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AH

Armada Hoffler Properties, Inc. (AHH)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 results showed mixed signals: total revenues of $114.6M and Normalized FFO/share of $0.25; GAAP diluted EPS was -$0.07 as derivative fair value declines and lower construction gross profit weighed on GAAP results .
  • Versus Wall Street consensus, revenue materially beat S&P Global’s estimate ($114.6M vs $63.2M), while EBITDA missed ($33.5M actual vs $44.2M estimate); EPS estimate was unavailable; guidance was maintained at $1.00–$1.10 Normalized FFO/share for FY25 . Values retrieved from S&P Global.
  • Operationally, office remained a standout: 97.5% occupied with 23.3% GAAP renewal spreads; retail renewals were solid and management indicated 85% of impacted spaces (Party City, Conn’s, Jo‑Ann) are leased/LOI at 20–25% higher rents; multifamily trade-out is improving into prime leasing season .
  • Balance sheet actions and risk management continue: 100% of debt fixed or hedged; $150M 2.50% swap added in January (premium $4.6M); liquidity stood at $211.7M; dividend right-sized to $0.14/share to align with property cash flow .
  • Near-term catalysts: Allied full ownership closing (June), T. Rowe Price HQ contributing FFO beginning Q2, retail backfill announcements, and continued office spreads in mixed-use ecosystems .

What Went Well and What Went Wrong

What Went Well

  • Office momentum: 97.5% occupancy; office same-store NOI +9.2% GAAP; renewal spreads +23.3% GAAP and +3.7% cash. “Our office assets remain essentially fully occupied at 97.5%... in highly‑amenitized mixed‑use environments” — CEO Shawn Tibbetts .
  • Retail renewals and backfills: retail renewal spreads +11.0% GAAP and +7.4% cash; management indicated 85% of impacted boxes are leased/LOI at 20–25% higher rents, reflecting demand in core locations .
  • Proactive balance sheet and risk management: 100% of debt fixed/hedged; new $150M swap at 2.50% in January; FY25 guidance maintained; liquidity $211.7M .

What Went Wrong

  • GAAP results pressure: GAAP diluted EPS of -$0.07 and net loss of $7.2M driven by lower fair value of non‑designated interest rate derivatives, lower construction gross profit, and equity loss in unconsolidated entities .
  • Construction segment slowdown: backlog stepped down to $80.4M and Q1 gross profit was $1.4M; FY25 guidance assumes lower construction gross profit ($4.8–$6.8M) vs prior ($6.8–$8.6M) .
  • EBITDA miss vs Street: EBITDA came in below S&P Global consensus; multi-family markets (Atlanta, Charlotte) still digesting supply, with near-term trade-outs under pressure at certain assets (e.g., The Everly) . Values retrieved from S&P Global.

Financial Results

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Total Revenues ($USD)$193,482,000 $187,652,000 $142,600,000 $114,643,000
Net (Loss) Income Attributable to Common & OP ($USD)$14,804,000 $(10,416,000) $26,140,000 $(7,227,000)
GAAP Diluted EPS ($USD)$0.17 $(0.11) $0.26 $(0.07)
FFO per Diluted Share ($USD)$0.40 $0.14 $0.29 $0.17
Normalized FFO per Diluted Share ($USD)$0.33 $0.35 $0.27 $0.25
Total Property NOI ($USD)$41,351,000 $45,762,000 $41,574,000 $42,240,000

Segment NOI breakdown:

Segment NOI ($USD)Q1 2024Q1 2025
Retail$19,025,000 $17,982,000
Office$13,540,000 $15,238,000
Multifamily$8,786,000 $9,020,000
Total Property NOI$41,351,000 $42,240,000

Key KPIs (Occupancy, renewal spreads):

KPIQ3 2024Q4 2024Q1 2025
Retail Occupancy96.2% 95.3% 94.5%
Office Occupancy94.7% 97.2% 97.5%
Multifamily Occupancy95.3% 95.3% 95.0%
Weighted Avg Occupancy95.4% 96.0% 95.7%
Retail Renewal Spreads (GAAP/Cash)13.1% / 7.8% 11.1% / 2.9% 11.0% / 7.4%
Office Renewal Spreads (GAAP/Cash)18.5% / 0.8% 18.7% / 3.5% 23.3% / 3.7%

Estimates vs Actual (Q1 2025) – S&P Global:

MetricEstimateActual
Revenue ($USD)$63,180,140*$114,643,000
EBITDA ($USD)$44,183,560*$33,539,000*
Primary EPS ($USD)N/A*$(0.0585)*
Target Price (USD)$8.00*$8.00*
Consensus Recommendation (Text)N/A*N/A*

Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Normalized FFO per diluted shareFY 2025$1.00 – $1.10 $1.00 – $1.10 Maintained
Portfolio NOI ($USD)FY 2025$171.2M – $175.8M $172.2M – $175.8M Raised (low end)
Construction Segment Gross Profit ($USD)FY 2025$6.8M – $8.6M $4.8M – $6.8M Lowered
G&A Expenses ($USD)FY 2025$(17.6)M – $(16.6)M $(17.0)M – $(16.2)M Lowered (expense improved)
Interest Income ($USD)FY 2025$15.7M – $16.7M $15.9M – $16.9M Raised
Adjusted Interest Expense ($USD)FY 2025$(63.5)M – $(59.5)M $(62.6)M – $(58.6)M Lowered (expense improved)

