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Armada Hoffler Reports Second Quarter 2023 Results
المصدر: Nasdaq GlobeNewswire / 03 أغسطس 2023 06:00:01 America/New_York
Net Income of $0.13 Per Diluted Share
Normalized FFO of $0.32 Per Diluted Share
Completed the Off-Market, Mixed-Use Acquisition of The Interlock in Atlanta's West Midtown
Announced $50 Million Common and Preferred Stock Repurchase Program
Maintained 2023 Full-Year Normalized FFO Guidance Range of $1.23 to $1.27 Per Diluted Share
VIRGINIA BEACH, Va., Aug. 03, 2023 (GLOBE NEWSWIRE) -- Armada Hoffler Properties, Inc. (NYSE: AHH) today announced its results for the quarter ended June 30, 2023 and provided an update on current events.
Second Quarter and Recent Highlights:
- Net income attributable to common stockholders and OP Unit holders of $11.7 million, or $0.13 per diluted share, compared to $27.8 million, or $0.31 per diluted share, for the three months ended June 30, 2022.
- Funds from operations attributable to common stockholders and OP Unit holders ("FFO") of $31.4 million, or $0.35 per diluted share, compared to $27.0 million, or $0.31 per diluted share, for the three months ended June 30, 2022. See "Non-GAAP Financial Measures."
- Normalized funds from operations attributable to common stockholders and OP Unit holders ("Normalized FFO") of $28.3 million, or $0.32 per diluted share, compared to $26.2 million, or $0.30 per diluted share, for the three months ended June 30, 2022.
- Maintained the Company's previous guidance range for 2023 full-year Normalized FFO of $1.23 to $1.27 per diluted share.
- Completed the previously announced $215 million acquisition of The Interlock, a 311,000 square foot Class A commercial mixed-use asset in Atlanta's West Midtown anchored by Georgia Tech.
- Announced the authorization of the repurchase of up to $50 million of the Company's shares of common stock and Series A preferred stock under a newly established share repurchase program.
- Maintained a 97% weighted average portfolio occupancy as of June 30, 2023. Multifamily occupancy was 96%, office occupancy was 96%, and retail occupancy was 98%.
- Second quarter commercial lease renewal spreads increased 8.9% on a GAAP basis and 7.3% on a cash basis.
- Same Store NOI increased 4.8% on a GAAP basis and 2.9% on a cash basis compared to the quarter ended June 30, 2022:
- Multifamily Same Store NOI increased 4.3% on a GAAP basis and 3.6% on a cash basis.
- Office Same Store NOI increased 1.3% on a GAAP basis and 2.0% on a cash basis.
- Retail Same Store NOI increased 7.5% on a GAAP basis and 3.1% on a cash basis.
- Committed an aggregate of $75 million of new investments across three ground-up multifamily development projects located in the Atlanta and Coastal Virginia markets.
- Third-party construction backlog as of June 30, 2023 was $593 million and construction gross profit for the second quarter was $3.5 million.
- Commemorated the topping out of T. Rowe Price's new global headquarters building in Harbor Point, with completion anticipated in the third quarter of 2024.
“For years, we have been describing the advantages of our business model. Vertical integration of the development process, asset class diversification, mixed-use environments, and best-in-class properties, are all important factors in our platform as well as our value proposition,” said Louis Haddad, President & CEO of Armada Hoffler. “This approach to real estate, 44 years in the making, has produced substantial growth over the last 10 years. Since Armada Hoffler's IPO in 2013, we have increased our asset base over five times, expanded our market cap nearly four times, doubled our earnings per share, and perhaps most importantly to investors, outperformed the REIT index on a total shareholder return basis over the same period.”
Financial Results
Net income attributable to common stockholders and OP Unit holders for the second quarter decreased to $11.7 million compared to $27.8 million for the second quarter of 2022. The period-over-period change was primarily due to gains recognized on dispositions in the second quarter of 2022. The decrease was partially offset by an increase in property operating income due to acquisitions and developments and higher general contracting gross profit.
