value creation is realized through consistent leasing activity.

Shawn: Releasing space.

Shawn: and increasing rentts

Shawn: In addition to the daily management of over 700 tenants,

Shawn: We executed 32 commercial leases for a total of approximately 250,000 square feet.

Shawn Tibbetts: Our commercial renewal spreads were 10.8% on a gap basis, while maintaining an overall commercial occupancy of 95% through the second quarter. Our trophy office product continues to demonstrate strength, as evidenced by our market-leading statistics. The office portfolio achieved an occupancy of 94.3 percent, a slight increase from the 93.6 percent last quarter and well above the high end of the peer set. In addition, the aforementioned properties achieved a 9% same-store NOI and a 24.3% positive renewal spread on a gap basis. These are primarily driven by our best-in-class town center assets. Additionally, our office expirations are minimal for the next few years.

Shawn: Our commercial renewal spreads were 10.8% on a gap basis.

Shawn: while maintaining an overall commercial occupancy of 95% through the second quarter.

Shawn: Our Trophy Office product continues to demonstrate strength, as evidenced by our market-leading statistics.

Shawn: The office portfolio achieved an occupancy of 94.3 percent, a slight increase from the 93.6 percent last quarter and well above the high end of the peer set.

Shawn: In addition, the aforementioned properties achieved a 9% same-store NOI and 24.3% positive renewal spread on a gap basis.

Shawn: These are primarily driven by our best-in-class town center assets.

Shawn: Additionally, our office expirations are minimal for the next few years.

Shawn Tibbetts: Coupled with our high-credit tenants, we expect to outperform the peer set for the foreseeable future by a very wide margin, and the results speak for themselves. This level of success is attributable to the combination of location, amenities, design, and recent vintage. As a result of these attributes, our office product remains in high demand and highly occupied, with rents at the high end of the respective sub-markets. Our office properties are in a class of themselves in each market, in addition to the location, quality, and amenities.

Speaker Change: coupleed with our high credit tenants we expect to outperform the peierset for the foreseeable future by a very wide margin and the results speak for themselves

Speaker Change: This level of success is attributable to the combination of location, amenities, design, and recent vintage.

Speaker Change: As a result of these attributes, our office product remains in high demand and highly occupied, with rents at the high end of the respective submarkets.

Speaker Change: Our office properties are in a class of themselves in each market.

Shawn Tibbetts: 95% of our office ABR is located in mixed-use ecosystems like Town Center of Virginia Beach and Harbor Point. At Harbor Point, we executed a new 35,000 square foot lease with Stiefel and delivered another 46,000 square feet of expansion space to Morgan Stanley. Harbor Point is now firmly entrenched as the destination of choice for financial services.

Speaker Change: in addition to the location quality and amenities

Shawn: ninety five percent of our office ab is located in mixed use ecosystems liketown center of virginia beach and harbor point

Speaker Change: at harbor point we executed a new thirty-five thousand square foot lease with steeple

Speaker Change: and delivered another forty-six thousand square feet of expansion space to morgan stanley

Speaker Change: arbor point is now firmly entrenched as the destination of choice for financial services

Shawn Tibbetts: The area is becoming more active every day, and we will see this continue to accelerate when thousands of T. Rowe Price employees are on site. We are witnessing a pronounced flight to quality within the market, and Harbor Point is the beneficiary. We recognize the challenges present in major office markets and what other landlords are experiencing, but it is simply not the case at Armada Hoffler. And, in fact, the opposite is true.

Speaker Change: The area is becoming more activated every day, and we will see this continue to accelerate when thousands of T-Road Price employees are on site.

Speaker Change: We are witnessing a pronounced flight to quality within the market, and Harbor Point is the beneficiary.

Speaker Change: We recognize the challenges present in major office markets and what other landlords are experiencing.

Speaker Change: but it it is simply not the case that are motn offler and in fact the opposite is true

Shawn Tibbetts: The first office tenant has already taken occupancy at Southern Post, and our anchor tenant, Vestas, will move in and open for business in the fall. These assets remain positioned to attract top-tier tenants who prioritize the premium real estate spaces that we are able to create in mixed-use communities. In the retail segment, we have executed new leases, including additions to our mixed-use communities like Strong Regional Concepts, South Moon Under, and Josefina. Our proactive leasing strategy has resulted in a positive lease renewal rate of 6% on a gap basis. Ensuring stable revenue, we believe that proactive tenant relationship management is key to maximizing NOI and property value. In the multifamily sector, robust performance was driven by strong submarket demand.

Speaker Change: The first office tenant has already taken occupancy at Southern Post, and our anchor tenant, Vestas, will move in and open for business in the fall.

Speaker Change: These assets remain positioned to attract top-tier tenants who prioritize the premium real estate spaces that we are able to create in mixed-use communities.

Shawn Tibbetts: In the retail segment, we have executed new leases, including additions to our mixed-use communities like Strong Regional Concepts, South Moon Under, and Jose Fino. We look forward to 2025 and beyond as they lease up and begin to positively contribute to NOI growth, with 43% of the units currently leased. We expect this momentum to continue given the limited supply of high-quality product in the submarket. Southern Post reinforces our reputation as a leader in creating high-quality, integrated communities. The T. Rowe Price Global Headquarters at Harbor Point is wrapping up, and we anticipate to move in later this year.

Speaker Change: In the retail segment, we have executed new leases, including additions to our mixed-use communities like Strong Regional Concepts, South Moon Under, and Josefina.

Speaker Change: Our proactive leasing strategy has resulted in a positive lease renewal rate of 6% on a gap basis, ensuring a stable revenue stream.

Speaker Change: We believe that proactive tenant relationship management is key to maximizing NOI and property values.

Speaker Change: In the multifamily sector, robust performance was driven by strong sub-market demand.

Shawn Tibbetts: Our multifamily properties achieved an average occupancy of 94.9% this quarter and demonstrated a strong 4.3% lease renewal spread. I will now spend a few moments highlighting the portfolio expansion in our mixed-use ecosystems, Southern Post and Harbor Point. Our development and construction teams remain on target to deliver the three projects in the pipeline throughout the remainder of the year. We look forward to 2025 and beyond as they lease up and begin to positively contribute to NOI growth. Gather Post, located in Roswell, Georgia, integrates retail, multifamily, and office while underscoring our commitment to enhancing community-driven, high-quality development.

Speaker Change: our multifamily properties achieved an average occupany of ninety four point nine percent this quarter and demonstrated a strong four point three percent lease renewal spread

Speaker Change: I will now spend a few moments highlighting the portfolio expansion in our mixed-use ecosystems, Southern Coast and Harbor Point.

Shawn Tibbetts: We are now 71% leased in the commercial space at rents running ahead of the pro forma level. Tenants will continue opening their doors through the fall, and we are excited to unveil several prominent brands and local businesses, adding a diverse mix of shopping and dining options that will enhance the project's appeal. The multifamily component, Chandler Residences, is also progressing well, with 43% of the units currently leased. We expect this momentum to continue given the limited supply of high-quality product in the submarket.

Speaker Change: We will continue opening their doors through the fall and we're excited to unveil several prominent brands and local businesses, adding a diverse mix of shopping and dining options that will enhance the projects appeal.

Speaker Change: The multifamily component Chandler residences is also progressing well with 43% of the units currently leased.

