Q2 2025 Armada Hoffler Properties Inc Earnings Call
1.
Operator: Good morning, ladies and gentlemen, and welcome to the Armada Hoffler Properties 2025 earnings conference call. At this time, all lines are in 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. This call is being recorded on Tuesday, August 5th, 2025. I would now like to turn the conference call over to Chelsea Forrest, VP of Investor Relations. Please go ahead.
Good morning, ladies and gentlemen, and welcome to the Amanda Hoffler 20205 earnings conference call. At this time. All lines are in listening mode. And 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.
This call is being recorded on Tuesday, August 5th, 2025.
Chelsea Forrest: Good morning, and thank you for joining Armada Hoffler Properties' second quarter 2025 earnings conference call and webcast. On the call this morning, in addition to myself, is Shawn Tibbetts, CEO and President, and Matthew Barnes-Smith, CFO. 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 4th, 2025. The numbers to access the replay are provided in the earnings press release. For those who listen to the rebroadcast of this presentation, we remind you that the remarks made herein are as of today, August 5th, 2025, and will not be updated subsequent to the initial earnings call.
I would now like to turn the conference call over to Chelsea Forest VP of investor relations. Please go ahead.
Good morning and thank you for joining our Mada. Hoffler second quarter 2025 earnings conference call and webcast.
On the call this morning in addition to my self is Sean Tibbits CEO and president and Matthew Barnes Smith CFO.
The press release announcing our second quarter, earnings along with our supplemental package where distributed yesterday afternoon.
A replay of this call will be available shortly after the conclusion of the call through September 4th 2025 the numbers to access. The replay are provided in the earnings press release.
Chelsea Forrest: 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 outlook. 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.
For those who listen to the rebroadcast of this presentation, we remind you that the remarks made here in are as of today, August 5th, 2025 and will not be updated. Subsequent to the 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 programs, our construction business, our liquidity position, our portfolio performance, and financing activities, as well as comments on our outlook.
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.
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 and our press release that we distributed yesterday and the risk factors disclosed in the document we have filed with and furnished to the FCC. 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. I will now turn the call over to Shawn.
These beliefs, assumptions, and expectations may change as a result of possible events or factors, not all of which are known, 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 4-link statement disclosure in our press release that we distributed yesterday. And the risk factors disclosed in the document we have filed with and furnished to the FCC.
We will also discuss certain non-gaap Financial measures including but not limited to ffo and normalized ffo.
Shawn Tibbetts: Good morning, and thank you for joining us as we review Armada Hoffler Properties' second quarter results and share our perspective on the path forward for the remainder of 2025 and beyond. Our portfolio continues to deliver consistent NOI growth, underscoring the strength of our assets and the discipline of our execution. In parallel, we are making meaningful progress on enhancements to the balance sheet, supporting long-term growth and flexibility. We are committed to our strategic foundation, which is quality, a company value that guides how we operate and allocate capital. We are focused on maintaining a high-performing portfolio, optimizing property-level performance and margin through operational excellence while delivering reliable results quarter after quarter. The second quarter results were solid across our portfolio. As outlined in our release, we delivered normalized FFO of $0.25 per diluted share, supported by consistent performance in office and retail.
Good morning and thank you for joining us as we review. Our M Hoppers second quarter results and share our perspective on the path forward for the remainder of 2025 and Beyond.
Our portfolio continues to deliver consistent NOI growth, underscoring the strength of our assets and the discipline of our execution.
In parallel, we are making meaningful progress on enhancements to the balance sheet, supporting long-term growth and flexibility.
We are committed to our strategic Foundation which is quality a company value that guides how we operate and allocate capital.
We're focused on maintaining a high-performing portfolio. Optimizing property, level performance and margin through operational excellence, while, delivering reliable results, quarter after quarter,
Shawn Tibbetts: Office occupancy remained high at 96.3%, with positive releasing spreads of 11.7%, while retail occupancy was 94.2%, with renewal spreads of 10.8%. Multifamily experienced a modest dip in occupancy to 94%. Overall, portfolio occupancy remained healthy, averaging at least 95% for the fourth consecutive quarter. Property-level income continues to outperform our 2025 guidance. As we outlined last quarter, we adjusted our expectations for construction activity this year, and we remain in line with those updated projections. I will remind you of our strategy to shift away from reliance on fee income and toward higher quality recurring property-level earnings in the coming years. Therefore, we are reaffirming full-year guidance. We believe that our focus on property income derived from the best properties in the market should benefit shareholders in terms of value and share multiple, as the equity market recognizes our shift away from mezzanine financing deals and fees for service.
The second quarter results were solid across our portfolio as outlined in our release. We delivered normalized, ffo of 25 cents per diluted share supported by consistent performance in office and Retail
off this occupancy remained, high at 96.3% with positive releasing spreads of 11.7%.
while retail occupancy was 94.2% with renewal spreads of 10.8%,
Multi family experience, the modest dip in occupancy to 94%.
Overall portfolio occupancy, remain healthy averaging, at least 95% for the fourth consecutive quarter.
Property level income, continues to outperform our 2025 guidance. As we outline last quarter, we adjusted our expectations for construction activity this year and we remain in line with those updated projections.
I will remind you of our strategy to shift the way from Reliance on fee income and toward higher quality. Recurring property level earnings in the coming years. Therefore we are reaffirming for your guidance.
