Net Income of
Normalized FFO of
Raised 2021 Full-Year Normalized FFO Guidance to
Increased Fourth Quarter Cash Dividend on Common Shares for the Third Time This Year
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 endedSeptember 30, 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 endedSeptember 30, 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 endedSeptember 30, 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 .
- Multifamily Same Store NOI increased 19.0% on a GAAP basis and 19.5% on a cash basis compared to the quarter ended
- Leased 90,000 square feet of commercial office and retail space since the Company’s previous quarterly update, including 36,000 square feet at
Wills Wharf . - Announced the commencement of construction at mixed-use development project,
Southern Post inRoswell, Georgia by the end of 2021. - Completed the off-market acquisition of
Greenbrier Square , a Kroger-anchored retail center inChesapeake, VA . - Completed the off-market acquisition of
Overlook Village , a 150,000 square foot retail center inAsheville, NC anchored byT.J. Maxx |Homegoods and Ross.
“Leasing activity is at the highest velocity we’ve seen in years, the development pipeline is well-stocked, off-market acquisition opportunities are on the horizon, and property NOI continues to increase,” said
Financial Results
Net income attributable to common stockholders and OP Unit holders for the third quarter decreased to
FFO attributable to common stockholders and OP Unit holders for the third quarter increased to
Operating Performance
At the end of the third quarter, the Company’s 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
Balance Sheet and Financing Activity
As of
The Company refinanced the loan secured by
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
Full-year 2021 Guidance [1] | Expected Ranges | |||||
Total NOI | ||||||
Construction Segment Gross Profit | ||||||
G&A Expenses | ||||||
Mezzanine Interest Income | ||||||
Interest Expense[2] | ||||||
Normalized FFO per diluted share [3] | ||||||
[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 Company’s supplemental financial package available at www.ArmadaHoffler.com.
Webcast and Conference Call
The Company will host a webcast and conference call on
About
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 Company’s operating property portfolio, the Company’s development pipeline, the Company’s construction and development business, including backlog and timing of deliveries and estimated costs, financing activities, and the Company’s financial outlook and expectations. For a description of factors that may cause the Company’s actual results or performance to differ from its forward-looking statements, please review the information under the heading “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended
Non-GAAP Financial Measures
The Company calculates FFO in accordance with the standards established by the
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 Company’s 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 Company’s operating performance with that of other REITs.
However, because FFO excludes depreciation and amortization and captures neither the changes in the value of the Company’s 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 Company’s properties, all of which have real economic effects and could materially impact the Company’s results from operations, the utility of FFO as a measure of the Company’s 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 Company’s 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 Company’s performance.
Management also believes that the computation of FFO in accordance with Nareit’s definition includes certain items that are not indicative of the results provided by the Company’s operating property portfolio and affect the comparability of the Company’s 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 Company’s 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 Company’s 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 Company’s 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)
(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, net | 13,753 | 38,735 | ||||||
Construction contract costs and estimated earnings in excess of billings | 370 | 138 | ||||||
Equity 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 costs and estimated earnings | 2,674 | 6,088 | ||||||
Operating 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 | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
(Unaudited) | ||||||||||||||||
Revenues | ||||||||||||||||
Rental revenues | $ | 49,560 | $ | 39,636 | $ | 142,679 | $ | 121,840 | ||||||||
General contracting and real estate services revenues | 17,502 | 58,617 | 71,473 | 163,283 | ||||||||||||
Total 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 and real estate services expenses | 15,944 | 56,509 | 68,350 | 157,401 | ||||||||||||
Depreciation and amortization | 16,886 | 14,176 | 52,237 | 42,232 | ||||||||||||
Amortization of right-of-use assets - finance leases | 278 | 147 | 745 | 440 | ||||||||||||
General and administrative expenses | 3,449 | 2,601 | 10,957 | 9,382 | ||||||||||||
Acquisition, development and other pursuit costs | 8 | 26 | 111 | 555 | ||||||||||||
Impairment charges | — | 47 | 3,122 | 205 | ||||||||||||
Total expenses | 54,825 | 88,489 | 186,677 | 251,448 | ||||||||||||
Gain (loss) on real estate dispositions, net | (113 | ) | 3,612 | 3,604 | 6,388 | |||||||||||
Operating 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 derivatives and other | 131 | 318 | 838 | (1,424 | ) | |||||||||||
Unrealized credit loss release (provision) | 617 | 33 | 284 | (227 | ) | |||||||||||
Other income (expense), net | (105 | ) | 177 | 81 | 521 | |||||||||||
Income 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 to noncontrolling interests in investment entities | — | 45 | — | 181 | ||||||||||||
Preferred stock dividends | (2,887 | ) | (2,220 | ) | (8,661 | ) | (4,462 | ) | ||||||||
Net income attributable to common stockholders and OP Unitholders | $ | 4,861 | $ | 8,651 | $ | 13,551 | $ | 27,989 | ||||||||
ARMADA HOFFLER PROPERTIES, INC.
