GlobeNewswire Inc | Nov 2, 2021 06:00AM EDT

November 02, 2021

Net Income of $0.06 Per Diluted Share

Normalized FFO of $0.26 Per Diluted Share

Raised 2021 Full-Year Normalized FFO Guidance to $1.05 to $1.07 Per Diluted Share

Increased Fourth Quarter Cash Dividend on Common Shares for the Third Time This Year

VIRGINIA BEACH, Va., Nov. 02, 2021 (GLOBE NEWSWIRE) -- Armada Hoffler Properties,Inc. (NYSE: AHH) today announced its results for the quarter ended September30, 2021 and provided an update on current events.

Third Quarter and Recent Highlights:

-- Net income attributable to common stockholders and OP Unit holders of $4.9 million, or $0.06 per diluted share, compared to $8.7 million, or $0.11 per diluted share, for the three months ended September30, 2020. -- Funds from operations attributable to common stockholders and OP Unit holders ("FFO") of $21.9 million, or $0.27 per diluted share, compared to $19.2 million, or $0.24 per diluted share, for the three months ended September30, 2020. See "Non-GAAP Financial Measures." -- Normalized funds from operations attributable to common stockholders and OP Unit holders ("Normalized FFO") of $21.5 million, or $0.26 per diluted share, compared to $19.0 million, or $0.24 per diluted share, for the three months ended September30, 2020. -- Raised 2021 full-year Normalized FFO guidance to $1.05 to $1.07 per diluted share from the Company's previous guidance range of $1.02 to $1.06 per diluted share due to higher forecast net operating income ("NOI") from the operating portfolio. -- Announced a fourth quarter cash dividend of $0.17 per common share, resulting in the third quarterly increase this year, a 6.25% increase over the prior quarter's dividend, and a 54.5% cumulative increase year-to-date. -- Stabilized operating property portfolio occupancy increased to 96.4% as of September 30, 2021. Office occupancy was 96.9%, retail occupancy was 95.2%, and multifamily occupancy was 97.4%. -- Positive releasing spreads on retail lease renewals during the third quarter of 13.3% on a GAAP basis and 8.4% on a cash basis. -- Same Store NOI increased 10.5% on a GAAP basis and 8.7% on a cash basis compared to the quarter ended September 30, 2020. Highlights include:Multifamily Same Store NOI increased 19.0% on a GAAP basis and 19.5% on a cash basis compared to the quarter ended September 30, 2020.Retail Same Store NOI increased 15.3% on a GAAP basis and 9.5% on a cash basis compared to the quarter ended September 30, 2020. -- Leased 90,000 square feet of commercial office and retail space since the Companys previous quarterly update, including 36,000 square feet at Wills Wharf. -- Announced the commencement of construction at mixed-use development project, Southern Post in Roswell, Georgia by the end of 2021. -- Completed the off-market acquisition of Greenbrier Square, a Kroger-anchored retail center in Chesapeake, VA. -- Completed the off-market acquisition of Overlook Village, a 150,000 square foot retail center in Asheville, NC anchored by T.J. Maxx | Homegoods and Ross.

Leasing activity is at the highest velocity weve seen in years, the development pipeline is well-stocked, off-market acquisition opportunities are on the horizon, and property NOI continues to increase, said Lou Haddad, President & CEO. All these factors have combined to enable us to again raise our full year guidance. Additionally, as announced in last week's press release, the Board raised the dividend for the third time this year.

Financial Results

Net income attributable to common stockholders and OP Unit holders for the third quarter decreased to $4.9 million compared to $8.7 million for the third quarter of 2020. The period-over-period change was primarily due to a decrease in gains on real estate dispositions, a decrease in general contracting gross profit, a decrease in interest income on our mezzanine loan portfolio, and an increase in interest expense. Additionally, we paid more in preferred dividends due to the issuance of additional preferred stock during 2020. These decreases were partially offset by NOI resulting primarily from leasing activity and property acquisitions.

FFO attributable to common stockholders and OP Unit holders for the third quarter increased to $21.9 million compared to $19.2 million for the third quarter of 2020. Normalized FFO attributable to common stockholders and OP Unit holders for the third quarter increased to $21.5 million compared to $19.0 million for the third quarter of 2020. The period-over-period changes in FFO and Normalized FFO were due to NOI resulting primarily from leasing activity and property acquisitions. These increases were partially offset by a decrease in general contracting gross profit, a decrease in interest income on our mezzanine loan portfolio, and an increase in interest expense. Additionally, we paid more in preferred dividends due to the issuance of additional preferred stock during 2020.