Shawn Tibbetts: We believe the market rewards property-level income, which clearly deserves a higher value recognition. On the capital front, we successfully completed our first debt private placement in July, raising $115 million. This transaction marks a significant milestone in balance sheet management, increasing financial flexibility while reducing interest rate risk. The demand and oversubscription for this issuance reflects confidence in our portfolio quality and long-term strategy. We are grateful for new long-term capital partnerships with these institutional investors. We look forward to expanding relationships with credit investors, such as life insurers and major banks. Matt will go over more details later in the call.
We believe that our focus on property income, derived from the best properties in the market should benefit shareholders in terms of value and share multiple as the equity Market recognizes our shift, away from Mezzanine, Financing deals and fees for service.
We believe the market rewards property level income which clearly deserves a higher value recognition.
On the Capitol Front, we successfully completed our first debt private placement in July, raising 115 million. This transaction marks a significant milestone in balance sheet management, increasing Financial flexibility while reducing interest rate risk.
The demand and over subscription for this issuance reflects confidence in our portfolio quality and long-term strategy. We are grateful for new long-term capital Partnerships with these institutional investors.
Shawn Tibbetts: Our retail portfolio continues to perform well. We have successfully backfilled former big-box vacancies from tenants like Party City, Cons, Joann's, and Bed Bath & Beyond with stronger, higher-credit retailers such as Trader Joe's, Boot Barn, Golf Galaxy, and others at a weighted average of 33% higher rents. This success reflects our ongoing focus on optimization of tenant mix, targeted reconfigurations, and proactive leasing strategies. With limited new big-box development nationally, we remain well-positioned to capture demand for infill retail space and drive long-term value across the portfolio. I will highlight a few of these transactions. At Southgate in Colonial Heights, Virginia, we executed an LOI to downsize Burlington and create space for a national sporting goods retailer, also under LOI, therefore backfilling Cons. This reconfiguration would drive almost 40% rent increase and enhance tenant quality at the center.
We look forward to expanding relationships with credit investors, such as life insurers and major Banks. Matt will go over more details, later in the call.
Our retail portfolio continues to perform well. We've successfully backfilled former big box vacancies from tenants like Party City, Jo-Ann's, and Bed Bath & Beyond with stronger, higher credit retailers, such as Trader Joe's, Boot Barn, Golf Galaxy, and others at a weighted average of 33% higher rents.
This success reflects our ongoing focus on optimization of tenant, mix targeted, reconfigurations and proactive, leasing strategies.
With limited new Big Box, development nationally, we remain well positioned to capture demand for infill retail space and drive long-term value across the portfolio. I will highlight a few of these transactions.
Shawn Tibbetts: At Columbus Village, adjacent to Town Center of Virginia Beach, we are pleased to confirm Trader Joe's as the anchor grocer for the former Bed Bath & Beyond space. Trader Joe's will be joined by Golf Galaxy, with both expected to open by early 2026. We expect to grow rents by nearly 60% over what Bed Bath & Beyond was paying. These additions further elevate the area's retail appeal and support the 130,000 residents within a three-mile radius and our 760 apartment units at Town Center. Subsequent to the quarter, at Overlook Village in Asheville, we leased the former Party City space to Boot Barn at over 60% leasing spread and assigned the Joann lease to Burlington through the bankruptcy process, avoiding downtime and preserving rent. These changes enhance merchandising profiles and strengthen the tenant mix alongside anchors like TJ Maxx, HomeGoods, and Ross.
At Southgate in Colonial Heights Virginia. We executed an Loi to downsize Burlington and create space for a national Sporting Goods retailer. Also under Loi therefore, backfilling times this reconfiguration would drive almost 40%, rent, increase and enhance tenant quality at the center.
At Columbus Village, adjacent to town center of Virginia Beach. We are pleased to confirm Trader. Joe's as the anchor ger for the former Bed Bath and Beyond Space.
Trader Joe's will be joined by Golf Galaxy with both expected to open by early 2026.
We expect to grow rents by nearly 60% over what Bed Bath and Beyond was paying.
These additions further elevate the area's retail appeal and support the 130,000 residents within a 3-mile radius, as well as our 760 apartment units at Town Center.
Why process avoiding downtime and preserving rent.
Shawn Tibbetts: Southern Post in Roswell, Georgia, a northern Atlanta suburb, continues to grow into a dynamic, walkable destination that brings together residential, retail, dining, and office uses in a highly curated environment. Since last quarter, all the restaurants have opened, adding energy to the street-level experience and contributing to a steady increase in activity. We've also focused on activating the central plaza with community-driven events such as live music and local markets, reinforcing Southern Post's role as both a neighborhood amenity and destination. Interest in the remaining office space remains healthy, supported by the vibrant mixed-use setting and the strong demand we continue to see for well-located, experiential environments. Our office portfolio remains essentially full at 96% occupancy, with minimal vacancy and continued demand for the limited space that remains.
These changes enhance merchandising profile and strengthen. The tenant mix alongside anchors like TJ, Maxx, HomeGoods and Ross.
Southern post and Roswell. Georgia, a northern Atlanta suburb continues to grow into a dynamic walkable destination. That brings together residential retail dining and office uses in a highly curated environment.
Since last quarter, all the restaurants have opened adding energy to the street level experience, and contributing to a steady increase in activity.
We've also focused on activating the Central Plaza with community-driven events such as live music and local markets reinforcing, Southern post's role as both a neighborhood, amenity and destination.
Interest in the remaining office space remains healthy supported by the vibrant, mixed use setting and the strong demand we continue to see for well-located experiential environments.
