Armada Hoffler Properties (AHH) 8 Aug 242024 Q2 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to the Armada Hoffler Second Quarter 2024 Earnings Conference Call. [Operator Instructions] 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.

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, is Lou Haddad, CEO; Matthew Barnes-Smith, CFO; and Shawn Tibbetts, President and COO. our distributed earnings, yesterday announcing supplemental with release were package, afternoon. press second along quarter our The A replay X, of after the this call will of call be the through September XXXX. conclusion available shortly replay The numbers release. provided the earnings are to press in the access

to XXXX, who of rebroadcast be the subsequent and that will listen remind as of financial this herein to remarks not made For are we earnings today, you the those presentation, the August call. X, updated

we current filed as not disclosure our results yesterday known all can and risks SEC. actual release a documents uncertainties the that disclosed beyond with we statements forward-looking expectations as are and we afternoon beliefs, related comments materially which differ financing factors well change our statements our construction the call, During assumptions mezzanine of our or to into and may taking on based generally listeners we and or to position, and difficult performance pipeline, statements, including as portfolio forward-looking program, and expectations, have liquidity and in factors, outlook. Listeners events to may the expectations upon beliefs, the make information available. review in of to assumptions These many guidance currently distributed of advise furnished this portfolio, management's the forward-looking future impact dispositions, that statement our that and our are is control. and cause which development our our press and These performance of of activities business, our acquisitions to are account from the risk possible any are cautioned result our predict

armadahoffler.com. I'll including, are available as package, Lou. non-GAAP as FFO over call reconciliations at most the We now financial the our to limited measures Definitions measures FFO. to quarterly included on but also which to, will comparable well is of turn these in non-GAAP the supplemental certain not discuss website normalized GAAP and measures,

you Thanks, morning, thank Good Chelsea. and us today. for joining

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

to better. We our demand couple one-time portfolio the combined of for been an space rents never These robust with outperformance metrics. items, Tenant continue produced ending operating a the all-time at results, anticipate period. see end earnings high, is have of the with prior We our significant for our and high guidance. at year produce now

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

as Matt assumed active for years. Board over Hoffler, update. strategic retired my the and some enthusiastic He expects lead the the next Hoffler. I'll as our As of as more has CEO. At expected, Board. on active Chairman, role the of vision call I to core now dual be years. has remains from just with I the and He last for coming future perform turn delivers have business of to quarterly company a execution the and organization already our members last the not our assumed Chairman several early exceed of team the duties when our to within Shawn Dan before X year quarter. my Chair. could in built until Founder Armada metrics of to he highlight will appoint highest now remain the time, the expectations continues the I Shawn for Executive Shawn that to will role many

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

expectations. other increase market $X.XX per write-off The line be taxable and earnings of FFO diluted an costs. This of associated and quarter resulted our and and for share a fair accounting $X.X can liability change derivatives attributed second treatment subsequent with the the TRS FFO noncash pursuit and FFO in of in reduction XXXX, reported our of between this developments diluted for the in to FFO the accumulated one-time our million. by write-off in quarter we normalized variance and normalized of For $X.XX per share, value of

in expect this tenant quarter, XX% guide recorded event, to portfolio. quarter well REIT meaningful business that We as our performance own feature The a posted fee-based This highest unique a the range. Each to publicly internally a million to history. to profit, one-time top portfolio. termination third-party coupled as traded the management of we construction division us only is fee model operating segments to construction Hoffler quarter, our produced benefit Construction that earnings the is across Armada occupancy from our next as build gross robust believe with U.S. Hoffler's maintaining $X.X be Armada will of the our end business this of to

XX.X% portfolio X Retail segment Looking The X.X% GAAP results and X.X% with These re-leasing X.X% spreads. cash respectively. segment spread specifically posted basis, at on positive the a the Office performance, all spread. a segments were GAAP achieving achieved