Operating Performance

At the end of the third quarter, the Companys office, retail and multifamily stabilized operating property portfolios were 96.9%, 95.2% and 97.4% (conventional multifamily was 97.4% and student housing was 97.5%) occupied, respectively.

Total construction contract backlog was $106.9 million at the end of the third quarter.

Balance Sheet and Financing Activity

As of September30, 2021, the Company had $1.0 billion of total debt outstanding, including $30.0 million outstanding under its revolving credit facility. Total debt outstanding excludes GAAP adjustments. Approximately 58% of the Companys debt had fixed interest rates or was subject to interest rate swaps as of September30, 2021. After giving effect to LIBOR interest rate caps with strike prices at or below 50 basis points as of September30, 2021, 96% of the Companys debt was either fixed or hedged.

The Company refinanced the loan secured by Thames Street during the third quarter. The new $71.0million loan bears interest at a rate of Bloomberg Short-Term Bank Yield Index ("BSBY") plus a spread of 1.30% and will mature on September 30, 2026. The Company simultaneously entered into an interest rate swap agreement that effectively fixes the interest rate at 2.35% for the term of the loan. The Company has no loans scheduled to mature during the remainder of 2021 and $19.6 million of loans scheduled to mature in 2022.

The Company is currently in compliance with all debt covenants.

Outlook

The Company issued updated 2021 full-year Normalized FFO guidance in the range to $1.05 to $1.07 per diluted share from $1.02 to $1.06. The following table updates the Company's assumptions underpinning this forecast. The Company's executive management will provide further details regarding its 2021 earnings guidance during today's webcast and conference call.

Full-year 2021 Guidance ^[1] Expected RangesTotal NOI $122.5M $123.4MConstruction Segment Gross Profit $3.6M $4.0MG&A Expenses $14.8M $15.1MMezzanine Interest Income $18.2M $18.6MInterest Expense^[2] $33.6M $34.0MNormalized FFO per diluted share ^[3] $1.05 $1.07

[1] Includes the following assumptions:

-- Interest Expense based on Forward LIBOR Curve, which forecasts rates ending the year at 0.10% -- Opportunistic sale of common stock through the ATM program, resulting in a full year weighted average share count of 82M -- Disposition of Johns Hopkins Village during the fourth quarter

[2] Includes interest expense on finance leases[3] 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 unrealized credit losses, 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.

Supplemental Financial Information

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

Webcast and Conference Call

The Company will host a webcast and conference call on Tuesday, November2, 2021 at 8:30 a.m.Eastern Time to review financial results and discuss recent events. The live webcast will be available through the Investors pageof the Companys 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 Thursday, December2, 2021 by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 13723130.

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 Companys operating property portfolio, the Companys development pipeline, the Companys construction and development business, including backlog and timing of deliveries and estimated costs, financing activities, and the Companys financial outlook and expectations. For a description of factors that may cause the Companys actual results or performance to differ from its forward-looking statements, please review the information under the heading Risk Factors included in the Companys Annual Report on Form 10-K for the year ended December 31, 2020, and the other documents filed by the Company with the Securities and Exchange Commission (the SEC) from time to time. The Companys actual future results and trends may differ materially from expectations depending on a variety of factors discussed in the Companys filings with the the SEC. These factors include, without limitation: (a) the impact of the coronavirus (COVID-19) pandemic on macroeconomic conditions and economic conditions in the markets in which the Company operates, including, among others: (i) disruptions in, or a lack of access to, the capital markets or disruptions in the Companys ability to borrow amounts subject to existing construction loan commitments; (ii) adverse impacts to the Companys tenants and other third parties businesses and financial condition that adversely affect the ability and willingness of the Companys tenants and other third parties to satisfy their rent and other obligations to the Company, including deferred rent; (iii) the ability and willingness of the Companys tenants to renew their leases with the Company upon expiration of the leases or to re-lease the Companys properties on the same or better terms in the event of nonrenewal or early termination of existing leases; and (iv) federal, state and local government initiatives to mitigate the impact of the COVID-19 pandemic, including additional restrictions on business activities, shelter-in place orders and other restrictions, and the timing and amount of economic stimulus or other initiatives; (b) the Companys ability to continue construction on development and construction projects, in each case on the timeframes and on terms currently anticipated; (c) the Companys ability to accurately assess and predict the impact of the COVID-19 pandemic on its results of operations, financial condition, dividend policy, acquisition and disposition activities and growth opportunities; and (d) the Companys ability to maintain compliance with the covenants under its existing debt agreements or to obtain modifications to such covenants from the applicable lenders. The Company expressly disclaims any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by 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 Companys 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 Companys operating performance with that of other REITs.