Shawn Tibbetts: The primary driver of the quarter's occupancy change was the return of a WeWork floor at One City Center in Durham, North Carolina, which we had previously communicated. Including this give-back, we were able to maintain high occupancy across the portfolio, and we're seeing interest in the space. Notably, less than 4% of our office space expires in 2026, providing strong earnings visibility and minimal near-term backfill rents. This stable performance reflects our strategy of owning office assets within amenity-rich, mixed-use environments, locations that continue to attract and retain tenants in today's hybrid work landscape. Recent trends reinforce this strategy. A recent Fortune article highlighted that 54% of Fortune 100 companies have now returned to fully in-office work, up from just 5% two years ago, with hybrid models declining to 41%.
Our office portfolio remains essentially full at 96% occupancy, with minimal vacancy and continued demand for the limited space that remains.
The primary driver of the quarter's occupancy. Change was the return of a we worked floor at 1 City Center in Durham North Carolina which we had previously communicated
Including this get back. We were able to maintain High occupancy across the portfolio and we're seeing interest in the space, notably less than 4% of our office space expires in 2026, providing strong earnings visibility and minimal near-term. Backfill risk. This stable performance reflects our strategy of owning office assets within amenity Rich, mixed juice environments locations, that continue to attract and retain tenants in today's hybrid work landscape.
Recent Trends, reinforce this strategy.
Shawn Tibbetts: Reflecting this dynamic, we're seeing interest from firms relocating from the aging suburban office parks or hollowed-out downtown cores to more engaging, high-amenity environments. Town Center of Virginia Beach continues to draw employers valuing walkable access to dining, retail, and residences. Harbor Point in Baltimore has experienced the same trend. Since the opening of the new T. Rowe Price Global Headquarters, which was intentionally located there for these very reasons, retail sales at Harbor Point have increased by over 20%, reinforcing the long-term value of our placemaking strategy. The Wall Street Journal recently highlighted research from ADP that once again listed Baltimore as among the very best metros for recent college graduates based on high wages, a very strong hiring rate, and affordability. In Baltimore, college graduates are landing jobs with top national firms in the financial services, technology, and healthcare sectors.
A recent Fortune article highlighted that 54% of Fortune 100 companies. Have now returned to fully in office work up from just 5% 2 years ago with Hybrid, models declining to 41%.
Reflecting this Dynamic, we're seeing interest from firms. Relocating from the Aging, Suburban office Parks or hollowed out downtown cores to more engaging High, amenity environments.
Town Center, Virginia Beach continues to draw employers valuing walkable access to dining retail and Residences.
Harbor Point in Baltimore has experienced the same trend.
Since the opening of the new tro price Global headquarters, which was intentionally located there. For these very reasons, retail sales at Harbor Pointe have increased by over 20% reinforcing. The long-term value of our placemaking strategy,
The Wall Street Journal recently, highlighted research from ADP that once again listed Baltimore as among the very best metros for recent college graduates based on Highway wages, a very strong hiring rate and affordability
Shawn Tibbetts: Within Baltimore, we believe that the new Harbor Point submarket is the epicenter of that trend, with major financial and professional service tenants like T. Rowe Price, Stifel, Franklin Templeton, EY, Transamerica, and Morgan Stanley anchoring our office space. This growing cluster of high-quality employers is attracting top-tier talent who value having a short walk to great waterfront restaurants, retail, and residential options. Our multifamily portfolio maintains solid fundamentals, delivering occupancy of 94%, a modest decline from 95% in the first quarter. The dip in occupancy was driven in part by seasonal turnover at The Edison and Smiths Landing, as well as supply and demand pressures tied to the broader macroeconomic environment and shifts in federal funding, factors that have a heightened impact on properties located near university. However, I am pleased to let you know that we are now 95% leased at Smiths Landing.
In Baltimore college, graduates are landing jobs with top National firms. In the financial services, technology and Healthcare sectors. And within Baltimore, we believe that the new Harbour Pointe submarket is the epicenter of that Trend with major Financial and Professional Service tenants like Pirro price people, Franklin Templeton, ey, Transamerica and Morgan Stanley anchoring our office space.
This growing cluster of high-quality employers are attracting top tier Talent, who value having a short walk to Great waterfront restaurants, retail and residential options.
Our multifamily portfolio maintains solid fundamentals. Delivering occupancy of 94% modest decline from 95% in the first quarter.
The diff in occupancy, was driven in part by seasonal turnover at the Edison, and Smith's Landing as well as supply and demand, pressures tied to the broader macroeconomic environment and shifts in federal funding.
Shawn Tibbetts: Renewal leases in the quarter grew by 4.8%, while new leases increased by 2.8%. These positive trends extended into July, with spreads continuing to improve at a blended 4.3% for July, underscoring the underlying demand in our key markets. Notably, Chandler Residences at Southern Post transitioned to our stabilized portfolio during the quarter, contributing to the strengthening of our asset base. In Harbor Point, Allied, the newest multifamily building, is leasing ahead of schedule at 68% leased as of July 20th. We continue to see strong demand for this premier waterfront location within the mixed-use community. At the same time, we're maintaining a disciplined approach to balance lease-up velocity at Allied while monitoring potential impacts to occupancy and rent growth at our other Harbor Point multifamily assets, 1405 Point and 1305 Dock Street. At Greenside in Charlotte, construction is now underway on the improvements we outlined last quarter.