Speaker Change: We expect this momentum to continue given the limited supply of high quality product in the Submarket.

Shawn Tibbetts: Southern Post reinforces our reputation as a leader in creating high-quality, integrated communities. It strengthens our presence in the Southeast region and showcases our ability to deliver complex, mixed-use projects that meet evolving market demands. The T. Rowe Price Global Headquarters at Harbor Point is wrapping up, and we anticipate to move in later this year.

Speaker Change: Southern post reinforces our reputation as a leader in creating high quality integrated communities.

Speaker Change: It strengthens our presence in the southeast region and showcases our ability to deliver complex mixed use projects that meet evolving market demands.

Speaker Change: The T Rowe price Global headquarters at Harbor point is wrapping up and we anticipate to move in later this year.

Shawn Tibbetts: This Trophy Build-to-Suit project is well-situated among our assets on the peninsula and will bring thousands of additional professional workers to the site. Our Allied Harbor Point project is also progressing well, with pre-leasing kicked off in July. This 312-unit high-rise apartment building sits at the top of the market, and its approximately 1,200-space parking garage component complements the T-Row Price Project. Its waterfront views and amenities are virtually Baltimore's best, and we look forward to this property complementing our other trophy assets at Harbor Point.

Shawn Tibbetts: This Trophy Build-to-Suit project is well-situated among our assets on the peninsula and will bring thousands of additional professional workers to the site. Our Allied Harbor Point project is also progressing well, with pre-leasing kicked off in July. This 312-unit high-rise apartment building sits at the top of the market, and its approximately 1,200-space parking garage component complements the T-Row Price Project. In early July, they successfully executed on the sale of a pre-stabilized apartment project, Solis City Park, in the expected mid-5 cap range.

Speaker Change: This trophy built to suit project is well situated among our assets on the peninsula and will bring thousands of additional professional workers to the site.

Speaker Change: Our Allied Harbor point project is also progressing well with pre leasing kicked off in July.

Speaker Change: This 312 unit high rise apartment building sits at the top of the market.

Speaker Change: And it's approximately 1200 space parking garage component complement the T. Rowe price project its waterfront views in the middle East are virtually Baltimore's best and we look forward to this property complementing our other trophy assets at Harbor point.

Shawn Tibbetts: As mentioned in the previous quarter, our partner was contemplating a sale of one of the deals in our real estate financing portfolio at a mid-5 cap rate. In early July, they successfully executed on the sale of a pre-stabilized apartment project, Solis City Park, at the expected mid-5 cap range.

Speaker Change: As mentioned in the previous quarter, our partner was contemplating a sale of one of the deals in our real estate financing portfolio at a mid five cap rate.

Speaker Change: In early July they successfully executed on the sale of our pre stabilized apartment project Solar City Park and the expected mid five cap range.

Shawn Tibbetts: This market data point confirms our business thesis in several ways. They have since returned the principal and accrued interest to us at an annual return on invested capital of over eight percent. We will deploy some of the capital into a very attractive multifamily deal located in a high-growth Southeast market with the same partner. Meanwhile, our construction business continues to produce record profits. While working through the $300 million current backlog, the second quarter yielded results consistent with the targeted projections included in our original 2024 guide.

Speaker Change: This market data point confirms our business thesis in several ways.

Shawn Tibbetts: They have since returned the principal and accrued interest to us at an annual return on invested capital of over 8 percent. We will deploy some of the capital into a very attractive multifamily deal located in a high-growth Southeast market with the same partner. Our construction business continues to produce record profits. While working through the $300 million current backlog, the second quarter yielded results consistent with the targeted projections included in our original 2024 guide.

Speaker Change: They have since returned to principal and accrued interest to us at an annual return on invested capital of over 8%.

Speaker Change: We will deploy some of the capital into a very attractive multifamily deal located in a high growth southeast market with the same partner.

Speaker Change: Our construction business continues to produce record profits.

Speaker Change: Working through the $300 million current backlog the second quarter yielded results consistent with the targeted projections included in our original 2020 for guidance.

Shawn Tibbetts: The partner firms using our construction expertise continue to identify and execute on opportunities that allow us to demonstrate our capabilities and collect market data for our internal underwriting of future opportunities. Our diversified portfolio continues to perform well, with each asset class contributing positively to the company's financial results. We remain committed to leveraging expertise to optimize the portfolio. Drive growth and deliver long-term value to shareholders. Operator We are ready for the question and answer session.

Shawn Tibbetts: The partner firms using our construction expertise continue to identify and execute on opportunities that allow us to demonstrate our capabilities and collect market data for our internal underwriting of future opportunities. Our diversified portfolio continues to perform well, with each asset class contributing positively to the company's financial results. We remain committed to leveraging expertise. Optimize the Portfolio, Tribe Grows. Operator. We are ready for the question and answer session.

Speaker Change: The partner firms using our construction expertise continued to identify and execute on opportunities that allow us to demonstrate our capabilities and collect market data for our internal underwriting of future opportunities.

Speaker Change: Our diversified portfolio continues to perform well.

Speaker Change: With each asset class contributing positively to the company's financial results.

Speaker Change: We remain committed to leveraging expertise to optimize the portfolio.

Speaker Change: Drive growth.

Speaker Change: And deliver long term value to shareholders.

Speaker Change: Operator.

Speaker Change: We are ready for the question and answer session.

Operator: Thank you so much, presenters. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number 1 on your touchtone phone. You will hear a prompt that your hand has been raised. And should you wish to decline from the polling process, please press the star followed by the number 2. And if you're using a speakerphone, please lift the handset before pressing it in. One moment, please, for your first question. Our first question comes from the line of Rob Stevenson of SHAN. Your line is now open.

Speaker Change: Thank you so much for centuries.

Operator: Thank you so much, presenters. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. And should you wish to decline the polling process, please press the star followed by the number two. And if you're using a speakerphone, please lift the handset before pressing it. One moment, please, for your first question. Our first question comes from the line of Rob Stevenson of Strand. Your line is now open.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one on your Touchtone phone, you'll hear a prompt that your hand has been raised and should you wish to declines on the polling process. Please press the star followed by the number two and if youre using a speaker phone. Please lift the handset before pressing.

Speaker Change: One moment. Please for your first question.

Speaker Change: Our first question comes from the line of Rob Stevenson of Janney. Your line is now open.

Robert Stevenson: Morning, guys. Shawn or Lou, the development pipelines are essentially complete here. I can't remember you guys not having something under construction for almost 10 years since I covered you. Are there any projects that are penciling right now given demand and your cost of capital?

Rob Stevenson: Morning, guys. Shawn or Lou, the development pipelines are essentially complete here. I can't remember you guys not having something under construction for almost 10 years since I covered you. Are there any projects that are penciling right now given demand and your cost of capital?

Rob Stevenson: Good morning, guys.

Rob Stevenson: Shorter loop development pipeline is essentially complete here I can't remember you guys not having something under construction in almost 10 years I've covered you are there any projects that are penciling right now given demand in your cost of capital.

Shawn Tibbetts: Morning, Rob. Thanks for the question. We are not finding what we believe pencils. Obviously, cap rates have moved, and interest rates have moved. The economic backdrop is, frankly, moving all over the place, and we're not seeing anything that attracts us to pull the trigger or even begin intense underwriting, given the environment. So we're always on the lookout, but no, sir, we are not seeing anything that is causing us to be tempted to move at this time.