However, because FFO excludes depreciation and amortization and captures neither the changes in the value of the Companys 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 Companys properties, all of which have real economic effects and could materially impact the Companys results from operations, the utility of FFO as a measure of the Companys 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 Companys 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 Companys performance.

Management also believes that the computation of FFO in accordance with Nareits definition includes certain items that are not indicative of the results provided by the Companys operating property portfolio and affect the comparability of the Companys 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, provision for unrealized 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 Companys 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 Companys 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 Companys 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)

September 30, December 31, 2021 2020 (Unaudited) ASSETS Real estate investments: Income producing property $ 1,744,124 $ 1,680,943 Held for development 11,294 13,607 Construction in progress 54,871 63,367 1,810,289 1,757,917 Accumulated depreciation (278,218 ) (253,965 )Net real estate investments 1,532,071 1,503,952 Real estate investments held for sale 68,762 1,165 Cash and cash equivalents 28,038 40,998 Restricted cash 5,415 9,432 Accounts receivable, net 30,576 28,259 Notes receivable, net 118,164 135,432 Construction receivables, including retentions, 13,753 38,735 netConstruction contract costs and estimated 370 138 earnings in excess of billingsEquity method investment 9,174 1,078 Operating lease right-of-use assets 23,547 32,760 Finance lease right-of-use assets 47,266 23,544 Acquired lease intangible assets 65,197 58,154 Other assets 42,051 43,324 Total Assets $ 1,984,384 $ 1,916,971 LIABILITIES AND EQUITY Indebtedness, net $ 968,424 $ 963,845 Liabilities related to assets held for sale 60,021 ? Accounts payable and accrued liabilities 26,549 23,900 Construction payables, including retentions 22,078 49,821 Billings in excess of construction contract 2,674 6,088 costs and estimated earningsOperating lease liabilities 31,607 41,659 Finance lease liabilities 46,078 17,954 Other liabilities 62,197 56,902 Total Liabilities 1,219,628 1,160,169 Total Equity 764,756 756,802 Total Liabilities and Equity $ 1,984,384 $ 1,916,971

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

Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 (Unaudited)Revenues Rental revenues $ 49,560 $ 39,636 $ 142,679 $ 121,840 General contracting andreal estate services 17,502 58,617 71,473 163,283 revenuesTotal revenues 67,062 98,253 214,152 285,123 Expenses Rental expenses 12,717 10,223 34,841 27,907 Real estate taxes 5,543 4,760 16,314 13,326 General contracting andreal estate services 15,944 56,509 68,350 157,401 expensesDepreciation and 16,886 14,176 52,237 42,232 amortizationAmortization ofright-of-use assets - 278 147 745 440 finance leasesGeneral and 3,449 2,601 10,957 9,382 administrative expensesAcquisition, development 8 26 111 555 and other pursuit costsImpairment charges ? 47 3,122 205 Total expenses 54,825 88,489 186,677 251,448 Gain (loss) on real (113 ) 3,612 3,604 6,388 estate dispositions, netOperating income 12,124 13,376 31,079 40,063 Interest income 3,766 4,417 14,628 16,055 Interest expense (8,827 ) (7,523 ) (25,220 ) (22,938 )Change in fair value of 131 318 838 (1,424 )derivatives and otherUnrealized credit loss 617 33 284 (227 )release (provision)Other income (expense), (105 ) 177 81 521 netIncome before taxes 7,706 10,798 21,690 32,050 Income tax benefit 42 28 522 220 Net income 7,748 10,826 22,212 32,270 Net loss attributable tononcontrolling interests ? 45 ? 181 in investment entitiesPreferred stock dividends (2,887 ) (2,220 ) (8,661 ) (4,462 )Net income attributableto common stockholders $ 4,861 $ 8,651 $ 13,551 $ 27,989 and OP Unitholders