Factors that have a heightened impact on properties located near universities. However, I am pleased to let you know that we are now 95% lease. It's Miss Landing.
Renewal leases in the quarter, grew by 4.8% while new leases increased by 2.8%.
These positive Trends extended into July, with spreads continuing to improve at a blended, 4.3% for July underscoring, the underlying demand in our key markets.
Notably Chandler residences at Southern post transition to our stabilized portfolio, during the quarter contributing to the strengthening of our asset base.
We can send you to see strong demand for this Premier Waterfront location within the mixed-use community.
At the same time, we're maintaining a discipline approach to balance lease up velocity and Allied while monitoring potential impacts to occupancy and rent. Growth at our other Harbor. Pointe multi, Family Assets, 1405 point and 1305. Dock Street.
Shawn Tibbetts: These enhancements were prompted by water intrusion that affected several units, and we're using this as an opportunity to improve the building. Work is progressing in phases, and we will continue over the next 10 to 12 months, with a portion of units remaining offline during this time. Given Greenside's prime location in Midtown, less than a mile from the new Carolinas Medical Center and Pearl Innovation Medical District, we remain confident in our ability to generate long-term value from this asset. We are also actively evaluating opportunities within our real estate financing platform, including the potential to bring two high-quality multifamily assets, the Allure and Gainesville II, onto our balance sheet. The Allure, located in Chesapeake, Virginia, is currently 93% leased and continues to benefit from strong leasing momentum. The property is situated in a market with stable fundamentals and desirable demographics.
At greenside in Charlotte, construction is now underway on the improvements. We outlined last quarter. These enhancements were prompted by water intrusion that affected several units, and we're using this as an opportunity to improve the building.
work is progressing in phases and we will continue over the next 10 to 12 months with a portion of units, remaining offline during this time,
Given greensides prime location in Midtown less than a mile from the new Carolinas Medical Center and pearl Innovation Medical District. We remain confident in our ability to generate long-term value from the sassa
We're also actively evaluating opportunities within our real estate financing platform including the potential to bring 2 high-quality multi Family Assets, the Allure and Gainesville 2 on to our balance sheet.
Shawn Tibbetts: Within a five-mile radius, average household incomes exceed that of downtown Atlanta, and the area is served by some of the highest-rated public schools in the region. Gainesville II is approximately 97% leased and sits adjacent to our existing Everly multifamily asset, about an hour north of Atlanta. This proximity enables us to capture operating efficiencies and economies of scale by managing the two assets together. We expect bringing these properties onto our balance sheet will contribute additional recurring NOI and further enhance the quality of our portfolio. We remain focused on value creation through disciplined execution. As we move through the second half of the year, we are well-positioned to benefit from continued execution across the portfolio, from retail leasing and office occupancy consistency to the stabilization of recently delivered assets. I will echo my sentiment from the last call.
The Allure located in Chesapeake Virginia is currently 93%, leased and continues to benefit from strong, leasing momentum. The property is situated in a market with stable fundamentals and desirable demographics within a 5, Mi radius average household, incomes exceed, that of downtown Atlanta. And the area is served by some of the highest rated public schools in the region.
Gainesville 2 is approximately 97% leased and sets adjacent to our existing Everly, multi Family Assets about an hour north of Atlanta.
As we move through the second half of the year, we are well, positioned to benefit from continued execution across the portfolio from retail, Leasing and office occupancy. Consistency to the stabilization of recently, delivered assets,
Shawn Tibbetts: We are building a stronger, simpler, and more resilient Armada Hoffler Properties, one that is more efficient, better balanced, and capable of generating consistent, reliable earnings growth over time. I am proud of the momentum we have generated, and I am confident in the team's ability to deliver sustained, predictable earnings growth while enhancing shareholder value. I will now turn the call over to Matt.
I will echo my sentiment from the last call.
we are building a stronger simpler and more resilient Armada Hoffler
1 that has more efficient better balanced and capable of generating consistent reliable earnings growth over time.
I'm proud of the momentum. We have generated and I am confident in the team's ability to deliver sustained predictable earnings growth while enhancing shareholder value.
Matthew Barnes-Smith: Good morning, and thank you, Shawn Tibbetts. Armada Hoffler Properties delivered another solid quarter, reflecting the strength of our mixed-use portfolio, the resilience of our operating platform, and the continued execution of our financial strategy. With signs of renewed momentum across the real estate sector and tenant demand broadening, we are executing with focus whilst positioning the business for long-term growth. For the second quarter of 2025, normalized FFO attributable to common shareholders was $25.4 million, or $0.25 per diluted share, in line with our expectations and guidance. FFO attributable to common shareholders was $19 million, or $0.19 per diluted share. FFO came in at $18.4 million, or $0.18 per diluted share, reflecting continued alignment between our operating cash flows and the restructured dividend. Same-store NOI increased 1.4% on a GAAP basis and 0.3% on a cash basis.
I'll now turn the call over to Matt.
Good morning, and thank you, Sean. The model of flood delivered another solid quarter, reflecting the strength of our mixed-use portfolio, the resilience of our operating platform, and the continued execution of our financial strategy.
With signs of renewed momentum across the real estate sector and tenant demand broadening. We are executing with focused whilst positioning the business for long-term growth.
For the second quarter of 2025 normalize ffo attributable to Common shareholders, was 25.4 million or 25 cents per diluted share in line with our expectations and guidance.
Ffo attributable to Common shareholders. Was 19 million or 19 cents per diluted. Share afo came in at 18.418%.