Louis Haddad: Morning, Rob. Thanks for the question. We are not finding what we believe pencils. Obviously, cap rates have moved, and interest rates have moved. The economic backdrop is, frankly, moving all over the place, and we're not seeing anything that attracts us to pull the trigger or even begin intense underwriting, given the environment. So we're always on the lookout, but no, sir, we are not seeing anything that is causing us to be tempted to move at this time.

Speaker Change: Good morning, Rob. Thanks for the question, we are not finding what we believe pencils, obviously cap rates have moved interest rates have moved the economic backdrop is frankly, moving all over the place and we were not seeing anything that attracts us couple of trigger or even began.

Shawn Tibbetts: What about on the redevelopment side beyond Columbus Village 2 and Virginia Beach?

Speaker Change: An intense underwriting given the environment. So we're always on the lookout, obviously, but no sorry, we are not seeing something that is causing us to be tempted to move at this time.

Louis Haddad: What about on the redevelopment side beyond Columbus Village 2 and Virginia Beach?

Speaker Change: What about on the redevelopment side beyond Columbus village, two in Virginia Beach.

Shawn Tibbetts: Yeah, I think, you know, things like that make sense, especially when we're looking at the basis we have in the land. We are working on, as you know, a redevelopment opportunity there. But, you know, it's rather small at the end of the day; we're talking 10 million, 15 million, not, you know, wholesale massive development. So, you know, we think that works like that type of thing, especially given the kind of attractive tenants that we're looking at, but we're not looking at any major redevelopments as we sit here today for the same reason. Okay.

Louis Haddad: Yeah, I think, you know, things like that make sense, especially when we're looking at the basis we have in the land. We are working on, as you know, a redevelopment opportunity there. But, you know, it's rather small at the end of the day; we're talking 10 million, 15 million, not, you know, wholesale massive development. So, you know, we think that works like that type of thing, especially given the kind of attractive tenants that we're looking at, but we're not looking at any major redevelopments as we sit here today for the same reason. Okay.

Speaker Change: Yes, I think things like that makes sense, especially when we're looking at the basis. We have in the land. We are working on as you know a redevelopment opportunity there, but it is rather small at the end of the day, we're talking $10 million $15 million.

Speaker Change: Wholesale massive development so.

Matt: We think that works that type of thing, especially given the kind of attractive tenants that we're looking at but we're not we're not looking at any a major redevelopment as we sit here today for the same reasons, Okay, and then Matt. So 62 cents year to date the guidance is $1 23 to $1 27 in Lucerne.

Rob Stevenson: OK. And then, Matt, so $0.62 here to date, the guidance is $123 to $127 for Lucent. You're trending towards the high end, so $61 to $65 in the back half.

Robert Stevenson: OK. And then, Matt, so $0.62 here to date, the guidance is $123 to $127 for Lucent. You're trending towards the high end, so $61 to $65 in the back half.

Robert Stevenson: You've got the WeWork drag, and I think you've also got some drag here from capitalized interest as the Baltimore and Southern Post deliver here. How should we be thinking about the cadence in the back half? Is the second quarter likely to be the sort of high point for the year? Did I understand correctly, the $1.5 million TRS benefit is a third-quarter impact, not a second quarter?

Matthew Barnes: You've got the WeWork drag, and I think you've also got some drag here from capitalized interest as the Baltimore and Southern Post deliver here. How should we be thinking about the cadence in the back half? Is the second quarter likely to be the sort of high point for the year? Did I understand correctly, the $1.5 billion TRS benefit is a third-quarter impact, not a second quarter?

Matt: We're trending towards the high end, so 61 to 65 in the back half.

Robert Stevenson: You've got though we work drag and I think you've also got some drag here from capitalized interest as the Baltimore and southern post.

Speaker Change: Deliver here, how should we be thinking about the cadence in the back half is.

Speaker Change: The second quarter likely to be the sort of high point for the year.

Speaker Change: Is that and what's the did I understand correctly, the $1 5 million Trs benefit that's a third quarter impact not a second quarter.

Matthew Barnes: Hey, good morning. Good morning, Rob.

Speaker Change: Hey, good morning, good morning, Rob Yes.

Speaker Change: 151, 6 million tax positive tax impact is a Q2 second quarter impact. We believe we know theres going to be a termination fee that will be a <unk>.

Speaker Change: It's quarter impacts of that to the positive NOI, but you are you are correct. The second quarter will we believe feed.

Matthew Barnes: Yeah, the 1.5, 1.6 million tax, positive tax impact is a Q2, second quarter impact. We believe, or we know there's going to be a termination fee that will be a third quarter impact on the positive of NOI, but you are correct. The second quarter will, we believe, be the kind of highest-quality quarter that we're looking at this year. The two areas, and you rightly pointed out that the first one, interest expense, will increase in the back half of the year as these developments come online.

Matthew Barnes: Yeah, the 1.5, 1.6 million tax, positive tax impact is a Q2, second quarter impact. We believe, or we know there's going to be a termination fee that will be a third quarter impact on the, to the positive of NOI, but you are, you are correct. The second quarter will, we believe, be the kind of highest quarter that we're looking at this year. The two areas, and you rightly pointed out that the first one, interest expense, will increase into the back half of the year as these developments come online, and we no longer capitalize the interest through the lease-up period of these developments.

Speaker Change: The highest quarter that we're looking at this year the two areas.

Speaker Change: And you rightly pointed out that the first one interest expense would increase into the back half of the year as these developments come online and we no longer capitalize the interest through the lease up period of these developments and the second part of that is the construction gross profits.

Matthew Barnes: And we no longer capitalize the interest through the lease-up period of these developments. And the second part of that is the construction gross profit, which, as we said on previous calls, was heavy in the first half of the year. We still anticipate guiding to the midpoint of our construction gross profit range, 13.7 million-ish, which would show that it's coming down in the second or third quarter and fourth quarter of this year.

Matthew Barnes: And the second part of that is the construction gross profit, which as we said on previous calls, was heavy in the first half of the year. We still anticipate guiding to the midpoint of our construction gross profit range, 13.7 million-ish, which would show that it's coming down in the second or third quarter and fourth quarter of this year.

Speaker Change: As we said on previous calls was heavy in the first half of the year, we still anticipate guiding to the midpoint of our construction gross profit range.

Matthew Barnes: <unk> 7 million ish, which woods, which would show you that it's coming coming down in the in the second.

Matthew Barnes: Third quarter fourth quarter of this year.

Robert Stevenson: Okay, and then last one for me, some other REITs have, you know, reopened their previously issued preferred stock series and raised some capital that way. Is that something that you guys have been thinking about given that the preferred is still under 10% of the capitalization or is 7% or wherever it is today about where you want it, and that cost of capital isn't attractive for you these days?

Rob Stevenson: Okay, and then last one for me, some other REITs have, you know, reopened their previously issued preferred stock series and raised some capital that way. Is that something that you guys have been thinking about given that the preferred is still under 10% of the capitalization or is 7% or wherever it is today about where you want it, and that cost of capital isn't attractive for you these days?

Speaker Change: Okay, and then last one for me.

Speaker Change: Some other rights of.

Speaker Change: Reopened their previously issued preferred stock series and raising some capital that way.

