• Armada Hoffler Properties Reports Second Quarter 2022 Results

    المصدر: Nasdaq GlobeNewswire / 04 أغسطس 2022 06:00:01   America/New_York

    Net Income of $0.31 Per Diluted Share

    Normalized FFO of $0.30 Per Diluted Share

    Raised 2022 Full-Year Normalized FFO Guidance Range to $1.16 to $1.20 Per Diluted Share

    Increased Third Quarter Cash Dividend on Common Shares By 12%

    VIRGINIA BEACH, Va., Aug. 04, 2022 (GLOBE NEWSWIRE) -- Armada Hoffler Properties, Inc. (NYSE: AHH) today announced its results for the quarter ended June 30, 2022 and provided an update on current events.

    Second Quarter and Recent Highlights:

    • Net income attributable to common stockholders and OP Unit holders of $27.8 million, or $0.31 per diluted share, compared to $5.6 million, or $0.07 per diluted share, for the three months ended June 30, 2021. 
    • Funds from operations attributable to common stockholders and OP Unit holders ("FFO") of $27.0 million, or $0.31 per diluted share, compared to $22.9 million, or $0.28 per diluted share, for the three months ended June 30, 2021. See "Non-GAAP Financial Measures." 
    • Normalized funds from operations attributable to common stockholders and OP Unit holders ("Normalized FFO") of $26.2 million, or $0.30 per diluted share, compared to $23.4 million, or $0.29 per diluted share, for the three months ended June 30, 2021.
    • Raised 2022 full-year Normalized FFO guidance to $1.16 to $1.20 per diluted share from the Company's previous guidance range of $1.15 to $1.19 per diluted share. This represents a 10% increase over 2021 results.
    • Announced a third quarter cash dividend of $0.19 per common share, a 12% increase over the prior quarter's dividend.
    • Stabilized operating property portfolio occupancy increased to 97.3% as of June 30, 2022. Office occupancy was 97.9%, retail occupancy was 97.1%, and multifamily occupancy was 97.2%.
    • Same Store net operating income ("NOI") increased 6.0% on a GAAP basis and 7.4% on a cash basis compared to the quarter ended June 30, 2021.
      • Multifamily same store NOI increased 12.5% on a GAAP and cash basis.
      • Commercial same store NOI increased 4.1% on a GAAP basis and 5.8% on a cash basis.
    • Third-party construction backlog totaling $541 million, highest in the Company's history
    • Positive releasing spreads during the second quarter of 13.1% on a GAAP basis and 3.0% on a cash basis for office and 9.9% on a GAAP basis and 3.5% on a cash basis for retail.
    • Achieved an 8.1% increase in rental rates on apartment trade outs across the multifamily segment.
    • Completed $177 million of sales of noncore assets at a blended 4.1% exit cap rate.
      • The Residences at Annapolis Junction in Baltimore for $150 million, 4.15% cash cap rate.
      • Two outparcels at North Pointe in Durham, North Carolina for $24 million, 4.0% cash cap rate.
      • Two outparcels at Sandbridge Commons in Virginia Beach for $3 million, 4.5% cash cap rate.
    • Appointed Dennis H. Gartman, renowned investor, economist, and longtime publisher of “The Gartman Letter,” as a member of our board of directors. He is the sixth independent member.
    • Executed a new office lease with Franklin Templeton for 60,000 square feet at the Company’s Wills Wharf office building in Baltimore’s Harbor Point neighborhood. The investment management firm has agreed to lease the entire fifth floor and a portion of the fourth floor of Wills Wharf and will bring the building to 91% occupancy.

    "We believe the types of assets we own will outperform the competitive set through most any business cycle. High-quality facilities in mixed-use environments located in desirable sub-markets stand the test of time," said Louis Haddad, President & CEO. "When you have premium properties amongst limited peer competition, you have the ability to move rents in a positive direction through virtually any macro-economic backdrop."

    Financial Results

    Net income attributable to common stockholders and OP Unit holders for the second quarter increased to $27.8 million compared to $5.6 million for the second quarter of 2021. The period-over-period change was primarily due to an increase in property operating income due to acquisitions, gains recognized on dispositions, developments and improved same-store performance, increased general contracting gross profit, and changes in the fair value of interest rate derivatives. The increase was partially offset by a decrease in interest income on our mezzanine loan portfolio, a decrease in income tax benefit, an increase in interest expense, and an increase in loss on extinguishment of debt.