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

Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 (Unaudited)Net income attributable tocommon stockholders and OP $ 4,861 $ 8,651 $ 13,551 $ 27,989 UnitholdersDepreciation and 16,886 14,131 52,237 41,867 amortization^(1)Loss (gain) on operatingreal estate dispositions, 113 (3,612 ) (3,351 ) (6,388 )net^(2)Impairment of real estate ? ? 3,039 ? assetsFFO attributable to commonstockholders and OP $ 21,860 $ 19,170 $ 65,476 $ 63,468 UnitholdersAcquisition, development 8 26 111 555 and other pursuit costsImpairment of intangible ? 47 83 205 assets and liabilitiesLoss on extinguishment of 120 ? 120 ? debtUnrealized credit loss (617 ) (33 ) (284 ) 227 provision (release)Amortization ofright-of-use assets - 278 147 745 440 finance leasesChange in fair value of (131 ) (318 ) (838 ) 1,424 derivatives and otherNormalized FFO available tocommon stockholders and OP $ 21,518 $ 19,039 $ 65,413 $ 66,319 UnitholdersNet income attributable tocommon stockholders and OP $ 0.06 $ 0.11 $ 0.17 $ 0.36 Unitholders per dilutedshare and unitFFO attributable to commonstockholders and OP $ 0.27 $ 0.24 $ 0.81 $ 0.81 Unitholders per dilutedshare and unitNormalized FFO attributableto common stockholders and $ 0.26 $ 0.24 $ 0.81 $ 0.85 OP Unitholders per dilutedshare and unitWeighted average common 81,936 78,443 81,164 78,020 shares and units - diluted

________________________________________(1) The adjustment for depreciation and amortization for the three and nine months ended September 30, 2020 excludes $0.1 million and $0.4 million, respectively, of depreciation attributable to the Company's joint venture partners.(2) The adjustment for gain on operating real estate dispositions for the nine months ended September 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 Nine Months Ended September 30, September 30, 2021 2020 2021 2020Office Same Store^(1) Same Store NOI, Cash Basis $ 6,357 $ 6,298 $ 19,201 $ 18,543 GAAP Adjustments ^(2) 70 286 714 1,269 Same Store NOI 6,427 6,584 19,915 19,812 Non-Same Store NOI ^(3) 550 455 1,869 702 Segment NOI 6,977 7,039 21,784 20,514 Retail Same Store^ (4) Same Store NOI, Cash Basis 12,092 11,046 35,350 32,879 GAAP Adjustments^ (2) 163 (415 ) 636 2,784 Same Store NOI 12,255 10,631 35,986 35,663 Non-Same Store NOI ^(3) 2,598 612 6,270 5,054 Segment NOI 14,853 11,243 42,256 40,717 Multifamily Same Store^ (5) Same Store NOI, Cash Basis 4,565 3,821 13,465 12,542 GAAP Adjustments^ (2) 184 170 557 98 Same Store NOI 4,749 3,991 14,022 12,640 Non-Same Store NOI ^(3) 4,721 2,380 13,462 6,736 Segment NOI 9,470 6,371 27,484 19,376 Total Property NOI 31,300 24,653 91,524 80,607 General contracting & real 1,558 2,108 3,123 5,882 estate services gross profitDepreciation and amortization (16,886 ) (14,176 ) (52,237 ) (42,232 )General and administrative (3,449 ) (2,601 ) (10,957 ) (9,382 )expensesAcquisition, development and (8 ) (26 ) (111 ) (555 )other pursuit costsImpairment charges ? (47 ) (3,122 ) (205 )Gain (loss) on real estate (113 ) 3,612 3,604 6,388 dispositions, netInterest income 3,766 4,417 14,628 16,055 Interest expense (8,827 ) (7,523 ) (25,220 ) (22,938 )Unrealized credit loss 617 33 284 (227 )release (provision)Amortization of right-of-use (278 ) (147 ) (745 ) (440 )assets - finance leasesChange in fair value of 131 318 838 (1,424 )derivatives and otherOther income (expense), net (105 ) 177 81 521 Income tax benefit 42 28 522 220 Net income 7,748 10,826 22,212 32,270 Net loss attributable tononcontrolling interest in ? 45 ? 181 investment entitiesPreferred stock dividends (2,887 ) (2,220 ) (8,661 ) (4,462 )Net income attributable to $ 4,861 $ 8,651 $ 13,551 $ 27,989 AHH and OP unitholders

________________________________________(1) Office same-store portfolio excludes 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 Apex Entertainment, Delray Beach Plaza, Greenbrier Square, Nexton Square, Overlook Village, and Premier Retail. In addition, retail same store results exclude the seven-property retail portfolio that was disposed in May 2020 (Alexander Pointe, Bermuda Crossroads, Gainsborough Square, Harper Hill Commons, Indian Lakes Crossing, Renaissance Square, and Stone House Square) and Oakland Marketplace and Socastee Commons, each of which were disposed in 2021.(5) Multifamily same-store portfolio excludes The Residences at Annapolis Junction, Edison Apartments, Johns Hopkins Village, Summit Place, and The Cosmopolitan.

Contact:

Michael P. OHaraArmada Hoffler Properties,Inc.Chief Financial Officer, Treasurer, and SecretaryEmail: MOHara@ArmadaHoffler.comPhone: (757) 366-6684