Armada Hoffler Properties, Inc. (AHRT) Earnings

Management highlights

• Strategic transformation progress: Entered into a binding agreement to sell 11 multifamily assets for $562 million, completed the sale of the construction business, advanced the wind down of the real estate financing platform, repurchased 4.3 million shares of common stock, nominated 2 highly qualified independent directors to the Board, secured term sheets or reached final stages on all 3 2026 debt maturities, launched new corporate identity, and raised full - year FFO as adjusted guidance. • Portfolio highlights: Retail portfolio has strong leasing activity with rent commencements at Columbus Village and Interlock driving economic occupancy increases; office portfolio has high leased and economic occupancy, with same - store NOI growth and plans for rent commencements and re - leasing. • Capital allocation: Repurchased approximately 4.2 million shares for a total of $24.1 million at a weighted average price of approximately $5.70 per share; reallocated half of the previously modeled acquisition capital towards share repurchases. • People investment: Investing intentionally in people and building a culture centered on accountability, execution, and disciplined decision - making.

Guidance

The management has raised the full - year 2026 FFO as adjusted guidance range to $0.51 to $0.55 per diluted share, reflecting the continued restructuring progress, retail and mixed - use office portfolio strength, and the solid first quarter performance.

Segment performance

In the first quarter of 2026, AH Realty Trust's retail portfolio had a stabilized lease occupancy of 94.8% and economic occupancy of 92.5% at quarter end. Retail same - store NOI for the quarter was up 2.2%. The mixed - use office portfolio had a stabilized lease occupancy of 96% and economic occupancy of 87.7% at quarter end. Office same - store NOI for the quarter was up 0.7%. FFO as adjusted attributable to common shareholders was $15.1 million or $0.15 per diluted share for the first quarter.

Risks & headwinds

Forward - looking statements are based upon management's beliefs, assumptions and expectations, taking into account information that is currently available. These beliefs, assumptions and expectations may change as a result of possible events or factors, not all of which are known and many of which are difficult to predict and generally beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations, and listeners are advised to review the forward - looking statement disclosure in our press release that we distributed yesterday afternoon and the risk factors disclosed in documents we have filed with or furnished to the SEC.

Analyst Q&A

• Q: Congratulations on the progress of the restructuring. The capital markets activity is especially impressive given the macro and interest rate volatility. I was hoping if you could talk to kind of the breadth and depth of buyers for multifamily and for the construction platform and maybe the decision to go with the portfolio versus single assets?

  A: Yes, thank you for the question. And we appreciate the congratulatory remarks. We are excited to be able to beat our forecast and raise, and we're excited about the path forward. In terms of the capital markets, we've continued to see, especially in the multifamily and retail, obviously, the depth of the market. It's good to see that those markets remain strong even given the kind of macro headwinds. That being said, we had an opportunity to sell to Harbor Group here, great deal for our shareholders, obviously, at a mid - 5 cap on in - place and likely, hopefully, a good deal for their investors. We saw interest. We talked to quite a few folks, but we were able to make the best deal for shareholders all things considered with Harbor Group. So we feel good about that. And we're excited, by the way. We're a couple of weeks out, and will be -- that will be a material move, as you're aware, for our firm at $562 million, paying down debt. And as you heard, buying back some of our own shares at what we believe is a nice discount. In terms of construction, that business was and has been in wind - down mode. So our view was let's sell it. And the best buyer for that was actually the employees of the company. So we essentially traded that for a price that's north of what was due to the shareholders anyway in terms of gross profit, but we sold that at a slight uptick from what gross profit would have otherwise been received by the shareholders. It's a tough business right now, as you could imagine, with interest rates, and we think this is the best move for the company, for the shareholders to create a more simplistic company reduce not only confusion, but reduce risk, quite frankly, over the short, mid and long run. So we're excited about that.

• Q: Super helpful. And then I appreciate the enhanced disclosure. And you mentioned several lease commencements in the second half '26 for both retail and office, but also some offsets and known move - outs. Can you give any type of year - end '26 economic occupancy projections or ranges for either portfolio?