    FFO attributable to common stockholders and OP Unit holders for the second quarter increased to $27.0 million compared to $22.9 million for the second quarter of 2021. Normalized FFO attributable to common stockholders and OP Unit holders for the second quarter increased to $26.2 million compared to $23.4 million for the second quarter of 2021. The period-over-period changes in FFO and Normalized FFO were due to higher property operating income resulting primarily from leasing activity and property acquisitions and an increase in general contracting gross profit. These increases were partially offset by a decrease in interest income on our mezzanine loan portfolio and an increase in interest expense.

    Operating Performance

    At the end of the second quarter, the Company’s office, retail and multifamily stabilized operating property portfolios were 97.9%, 97.1% and 97.2% occupied, respectively.

    Total construction contract backlog was $541.2 million at the end of the second quarter.

    Balance Sheet and Financing Activity

    As of June 30, 2022, the Company had $1.2 billion of total debt outstanding, including $82.0 million outstanding under its revolving credit facility. Total debt outstanding excludes GAAP adjustments. Approximately 45% of the Company’s debt had fixed interest rates or was subject to interest rate swaps as of June 30, 2022. The Company’s debt was 100% fixed or hedged as of June 30, 2022 after considering interest rate caps with strike prices at or below 300 basis points.

    Outlook

    The Company raised its 2022 full-year Normalized FFO guidance range to $1.16 to $1.20 per diluted share. The following table updates the Company's assumptions underpinning this forecast. The Company's executive management will provide further details regarding its 2022 earnings guidance during today's webcast and conference call.

    Full-year 2022 Guidance[1][2] Expected Ranges
    Total NOI $144.8M $145.8M
    Construction Segment Gross Profit $7.3M $8.3M
    G&A Expenses $16.0M $16.5M
    Interest Income $12.6M $13.0M
    Interest Expense[3] $32.9M $33.6M
    Normalized FFO per diluted share $1.16 $1.20
         

    [1] Includes the following assumptions:

    • Interest expense, net of interest rate caps, based on the Forward Yield Curve ending 2022 at 3.7%
    • No capital markets activity for the remainder of the year
    • Acquisition of $25 to $35 million of grocery-anchored retail assets
    • The Interlock mezzanine loan paid off during the fourth quarter of 2022

    [2] Ranges exclude certain items per Company's Normalized FFO definition: Normalized FFO excludes certain items, including debt extinguishment losses, acquisition, development and other pursuit costs, mark-to-market adjustments for interest rate derivatives, provision for non-cash unrealized credit losses, certain costs for interest rate caps designated as cash flow hedges, amortization of right-of-use assets attributable to finance leases, severance related costs, and other non-comparable items. See "Non-GAAP Financial Measures." The Company does not provide a reconciliation for its guidance range of Normalized FFO per diluted share to net income per diluted share, the most directly comparable forward-looking GAAP financial measure, because it is unable to provide a meaningful or accurate estimate of reconciling items and the information is not available without unreasonable effort as a result of the inherent difficulty of forecasting the timing and/or amounts of various items that would impact net income per diluted share. For the same reasons, the Company is unable to address the probable significance of the unavailable information and believes that providing a reconciliation for its guidance range of Normalized FFO per diluted share would imply a degree of precision for its forward-looking net income per diluted share that could be misleading to investors.

    [3] Includes interest expense on finance leases

    Supplemental Financial Information

    Further details regarding operating results, properties and leasing statistics can be found in the Company’s supplemental financial package available at www.ArmadaHoffler.com.

    Webcast and Conference Call

    The Company will host a webcast and conference call on Thursday, August 4, 2022 at 8:30 a.m. Eastern Time to review financial results and discuss recent events. The live webcast will be available through the Investors page of the Company’s website, www.ArmadaHoffler.com. To participate in the call, please dial 877-407-3982 (domestic) or 201-493-6780 (international). A replay of the conference call will be available through Sunday, September 4, 2022 by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 13730643.

    About Armada Hoffler Properties, Inc.

    Armada Hoffler Properties (NYSE:AHH) is a vertically-integrated, self-managed real estate investment trust ("REIT") with four decades of experience developing, building, acquiring and managing high-quality office, retail and multifamily properties located primarily in the Mid-Atlantic and Southeastern United States. The Company also provides general construction and development services to third-party clients, in addition to developing and building properties to be placed in their stabilized portfolio. Founded in 1979 by Daniel A. Hoffler, Armada Hoffler has elected to be taxed as a REIT for U.S. federal income tax purposes. For more information visit ArmadaHoffler.com.