FFO attributable to common stockholders and OP Unit holders for the second quarter increased to $31.4 million compared to $27.0 million for the second quarter of 2022. Normalized FFO attributable to common stockholders and OP Unit holders for the second quarter increased to $28.3 million compared to $26.2 million for the second quarter of 2022. The period-over-period increases in FFO and Normalized FFO were due to an increase in property operating income due to acquisitions and developments and higher general contracting gross profit. These increases were partially offset by higher interest expense.
Operating Performance
At the end of the second quarter, the Company’s office, retail, and multifamily stabilized operating property portfolios were 96.2%, 98.2%, and 96.2% occupied, respectively.
Total construction contract backlog was $592.8 million as of June 30, 2023.
Interest income from real estate financing investments was $3.2 million for the three months ended June 30, 2023.
Balance Sheet and Financing Activity
As of June 30, 2023, the Company had $1.3 billion of total debt outstanding, including $149.0 million outstanding under its revolving credit facility. Total debt outstanding excludes GAAP adjustments and deferred financing costs. Approximately 68% of the Company’s debt had fixed interest rates or was subject to interest rate swaps as of June 30, 2023. The Company’s debt was 100% fixed or economically hedged as of June 30, 2023 after considering interest rate caps.
Outlook
The Company maintained its 2023 full-year Normalized FFO guidance range at the Company's previous guidance range of $1.23 to $1.27 per diluted share. The following table updates the Company's assumptions underpinning its full-year guidance. The Company's executive management will provide further details regarding its 2023 earnings guidance during today's webcast and conference call.
Full-year 2023 Guidance [1] Expected Ranges Portfolio NOI $161.1M $161.9M Construction Segment Gross Profit $11.8M $12.8M G&A Expenses $17.6M $18.3M Interest Income $14.2M $14.6M Interest Expense[2] $47.2M $47.9M Normalized FFO per diluted share $1.23 $1.27 [1] 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.
[2] Includes the interest expense on finance leases and interest receipts of non-designated derivatives.Supplemental Financial Information
Further details regarding operating results, properties, and leasing statistics can be found in the Company’s supplemental financial package available on the Investors page at ArmadaHoffler.com.
Webcast and Conference Call
The Company will host a webcast and conference call on Thursday, August 3, 2023 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, ArmadaHoffler.com. To participate in the call, please dial (+1) 888 396 8049 (toll-free dial-in number) or (+1) 416 764 8646 (toll dial-in number). The conference ID is 79880370. A replay of the conference call will be available through Sunday, September 3, 2023 by dialing (+1) 877 674 7070 (toll-free dial-in number) or (+1) 416 764 8692 (toll dial-in number) and providing passcode 880370#.
About Armada Hoffler Properties, Inc.
Armada Hoffler (NYSE:AHH) is a vertically integrated, self-managed real estate investment trust with over four decades of experience developing, building, acquiring, and managing high-quality multifamily, office, and retail 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. Forward-looking statement depend on assumptions, data or methods which may be incorrect or imprecise, and the Company may not be able to realize any forward-looking statement. 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, 2022, 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, debt extinguishment losses and prepayment penalties, impairment and accelerated amortization of intangible assets and liabilities, property acquisition, development and other pursuit costs, mark-to-market adjustments for interest rate derivatives not designated as cash flow hedges, amortization of payments made to purchase 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. Other equity REITs may not calculate Normalized FFO in the same manner as we do, and, accordingly, our Normalized FFO may not be comparable to such other REITs' Normalized FFO.