Our X% of multifamily the reported combined portfolio trade-out of July. the X.X% accelerating quarter, spread for month to a for

spreads improving the of our high-quality July. improvement new in apartment assets turning to of outperformance of set, in X.X% strong quarter All second the of increasing flat the seen for quarter XXXX on significant trade-outs, submarkets. remained peer fourth have of essentially our positive lease of in to value the XXXX, in for the the We X.X% July at leases from demonstrate second negative these at X.X%. Renewal and metrics X.X% month quarter, strength

the market, this metrics once and indicating high-quality this believe portfolio in at and segment standout a on a is that again cash sector Our the cover assets X% X.X% performance We on components NOI and unmatched performer Shawn The will high basis leasing the GAAP Office X.X% same-store the even of in challenging positive on full a REIT great was these in later remain locations call. demand. and in basis. posting X.X% growth. same-store GAAP quarter, growth was cash

and of continuing our investment-grade This on and debt exchange sheet transition. more continue market as sheet we sheet to we'll not one. monitor On paying opportunities transactions. total debt affect we balance rating, balance maintain side, We term worth down execute balance intend this will the expensive leverage $XX quarter, one accretive million the executed to to for on credit for our loans

on bid call through rotation $X opportunistically We as of sectors early approximately also Shawn. will and market REITs. I the we over rate-sensitive July million wider strong into ATM issued pass took now the advantage especially the to the for

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

that during the second able color components Additionally, all our just presented appreciate reviewed. We will for call, through results we our of impressive to the I Matt quarter high-level to the add was joining a the us first material walk to XXXX during review the $X.XX. $X.XX the to and suggesting team of range underpinning guidance quarter. you has components produce

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

the remarks, the income you Post materially recall partners Park X lumpiness over the a Solis through combination Allied of of If as of result Point and year, quarters. first Harbor Southern reduction higher of and of construction my our stabilization, the to cost interest carry profit the contribute earnings the in of half selling the City

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

the is slightly leasing high with of the first quarter, quarter. In XX%, The occupancy ahead of terms combination the of demonstrates the execution portfolio. operating operating NOI, across portfolio our performance, across and consistent previous and occupancy strong

in Our assets the located best strategically properties submarket. the the positioned are respective and typically are attractive in markets, and newest

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

fundamentals through properties, leasing sectors. our consistent increasing walking value is Let's and retail our rents. spend activity, In across realized time some and the space creation through re-leasing office

daily we commercial executed XXX total a approximately tenants, In over addition management XX square leases XXX,XXX to of for feet. of the

of Our commercial XX% maintaining were a on the quarter. commercial overall renewal spreads GAAP an basis, while through second XX.X% occupancy

continues strength, last market-leading set. high product evidenced as the Office and the above a demonstrate well quarter XX.X% of office XX.X%, of trophy Our increase an by peer portfolio to end achieved from occupancy slight the our statistics. The

assets. NOI positive addition, spreads XX.X% and X% achieved are on renewal aforementioned center a In primarily by properties basis. GAAP town the same-store These best-in-class driven our a

years. tenants, vintage. the set attributable margin, future and credit of location, peer are success Additionally, the next wide combination our very few themselves. This results speak our is a office to with expirations foreseeable by minimal of expect outperform high to Coupled recent the level for and we the the design for for amenities,

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

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

Stifel and firmly becoming quality more Point, of of Rowe for Stanley. of a will entrenched is now and the when the of as In activated day, another Price accelerate and amenities, located Town expansion square to Harbor financial executed Harbor space XX,XXX location, Center is and site. we this to continue mixed-use Harbor are every thousands like employees Morgan addition Point destination lease in ABR new XX,XXX-square-foot with T. area on office services. see our we is The XX% of Beach Virginia ecosystems Point. At feet delivered to choice

beneficiary. witnessing are the fact, opposite in market, simply We experiencing. Hoffler, is true. the it landlords other at challenges We the Armada major markets is within present and not pronounced a and case office are the recognize what flight Harbor But and Point to the quality in is

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

we estate additions to communities. strong Josefina. retail These we segment, top-tier our are assets and attract the new Under that to leases, South have who mixed-use premium Moon prioritize including remain mixed-use create real communities concepts, In executed like positioned tenants spaces regional the in to able

stable in performance relationship on proactive proactive basis, a submarket the driven a is multifamily strong NOI robust X% Our sector, demand. resulted key values. revenue management has to that GAAP of renewal stream. leasing tenant maximizing lease We and ensuring by positive rate property a In strategy was believe

occupancy X.X% our expansion Harbor achieved ecosystems, and properties and spend this quarter a average Our portfolio strong lease the highlighting of a moments Southern XX.X% spread. I multifamily renewal now few Post in mixed-use will Point. demonstrated an