Matthew Barnes-Smith: Subsequent to the end of the quarter, we achieved an important milestone by successfully executing our first-ever private placement bond issuance, raising $115 million across three, five, and seven-year tranches. This targeted transaction was met with institutional demand and priced with a blended interest rate of 5.86% and a weighted average term of 5.3 years. A portion of the proceeds from the private placement were used to repay the construction loan secured by Southern Post and a portion of our credit facilities, and the remaining proceeds will be used for general corporate purposes. This financing advances the three core pillars of our capital strategy: quality. We are transitioning our balance sheet towards fixed-rate, long-duration capital without reliance on derivative instruments. Several years ago, we targeted a reduction in our weighted average cost of capital through deleveraging and earning an investment-grade triple B rating on our balance sheet elements.
Same store and AI increase 1.4 on a gap basis and 0.3% on a cash basis.
Subsequent to the end of the quarter, we achieved an important Milestone by successfully executing. Our first ever private placement Bond issuance raising 115 million across 3, 5 and 7 year tranches.
This targeted transaction was met with institutional demand and price with a blended interest rate of 5.86% and a weighted average term of 5.3 years. A portion of the proceeds from the private placement. Were used to replace the construction loan secured by Southern post and a portion of our credit facilities. And the remaining proceeds will be used for General Corporate purposes.
Matthew Barnes-Smith: That is not easy, given where we began, and we are not claiming total victory, but we have moved a long way on that path with our rating and this transaction being good examples of what discipline can produce. Discipline. The proceeds were used to pay down shorter-term, high-cost facilities, improving cash flow visibility and volatility from variable rate debt. While somewhat dilutive, it's again the right strategy, aligning our balance sheet assets and capital duration despite the near-term earnings mentalities that often drive rate management decisions. Simplicity. We are continuing to streamline our capital structure, improving the foundation of our investment-grade metrics and long-term strategic flexibility. This follows the work we began in the first quarter of this year, including the hedging transactions on 150 million of notional exposure and the board's decisions to right-size the dividend to a sustainable level.
That is not easy given where we began, and we are not claiming total victory. However, we have moved a long way on that path, with our rating and this transaction being good examples of what discipline can produce.
Discipline. The proceeds were used to pay down shorter term, high-cost facilities, improving cash flow visibility and volatility from variable rate debt.
While somewhat dilutive. It's again, the right strategy, aligning, our balance sheet assets and capital duration, despite the near-term earnings mentalities, that often drives, reach management decisions
Simplicity, We are continuing to streamline our capital structure improving the foundation of our investment grade metrics, and long-term strategic flexibility.
Matthew Barnes-Smith: Taken together, these steps provide the right foundation for stability, strategic optionality, and set the business up well for consistent shareholder returns through the cycle. As of June 30, 2025, net debt to total adjusted EBITDA stood at 7.7 times. Stabilized portfolio debt to stabilized portfolio adjusted EBITDA stood at 5.2 times. We maintain total liquidity of 172.2 million, including availability under our revolving credit facility. AFFO payout ratio stands at 77.8%, and after adjusting for non-cash interest income, the ratio was at 97.2%. Our unencumbered asset base remains strong, supporting both balance sheet flexibility and long-term borrowing capacity. As I mentioned last quarter, we continue to be rigorous in our approach to expenses.
This follows the work. We began in the first quarter of this year, including the hedging transactions on 150 million of notional exposure and the board's decisions to right size the dividend to a sustainable level taken together. These steps provide the right foundation for stability, strategic optionality, and sets the business up, well for consistent shareholder returns through the cycle.
As of June 30th 2025 net debt, total adjusted debit dusted at 7.7 times stabilized portfolio debt, to stabilize portfolio, just to ease it down 5.2 times. We maintain total liquidity of 172.2 million including availability under our revolving. Credit facility, asfo payout ratio stands at 77.8%. And after adjusting for non-cash interest income, the ratio was at 97.2% on incumbent asset base, remains strong, supporting both, balance sheet, flexibility and long-term borrowing capacity.
Matthew Barnes-Smith: G&A for the full year is projected to be materially reduced year over year, consistent with our commitment to aligning costs with the current scale of our business, while preserving the resources necessary to execute on our strategy. The capital markets remain selective, and we are structuring our balance sheet to reflect that reality. With our debt private placement complete, our liquidity intact, and exercising the 12-month extension option on one of our term loans, we have the ability to remain patient and disciplined as the cycle evolves. We are reaffirming our full-year normalized FFO guidance of $1 to $1.10 per diluted share, supported by stable operating performance, which will overcome the updated third-party construction projection and a simplified capital base. With that, I'll now turn the call over to Shawn Tibbetts for his closing remarks.
As I mentioned last quarter, we continue to be rigorous in our approach to expenses GNA to the full year. Is projected to be materially reduced year-over-year consistent with our commitment to aligning costs with the current scale of our business.
While preserving the resources necessary to execute on our strategy.
The capital markets remain selective and we are structuring our balance sheet to reflect that reality with our debt. Private placement complete, our liquidity intact and exercising the 12-month extension option on 1 of our term loans. We have the ability to remain patient and disciplined as the cycle evolves.
We are reaffirming our full year normalized. Ffo guidance of a dollar to a dollar 10 per diluted share supported by stable operating performance which will overcome the updated third-party construction projection and a simplified Capital base.
