Armada Hoffler Properties NYSE: AHRT raised its full-year 2026 FFO as adjusted guidance after reporting second-quarter results that reflected continued portfolio leasing gains and progress on its restructuring plan.
Chairman, President and CEO Shawn Tibbetts said the company now expects full-year FFO as adjusted of $0.53 to $0.57 per diluted share. Second-quarter FFO as adjusted was $14.1 million, or $0.14 per diluted share, while AFFO totaled $18.1 million, or $0.18 per share. The company said its dividend payout ratio was approximately 77% of AFFO.
“This has been the most consequential and productive quarter” in the company’s history, Tibbetts said, citing asset sales, debt repayment, the exit from construction operations and a substantial wind-down of its real estate financing platform.
Multifamily Sales Drive Deleveraging
The company said it has largely completed its transition into a pure-play owner and operator of open-air retail and mixed-use office properties. In May, it completed the sale of nine multifamily properties to affiliates of Harbor Group International for $485 million.
Greenside and Premier remain under contract with Harbor Group International for a combined $77 million. The company expects Greenside to close by the end of 2026 and Premier by mid-2027. Separately, it has a purchase-and-sale agreement for The Everly and Solis Gainesville at an aggregate gross sales price of $95.5 million, with the buyer’s deposit nonrefundable and closing anticipated by the end of the third quarter.
The company plans to retain Smith’s Landing because of its ground-lease structure and stable cash flow. Tibbetts said the completed and pending transactions represent more than $565 million of signed or closed asset sales.
Proceeds from the initial Harbor Group transaction supported substantial debt reduction. During the quarter, the company paid down $353 million of variable-rate debt and $456 million of net debt overall. Total debt declined to $1.04 billion at June 30 from $1.49 billion at the end of the first quarter.
Net debt to total adjusted EBITDA improved to 7.1 times from 8.3 times in the prior quarter. CFO Matthew Barnes-Smith said the company is targeting a range of 5.5 to 6.5 times and expects further improvement as it completes remaining multifamily and real estate financing dispositions.
As of quarter-end, all debt was fixed rate or hedged, with a weighted average interest rate of 4.3%. The company reported $267.1 million of liquidity, including $203.7 million of borrowing availability and $35.5 million of cash.
Retail and Office Portfolio Performance
Total property portfolio NOI rose 2.2% year over year to $35.3 million. Blended same-store cash NOI increased 5.3%, including 2.9% growth in retail and 8.3% growth in office.
The retail portfolio was 95.1% leased at quarter-end, with cash renewal lease spreads of 8.7%. Retail same-store NOI growth was supported by economic occupancy gains, prior leasing activity and the backfill of former Bed Bath & Beyond, Party City and Joann anchor spaces. New occupants include Burlington, Boot Barn, Bob’s Discount Furniture, Golf Galaxy and Trader Joe’s.
Executive Vice President of Asset Management Craig Ramiro said the shopping-center portfolio’s same-store NOI increased 5.7% year over year. At Columbus Village, year-to-date visits rose more than sixfold from the prior year after the openings of Trader Joe’s and Golf Galaxy, while inline-shop and outparcel rents doubled, according to Ramiro.
At Southgate Square, visits increased 54% year to date after a restaurant backfilled former Joann space and 7 Brew Coffee leased a previously undeveloped parking-area site. The company said it recorded more than 33% renewal spreads on inline shop space at the property and is negotiating with a national fast-casual restaurant at a 55% positive cash spread.
At The Interlock in Atlanta, retail NOI increased 32% year over year as a rooftop space reached full economic occupancy after being re-leased at a 64% positive cash spread. Visits rose 33%, while parking transactions increased 36%. The company expects further NOI gains as rent from F1 Arcade begins in the third quarter.
Office occupancy ended the quarter at 96.7% leased, while economic occupancy was 90%. Office renewal cash spreads were 21.6%. The company cited higher occupancy and rent commencements at Harbor Point in Baltimore, Town Center in Virginia Beach and The Interlock.
At 222 Central Park, the company moved its own offices into previously vacant retail space elsewhere in Town Center, freeing its former office space. It subsequently leased 38,000 square feet at what Tibbetts described as top-of-market rent, creating $1.3 million of new annualized base rent.
Guidance and Capital Allocation
The company increased its full-year same-store cash NOI growth outlook to 2.5% to 3.5% for retail and 2.75% to 3.75% for office. It reported $1.8 million of signed but not occupied annualized base rent in retail, with most expected to be realized in 2027, and $4.6 million in office, more than half of which is expected to commence this year.
Through June 30, the company repurchased 5.6 million shares for approximately $33.2 million, at a weighted average price of $5.92 per share. About $54.1 million remained under its repurchase authorization following the board’s decision in May to increase total authorized capacity to $100 million.
Barnes-Smith said the updated outlook assumes completion of remaining multifamily dispositions, the exit of the remaining real estate financing position, additional secured and unsecured debt paydowns, and no acquisitions during fiscal 2026. Management said it will continue evaluating share repurchases, targeted redevelopment, outparcel development and selectively accretive acquisitions.
About Armada Hoffler Properties (NYSE:AHRT)
Armada Hoffler Properties, Inc is a publicly traded real estate investment trust (REIT) specializing in the ownership, operation and development of retail, office and mixed-use properties. The company’s portfolio primarily comprises neighborhood and community shopping centers, urban infill retail sites and select office buildings located in high-growth markets. Armada Hoffler also provides in-house property management and leasing services, leveraging its vertically integrated platform to enhance asset value and tenant satisfaction.
Founded on a legacy of commercial real estate development dating back to the 1970s, Armada Hoffler went public in 2016 through a strategic combination of private real estate entities.
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