Armada Hoffler Properties(AHH) - 2025 Q2 - Quarterly Results

Armada Hoffler Q2 2025 Earnings Release Second Quarter 2025 Highlights The company reported higher GAAP Net Income but lower Normalized FFO per share, maintaining strong portfolio occupancy Q2 2025 Key Financial Metrics (per diluted share) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | GAAP Net Income | $0.04 | $0.00 | | FFO | $0.19 | $0.25 | | Normalized FFO | $0.25 | $0.34 | Stabilized Portfolio Occupancy (as of June 30, 2025) | Segment | Occupancy Rate | | :--- | :--- | | Overall | 94.9% | | Retail | 94.2% | | Office | 96.3% | | Multifamily | 94.0% | - The company achieved positive renewal spreads across its commercial segments, indicating strong leasing demand[3] Q2 2025 Commercial Renewal Spreads | Segment | GAAP Basis | Cash Basis | | :--- | :--- | :--- | | Retail | 10.8% | 5.5% | | Office | 11.7% | 5.5% | - During the quarter, the company executed 14 renewals and 10 new commercial leases, totaling approximately 161,000 net rentable square feet[1][3] Financial Performance Net income increased due to a one-time gain, while FFO and Normalized FFO declined from lower contracting profit and higher interest expense Key Financial Metrics (YoY Comparison) A significant one-time gain boosted net income, while lower general contracting profit and higher expenses reduced FFO and Normalized FFO - The increase in net income from $0.4 million in Q2 2024 to $3.9 million in Q2 2025 was primarily due to a $6.9 million gain on the consolidation of Allied | Harbor Point[4] - FFO decreased from $22.4 million to $19.0 million year-over-year, mainly due to lower general contracting gross profit, higher interest expense, and equity losses from unconsolidated entities[5] - Normalized FFO decreased from $30.2 million to $25.4 million year-over-year, also driven by a decline in general contracting gross profit and equity losses[5] FFO & Normalized FFO Reconciliation Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income attributable to common stockholders | $3,907 | $375 | | FFO attributable to common stockholders | $18,971 | $22,439 | | Normalized FFO available to common stockholders | $25,390 | $30,204 | Consolidated Balance Sheet Total assets and liabilities grew, driven by increases in income-producing properties and net indebtedness respectively Selected Balance Sheet Data (in thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Net real estate investments | $1,977,732 | $1,745,078 | | Total Assets | $2,576,671 | $2,512,863 | | Indebtedness, net | $1,446,820 | $1,295,559 | | Total Liabilities | $1,715,880 | $1,623,194 | | Total Equity | $860,791 | $889,669 | Consolidated Income Statement Total revenues declined due to lower contracting activity, but operating and net income increased, boosted by a consolidation gain Selected Income Statement Data (in thousands) | Account | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total revenues | $101,263 | $184,736 | | Operating income | $19,968 | $18,555 | | Gain on consolidation of real estate entities | $6,915 | $— | | Net income | $6,717 | $3,279 | Operating Performance The stabilized portfolio maintained high occupancy, Same Store NOI grew, and the construction backlog stood at $106.6 million Portfolio Performance & Leasing Activity The portfolio showed strong occupancy across all segments, with positive rental rate spreads on commercial lease renewals Stabilized Operating Portfolio Occupancy (Q2 2025) | Segment | Occupancy Rate | | :--- | :--- | | Retail | 94.2% | | Office | 96.3% | | Multifamily | 94.0% | - Positive renewal spreads were achieved in both the retail segment (10.8% GAAP, 5.5% Cash) and the office segment (11.7% GAAP, 5.5% Cash)[3] - A total of 161,000 net rentable square feet were leased through 14 renewals and 10 new commercial leases in Q2 2025[3] Construction and Development The third-party construction contract backlog was $106.6 million, with the segment generating $1.4 million in gross profit - The total third-party construction contract backlog was $106.6 million as of June 30, 2025[7][8] - General contracting and real estate services gross profit for the second quarter was $1.4 million[8] Same Store Net Operating Income (NOI) Same Store NOI increased by 1.4% on a GAAP basis, driven by growth in the Office and Multifamily segments - Overall Same Store Net Operating Income (NOI) increased by 1.4% on a GAAP basis compared to the quarter ended June 30, 2024[8] Same Store NOI by Segment (in thousands) | Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Retail | $18,236 | $18,143 | | Office | $15,263 | $15,027 | | Multifamily | $8,014 | $7,777 | Balance Sheet and Financing The company managed $1.4 billion in debt, with 94% fixed or hedged, and executed significant post-quarter financing activities - Total debt outstanding was $1.4 billion as of June 30, 2025, of which 94% was fixed or economically hedged[10] - On June 10, 2025, the company acquired the remaining interest in its Harbor Point Parcel 4 project, making it a wholly owned subsidiary[8] - On July 22, 2025, the company issued $115.0 million of senior unsecured notes to repay a $65.0 million construction loan and $48.0 million under its revolving credit facility[8] - On July 24, 2025, the company entered into four interest rate swap agreements with a total notional value of $820.0 million[8] 2025 Full-Year Outlook The company reaffirmed its full-year 2025 Normalized FFO guidance range of $1.00 to $1.10 per diluted share - The company maintained its 2025 full-year Normalized FFO guidance range of $1.00 to $1.10 per diluted share[11] Full-Year 2025 Guidance Assumptions | Metric | Expected Range | | :--- | :--- | | Portfolio NOI | $173.6 M - $176.0 M | | Construction Segment Gross Profit | $5.0 M - $7.0 M | | G&A Expenses | ($17.2 M) - ($16.4 M) | | Interest Income | $15.3 M - $16.3 M | | Adjusted Interest Expense | ($64.7 M) - ($60.7 M) | - Key operational assumptions for the second half of 2025 include the stabilization of the Southern Post Commercial project in Q4, the acquisition of two real estate financing investments, and one property disposition[14] Non-GAAP Financial Measures The company uses FFO, Normalized FFO, and NOI to provide clearer insight into its core operational performance - FFO is calculated according to Nareit standards, which excludes real estate-related depreciation and amortization and gains/losses from property sales to better represent operational performance[18][19] - Normalized FFO adjusts FFO for certain non-comparable items, such as property acquisition costs, mark-to-market adjustments for interest rate derivatives, and severance costs, which management believes provides a more useful performance measure[22] - NOI is calculated as segment revenues less segment expenses and is the primary measure used by the company's chief operating decision-maker to assess the performance of its business segments[23] Conference Call Information A conference call to discuss Q2 2025 financial results is scheduled for August 5, 2025, at 8:30 a.m. Eastern Time - A webcast and conference call to discuss Q2 2025 results is scheduled for Tuesday, August 5, 2025, at 8:30 a.m. Eastern Time[15] - Dial-in numbers for the live call are (+1) 800 549 8228 (toll-free) and (+1) 646 564 2877 (toll), with conference ID 67471[15]