Assumptions include delivery of T. Rowe Price HQ and Allied in Q1 2025 and Chandler Residences stabilization in Q2 2025 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
Macro/tariffsFocus on balance sheet quality, headwinds from interest expense and construction timing “External factors like tariffs and ongoing macro uncertainty are top of mind… we’re focused on what we can control” Elevated uncertainty; disciplined cost control
Office demand in mixed-use~95% occupied; strong demand; WeWork backfills; trophy positioning 97.5% occupied; GAAP spreads +23.3%; premium vs CBD rents sustained Strengthening
Retail closures/backfillsBed Bath & Beyond backfills underway; strong tenant demand Conn’s/Party City/Jo‑Ann ~115k sf; 85% leased/LOI with 20–25% higher rents Risk managed constructively; positive spreads
Multifamily supply digestionNew lease trade-outs negative at The Everly amid incentives; stabilization expected over 12 months Blended trade-out +2.6%; April renewals ~5.1% and new lease spreads rebounded to ~4.1% Improving into prime season
Balance sheet/hedging/dividendEquity raise; deleveraging; target private placement debt 100% fixed/hedged debt; new $150M 2.50% swap; dividend at $0.14/share; liquidity $211.7M Enhanced flexibility and coverage

Management Commentary

  • “Our office assets remain essentially fully occupied at 97.5%... It is an especially good time to be concentrated in highly‑amenitized mixed‑use environments...” — CEO Shawn Tibbetts .
  • “External factors like tariffs and ongoing macroeconomic uncertainty are top of mind... we are focused on disciplined cost management... G&A reduction of 13% YoY.” — CEO .
  • “Normalized FFO attributable to common shareholders was $25.6M or $0.25 per diluted share... office same-store NOI increased 9.2% GAAP; we completed a $150M swap at 2.5%.” — CFO Matthew Barnes .
  • “We reset our quarterly dividend to $0.14 per share... fully supported by operating property cash flow.” — CEO ; confirmed in dividend press release .
  • “85% [of Conn’s/Party City/Jo‑Ann spaces] are already at lease or LOI at 20–25% higher rents.” — CEO .

Q&A Highlights

  • Macro/tariffs impact concentrated in construction starts; leasing activity remains strong across portfolio .
  • Portfolio composition: management favors mixed-use ecosystems; limited near-term acquisition/disposition given market softness; office development less attractive on risk-adjusted return today .
  • Office spreads sustainability: leases typically include 2–3% annual escalators and 10‑year terms; limited rollover near term .
  • Retail tenant risk: Conn’s/Party City/Jo‑Ann closures addressed with backfills/LOIs; Nordstrom Rack renewal extended 5 years; downtime expected to be manageable .
  • Baltimore multifamily: care to avoid cannibalization; Allied lease-up paced over 18–24 months; T. Rowe HQ employee presence supportive for demand .
  • Balance sheet: equity raise diluted ~$0.05/share net; preference for disciplined leverage; exploring debt private placements when pricing aligns .

Estimates Context

  • Revenue materially beat S&P Global consensus ($114.6M actual vs $63.2M estimate); EBITDA missed ($33.5M actual vs $44.2M estimate); Primary EPS estimate unavailable, S&P “actual” was -$0.0585. Values retrieved from S&P Global.
  • Consensus target price was $8.00 and recommendation text unavailable. Values retrieved from S&P Global.
  • Implication: Street models likely need to incorporate stronger office renewal spreads and higher property NOI, offset by lower construction profits and derivative impacts. Guidance reaffirmation anchors FY25 Normalized FFO at $1.00–$1.10 .

Key Takeaways for Investors

  • Office strength is the core driver: high occupancy and robust re‑leasing spreads in mixed‑use ecosystems support NOI resilience and rent premiums vs CBD markets .
  • Retail risk appears well managed: management has LOIs/leases on ~85% of impacted boxes with higher rents, indicating embedded uplift as spaces come online .
  • Multifamily fundamentals are stabilizing: trade‑outs improved in April; lease‑up pacing at Allied is deliberate to protect market rates; expect gradual improvement through prime season .
  • Earnings mix shift: construction profits are stepping down (guidance cut), but property NOI and expense management (13% G&A reduction YoY) help buffer earnings, consistent with strategy to prioritize property-level income .
  • Risk management intact: 100% fixed/hedged debt, $150M swap at 2.50%, and dividend right-sized to property cash coverage reduce volatility and enhance financial flexibility .
  • Near-term watch items: Allied ownership closing in June, T. Rowe HQ FFO contributions starting Q2, Interlock retail/entertainment (e.g., F1 Arcade) activation, and additional backfill announcements in retail .
  • Trading setup: Revenue beat vs Street contrasted by EBITDA shortfall; maintained FY25 FFO guidance limits downside; continued execution on leasing and backfills likely to be the narrative drivers.