RECONCILIATION OF NET INCOME TO FFO & NORMALIZED FFO
(in thousands, except per share amounts)
Three Months Ended | Nine Months Ended | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
(Unaudited) | ||||||||||||||||
Net income attributable to common stockholders and OP Unitholders | $ | 4,861 | $ | 8,651 | $ | 13,551 | $ | 27,989 | ||||||||
Depreciation and amortization(1) | 16,886 | 14,131 | 52,237 | 41,867 | ||||||||||||
Loss (gain) on operating real estate dispositions, net(2) | 113 | (3,612 | ) | (3,351 | ) | (6,388 | ) | |||||||||
Impairment of real estate assets | — | — | 3,039 | — | ||||||||||||
FFO attributable to common stockholders and OP Unitholders | $ | 21,860 | $ | 19,170 | $ | 65,476 | $ | 63,468 | ||||||||
Acquisition, development and other pursuit costs | 8 | 26 | 111 | 555 | ||||||||||||
Impairment of intangible assets and liabilities | — | 47 | 83 | 205 | ||||||||||||
Loss on extinguishment of debt | 120 | — | 120 | — | ||||||||||||
Unrealized credit loss provision (release) | (617 | ) | (33 | ) | (284 | ) | 227 | |||||||||
Amortization of right-of-use assets - finance leases | 278 | 147 | 745 | 440 | ||||||||||||
Change in fair value of derivatives and other | (131 | ) | (318 | ) | (838 | ) | 1,424 | |||||||||
Normalized FFO available to common stockholders and OP Unitholders | $ | 21,518 | $ | 19,039 | $ | 65,413 | $ | 66,319 | ||||||||
Net income attributable to common stockholders and OP Unitholders per diluted share and unit | $ | 0.06 | $ | 0.11 | $ | 0.17 | $ | 0.36 | ||||||||
FFO attributable to common stockholders and OP Unitholders per diluted share and unit | $ | 0.27 | $ | 0.24 | $ | 0.81 | $ | 0.81 | ||||||||
Normalized FFO attributable to common stockholders and OP Unitholders per diluted share and unit | $ | 0.26 | $ | 0.24 | $ | 0.81 | $ | 0.85 | ||||||||
Weighted average common shares and units - diluted | 81,936 | 78,443 | 81,164 | 78,020 | ||||||||||||
________________________________________
(1) The adjustment for depreciation and amortization for the three and nine months ended
(2) The adjustment for gain on operating real estate dispositions for the nine months ended
ARMADA HOFFLER PROPERTIES, INC.
RECONCILIATION OF NET INCOME TO SAME STORE NOI, CASH BASIS
(in thousands) (unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
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 | ||||||||||||
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 | ||||||||||||
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 estate services gross profit | 1,558 | 2,108 | 3,123 | 5,882 | ||||||||||||
Depreciation and amortization | (16,886 | ) | (14,176 | ) | (52,237 | ) | (42,232 | ) | ||||||||
General and administrative expenses | (3,449 | ) | (2,601 | ) | (10,957 | ) | (9,382 | ) | ||||||||
Acquisition, development and other pursuit costs | (8 | ) | (26 | ) | (111 | ) | (555 | ) | ||||||||
Impairment charges | — | (47 | ) | (3,122 | ) | (205 | ) | |||||||||
Gain (loss) on real estate dispositions, net | (113 | ) | 3,612 | 3,604 | 6,388 | |||||||||||
Interest income | 3,766 | 4,417 | 14,628 | 16,055 | ||||||||||||
Interest expense | (8,827 | ) | (7,523 | ) | (25,220 | ) | (22,938 | ) | ||||||||
Unrealized credit loss release (provision) | 617 | 33 | 284 | (227 | ) | |||||||||||
Amortization of right-of-use assets - finance leases | (278 | ) | (147 | ) | (745 | ) | (440 | ) | ||||||||
Change in fair value of derivatives and other | 131 | 318 | 838 | (1,424 | ) | |||||||||||
Other 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 to noncontrolling interest in investment entities | — | 45 | — | 181 | ||||||||||||
Preferred stock dividends | (2,887 | ) | (2,220 | ) | (8,661 | ) | (4,462 | ) | ||||||||
Net income attributable to AHH and OP unitholders | $ | 4,861 | $ | 8,651 | $ | 13,551 | $ | 27,989 | ||||||||
________________________________________
(1) Office same-store portfolio excludes
(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
(5) Multifamily same-store portfolio excludes
Contact:
Michael P. O’Hara
Chief Financial Officer, Treasurer, and Secretary
Email: MOHara@ArmadaHoffler.com
Phone: (757) 366-6684
Source:
2021 GlobeNewswire, Inc., source