Speaker Change: Is that something that you guys have been thinking about given that the preferred is still under 10% of the capitalization or is 7% or wherever it is today about where you want it and that cost of capital isn't attractive for you. These days.

Louis Haddad: Rob, I think it's a great question. Obviously, the economic backdrop has changed dramatically since our last update. Volatility is certainly unsettling, and the subsequent movement to a slower growth, lower interest environment enables us to contemplate additional avenues to strengthen our balance sheet. But as we sit here today, we are not ready to make any of those type of calls on this Thursday morning. But at the end of the day, we're looking at that at all. I think it's a great question, and frankly, a great idea. But I can tell you that it's not top of mind as we sit here in this room. All right, thanks guys. Have a great day!

Matthew Barnes: Rob, I think it's a great question. Obviously, the economic backdrop has changed dramatically since our last update. Volatility is certainly unsettling, and the subsequent movement to a slower growth, lower interest environment enables us to contemplate additional avenues to strengthen our balance sheet.

Robert Stevenson: Brian I think that's a great question, obviously, the economic backdrop backdrop has changed dramatically since our last update.

Louis Haddad: Volatility is certainly unsettling and the subsequent movement to like the slower growth lower interest environment enables us to contemplate additional avenues to strengthen our balance sheet, but as we sit here today, we are not ready to make any of those type of calls.

Matthew Barnes: But as we sit here today, we are not ready to make any of those type of calls on this Thursday morning. But at the end of the day, we're looking at that at all. I think it's a great question, and frankly, a great idea.

Speaker Change: On this Thursday morning, but at the end of the day, we're looking at it all I think it's a great question frankly, a great idea, but I can tell you that it's not top of mind as we sit here in the room. This morning alright.

Rob Stevenson: But I can tell you that it's not top of mind as we sit here in this room. All right. Thanks, guys. Have a great day.

Robert Stevenson: All right, thanks guys. Have a great day. Appreciate the time.

Rob Stevenson: All right. Thanks guys. Have a great day. Appreciate the time.

Speaker Change: Alright, Thanks, guys have a great day I appreciate the time.

Rob: Thanks, Rob.

Rob Stevenson: Thank you so much.

Operator: And again, if you would like to ask a question, please press star 1. And our next question comes from the line of Peter Abramowitz of Jeffries. Your line is now open.

Speaker Change: Again, if you would like to ask a question. Please press star one.

Speaker Change: And our next question comes from the line of Peter Abramowitz with Jefferies. Your line is now open.

Peter Abramowitz: Yes, thank you very much. So you touched on at a high level some of the items impacting the bridge from FFO this quarter to kind of get, like you said, to sort of the top end of the range for the rest of the year. I guess if we just step back and think about it, you kind of have some unexpected items that are tailwinds through the termination fee in the third quarter and the tax benefit in the second quarter. I know you kind of kept all the ranges the same as they were last quarter, and that's how you sort of get to the high end, but if we just think about, you know, kind of swing factors within the portfolio or elsewhere in the business, like, Because I think we're maybe a little bit surprised that if you have some of these unexpected tailwinds, you don't see a little bit of a rise.

Peter Abramowitz: Yes. Thank you very much so you touched on at a high level on some of the items impacting the bridge from <unk> this quarter to kind of get like you said to sort of the top end of the range.

Peter Abramowitz: For the rest of the year I guess, if we just step back and think about it.

Peter Abramowitz: You kind of have some unexpected items that are tailwind through the termination fee in the third quarter and the tax benefit in the second quarter.

Peter Abramowitz: You know, I kind of kept all the ranges the same as they were last quarter, and that's how you sort of get to the high end. But if we just think about kind of swing factors within the portfolio or elsewhere in the business, like what would make you comfortable? Because I think we're maybe a little bit surprised that if you have some of these unexpected tailwinds, not to see a little bit of a rate increase is up on.

Peter Abramowitz: I know you've kind of kept all the range is the same as they were last quarter and Thats, how you sort of get to the high end, but.

Peter Abramowitz: We just think about kind of swing factors within the portfolio or elsewhere in the business like what what would make you comfortable because I think there was maybe a little bit surprised that if you have some of these unexpected tailwind not see a little bit of a raise.

Shawn Tibbetts: Yeah, I think, you know, Peter, thank you for the question. Good morning.

Speaker Change: Yes, I think you.

Speaker Change: You know.

Shawn Tibbetts: I think as we look at our opportunities in the future, we are constantly trying to accelerate the lease-up of these developments. And as Matt mentioned, the kind of interest or, you know, carry cost of those less than stabilized developments, obviously, we're still constructing part of them. We think a conservative approach is to show that drag and to represent that drag and kind of hold the range as it is. I think if, you know, if we saw tailwinds, it would be in faster lease up of, you know, some are part of those developments.

Shawn Tibbetts: I think as we look at our opportunities in the future, we are constantly trying to accelerate the lease up of these developments, and as Matt mentioned the kind of interest or carry cost of those less than stabilized developments, obviously, we're still constructing part of them. We think a conservative approach is to show that drag and to represent that drag and kind of hold the range as it is. I think if we saw tailwinds, it would be in a faster lease up of some of those developments, and you know I don't think as we sit here today, again given the economic backdrop, that we can come out with certainty and move that range with you know in good faith. Certainly, we're working to that end, but you know as we sit here today, we think that's the prudent kind of message to send to the street.

Shawn Tibbetts: Peter Thank you for the question good morning, I think as we look at.

Shawn Tibbetts: Our opportunities in the future we are constantly trying to accelerate lease up of these developments and as Matt mentioned, the kind of interest or carry cost of those less than stabilized developments, obviously, we're still constructing part of them.

Shawn Tibbetts: We think a conservative approach is to show that drag and to represent that dragon and kind of holding the range. As it is I think if you know if we saw <unk> they would be in faster lease up of some are part of those developments and.

Shawn Tibbetts: And, you know, I don't think as we sit here today, again, given the economic backdrop, that we can come out with certainty and move that range with, you know, in good faith. Certainly, we're working to that end. But, you know, as we sit here today, we think that's the prudent kind of message to send to the street.

Speaker Change: I don't think as we sit here today again, given the economic backdrop that we can come out with certainty and move that range with a.

Shawn Tibbetts: In good faith, certainly we're working to that end, but as we sit here today, we think that's the prudent kind of message to send to the street.

Shawn Tibbetts: Okay.

Peter Abramowitz: That's helpful. Thanks, Shawn.

Shawn Tibbetts: That's helpful. Thanks, Sean and then on the leasing spreads they were particularly strong in office I think you called out of town Center.

Speaker Change: Driving a lot of that any specific deals that kind of stood out in there.

Speaker Change: Is that sort of indicative of where the market is in Virginia beach or overall in your portfolio.

Shawn Tibbetts: And then on the leasing spreads, they were particularly strong in office. I think you called out Town Center as driving a lot of that. Any specific deals that kind of stood out in there? And I guess, is that sort of indicative of where the market is in Virginia Beach or overall in your portfolio?

Speaker Change: I would say, Virginia Beach was strong we had we.

Speaker Change: We had some fairly good sized leases here in Virginia Beach I'll just share with you on the retail side Anthropologie that was a nice lease.