    Forward-Looking Statements

    Certain matters within this press release are discussed using forward-looking language as specified in the Private Securities Litigation Reform Act of 1995, and, as such, may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those projected in the forward-looking statement. These forward-looking statements may include comments relating to the current and future performance of the Company’s operating property portfolio, the Company’s development pipeline, the Company's mezzanine program, the Company’s construction and development business, including backlog and timing of deliveries and estimated costs, financing activities, as well as acquisitions, dispositions, and the Company’s financial outlook, guidance, and expectations. For a description of factors that may cause the Company’s actual results or performance to differ from its forward-looking statements, please review the information under the heading “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and the other documents filed by the Company with the Securities and Exchange Commission from time to time. The Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in the Company's expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by applicable law.

    Non-GAAP Financial Measures

    The Company calculates FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts ("Nareit"). Nareit defines FFO as net income (loss) (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains or losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.

    FFO is a supplemental non-GAAP financial measure. The Company uses FFO as a supplemental performance measure because it believes that FFO is beneficial to investors as a starting point in measuring the Company’s operational performance. Specifically, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, which do not relate to or are not indicative of operating performance, FFO provides a performance measure that, when compared period-over-period, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare the Company’s operating performance with that of other REITs.

    However, because FFO excludes depreciation and amortization and captures neither the changes in the value of the Company’s properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of the Company’s properties, all of which have real economic effects and could materially impact the Company’s results from operations, the utility of FFO as a measure of the Company’s performance is limited. In addition, other equity REITs may not calculate FFO in accordance with the Nareit definition as the Company does, and, accordingly, the Company’s FFO may not be comparable to such other REITs’ FFO. Accordingly, FFO should be considered only as a supplement to net income as a measure of the Company’s performance. FFO should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or service indebtedness. Also, FFO should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP.

    Management also believes that the computation of FFO in accordance with Nareit’s definition includes certain items that are not indicative of the results provided by the Company’s operating property portfolio and affect the comparability of the Company’s period-over-period performance. Accordingly, management believes that Normalized FFO is a more useful performance measure that excludes certain items, including but not limited to, acquisition, development and other pursuit costs, gains or losses from the early extinguishment of debt, impairment of intangible assets and liabilities, mark-to-market adjustments for interest rate derivatives, certain costs for interest rate caps designated as cash flow hedges, provision for unrealized non-cash credit losses, amortization of right-of-use assets attributable to finance leases, severance related costs, and other non-comparable items.

    NOI is the measure used by the Company’s chief operating decision-maker to assess segment performance. The Company calculates NOI as property revenues (base rent, expense reimbursements, termination fees and other revenue) less property expenses (rental expenses and real estate taxes). NOI is not a measure of operating income or cash flows from operating activities as measured in accordance with GAAP and is not indicative of cash available to fund cash needs. As a result, NOI should not be considered an alternative to cash flows as a measure of liquidity. Not all companies calculate NOI in the same manner. The Company considers NOI to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the core operations of the Company’s real estate and construction businesses. To calculate NOI on a cash basis, we adjust NOI to exclude the net effects of straight line rent and the amortization of lease incentives and above/below market rents.

    For reference, as an aid in understanding the Company’s computation of NOI, NOI Cash Basis, FFO and Normalized FFO, a reconciliation of net income calculated in accordance with GAAP to NOI, NOI Cash Basis, FFO and Normalized FFO has been included further in this release.


    ARMADA HOFFLER PROPERTIES, INC.
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (dollars in thousands)