Shawn Tibbetts: Thank you for joining us today and for your continued interest in Armada Hoffler Properties. We remain focused on delivering strong operational performance and driving long-term value for our shareholders. As always, I want to recognize our dedicated team for their hard work and commitment. We look forward to keeping you updated on our progress in the quarters to come. Operator, we are now ready for the question-and-answer session.
With that, I'll now turn the call over to Sean for his closing remarks.
Thank you for joining us today and for your continued interest in our M Hospital.
We remain focused on delivering strong, operational, performance and driving long-term value for our shareholders. As always, I want to recognize our dedicated team for their hard work and commitment.
We look forward to keeping you updated on our progress, in the quarters to come.
Operator. We are now ready for the question and answer session.
Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will then hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any key. One moment, please, for your first question. Your first question comes from Viktor Fediv from Scotia Bank. Please go ahead.
Thank you, ladies and gentlemen, we will now begin the question and answer session.
Should you have a question please? Press the star followed by the 1 on your touchtone phone.
You will then hear a prompt that your hand has been raised.
Should you wish to decline from the polling process? Please press the star followed by the 2?
If you are using a speaker-phone, please lift the handset. Before pressing any Keys 1 moment, please for your first question.
Viktor Fediv: Good morning, everyone, and thank you for taking my question. I would like to ask about your decision to maintain guidance, which now implies a pretty wide range of $0.50 to $0.60 for the second half of 2025. Can you provide some details on potential scenarios that would lead to Armada Hoffler Properties achieving the lower or upper end of this range?
Your first question comes from Victor vettis from Scotia Bank. Please go ahead.
Good morning everyone and thank you for taking my question. I'd like to ask about your decision to maintain guidance which now implies a pretty wide range of 50 to 60 stands for the second half of 2025. So can you provide some details on potential scenarios that would lead to ahh achieving the lower lower or upper end of these range?
Shawn Tibbetts: Thank you, Viktor. We obviously take a hard look at this, and we maintain a fixed eye on this model. We think that the range is appropriate. We do have, as you know, and as we mentioned, the asset Allied and Harbor Point coming online and leasing up ahead of schedule. So, we think that provides some upside. Certainly, there are headwinds in the market broadly, but given the slight increase in the guidance on construction as well as the Allied, we think it is prudent to maintain guidance and look for that upside. In terms of downside, certainly, as I said, there are things out in the market that we cannot control, but Matt and his team have done a nice job getting the balance sheet in position to defend against fluctuation in the interest rate market. So, I think we are in pretty good shape.
Thank you, Victor.
Yeah we uh obviously we take a hard look at this and we maintain um kind of a fixed.
Shawn Tibbetts: Matt, anything you want to add?
Viktor Fediv: No, the only item that I would always caution when we are forecasting is the general construction work that we do. As that is a kind of percent complete work, as those projects ebb and flow over their life, will depend on when the timing on booking that work can be recognized.
Shawn Tibbetts: I think to cap it off, to the point, we have got some upside opportunities and faster lease up. Hence the reason we took the rest of the position, part of the reason we took the rest of the position in that asset at Harbor Point. I think we feel good about the range. We feel good about the midpoint.
Viktor Fediv: Got it. Thank you. I think just a quick follow-up on this new office floor vacated by WeWork. Just trying to understand the potential downtime. For example, if you decide to subdivide it into smaller units, what it might be in terms of downtime.
Out in the market that we can't control but Matt and his team have done a nice job, getting the balance sheet in position to defend against fluctuation in the interest rate market. So I think we're in pretty good pretty good shape. And Matt anything you want to add know, the, the only only item that I would always always caution. Um, when, when we're forecasting is the, uh, General, uh, construction work that we that we do. Um, you know, as that is a kind of percent complete work has those projects, you know, Evan Evan flow over their life will depend on when when the timing on booking that that work could be recognized. Yeah, but I think that to cap it off to the point. We've got some upside opportunities and faster lease up. Hence, the reason we took the rest of the position, uh, part of the reason we took the rest of the position in that asset at Harbor Point. So yeah, I think we feel, we feel good about the range. We feel good about the midpoint
Shawn Tibbetts: Sure. I will say the team did a nice job negotiating the downsize of WeWork. They do remain in one floor, which leaves us with 31,000 seats of vacancy. We predicted and broadcast this back in April of 2024, and we are fortunate to have continuous rent payment through the quarter here. I will say this, we are early in the process as a result. We are just receiving the space back. There is an internal staircase there, some structural kind of enhancements that we need to make there. I would say from a marketing perspective, again, we are early in the process, but certainly you could see a demising of the space. Obviously, we hope we could get a full-floor user, but I would say it is too early to call that shot, but we do have some interest, and we will continue to work on that.
Got it. Thank you. I think, I just quick follow up on this. Uh, new office floor, located by we work. Uh, just trying to understand the potential downtime. For example, if you decide to subdivide it into smaller, uh, units, what it might be, um, in terms of downtime.
Viktor Fediv: Got it. Thank you.
Sure, well, I'll say the team did a nice job negotiating. Um, the downsize of Wei work, they do remain in 1 floor, which leaves us with 31,000, seat of vacancy. We predicted and broadcast this back in April, of 2024. And we're fortunate to have continuous rent payment through. Um, you know, through the quarter here. I, I'll say this. We're early in the process as a result, we're just receiving the space back. There's an internal staircase there, some, some structural, um, you know, kind of enhancements that we need to make their. I would say, from a marketing perspective. Again, we're early in the process but certainly you could see a demising of the space. Obviously, we hope we could get a full floor user. Um, but I would say it's too early to call that shot, but we do have some interest and we'll continue to work on that.