Shawn Tibbetts: I would say Virginia Beach was strong. We had some fairly good-sized leases here. Virginia Beach, I'll just share with you on the retail side, Anthropologie. That was a nice lease. We were able to get a good deal on that. The comment was really specific to the town center office, which showed some good growth in that rent. Some renewals here at town center in the building that we're sitting in, some longtime tenants, and we were able to negotiate some nice deals with them.

Shawn Tibbetts: We were able to get a good deal on that the comment was really specific to the town Center office, which which showed some good kind of growth in that rent.

Shawn Tibbetts: Renewals here at town Center and the building that were sitting in some longtime tenants and we were able to negotiate some nice deals with them, but yeah. I think this goes back to our story, which is this mixed use ecosystem is driving demand and that demand allows us to two.

Shawn Tibbetts: But yeah, I think this goes back to our story, which is this mixed-use ecosystem driving demand, and that demand allows us to kind of command a little higher price than the competition because, frankly, the competition is in a different league when compared to either town center or Harbor Point and, soon, Southern Post. So we, you know, again, this is our thesis, and we're proud of it. We want to leverage it where we can, and it seems that people are willing to pay for that kind of highest quality trophy asset setting, and that's what gets them.

Shawn Tibbetts: But yeah, I think this goes back to our story, which is that this mixed-use ecosystem is driving demand, and that demand allows us to kind of command a little higher price than the competition because, frankly, the competition is in a different league when compared to either town center or Harbor Point and, soon, Southern Post. So we, you know, again, this is our thesis, and we're proud of it. We want to leverage it where we can. And it seems that people are willing to pay for that kind of highest quality trophy asset setting. And that's what gets them.

Shawn Tibbetts: Kind of command, a little higher price than the competition because.

Shawn Tibbetts: Frankly, the competition is in a different league win when compared to either town Center Harbor point and soon to be southern pattern. So we you know again. This is our thesis and and we're proud of it we want to leverage it where we can earn it seems that people are willing to pay for that kind of highest quality trophy asset setting in.

Shawn Tibbetts: And that's what gets us into those spreads.

Peter Abramowitz: Got it. And then you mentioned, uh, I think a mid-five cap rate on the multifamily asset that's getting sold that you have a structured finance investment in. Just curious, do you think that's indicative of the market overall and where cap rates are? I think we've seen there was a large private equity deal that was closer to like 4% going in, which was surprisingly low to us, but just trying to square your comments against that large transaction and sort of where you think the market's at today.

Speaker Change: Got it and then you mentioned I think a mid five cap rate.

Peter Abramowitz: <unk>.

Peter Abramowitz: Good multifamily asset Thats getting sold that you have a structured finance investment and just curious do you think thats indicative of the market overall and where cap rates are I think we've seen.

Peter Abramowitz: There was a large private equity deal that was closer to like a 4% going in which was surprisingly low to us, but just trying to square your comments against.

Peter Abramowitz: Against that large transaction sort of where do you think the market's out today.

Shawn Tibbetts: Yeah, in fairness, I think we need to distill down what point in time we, so as we always try to do, we put out the stabilized kind of cap rate at five and a half, the going rate was less than five. And this is a strong Charlotte market. You know, you hear a lot of commentary about the market being overbuilt, so on and so forth. We are, after all, in the real estate game a long time, and Charlotte has great growth fundamentals.

Shawn Tibbetts: Yeah, in fairness, I think we need to distill down what point in time we, so as we always try to do, we put out the stabilized kind of cap rate at five and a half, the going in was less than five. And this is a strong Charlotte market. You know, you hear a lot of commentary about the markets being overbuilt, so on and so forth. We are, after all, in the real estate game for a long time, and Charlotte has great growth fundamentals.

Speaker Change: Yeah in fairness, I think we need to distill down what point in time, we so as we always try to do we put out the stabilized.

Shawn Tibbetts: The cap rate at five and a half but going in was less than five and this is a strong Charlotte market.

Shawn Tibbetts: You know you hear a lot of commentary about the market's overbuilt so on and so forth. We are after all in the real estate game long in Charlotte has great growth fundamentals. So I think you know my my comment to that would be yes, I think.

Shawn Tibbetts: So I think, you know, my comment to that would be, yes, I think the market is probably healthier than people give it credit for number one, number two, you know, to trade at a stabilized yield in the mid fives, probably sub five in terms of going up in yield, as we said here today when the transaction happened a few weeks back, I think, I think that demonstrates strength in these growth markets. Again, I'm not saying that there is not a supply coming online. But I think if we think about it for a long time, that supply in our mind is pretty quickly absorbed in these high growth markets throughout the kind of southeast and, you know, the South Atlantic.

Shawn Tibbetts: So I think, you know, my comment to that would be, yes, I think the market is probably healthier than people give it credit for, number one. Number two, to trade at a stabilized yield in the mid fives, probably sub five in terms of going up in yield, as we said here today when the transaction happened a few weeks ago, I think that demonstrates strength in these growth markets. Again, I'm not saying that there's not supply coming online, but I think if we think about it for a long time, that supply in our minds is pretty quickly absorbed in these high-growth markets throughout the Southeast and South Atlantic.

Peter Abramowitz: Got it. So that five and a half is more like a year two or year three number rather than going into year one.

Shawn Tibbetts: The market is probably healthier than people give it credit for number one number two to trade at a stabilized yield in the mid fives, probably sub five in terms of going in yield as we sit here today.

Shawn Tibbetts: Transaction happened a few weeks back I think I think that demonstrates strength in these growth markets again, I'm, not saying that theres not supply coming online, but I think if we think about it long that supply in our mind is pretty quickly absorbed in these high growth markets throughout the southeast and South Atlantic.

Peter Abramowitz: Got it. So that five-and-a-half is more like a year two or year three number rather than going into your

Speaker Change: Got it so that five and a half is more like a year two year three number rather than going into your one.

Shawn Tibbetts: Yeah, I would say out in stabilization, you know, 24, 36 months, whenever they kind of hit that stabilization period, but yeah, that's in the future. Got it. That's helpful. That's all for me. Thanks.

Speaker Change: Yeah, I would say out in stabilization 24 to 36 months whenever they kind of hit that stabilization period, but yes. That's in the future got it that's helpful. That's all for me. Thanks.

Speaker Change: Yes, Sir.

Operator: Thank you so much, and we don't have any further questions at this time. I would now like to turn the call over to Shawn Tibbetts for closing remarks.

Speaker Change: Thank you so much.

Operator: Thank you so much, and we don't have any further questions at this time. I would now like to turn the call over to Shawn Tibbetts for closing remarks.

Sean <unk>: We don't have any further questions at this time I would now like to turn the call to Sean <unk> for closing remarks.

Shawn Tibbetts: Thank you very much. I want to start by saying thank you to our talented team, our dedicated team. We've got strong DNA in this company, and we continue to leverage that alongside the culture to create shareholder value. So I just want to say again, thank you for joining us here today.

Shawn Tibbetts: Thank you very much.

Shawn Tibbetts: Well I'll start by saying, thank you to our talented team our dedicated team got strong DNA in this company and we continue to leverage that alongside the culture to create shareholder value. So just want to say again. Thank you for you all joining us here today. We appreciate you working alongside us to understand our story I do now.

Shawn Tibbetts: We appreciate you working alongside us to understand our story. I do know there's a lot going on in the market, so I know your time is valuable as you sit here and listen to our story. There's a lot of work to be done as the markets move out there, but we appreciate you. Just know we are here to continue to provide that value back to shareholders. We come in with a mission to do that every morning, and we're looking forward to continuing to drive this company onward and upward. And again, thank you for your time.

