Armada Hoffler Q2 FFO Falls

Core Viewpoint - Armada Hoffler Properties reported strong normalized FFO per diluted share of $0.25, significantly surpassing analyst expectations, despite a substantial decline in total revenue due to challenges in the construction business [1][5][8] Financial Performance - Total revenue for Q2 2025 was $101.3 million, down 45.2% from $184.7 million in Q2 2024, primarily due to a steep decline in construction and real estate services revenue [2][5] - Normalized FFO per diluted share decreased by 26.5% year over year, from $0.34 to $0.25 [2] - Rental revenue increased by 3%, rising to $65.1 million from $63.3 million [6] Operational Highlights - The company maintained high occupancy rates across its portfolio, with a weighted average occupancy of 94.9% [6] - Retail renewal spreads were 10.8% (GAAP) and 5.5% (Cash), while office renewal spreads were 11.7% (GAAP) and 5.5% (Cash), indicating effective lease management [7] - The construction backlog decreased to $106.6 million, reflecting a strategic shift away from third-party projects [8] Strategic Focus - Armada Hoffler is concentrating on core property-level income and has shifted focus from fee-based construction to stable rental income [5][8] - The company is actively managing its financial position, with total debt rising to $1.45 billion as of June 30, 2025, and has issued $115.0 million in senior notes to refinance variable-rate loans [9] - The quarterly dividend was set at $0.14 per share to align with property-level cash flow [10] Future Guidance - Management reaffirmed full-year 2025 guidance for normalized FFO per share at $1.00 to $1.10, with construction segment gross profit expected between $4.8 million and $6.8 million [13] - The company is prioritizing portfolio stabilization and prudent development, with a focus on replacing declining construction revenue with stable property NOI [14]