in construction as growth. and up NOI to of to positively Our begin X remain teams the year. the the target the projects look to to development throughout contribute and beyond We XXXX and pipeline remainder on lease the forward deliver they

to located developments. Roswell, high-quality integrates Southern retail, and commitment in Post, while office Georgia, community-driven underscoring our enhancing multifamily

shopping businesses, a mix of commercial with excited the ahead in units XX% We prominent dining forma local to multifamily at the fall, leased well appeal. The progressing will leased. Residences, component, XX% and enhance pro and the also we space unveil brands their opening doors are continue is options adding through of that rents Tenants of levels. now will currently several running diverse and project's are Chandler the

to momentum submarket. the supply given the this in limited expect product We continue high-quality of

It communities. to integrated Post our the mixed-use Southern high-quality showcases evolving strengthens as reputation in reinforces projects our a leader and deliver ability region presence market our demands. complex meet in creating Southeast that

we is to will our At additional peninsula site. Price at Harbor well in professional and This bring T. year. situated on workers Rowe and this Point wrapping of global move later to anticipate trophy among build-to-suit headquarters project is the thousands up, assets the

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

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

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

Our construction record produce business to profits. continues

firms partner expertise results that backlog, underwriting the future consistent $XXX yielded our and us execute original opportunities targeted our guidance. continue to projections collect our million current internal with included While working second capabilities on the opportunities. quarter of using through XXXX and in to demonstrate market data identify our allow construction The the for

We perform Our financial shareholders. optimize asset portfolio, the the continues to leveraging results. diversified long-term to to each portfolio and deliver committed value growth to company's drive with positively contributing expertise class to remain well,

session. question-and-answer Operator, we are for ready the

first Our Rob line Instructions] of Janney. [Operator question the from of comes Stevenson

now any pipeline Are development is penciling cost given there having guys XX Lou, or demand can't projects of something here. remember you. covered complete essentially Shawn construction under years and I've in capital? are not I right that almost you your

rates moved. even environment. believe not to anything cap all moved, trigger the are economic moving given intense pull we we rates the we're over begin is Rob, finding And the interest frankly us that not Obviously, place. seeing backdrop The have have attracts what underwriting pencils. or

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

What in the beyond side about Columbus on II redevelopment Virginia Beach? Village

Yes.

sense, have the like the in especially I when looking basis makes that at we think things land. we're

are We talking know, a $XX wholesale, but rather development. not the as the of day. you million, working redevelopment small there, massive on, at opportunity million, We're it's $XX end

for we're the at think of thing, that tenants any work, we So we're sit redevelopments kind reasons. we attractive at, especially type the major as of that same looking that not today given looking here but

trending is the the $X.XX in you're $X.XX then, and Matt, to guidance end. high And year-to-date, loose, so towards Okay. $X.XX

half. So in $X.XX $X.XX to the back

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

believe, the second a the to as was are one, quarter heavy we that period impact expense the out believe quarter and first of the construction areas, of lease-up gross these X interest -- that to that of quarter NOI. half show in of come million-ish, is to we this the longer range, these gross on online second quarter developments pointed positive the calls, of But of there's it's the quarter year. fee kind into guiding half this capitalize you said the $XX.X and down be profit of yes, the second $X.X the Rob, year. we're a correct, or the back coming developments. And be million, that you we year the anticipate million or of increase would will, will midpoint year. the second a highest impact through previous construction We be tax third QX first rightly we at looking The and the know $X.X termination positive tax going -- no We interest the which quarter impact. as profit, the fourth still in would our part third is

last Okay. And one then for me.

these issued capital want some Some you the preferred about thinking given that you been X%, that the previously other it reopened for preferred way. is guys you days? that XX% wherever raising is have REITs still about today, Or attractive that under stock where cost series capital their of have capitalization? it is Is and and of or that something isn't

sheet. to of those balance not Volatility growth, here the contemplate strengthen we is subsequent enables movement today, environment end the Rob, last calls at update. all. like dramatically question. slower morning. changed our But I we're But this lower any ready unsettling, are at economic think to us certainly Thursday interest to the has sit we our it's of to a additional the avenues on backdrop make of type day, Obviously, looking it great since as the and

great of you can a room idea, here mind frankly, question, tell great a the it's sit it's this that in not think morning. top I but we I as

from Jefferies. Instructions] question line [Operator Abramowitz next our of Peter the And comes of