Shawn Tibbetts: There's a lot going on in the market. So I know your time is valuable as you sit here and listen to our story. There is there's a lot of work to be done as the markets move out there, but we appreciate you just know we are here to continue to provide that value back to the shareholder we come in with a mission to do that every morning, and we're looking forward to continuing to drive this company.

Shawn Tibbetts: Onward, and upward and again, thank you for your time.

Operator: Thank you, presenters, and thank you, ladies and gentlemen. This includes today's conference call. Thank you for participating, and you may now disconnect. You have a great day.

Operator: Thank you, presenters, and thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating.

Speaker Change: Thank you presenters and thank you ladies and gentlemen. This concludes today's conference call. Thank you for your participation and you may now disconnect have a great day.

Operator: Okay.

Operator: At this time, all lines are in a listen only mode.

Operator: Following the presentation, we will conduct a question-and-answer session. But anytime during this call, you require immediate assistance, please press star 040 operator.

Operator: And this call is being recorded in Thursday, August 8, 2024.

Chelsea Forrest: I would like to turn the call over to Chelsea Forrest, Vice President of Invest Relations, please go ahead.

Chelsea Forrest: A replay of this call will be available shortly after the conclusion of the call through September 8, 2024. The numbers to access the replay are provided in the earnings press release. For those who listen to the rebroadcast of this presentation, you remind you that the remarks made herein are as of today, August 8, 2024, and will not be updated subsequent to this initial earnings call. During this call, we may make forward-looking statements, including statements related to the feature performance of our portfolio, our development pipeline, the impact of acquisitions and dispositions, our mezzanine program, our construction business, our liquidity position, our portfolio performance, and financing activities as well as comments on our guidance and outlook.

Chelsea Forrest: Listeners are cautioned that any forward-looking statements are based upon management's beliefs, assumptions and expectations, taking into account information that is currently available. These beliefs, assumptions and expectations may change as a result of the possible events or factors, not all of which are known and many of which are difficult to predict and generally beyond our control. These risk and uncertainties can cause actual results to differ materially from our current expectations and we advise listeners to review the forward-looking statement disclosure in our press release that we distributed yesterday afternoon and the risk factors disclosed in the documents we have filed with or furnished to the SEC. We will also discuss certain non-gap financial measures including but not limited to SSO and normalized SSO.

Chelsea Forrest: Definitions of these non-gap measures as well as reconciliation to the most comparable gap measures are included in the quarterly supplemental package, which is available on our website at ArmataHoffler.com.

Chelsea Forrest: I'll now turn the call over to Lou. Thanks, Chelsea.

Louis Haddad: Good morning and thank you for joining us today. As you can see from our earnings release, it was another strong quarter here at Armata Offler. We continue to see our portfolio produce robust operating metrics. Can it demand for our space is at an all-time high and rents have never been better. These results combined with a couple of one-time items produce significant outperformance for the period. We now anticipate the year ending with earnings at the high end of our prior guidance.

Louis Haddad: Before Sean and Matt delved into the specifics of this quarter's performance, I'll take a minute to update you on our succession plan. As expected, our founder and chairman, Dan Hoffler, retired last quarter. He remains active on our board. I've now assumed the role of chairman and will perform the dual role until early next year when the board expects to appoint Shawn as CEO. At that time, I will remain active as executive chair.

Louis Haddad: Shawn continues to exceed my highest expectations just as he has for the last five years. He has already assumed many of my duties and built a core team with several members from within the organization to lead the execution of our strategic vision for the company in the coming years. I could not be more enthusiastic for the future of Armada Hoffler.

Matthew Barnes: I'll now turn the call over to Matt to highlight some of our quarterly metrics before Shawn delivers the business update. Good morning and thank you, Lou. Once again, the team has produced another strong quarter of financial results in line with prior guidance. For the second quarter of 2024, we reported FFO of 25 cents per diluted share and normalized FFO of 34 cents per diluted share in line with our expectations. Variance between FFO and normalized FFO can be attributed to the change in fair market value of our derivatives and the right off of accumulated developments and other pursuit costs.

Matthew Barnes: This non-cash right off and subsequent accounting treatment resulted in a one-time reduction for the tax bull liability for our TRS and an associated increase in earnings for this quarter by $1.5 million. We expect this one-time event coupled with a tenet termination fee that will be recorded next quarter to guide us to the top end of our earnings range. Each of our operating segments produced a robust performance this quarter maintaining 95% occupancy across the portfolio.

Matthew Barnes: The construction division posted $4.3 million of gross profit, the highest quarter in Armada Hoffler's construction management history. This feature is unique to our business model as we believe that Armada Hoffler is the only publicly traded US REIT to benefit from a meaningful third party fee based construction business as well as to internally build to our own portfolio. Looking specifically at the portfolio performance, all three segments posted positive releasing spreads. The retail segment achieved 5.8% gap spread with the office segment achieving a 24.3% gap spread.

Matthew Barnes: These results were 2.9% and 4.4% on a cash basis respectively. Our multifamily portfolio reported a combined trade out spread of 2% for the quarter accelerating to 3.4% for the month of July. We have seen significant improvement in new lease trade-outs increasing from negative 4.8% in the fourth quarter of 2023 to essentially flat in the second quarter of 2024 turning positive in July at 2.3%. Renewal spreads on apartment leases remain strong at 4.3% for the second quarter improving to 4.4% for the month of July.

Matthew Barnes: All these metrics demonstrate outperformance of our peer set, the value of high quality assets and the strength of our sub. Markets. Our portfolio, same-store NOI growth was positive at 0.6% on a gap basis and 1.8% on a cash basis. The office segment was to stand out performer this quarter, posting 9% gap and 7.7% cash same-store growth. We believe this performance is unmatched in the receptor and once again indicating that even in a challenging market, high-quality assets in great locations remain full and in high demand.

Matthew Barnes: Film will cover the leasing proponents of these metrics later on the call. On the balance sheet side, we executed on $85 million worth of term loans this quarter, paying down more expensive debt and continuing our balance sheet transition. This will not affect total leverage as we exchange debt one for one. We intend to maintain our investment grade credit rating and will continue to monitor the market for opportunities to execute on a creative balance sheet transaction. We also opportunistically issued approximately 9 million on the ATM through early July as we took advantage of the wider market rotation into rate sensitive sectors and the especially strong bid for reach.

Shawn Tibbetts: I will now pass the call over to Sean. Thank you, Matt. And thank you, Lou, for your confidence in my ability to lead our company into the future.

Shawn Tibbetts: Additionally, we appreciate all of you for joining us to review the impressive results that our team was able to produce during the second quarter. I will walk through the high-level components and add color to the material Matt has just reviewed. We presented the components underpinning our 2024 guidance during the first quarter call, suggesting a range of $1.21 to $1.27. Given the earnings outperformances quarter, I will reiterate my comments made last call regarding the front-loaded nature of our earnings this year.

Shawn Tibbetts: If you recall my remarks, the combination of higher construction profit in the first half of the year, the reduction of interest income as a result of our partner selling solo city park. And the carry cost of southern posts and allied harbor point through stabilization materially contribute to the lumpiness of earnings over the four quarters. However, we do expect to hit the high end of the range due to strong performance and a couple of one-time items.