      June 30, 2022 December 31, 2021
      (Unaudited)  
    ASSETS    
    Real estate investments:    
    Income producing property $1,791,302  $1,658,609 
    Held for development  6,294   6,294 
    Construction in progress  71,676   72,535 
       1,869,272   1,737,438 
    Accumulated depreciation  (303,032)  (285,814)
    Net real estate investments  1,566,240   1,451,624 
    Real estate investments held for sale  115,680   80,751 
    Cash and cash equivalents  69,731   35,247 
    Restricted cash  6,681   5,196 
    Accounts receivable, net  32,250   29,576 
    Notes receivable, net  139,383   126,429 
    Construction receivables, including retentions, net  29,107   17,865 
    Construction contract costs and estimated earnings in excess of billings  493   243 
    Equity method investments  53,260   12,685 
    Operating lease right-of-use assets  23,387   23,493 
    Finance lease right-of-use assets  46,433   46,989 
    Acquired lease intangible assets  107,147   62,038 
    Other assets  75,743   45,927 
    Total Assets $2,265,535  $1,938,063 
    LIABILITIES AND EQUITY    
    Indebtedness, net $1,080,664  $917,556 
    Liabilities related to assets held for sale  84,049   41,364 
    Accounts payable and accrued liabilities  22,886   29,589 
    Construction payables, including retentions  47,429   31,166 
    Billings in excess of construction contract costs and estimated earnings  15,075   4,881 
    Operating lease liabilities  31,645   31,648 
    Finance lease liabilities  46,325   46,160 
    Other liabilities  51,126   55,876 
    Total Liabilities  1,379,199   1,158,240 
    Total Equity  886,336   779,823 
    Total Liabilities and Equity $2,265,535  $1,938,063 
             

    ARMADA HOFFLER PROPERTIES, INC.
    CONDENSED CONSOLIDATED INCOME STATEMENTS
    (in thousands, except per share amounts)

      Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
       2022   2021   2022   2021 
      (Unaudited)
    Revenues        
    Rental revenues $55,224  $47,378  $109,859  $93,119 
    General contracting and real estate services revenues  45,273   18,408   69,923   53,971 
    Total revenues  100,497   65,786   179,782   147,090 
    Expenses        
    Rental expenses  12,685   11,292   25,354   22,124 
    Real estate taxes  5,837   5,465   11,241   10,771 
    General contracting and real estate services expenses  43,418   18,131   67,239   52,406 
    Depreciation and amortization  18,781   17,285   37,338   35,351 
    Amortization of right-of-use assets - finance leases  277   278   555   467 
    General and administrative expenses  3,617   3,487   8,325   7,508 
    Acquisition, development and other pursuit costs  26   32   37   103 
    Impairment charges  286   83   333   3,122 
    Total expenses  84,927   56,053   150,422   131,852 
    Gain on real estate dispositions, net  19,493   —   19,493   3,717 
    Operating income  35,063   9,733   48,853   18,955 
    Interest income  3,352   6,746   6,920   10,862 
    Interest expense  (9,371)  (8,418)  (18,402)  (16,393)
    Loss on extinguishment of debt  (618)  —   (776)  — 
    Change in fair value of derivatives and other  2,548   314   6,730   707 
    Unrealized credit loss provision  (295)  (388)  (900)  (333)
    Other income (expense), net  68   7   297   186 
    Income before taxes  30,747   7,994   42,722   13,984 
    Income tax benefit  20   461   321   480 
    Net income  30,767   8,455   43,043   14,464 
    Net loss attributable to noncontrolling interests in investment entities  (128)  —   (228)  — 
    Preferred stock dividends  (2,887)  (2,887)  (5,774)  (5,774)
    Net income attributable to common stockholders and OP Unitholders $27,752  $5,568  $37,041  $8,690 
                     

    ARMADA HOFFLER PROPERTIES, INC.
    RECONCILIATION OF NET INCOME TO FFO & NORMALIZED FFO
    (in thousands, except per share amounts)

      Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
       2022   2021   2022   2021 
      (Unaudited)    
    Net income attributable to common stockholders and OP Unitholders $27,752  $5,568  $37,041  $8,690 
    Depreciation and amortization(1)  18,509   17,285   36,794   35,351 
    Gain on operating real estate dispositions, net(2)  (19,493)  —   (19,493)  (3,464)
    Impairment of real estate assets  201   —   201   3,039 
    FFO attributable to common stockholders and OP Unitholders $26,969  $22,853  $54,543  $43,616 
    Acquisition, development and other pursuit costs  26   32   37   103 
    Impairment of intangible assets and liabilities  85   83   132   83 
    Loss on extinguishment of debt  618   —   776   — 
    Unrealized credit loss provision  295   388   900   333 
    Amortization of right-of-use assets - finance leases  277   278   555   467 
    Change in fair value of derivatives not designated as cash flow hedges and other  (2,548)  (314)  (6,730)  (707)
    Amortization of interest rate cap premiums on designated cash flow hedges  481   59   523   117 
    Normalized FFO available to common stockholders and OP Unitholders $26,203  $23,379  $50,736  $44,012 
    Net income attributable to common stockholders and OP Unitholders per diluted share and unit $0.31  $0.07  $0.42  $0.11 
    FFO attributable to common stockholders and OP Unitholders per diluted share and unit $0.31  $0.28  $0.62  $0.54 
    Normalized FFO attributable to common stockholders and OP Unitholders per diluted share and unit $0.30  $0.29  $0.58  $0.54 
    Weighted average common shares and units - diluted  88,331   81,262   88,042   80,771 