  A: Sure. I'll just start by saying that -- we are encouraged by the tailwinds, by the strength of the market and the leasing kind of momentum and velocity activity out there broadly, especially in terms of our retail and mixed - use office portfolio. But I think, Craig, why don't you drill down a little bit, if you don't mind, just quickly and talk a little bit about what's on the horizon here?

• Q: I have a question on your decision to kind of shift from acquisitions to share buybacks. It kind of makes sense given where your stock is trading. Just trying to understand the financial implications because if I'm not mistaken, you were planning to use some 1031 exchange money to kind of do these acquisitions. I'm just trying to understand financial implications for you connected with this decision.

  A: Sure. Thank you, Victor. I think it's pretty straightforward. As we get closer to closure in a couple of weeks on the kind of biggest material part of our transaction or transformation, have a better line of sight on the tax consequence to the REIT, and it looks like that will not be material. So we chose to -- given the value the stock was trading at and kind of capital allocation opportunity cost, if you will, versus buying a retail center at a 7 cap, we said, look, north of a 9 cap, it's better to invest in our assets that we have perfect information on. And obviously, to the benefit of the shareholder, kind of reduce that share count. So we think that was the best move. Obviously, we'd like to get into a mode where we're acquiring additional properties, but not at all costs, right? It needs to be accretive to the shareholder. So our view was let's take the opportunity while there is a discount and let's take also the opportunity to close that distance between current share price and what we believe NAV is -- we will move through that chapter as well as kind of look at some repositioning, kind of some redevelopment opportunities on the smaller scale within the portfolio as we close that gap and then continue to focus on our FFO growth to grow the value of the firm. So we thought it made a lot of sense, especially given that gap to buy the shares back kind of opportunistically, especially given that the REIT is not facing a material tax consequence as a result of the sales of the assets or otherwise real estate positions.

• Q: Makes sense. And then on these 2 multifamily assets, which are left in Gainesville. So I see that now you're kind of expecting to close it in Q4 '26, first quarter of -- so just trying to understand your logic here. So are you trying to kind of reach full stabilization for those assets and then sell them at the highest price? Like just trying to understand whether you will be willing to sell it earlier or later? How do we think about that?

  A: Yes. I think, look, the reality is they are stabilized now. And there's some market timing to this as well in addition to the fact that the buyer was not willing to pay us what we wanted for those assets, and we believe the market will bear a better price. So we're going to take those and sell them at the market to get the best number that we can and obviously benefit the company and therefore, the shareholders the best that we can in the form of paying down debt and bringing capital back on the balance sheet.

• Q: Maybe kind of -- Shawn, just bringing together all your comments and just all the moves that you guys have made with the Board refresh and the selling multifamily, what would you say is the most meaningful movement that the company has made this year?

  A: Well, that's a tough one. As you can tell, Jon, and I appreciate the question, we're excited about where we are and more importantly, where we're headed. It's hard to single one out. But I think from an economic standpoint, the scale and the momentum created here as of late on the sale of the multifamily and the real estate financing as well as the construction business. I mean, we came to the market 3 months ago and said we are going to do these things, and we have materially done those things. I think when you add to that, this kind of evolution of our company, the ability to bring highly skilled directors on board is, in my mind, metaphorically accretive to the Board, right? And it gives us an opportunity to have some additional guidance. We appreciate more than they know the kind of contributions from George and Dennis. But as we evolve this company, we're bringing 2 folks with deep capital markets REIT, public REIT experience on to this Board. And we think that is helpful to us to kind of challenge some assumptions work through the challenges that face us ahead and continue to grow this company, grow, again, close that NAV gap and grow the FFO and in turn, grow the shareholder value over time. So we're just excited about this, excited about the opportunity, thankful for the directors that were with us and very thankful for the ones that will be joining us. And I think, look, I'd be remiss not to say I'm thankful for the team for digging in and plowing through this challenging yet rewarding kind of phase in our company here. But we're fired up. We're excited. We are bullish, and we are executing, and we're excited about the future.