Shawn Tibbetts: In terms of operating performance, occupancy across the portfolio is 95%. Lightly ahead of the first quarter, the combination of high occupancy and NOI consistent with the previous quarter demonstrates our strong leasing and operating execution across the portfolio. Our assets are strategically positioned in attractive markets and the properties are typically the newest and best located in the respective sub market. Our properties and communities feature top tier amenities that attract investment grade tenants who consistently choose them over competitors in the market.

Shawn Tibbetts: Let's spend some time walking through our fundamentals across sectors. In our retail and office properties, value creation is realized through consistent leasing activity, releasing space and increasing rents. In addition to the daily management of over 700 tenants, we executed 32 commercial leases for a total of approximately 250,000 square feet. Our commercial renewal spreads were 10.8% on a gap basis, while maintaining an overall commercial occupancy of 95% through the second quarter. Our trophy office product continues to demonstrate strength as evidence by our market leading statistics.

Shawn Tibbetts: The office portfolio achieved an occupancy of 94.3%, a slight increase from the 93.6% last quarter and well above the high end of the peer set. In addition, the aforementioned properties achieved a 9% same-store NLI and 24.3% positive renewal spread on a gap basis. These are primarily driven by our best-in-class town center assets. Additionally, our office explorations are minimal for the next few years. Couple with our high credit tenants, we expect to outperform the peer set for the foreseeable future by a very wide margin and the results speak for themselves.

Shawn Tibbetts: This level of success is attributable to the combination of location, amenities, design, and recent vintage. As a result of these attributes, our office product remains in high demand and highly occupied with rents at the high end of the respective submarkets. Our office properties are in a class of themselves in each market. In addition to the location, quality and amenities, 95% of our office ABR is located in mixed-use ecosystems like town center of Virginia Beach and Harbor Point.

Shawn Tibbetts: At Harbor Point, we executed a new 35,000 square foot lease with steeple and delivered another 46,000 square feet of expansion space to Morgan Stanley. Harbor Point is now firmly entrenched as the destination of choice for financial services. The area is becoming more activated every day and we will see this continue to accelerate when thousands of T-road price employees are on site. We are witnessing a pronounced flight to quality within the market and Harbor Point is the beneficiary.

Shawn Tibbetts: We recognize the challenges present in major office markets and what other landlords are experiencing, but it is simply not the case at Armada Houghler and in fact the opposite is true. The first office tenant has already taken occupancy at Southern Post and our anchor tenant Vestis will move in and open for business in the fall. These assets remain positioned to attract top tier tenants who prioritize the premium real estate spaces that we are able to create in mixed use communities.

Shawn Tibbetts: In the retail segment, we have executed new leases, including additions to our mixed use communities like strong regional concepts, South Moon under and Josefina. Our proactive leasing strategy has resulted in a positive lease renewal rate of 6% on a gap basis, ensuring a stable revenue stream. We believe that proactive tenant relationship management is key to maximizing NOI and property values.

Shawn Tibbetts: In the multi-family sector, robust performance was driven by strong sub-market demand. Our multi-family properties achieved an average occupancy of 94.9% this quarter and demonstrated a strong 4.3% lease renewal spread.

Shawn Tibbetts: We will now spend a few moments highlighting the portfolio expansion in our mixed use ecosystems, Southern Post and Harbor Point. Our development and construction teams remain on target to deliver the three projects in the pipeline throughout the remainder of the year. We look forward to 2025 and beyond as they lease up and begin to positively contribute to the NOI growth. Southern Post, located in Roswell, Georgia, integrates retail, multi-family and office while underscoring our commitment to enhancing community-driven high-quality developments.

Shawn Tibbetts: We are now 71% leased in the commercial space at rents running ahead of pro-formal levels, tenants will continue opening their doors through the fall and we are excited to unveil several prominent brands and local businesses adding a diverse mix of shopping and dining options that will enhance the project's appeal. The multi-family component, Chandler Residences, is also progressing well with 43% of the units currently leased. We expect this momentum to continue given the limited supply of high-quality product in the sub-market.

Shawn Tibbetts: Southern Post reinforces our reputation as a leader in creating high-quality integrated communities. It strengthens our presence in the Southeast region and showcases our ability to deliver complex mixed-use projects that meet evolving market demands. At T-road price, global headquarters at Harbor Point is wrapping up and we anticipate to move in later this year. This trophy built to suit project is well situated among our assets on the peninsula and will bring thousands of additional professional workers to the site.

Shawn Tibbetts: Our Allied Harbor Point project is also progressing well with pre-leasing kicked off in July. This 312 unit high-rise apartment building sits at the top of the market and it's approximately 1200 space parking garage component complements the T-road price project. Its waterfront views and amenities are virtually Baltimore's best and we look forward to this property complementing our other trophy assets at Harbor Point.

Shawn Tibbetts: As mentioned in the previous quarter, our partner was contemplating a sale of one of the deals in our real estate financing portfolio at a mid-five cap rate. In early July, they successfully executed on the sale of a pre-stabilized apartment project, Stolis City Park, and the expected mid-five cap range. This market data point confirms our business thesis in several ways. They have since returned the principal and accrued interest to us at an annual return on invested capital of over 8%.

Shawn Tibbetts: We will deploy some of the capital into a very attractive multi-family deal located in a high-growth southeast market with the same partner. Our construction business continues to produce record profits. While working through the $300 million current backlog, the second quarter yielded results consistent with the targeted projections included in our original 2024 guidance. The partner firms using our construction expertise continue to identify and execute on opportunities that allow us to demonstrate our capabilities and collect market data for our internal underwriting of future opportunities. Our diversified portfolio continues to perform well with each asset class contributing positively to the company's financial results. We remain committed to leveraging expertise to optimize the portfolio, drive growth, and deliver long-term value to shareholders.

Operator: Operator, we are ready for the question and answer session. Thank you so much for the presenters.

Operator: Ladies and gentlemen, you will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touchstone phone. You will hear a prompt that your hand has been raised. And should you wish to decline from the polling process, please press the star followed by the number two. And if you're using a speaker phone, please lift the handset before pressing any keys.

Operator: One moment, please, for your first question.

Peter Abramowitz: Our first question comes from the line of Fraub Stevenson of Sean. Your line is now open. Good morning, guys. Sean or Lou, development pipeline is essentially complete here. I can't remember you guys not having something under construction almost 10 years I've covered you. Are there any projects that are penciling right now given demand in your cost of capital? Poor Rob, thanks for the question. We are not finding what we believe pencils.

Peter Abramowitz: Obviously gap rates have moved, interest rates have moved. The economic backdrop is frankly moving all over the place. And we we're not seeing anything that attracts us to pull the trigger or even begin intense underwriting given the environment.

Shawn Tibbetts: So we're always on the lookout obviously, but no, sir, we are not seeing something that is causing us to be tempted to move at this time.

Shawn Tibbetts: What about on the redevelopment side beyond Columbus Village 2 in Virginia Beach? Yeah, I think, you know, things like that make sense, especially when we're looking at the basis we have in the land, we are working on, as you know, our redevelopment opportunity there, but, you know, it's rather small at the end of the day, we're talking 10 million, 15 million, not, you know, wholesale massive development. So, you know, we think that worked, that type of thing, especially given the kind of attractive tenants that we're looking at, but we're not, we're not looking at any major redevelopment.