Got it. Thank you.
Operator: Thank you. Your next question comes from Janney Montgomery from Bank of America. Please go ahead.
Janney Montgomery: Thank you. Good morning. I was wondering if you could maybe provide some cap rates around your expectations for the multifamily asset acquisitions and then the cap rate expectations for the disposition that you have now in guidance?
Thank you. And your next question comes from Jana Gallant from Bank of America. Please go ahead.
Shawn Tibbetts: Sure. Let's start with the multifamily. I think that we should be thinking about six-ish for the multifamilies, combined. As I mentioned in my comments, we have an opportunity to create synergy between the assets there in Gainesville. One of them is 184 units, and the other is 223 units. We have an opportunity to run them together should we choose to transact. We think that creates additional upside and additional efficiency there in Gainesville. In terms of the disposition, we've got 100% full asset there that we've owned for about 10 years. It's about 50% office, 50% retail. We think that the pricing's in the mid-sixes. The good news is two things. One, the right real estate decision could be to sell that asset because we would have a significant gain over the basis, especially given it's 100% full.
Thank you, good morning. Um, I was wondering if you could maybe provide some cap rates around your expectations for the multi, family asset Acquisitions. And then the cap rate expectations for the disposition that you have. Uh, now in guidance,
Sure, let's start with the multi family. Um, I think I think that we should be thinking about 6ish, um, for the multifamilies combined. As I mentioned in my comments, we have an opportunity to create Synergy between the assets. There in Gainesville. 1 of them is 184 units and the other is 223 units. So we have an opportunity to run them together. Uh, should we choose the transact, so we think that creates a additional upside in additional efficiency there in Gainesville in terms of the disposition. Um, we've got a 100% full asset there that we've owned for about 10 years.
Shawn Tibbetts: If that is the case, we will, if it is the right choice, transact and redeploy those capital dollars somewhere that makes a creative sense. I think, you know, I look at the two as two separate business cases, although they could come together as one. I think, you know, our view is, can we make a deal that's a creative relative to our private placement kind of benchmark, which is at the 583 level? That's kind of how we view this.
And it's about 50% off 50% retail and we think that the pricing is in the mid 6s. So the good news is 2 things 1. The right real estate decision could be to sell that asset because we would have a significant gain over the basis especially given its 100% full. If that is the case. Um, we will if it is the right choice transact and redeploy those at those capitals uh dollars somewhere that makes a creative sense. Right. So I think you know I look at the 2 is 2 separate business cases although they could come together as 1. Um but I I think you know our view is can we make a deal? It's accreted of relative to our private placement kind of Benchmark, which is at the 583 level and that's
Kind of how we do this.
Operator: Thank you. Thank you. Just as a reminder, if you wish to ask a question, please press star one. Your next question comes from Robert Stevenson from Janney Montgomery. Please go ahead.
Thank you.
Thank you.
Just as a reminder, if you wish to ask a question, please press star 1.
Robert Stevenson: Good morning, guys. Matt, you used the unsecured notes to repay Southern Post and the line. How are you thinking about the upcoming maturities of the Everly Encore and the TD term loan?
In your next question, it comes from Rob Stevenson from Janie. Please go ahead.
Good morning, guys. Um, Matt, you use the unsecured notes, uh, to repay Southern post and the line. How are you thinking about the upcoming maturities of the Everly Encore in the TD Term Loan?
Viktor Fediv: Certainly, Rob. Good morning. First of all, as you would recall from my remarks, we eventually pulled the extension option on the TD term loan already back in May. We have another 12 months on that. We have kicked that can for another year. The Everly has a 12-month extension option. We do have some flexibility there. We are actually seeing some fairly constructive rates in the Freddie and Fannie markets there. Some of the lifeco money is actually around the 5% to 5.25%. That is a pretty good cost of debt for us in current market conditions. To further look forward with the flexibility of the debt private placement market, the maturities for 2026 will be a combination of bank loans, of maybe some lifeco money on the fixed-rate debt, or potentially another private placement issuance.
Viktor Fediv: We are currently with the team working through making sure we get the right maturity ladders through that. As we kind of in earnest really get into the meat and bones of this balance sheet transition to reduce that reliance on the derivative products and move away from the variable rate debt.
Robert Stevenson: Okay, that is helpful. When you guys think about the Allied Harbor Point leasing up, and any other sort of EBITDA enhancements that you guys are going to pick up in the back half of the year earnings-wise, where are you expecting to finish 2025 from a leverage metric perspective at this point?
Do have some flexibility there where we're actually seeing, um, some fairly constructive rates in the uh, Freddy and F**** markets there. Um, some of the life code money is actually, you know, around the 5 to 5 and a quarter percent. So that's, that's a pretty good cost of debt for us, um, in current market conditions. Um, and then, you know, to further look forward with the flexibility of the debt private placement Market, the maturities for 2026 will be a combination, um, of bank loans of maybe some some life code money on the fixed rate debt or potentially another private placement issuance. So we are currently with the team working through, making sure we get the right maturity ladders um through that and and as we kind of in Earnest, really get into the meat and bones of this Banner sheet transition to reduce that Reliance on on the derivative products and uh, move away from the variable rate debt.
