Armada Hoffler Q2 2025 slides: Normalized FFO stable at $0.25, maintains guidance

Introduction & Market Context

Armada Hoffler Properties, Inc. (NYSE:AHH) has released its second quarter 2025 supplemental financial package, showing signs of stabilization after a challenging first quarter. The real estate investment trust, which focuses on developing, building, and managing high-quality retail, office, and multifamily properties primarily in the Mid-Atlantic and Southeastern United States, reported normalized funds from operations (FFO) of $0.25 per diluted share, consistent with Q1 2025 results.

The company’s stock has been under pressure in recent months, trading near its 52-week low of $6.10. Following the Q1 earnings miss reported earlier this year, when AHH posted an EPS of -$0.07 against expectations of $0.01, investors have been closely monitoring the company’s performance for signs of recovery.

Quarterly Performance Highlights

Armada Hoffler’s Q2 2025 results show improvement from Q1, with the company reporting net income of $6.7 million compared to a net loss in the previous quarter. Normalized FFO remained stable at $0.25 per diluted share, while FFO came in at $0.19 per diluted share.

As shown in the following quarterly highlights, the company maintained strong occupancy rates across its portfolio segments:

The weighted average stabilized portfolio occupancy stood at 94.9% as of June 30, 2025, with office properties leading at 96.3%, followed by retail at 94.2% and multifamily at 94.0%. Commercial leasing activity remained robust with 168,000 square feet of new and renewed commercial space during the quarter.

A particularly bright spot in the results was the strong lease renewal spreads, with retail lease renewals showing a 10.8% GAAP increase and office lease renewals at an impressive 11.7% GAAP increase. These metrics suggest the company has maintained pricing power despite broader market challenges.

Portfolio Performance

Armada Hoffler’s portfolio continues to demonstrate resilience across its three main segments: retail, office, and multifamily. The company’s stabilized portfolio summary provides a comprehensive view of its property holdings and performance metrics:

The company’s strategic focus on mixed-use communities is evident in its portfolio composition, with 60% of annualized base rent (ABR) coming from these properties. Mixed-use communities, which combine retail, office, and multifamily elements, have shown stronger performance compared to single-use properties.

The following reconciliation of funds from operations shows the company’s core earnings metrics:

For the three months ended June 30, 2025, Armada Hoffler reported FFO of $18.97 million ($0.19 per diluted share), normalized FFO of $25.39 million ($0.25 per diluted share), and adjusted FFO (AFFO) of $18.41 million ($0.18 per diluted share).

Strategic Initiatives

Armada Hoffler continues to advance its development pipeline, with key projects including Southern Post in Roswell, GA, and Allied Harbor Point in Baltimore, MD. These mixed-use developments align with the company’s strategic focus on creating integrated communities.

The company’s portfolio expansion projects are illustrated below:

Southern Post, a mixed-use development with an estimated cost of $132.6 million, is expected to be commercially stabilized by Q4 2025 according to the company’s guidance assumptions. Allied Harbor Point, with a cost of $242.1 million, represents another significant investment in the company’s mixed-use strategy.

The company’s emphasis on mixed-use communities is supported by strong fundamentals, including an average walk score of 90 across these properties. The mixed-use portfolio comprises 2.9 million square feet of commercial space and 1,288 multifamily units.

Financial Position & Outlook

Armada Hoffler’s capitalization and financial ratios provide insight into the company’s financial health:

As of June 30, 2025, the company reported total debt of $1.45 billion, with a debt-to-total capitalization ratio of 62%. The debt service coverage ratio stood at 1.7x, while the fixed charge coverage ratio was 1.5x. The company has maintained financial stability with 93.8% of its debt either fixed-rate or hedged, providing protection against interest rate fluctuations.

The company’s credit profile shows a weighted average interest rate of 4.4% and a weighted average maturity of 2.7 years:

Looking ahead, Armada Hoffler has reaffirmed its full-year 2025 normalized FFO guidance of $1.00 to $1.10 per diluted share, consistent with the guidance mentioned in the Q1 earnings report. This outlook is based on projected property portfolio NOI of $173.6-$176.0 million, construction segment profit of $5.0-$7.0 million, and adjusted interest expense of $64.7-$60.7 million.

Segment Performance

A breakdown of net income and NOI by segment provides further insight into the company’s performance drivers:

For the three months ended June 30, 2025, the office segment was the largest contributor to real estate NOI at $14.1 million, followed by retail at $13.8 million and multifamily at $9.0 million. The general contracting and real estate services segment generated $32.0 million in revenue but a more modest $1.4 million in gross profit, reflecting the lower-margin nature of this business.

The company’s top 20 tenants, which include investment-grade companies such as Constellation Energy (NASDAQ:CEG) Generation, Morgan Stanley (NYSE:MS), and T. Rowe Price, account for 23.7% of total ABR, providing a stable income base. Investment-grade tenants represent 75.3% of the top 20 tenants’ ABR, highlighting the quality of the company’s tenant roster.

In conclusion, Armada Hoffler’s Q2 2025 results demonstrate stabilization after a challenging first quarter, with normalized FFO holding steady at $0.25 per diluted share. The company’s strategic focus on mixed-use communities, strong lease renewal spreads, and high occupancy rates across its portfolio segments provide a foundation for continued performance as it executes on its development pipeline and maintains its full-year guidance.

Full presentation:

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