    ________________________________________

    (1) The adjustment for depreciation and amortization for the three and six months ended June 30, 2022 excludes $0.3 million and $0.5 million, respectively, of depreciation attributable to our joint venture partners.
    (2) The adjustment for gain on operating real estate dispositions for the six months ended June 30, 2021 excludes the gain on sale of easement rights on a non-operating parcel.
     

    ARMADA HOFFLER PROPERTIES, INC.
    RECONCILIATION OF NET INCOME TO SAME STORE NOI, CASH BASIS
    (in thousands) (unaudited)

      Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
       2022   2021   2022   2021 
    Office Same Store(1)        
    Same Store NOI, Cash Basis $6,552  $6,395  $13,163  $12,844 
    GAAP Adjustments(2)  122   368   124   645 
    Same Store NOI  6,674   6,763   13,287   13,489 
    Non-Same Store NOI(3)  5,005   642   9,771   1,318 
    Segment NOI  11,679   7,405   23,058   14,807 
             
    Retail Same Store(4)        
    Same Store NOI, Cash Basis  13,897   12,931   26,250   24,106 
    GAAP Adjustments(2)  856   898   931   1,220 
    Same Store NOI  14,753   13,829   27,181   25,326 
    Non-Same Store NOI(3)  1,187   182   4,450   2,077 
    Segment NOI  15,940   14,011   31,631   27,403 
             
    Multifamily Same Store(5)        
    Same Store NOI, Cash Basis  6,665   5,927   13,146   11,463 
    GAAP Adjustments(2)  208   182   426   366 
    Same Store NOI  6,873   6,109   13,572   11,829 
    Non-Same Store NOI(3)  2,210   3,096   5,003   6,185 
    Segment NOI  9,083   9,205   18,575   18,014 
             
    Total Property NOI  36,702   30,621   73,264   60,224 
             
    General contracting & real estate services gross profit  1,855   277   2,684   1,565 
    Depreciation and amortization  (18,781)  (17,285)  (37,338)  (35,351)
    General and administrative expenses  (3,617)  (3,487)  (8,325)  (7,508)
    Acquisition, development and other pursuit costs  (26)  (32)  (37)  (103)
    Impairment charges  (286)  (83)  (333)  (3,122)
    Gain on real estate dispositions, net  19,493   —   19,493   3,717 
    Interest income  3,352   6,746   6,920   10,862 
    Loss on extinguishment of debt  (618)  —   (776)  — 
    Interest expense  (9,371)  (8,418)  (18,402)  (16,393)
    Unrealized credit loss provision  (295)  (388)  (900)  (333)
    Amortization of right-of-use assets - finance leases  (277)  (278)  (555)  (467)
    Change in fair value of derivatives and other  2,548   314   6,730   707 
    Other income (expense), net  68   7   297   186 
    Income tax benefit  20   461   321   480 
    Net income  30,767   8,455   43,043   14,464 
             
    Net income attributable to noncontrolling interest in investment entities  (128)  —   (228)  — 
    Preferred stock dividends  (2,887)  (2,887)  (5,774)  (5,774)
    Net income attributable to AHH and OP unitholders $27,752  $5,568  $37,041  $8,690 

    ________________________________________

    (1) Office same-store portfolio excludes Exelon and Wills Wharf.

    (2) GAAP Adjustments include adjustments for straight-line rent, termination fees, deferred rent, recoveries of deferred rent, and amortization of lease incentives.
    (3) Includes expenses associated with the Company's in-house asset management division.
    (4) Retail same-store portfolio excludes Delray Beach Plaza, Greenbrier Square, Overlook Village, and Premier Retail as well as Oakland Marketplace, which was disposed in March 2021.
    (5) Multifamily same-store portfolio excludes Gainesville Apartments, 1305 Dock Street, Summit Place, Hoffler Place, and The Residences at Annapolis Junction.
     
     

    Contact:

    Chelsea Forrest
    Armada Hoffler Properties, Inc.
    Director of Corporate Communications and Investor Relations
    Email: CForrest@ArmadaHoffler.com
    Phone: (757) 612-4248


    Primary Logo

شارك على،