Viktor Fediv: Yeah, that's a good question. You would have seen that our net debt leverage metric tick up a little bit here at this quarter. That was because the Allied came on with the $90 million loan that we refinanced when we brought that on balance sheet. As EBITDA continues to come through, we expect that to come down into the 7.4-7.5 times range at the end of this year, but that obviously depends on how quickly we can stabilize not just the Allied, but also Southern Post. What I would caution, Robert Stevenson, on that when we're looking at these predictions is depending on the capital structures for these couple of assets that Shawn Tibbetts noted that may potentially come online from our mezzanine portfolio will obviously have an effect on that.
Okay, that's helpful. And then when you guys think about the, you know, Allied Harbor, Pointe, leasing up and any other sort of um EBA enhancements that you guys are going to pick up in the back half of the Year earnings wise. Um where you expecting to finish 2025 from a leverage metric perspective. At this point?
Viktor Fediv: But we are, as we've committed to trying to bring leverage down over the long run and right-size not just the quality of debt, but the amount of debt we have on our balance sheet.
Yeah, that's a, that's a good question. You would have, uh, seen that on net debt, leverage metric tick up. Um, a little bit here at the uh, this quarter, that was because the Allied came on with the 90 million, uh, loan that we refinanced when we brought that on on balance sheet as ebit, dark continues to to come through. We expect that to come down into the 7475 times range of the at the end of this year, but that obviously depends on how quickly we can stabilize not just the Allied but also, uh, Southern post what I would caution um, Rob on that when we're, when we're looking at these predictions is depending on the capital structures for these uh couple of assets that Sean noted that may potentially come online from our mezzanine portfolio, will obviously having a have an effect on that um but but we are you know as we've as we've committed to trying to bring leverage down over the long run and uh
Robert Stevenson: Okay. Then lastly, Shawn Tibbetts, beyond the 50/50 office retail assets that you talked about potentially selling, how are you and the board thinking about other strategic dispositions over the next 6 to 12 months? Is there a target that you're looking at in terms of dollar value? How are you guys also thinking about the mix between selling down apartments to redeploy into apartments, selling retail, selling one-offs like the South Bend asset, et cetera? How are you guys thinking about, or how should we be thinking about you guys selling stuff over the next 12 months or so?
Right size, not just the quality of debt that the amount of debt we have on our balance sheet.
Okay, and then lastly, Sean, um, beyond the sort of 50/50 office retail asset that you talked about, um, potentially um, selling how are you? Um, in the board thinking about, you know, other strategic dispositions, you know, over the next 6 to 12 months, um, you know, is there a Target that you're looking at in terms of dollar value, um,
Shawn Tibbetts: Thanks, Rob. I think to answer your first question, there's not necessarily a target, but there is what we view this internally as, is there an ability to isolate kind of dislocation in the market? If an asset is at or near 100% leased, as you saw us do at the end of last year, at the end of 2024, and we believe the upside's limited and there's an attractive price to be had, we think the appropriate move is to take our chips and invest them where we can grow, i.e., in a grocery-anchored center or otherwise that has a little bit of upside. I think, again, there's not necessarily a target, but we are reviewing the list of assets that we own, i.e., the capital that we can control, and looking for opportunities to lever a little bit of upside in that transaction.
Um, is there also, you know, how are you guys also thinking about the mix between selling down Apartments to redeploy into Apartments selling? You know, retail selling sort of 1 offs, like the South Bend, um, asset Etc house. How are you guys thinking about, you know, or how should we be thinking about you guys selling stuff over the next 12 months or so?
Shawn Tibbetts: I do not think there's a specific formula other than where do we see dislocation in the short run and can we take advantage of that.
Robert Stevenson: Okay. Thanks, guys. Appreciate the time this morning.
Thanks Rob. Um yeah I think to answer your first question, there's not necessarily a Target, but there is what we, you know, we view this internally as is there is there an ability to isolate kind of dislocation in the market, right? And if an asset is at or near 100% least, as you saw us do in the end of last year and the end of 2024 and we believe the upside is limited and there's an attractive price to be had. We think the appropriate move is to take our chips and invest them where we can grow IE in a, in a grocery, anchored Center or otherwise, that, um, has a little bit of upside. And I, I think, you know, again, there's not necessarily a Target, but we are reviewing the list of assets that we own IE the capital that we can control and looking for opportunities to leverage, a little bit of upside and, and, um, in that transaction. So yeah, I, I don't think there's a specific formula other than where do we see dislocation in the short run? And can we take advantage of that?
Shawn Tibbetts: Yes, sir.
Okay. Thanks guys. Appreciate the time this morning.
Operator: Thank you. There are no further questions at this time. I will now turn the call over to Shawn Tibbetts to close. Please go ahead.
Yes, sir.
Thank you.
Shawn Tibbetts: Thank you, Operator. I just want to say thank you again for your interest and your willingness to participate in this journey with us. Thank you to our employees, our investors, our new investors, all the folks who support us throughout this journey. Again, thank you for your time this morning. We look forward to updating you in future calls and future quarters.
There are no further questions at this time. I will now turn the call over to Mr. Sean Tibet to close.
Please go ahead. Thank you, operator.
I just want to say thank you again for your interest and your, um, your willingness to participate in this journey with us. Thank you to our employees, our investors, our new investors, all the folks who uh support us throughout this journey again, thank you for your time this morning. And we look forward to updating you in future future calls and future quarters.
Operator: Ladies and gentlemen, this concludes today's conference call. We thank you very much for your participation. You may now disconnect. Have a great day.
Gentlemen, this includes today's conference call, we thank you very much for your participation. You may now disconnect have a great day.