Shawn Tibbetts: As we sit here today for the same reasons.

Peter Abramowitz: Okay, and then Matt, so 62 cents here to date, the guidance is 123 to 127 and Lucent, you're turning towards the high end, so 61 to 65 in the back half, you've got the we work drag, and I think you've also got some drag here from capitalized interest as the Baltimore and Southern post of deliver here.

Matthew Barnes: How should we be thinking about the cadence in the back half is, you know, the second quarter likely to be the sort of high point for the year, you know, is that, and was the, that I understand correctly, the 1.5 million TRS benefit, that's a third quarter impact, not a second quarter. Hey, good morning, good morning, Rob. Yeah, the 1.5, 1.6 million tax positive tax impact is a queue to second quarter impact, we believe, or we know there's going to be a termination fee that will be a third quarter impact to the positive event.

Matthew Barnes: I don't know why, but you are, you are correct, the second quarter will, we believe, either be the kind of highest quarter that we're looking at this year. The two areas and you rightly pointed out that the first one interest expense will increase into the back half of the year as these developments come online, and we no longer capitalized the interest through the lease up period of these developments.

Matthew Barnes: And the second part of that is the construction grows profit as we said on previous calls was heavy in the first half of the year, we still anticipate guiding to the midpoint of our construction.

Peter Abramowitz: And then, last one for me, some other wreaths of, you know, reopened their previously issued preferred stock series and raising some capital that way, is that something that you guys have been thinking about given the preferred is still under 10% of the capitalization. Or is 7% or wherever it is today about where you want it and that cost of capital is an attractive for you these days.

Matthew Barnes: Probably, it's a great question. Obviously the economic backdrop is backdrop has changed dramatically since our last update volatility is certainly unsettling and the subsequent movement to like the slower growth, lower interest environment enables us to contemplate additional avenues, strengthen our balance sheet. But as we sit here today, we are not ready to make any of those type of calls on this Thursday morning, but at the end of the day, we're looking at it all. I think it's a great question, frankly, a great idea, but I can tell you that it's not top of mind as we sit here in the room, this morning.

Peter Abramowitz: All right.

Peter Abramowitz: Thanks, guys.

Peter Abramowitz: Have a great day.

Peter Abramowitz: I appreciate the time.

Matthew Barnes: Thanks, Rob.

Operator: Thank you so much.

Operator: And again, if you would like to ask a question, please press star one.

Peter Abramowitz: And our next question comes from the line of Peter Abramowitz of Jeffries. You know, I know you kind of kept all the ranges the same as they were last quarter. And that's how you sort of get to the high end. But if we just think about, you know, kind of swing factors within the portfolio or elsewhere in the business.

Shawn Tibbetts: Like what would make it comfortable because I think I was a little maybe a little bit surprised that if you have some of these unexpected tailwinds and not see a little bit of a raise. What's up on? Yeah, I think, you know, Peter, thank you for the question. Good morning. I think as we look at our opportunities in the future, we are constantly trying to accelerate lease up of these developments. And as Matt mentioned, the kind of interest or, you know, carry costs of those less than stabilized developments.

Shawn Tibbetts: Obviously, we're still constructing part of them. We think conservative approach is to show that drag and to represent that drag and kind of holding the range as it is. I think if, you know, if we saw tailwinds, it would be in faster lease up of, you know, some are part of those developments. And, you know, I don't think as we said here today, again, given the economic backdrop that we can come out with certainty and move that range with, you know, in good faith.

Shawn Tibbetts: Certainly, we're working to that end, but, you know, as we said here today, we think that's the prudent kind of message to send to the street. That's helpful. Thanks, Sean. And then on the leasing spreads, they were particularly strong in office. I think you called out town center as driving a lot of that. Any specific deals that that kind of stood out in there. And I guess that sort of indicative of where the market is in Virginia Beach or overall and portfolio.

Shawn Tibbetts: I would say Virginia Beach was strong. We had, we had some fairly good sized leases here of Virginia Beach. I was a share with you on the retail side anthropology. That was a nice lease. We're able to get a good deal on that. The comment was really specific to the town center office, which, which showed some good kind of growth in that rent. Some renewals here at town center in the building that we're sitting in some long time tenants and we're able to negotiate some nice deals with them.

Shawn Tibbetts: But yeah, I think this goes back to our story, which is this mixed you see go system is driving demand and that demand allows us to, to kind of command a little higher price than the competition because, frankly, the competition is in a different league when compared to either town center or harbor point and soon to be southern post. So we, you know, again, this is our thesis and and we're proud of it.

Shawn Tibbetts: We want to leverage it where we can and it seems that people are willing to pay for that kind of high quality trophy asset setting and that's what good.

Peter Abramowitz: And then you mentioned, I think, a mid-five cap rate on the multi-family access that's getting sold that you have a structured finance investment in. Just curious, do you think that's indicative of the market overall and where cap rates are? I think we've seen there was a large private equity deal that was closer to like a 4% going in, which was surprisingly low to us, but you're trying to square your comments against that large transaction and sort of where you think the market's at today.

Shawn Tibbetts: Yeah, in fairness, I think we need to distill down what point in time. So, as we always try to do, we put out the stabilized kind of cap rate at five and half. The going in was less than five. And this is a strong Charlotte market. You know, you hear a lot of commentary about the markets overbilt, so on and so forth. We are after all in the real estate game long and Charlotte has great growth fundamentals.

Shawn Tibbetts: So, I think, you know, my comment to that would be, yes, I think the market is probably healthier than people give it credit for. Number one, number two, you know, to trade at a stabilized yield in the mid fives, probably sub five in terms of going in yield, as we said here today, when transaction happened, you know, a few weeks back, I think I think that demonstrates strength in these growth markets.

Shawn Tibbetts: Again, I'm not saying that there's not supply coming online, but I think if we think about it long, that supply in our mind is pretty quickly absorbed in these high growth markets throughout the kind of Southeast and South Atlantic. Got it. To that five and a half is more like a year, two, year, three number rather than going in year one. Yeah, I would say out in stabilization, you know, 24 or 36 months whenever they kind of hit that stabilization period, but yeah, that's in the future. Got it.

Peter Abramowitz: That's awful.

Peter Abramowitz: That's all from me. Thanks. Yes, sir. Thank you so much.

Operator: And we don't have any further questions at this time.

Shawn Tibbetts: I would now like to send a call to Sean Tibitz for closing remarks. Thank you very much. You want to start by saying thank you to our talented team, our dedicated team. We've got strong DNA in this company and we continue to leverage that alongside the culture to create shareholder values. So just want to say again, thank you for you all joining us here today. We appreciate you working alongside us to understand our story.

Shawn Tibbetts: I do know there's a lot going on in the markets, so I know your time is valuable. As you said here and listen to our story, there's a lot of work to be done as the markets move out there. But we appreciate you. Just know we are here to continue to provide that value back to the shareholder. We come in with a mission to do that every morning and we're looking forward to continuing to drive this company onward and upward and again, thank you for your time.

Operator: Thank you, presenters. Thank you, ladies and gentlemen. This includes three conference calls. Thank you for participation and you may now disconnect. You have a great day. Thank you.

Q2 2024 Armada Hoffler Properties Inc Earnings Call

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