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, 2023 December 31, 2022 (Unaudited) ASSETS Real estate investments: Income producing property $ 2,083,488 $ 1,884,214 Held for development 6,294 6,294 Construction in progress 76,866 53,067 2,166,648 1,943,575 Accumulated depreciation (359,229 ) (329,963 ) Net real estate investments 1,807,419 1,613,612 Cash and cash equivalents 34,054 48,139 Restricted cash 2,043 3,726 Accounts receivable, net 41,431 39,186 Notes receivable, net 60,095 136,039 Construction receivables, including retentions, net 93,880 70,822 Construction contract costs and estimated earnings in excess of billings 406 342 Equity method investments 102,371 71,983 Operating lease right-of-use assets 23,218 23,350 Finance lease right-of-use assets 92,994 45,878 Acquired lease intangible assets 131,181 103,870 Other assets 81,962 85,363 Total Assets $ 2,471,054 $ 2,242,310 LIABILITIES AND EQUITY Indebtedness, net $ 1,264,643 $ 1,068,261 Accounts payable and accrued liabilities 24,263 26,839 Construction payables, including retentions 102,377 93,472 Billings in excess of construction contract costs and estimated earnings 18,311 17,515 Operating lease liabilities 31,611 31,677 Finance lease liabilities 93,214 46,477 Other liabilities 54,973 54,055 Total Liabilities 1,589,392 1,338,296 Total Equity 881,662 904,014 Total Liabilities and Equity $ 2,471,054 $ 2,242,310 ARMADA HOFFLER PROPERTIES, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share amounts)Three Months Ended
June 30,Six Months Ended
June 30,2023 2022 2023 2022 (Unaudited) Revenues Rental revenues $ 59,951 $ 55,224 $ 116,169 $ 109,859 General contracting and real estate services revenues 102,574 45,273 186,812 69,923 Interest income 3,414 3,352 7,133 6,920 Total revenues 165,939 103,849 310,114 186,702 Expenses Rental expenses 13,676 12,685 26,636 25,354 Real estate taxes 5,631 5,837 11,043 11,241 General contracting and real estate services expenses 99,071 43,418 180,241 67,239 Depreciation and amortization 19,878 18,781 38,346 37,338 Amortization of right-of-use assets - finance leases 347 277 624 555 General and administrative expenses 4,052 3,617 9,500 8,325 Acquisition, development and other pursuit costs 18 26 18 37 Impairment charges — 286 102 333 Total expenses 142,673 84,927 266,510 150,422 Gain on real estate dispositions, net 511 19,493 511 19,493 Operating income 23,777 38,415 44,115 55,773 Interest expense (13,629 ) (9,371 ) (25,931 ) (18,402 ) Loss on extinguishment of debt — (618 ) — (776 ) Change in fair value of derivatives and other 5,005 2,548 2,558 6,730 Unrealized credit loss provision (100 ) (295 ) (177 ) (900 ) Other income (expense), net 168 68 261 297 Income before taxes 15,221 30,747 20,826 42,722 Income tax (provision) benefit (336 ) 20 (524 ) 321 Net income 14,885 30,767 20,302 43,043 Net income attributable to noncontrolling interests in investment entities (269 ) (128 ) (423 ) (228 ) Preferred stock dividends (2,887 ) (2,887 ) (5,774 ) (5,774 ) Net income attributable to common stockholders and OP Unitholders $ 11,729 $ 27,752 $ 14,105 $ 37,041 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 30,2023 2022 2023 2022 (Unaudited) Net income attributable to common stockholders and OP Unitholders $ 11,729 $ 27,752 $ 14,105 $ 37,041 Depreciation and amortization (1) 19,655 18,509 37,900 36,794 Gain on operating real estate dispositions, net (2) — (19,493 ) — (19,493 ) Impairment of real estate assets — 201 — 201 FFO attributable to common stockholders and OP Unitholders 31,384 26,969 $ 52,005 $ 54,543 Acquisition, development and other pursuit costs 18 26 18 37 Accelerated amortization of intangible assets and liabilities (722 ) 85 (620 ) 132 Loss on extinguishment of debt — 618 — 776 Unrealized credit loss provision 100 295 177 900 Amortization of right-of-use assets - finance leases 347 277 624 555 Decrease (Increase) in fair value of derivatives not designated as cash flow hedges (4,297 ) (2,548 ) (490 ) (6,730 ) Amortization of interest rate derivatives on designated cash flow hedges 1,471 481 3,085 523 Normalized FFO available to common stockholders and OP Unitholders $ 28,301 $ 26,203 $ 54,799 $ 50,736 Net income attributable to common stockholders and OP Unitholders per diluted share and unit $ 0.13 $ 0.31 $ 0.16 $ 0.42 FFO attributable to common stockholders and OP Unitholders per diluted share and unit $ 0.35 $ 0.31 $ 0.59 $ 0.62 Normalized FFO attributable to common stockholders and OP Unitholders per diluted share and unit $ 0.32 $ 0.30 $ 0.62 $ 0.58 Weighted average common shares and units - diluted 88,724 88,331 88,562 88,042 ________________________________________