Yes.

would I of you on range to like guess of the the of on and this just at to unexpected have said, quarter. I you kind about of in back think the elsewhere about step swing high just the that's the you the think But same portfolio last bridge how ranges of in tailwinds end. quarter, in you that not a FFO because it, are we year. tailwinds kind get that kind of and if the of surprised sort sort get, the were impacting a of some the touched think items top for bit rest little as unexpected like little to the third I some quarter tax know benefit the a business, items of to fee second within kept level you you the the a what So if and these make quarter termination end raise? kind comfortable the bit I you have the from high maybe factors all of see to or if some was they you of

Yes.

Peter, thanks question. think the -- I for

part lease-up as are look trying interest of we the at of and accelerate those obviously, them, still of is. the range we're or of that as we to think constantly kind drag opportunities And approach developments, in kind stabilized than mentioned, our drag think cost these we in the conservative show represent to future, that developments. is it to of carry constructing a holding Matt I less as

some out we I think lease-up of as send the today, we backdrop Certainly, those here don't they given message that sit again, or part that with the kind with that faith. I sit today, prudent And we tailwinds, in we're in saw would of certainty as to be Street. economic come to of can if to and developments. faster we good move think end. -- here the But that's we range working think,

the That's spreads, in helpful. And leasing strong office. they were then particularly on

And that the out that. indicative Any Virginia stood in you as deals Beach overall I where driving in of think of of out portfolio? or of Town kind in lot is I is there? sort market Center specific called that a your guess,

in Beach. lease. comment that. had That a specific were is Town -- Center compared you of able in that to story, We them. But yes, really I sitting Point demand league side, to the some Town to competition deal in good a some at Southern on either us The fairly to or Harbor and Anthropologie. was building rent, think retail goes with tenants, were Center a just strong. frankly, is longtime allows and soon say nice and We some office, the Yes. be driving to Virginia here, mixed-use on was back some to good-sized that Virginia negotiate get with good we when kind renewals the nice deals which was Center this which I different share would showed I'll in, demand, our Beach this we're some the ecosystem here Town that Post. growth to able leases is

So we want can. our it that kind and quality And -- to we're those leverage this it. is pay seems people highest again, are gets thesis, we it asset setting, proud that and of that's what spreads. into to where willing trophy of for We

sold Got think, on it. a then a the finance you that And you mentioned, cap mid-X asset have multifamily getting rate structured that's investment in. I

are? a low deal large in, to of that's that which is you the sort market that private we've you to going of was Just square was equity where against to large a curious, think do surprisingly like seen think think where and us, comments there the overall just closer X% indicative today. I was market at cap trying rates your but transaction,

and down the cap The going a this think stabilized I put out -- fairness, of than market. in is need in to point In so rate as Yes. Charlotte kind we of strong always do, was X%, what we We less X.X%. to try we time. distill

so hear is so lot forth. You overbuilt, and commentary about the a of market on

growth Charlotte estate all, long, the are, in great real after and fundamentals. We has game

one. Number would the people kind online. these mind, I our throughout in I weeks than I'm is mid-Xs, few in the of going the we supply absorbed that at think that South for, I we here two, in and that in of to yes, yield the think a credit Southeast my yield back, growth When strength these if that So give market about there's high-growth stabilized it happened to not probably a sit I trade Again, in But healthier coming quickly be, think probably sub-X% think think number as terms transaction comment supply, in markets demonstrates is it long, saying not pretty Atlantic. markets. today.

Got it.

X.X% X a than in that year rather going like X, year is number year more So X?

stabilization, of would I XX, yes, whenever months, period. XX in kind hit out Yes. that say But they the in that's stabilization future.

to closing have to the like call further at remarks. for don't any questions now time. Shawn And would this I we turn Tibbetts

our Thank DNA you got you the value. to that very much. to culture We alongside I leverage to we continue create shareholder want in start by saying just dedicated company, team, thank and team. talented our this to strong

do market. I you just here you thank to on So to story. I working a today. lot again, us for going appreciate you joining our understand want say, in We all alongside there's us the know

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

and This may now Thank gentlemen. for you disconnect. your presenters, call. you, ladies you, thank today's conference concludes and Thank you and participation,

You a have day. great