ARMADA HOFFLER PROPERTIES, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2025
Armada Hoffler Properties, Inc. reported its quarterly results for the period ended March 31, 2025. The company’s net income was $23.1 million, or $0.29 per diluted share, compared to $20.5 million, or $0.26 per diluted share, in the same period last year. Revenue increased 12.1% to $143.8 million, driven by growth in property operations and development activities. The company’s same-store property revenue grew 4.1% year-over-year, driven by rent increases and occupancy gains. FFO (funds from operations) was $44.8 million, or $0.56 per diluted share, compared to $39.3 million, or $0.49 per diluted share, in the same period last year. The company’s balance sheet remains strong, with a debt-to-equity ratio of 0.43 and a cash balance of $143.8 million.
Armada Hoffler Properties: Navigating Challenges and Positioning for Growth
Armada Hoffler Properties, a vertically-integrated self-managed REIT, has navigated a complex economic landscape in the first quarter of 2025. Despite facing headwinds, the company remains focused on delivering long-term, sustainable shareholder value through strategic investments and operational excellence.
Financial Performance Overview
For the three months ended March 31, 2025, Armada Hoffler reported a net loss attributable to common stockholders and OP Unitholders of $7.2 million, or $0.07 per diluted share, compared to net income of $14.8 million, or $0.17 per diluted share, in the same period of 2024. This decline was primarily driven by unrealized losses on non-designated interest rate derivatives, which negatively impacted Funds from Operations (FFO) by $5.6 million.
Funds from Operations (FFO) attributable to common stockholders and OP Unitholders was $17.2 million, or $0.17 per diluted share, compared to $35.0 million, or $0.40 per diluted share, in the prior-year period. Normalized Funds from Operations (Normalized FFO), which excludes certain non-recurring items, was $25.6 million, or $0.25 per diluted share, compared to $29.4 million, or $0.33 per diluted share, in the first quarter of 2024.
Segment Performance
Armada Hoffler’s diversified portfolio of retail, office, and multifamily properties, as well as its general contracting and real estate services business, and real estate financing investments, contributed to the company’s overall performance.
Retail Segment Retail segment NOI decreased 5.5% to $18.0 million, primarily due to the dispositions of the Market at Mill Creek and Nexton Square properties, partially offset by the commencement of operations at Southern Post Retail. Retail same-store NOI was relatively flat, increasing by just 0.2%.
Office Segment Office segment NOI increased 12.5% to $15.2 million, driven by the addition of new tenants at Wills Wharf, Thames Street Wharf, and The Interlock Office. Office same-store NOI grew 9.2%, reflecting the strong leasing activity.
Multifamily Segment Multifamily segment NOI was relatively consistent, increasing by 2.7% to $9.0 million. Multifamily same-store NOI decreased 3.2%, primarily due to increased utility expenses at the company’s Harbor Point properties in Baltimore.
General Contracting and Real Estate Services Segment The general contracting and real estate services segment reported a 33.4% decrease in gross profit to $1.4 million, primarily due to the substantial reduction in the company’s backlog as previously executed projects were completed.
Real Estate Financing Segment The real estate financing segment’s gross profit decreased 24.2% to $2.0 million, primarily due to decreased interest rates for the Solis Gainesville II and The Allure at Edinburgh investments, as well as the redemption of Solis City Park II in July 2024, partially offset by higher principal balances across multiple investments.
Balance Sheet and Liquidity
As of March 31, 2025, Armada Hoffler had $45.7 million in unrestricted cash and cash equivalents, as well as $160.4 million in available borrowings under its revolving credit facility and $8.6 million in available borrowings under its construction loans. The company continues to implement a strategic transformation of its borrowing composition, increasing the proportion of unsecured debt to 56.5% of total borrowings, up from 54.8% a year earlier.
During the first quarter of 2025, the company increased outstanding borrowings on its revolving credit facility by $21.0 million. Armada Hoffler also has $134.8 million in debt maturing during the remainder of 2025, which it plans to repay or extend through available options.
Operational Highlights
Despite the challenging environment, Armada Hoffler achieved several operational milestones in the first quarter of 2025:
- Weighted average stabilized portfolio occupancy was 95.7%, with retail occupancy at 94.5%, office occupancy at 97.5%, and multifamily occupancy at 95.0%.
- The company executed 31 commercial lease renewals and 11 new commercial leases, totaling 313,002 net rentable square feet.
- Office same-store NOI increased 9.2% on a GAAP basis compared to the prior-year period.
- The company’s third-party construction backlog stood at $80.4 million as of March 31, 2025, with construction gross profit of $1.4 million for the quarter.
Outlook and Strategic Initiatives
Armada Hoffler’s management remains cautiously optimistic about the company’s future, despite the headwinds faced in the first quarter. The company is focused on several strategic initiatives to position itself for long-term growth:
Strengthening the Balance Sheet: The company’s ongoing efforts to increase the proportion of unsecured debt and extend debt maturities will enhance its financial flexibility and resilience.
Disciplined Capital Allocation: Armada Hoffler is carefully evaluating new development, acquisition, and investment opportunities to ensure they align with its long-term strategic objectives and deliver sustainable returns.
Operational Excellence: The company is committed to maintaining high occupancy rates, driving positive leasing spreads, and optimizing the performance of its diversified portfolio.
Diversification and Growth: Armada Hoffler continues to explore opportunities to expand its presence in the retail, office, and multifamily sectors, as well as its real estate financing and general contracting businesses, to further diversify its revenue streams.
Sustainability and ESG: The company is integrating environmental, social, and governance (ESG) considerations into its operations and decision-making processes to enhance long-term value creation and mitigate risks.
Conclusion
Armada Hoffler’s first-quarter 2025 results reflect the challenges faced by the real estate industry, but the company’s diversified business model, prudent financial management, and strategic initiatives position it well to navigate the current environment and capitalize on future growth opportunities. By maintaining a strong balance sheet, optimizing operational performance, and pursuing disciplined capital allocation, Armada Hoffler is poised to deliver long-term, sustainable value for its shareholders.