(1) The adjustment for depreciation and amortization for the three and six months ended June 30, 2023 exclude $0.2 million and $0.4 million, respectively, of depreciation attributable to our joint venture partners. 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 each of the three and six months ended June 30, 2023 excludes $0.5 million for the gain on disposition of a non-operating parcel at Market at Mill Creek. 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 30,2023 2022 2023 2022 Office Same Store(1) Same Store NOI, Cash Basis $ 10,342 $ 10,143 $ 12,971 $ 13,163 GAAP Adjustments (2) 924 980 262 124 Same Store NOI 11,266 11,123 13,233 13,287 Non-Same Store NOI (3) 1,818 556 12,227 9,771 Segment NOI 13,084 11,679 25,460 23,058 Retail Same Store (4) Same Store NOI, Cash Basis 15,476 15,062 31,192 29,711 GAAP Adjustments (2) 1,676 900 2,424 1,941 Same Store NOI 17,152 15,962 33,616 31,652 Non-Same Store NOI (3) 1,260 (22 ) 1,463 (21 ) Segment NOI 18,412 15,940 35,079 31,631 Multifamily Same Store (5) Same Store NOI, Cash Basis 7,293 7,055 13,725 13,146 GAAP Adjustments (2) 280 208 488 425 Same Store NOI 7,573 7,263 14,213 13,571 Non-Same Store NOI (3) 1,575 1,820 3,738 5,004 Segment NOI 9,148 9,083 17,951 18,575 Total Property NOI 40,644 36,702 78,490 73,264 General contracting & real estate services gross profit 3,503 1,855 6,571 2,684 Real estate financing gross profit 2,416 2,422 4,855 5,056 Interest income(6) 189 113 372 222 Depreciation and amortization (19,878 ) (18,781 ) (38,346 ) (37,338 ) Amortization of right-of-use assets - finance leases (347 ) (277 ) (624 ) (555 ) General and administrative expenses (4,052 ) (3,617 ) (9,500 ) (8,325 ) Acquisition, development and other pursuit costs (18 ) (26 ) (18 ) (37 ) Impairment charges — (286 ) (102 ) (333 ) Gain on real estate dispositions, net 511 19,493 511 19,493 Interest expense(7) (12,820 ) (8,554 ) (24,025 ) (16,760 ) Loss on extinguishment of debt — (618 ) — (776 ) Change in fair value of derivatives and other 5,005 2,548 2,558 6,730 Unrealized credit loss provision (100 ) (295 ) (177 ) (900 ) Other income (expense), net 168 68 261 297 Income tax (provision) benefit (336 ) 20 (524 ) 321 Net income 14,885 30,767 20,302 43,043 Net income attributable to noncontrolling interests in investment entities (269 ) (128 ) (423 ) (228 ) Preferred stock dividends (2,887 ) (2,887 ) (5,774 ) (5,774 ) Net income attributable to AHH and OP unitholders $ 11,729 $ 27,752 $ 14,105 $ 37,041 ________________________________________
(1) Office same-store portfolio excludes Wills Wharf and The Interlock Office for the three and six months ended June 30, 2023 and 2022. Office same-store portfolio also excludes Constellation Office for the six months ended June 30, 2023 and 2022. (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 Town Center Pembroke and The Interlock Retail for the three months ended June 30, 2023 and 2022. (5) Multifamily same-store portfolio excludes The Everly, 1305 Dock Street, and Chronicle Mill.for the three and six months ended June 30, 2023 and 2022. Multifamily same-store portfolio also excludes 1305 Dock Street for the six months ended June 30, 2023 and 2022. (6) Excludes real estate financing segment interest income. (7) Excludes real estate financing segment interest expense. Contact:
Chelsea Forrest
Armada Hoffler
Director of Corporate Communications and Investor Relations
Email: CForrest@ArmadaHoffler.com
Phone: (757) 612-4248
- Net income attributable to common stockholders and OP Unit holders of $11.7 million, or $0.13 per diluted share, compared to $27.8 million, or $0.31 per diluted share, for the three months ended June 30, 2022.