Armada Hoffler Properties reports stable performance in second quarter

Published August 14, 2013 by Paula C. Squires

In his first conference call on earnings since Armada Hoffler Properties Inc. (AHH) went public in May, CEO Louis Haddad shared some good news on Wednesday: the average occupancy rate for company properties remained stable during the second quarter at 93.5 percent

With only 48 days under its belt as a public REIT, Armada didn’t have as many figures to flash around as other public REITs. What it did report:

·         Pro forma funds from operations (FFO) of $6.5 million, or 20 cents a share
·         Net income of $8.4 million, or 26 cents a share, which includes one-time items and transactions from the IPO.
·         Excluding one-time and non-cash items, net income for the second quarter was $1.4 million, or 4 cents per share.
·         Announced that its Board of Directors has declared a dividend of 16 cents per share on the company's shares of common stock for the third quarter of 2013.

During the second quarter, AHH executed new and renewal leases totaling more than 80,000 square feet in the office and retail portfolios.  It’s engaged in 17 construction contracts with an estimated value of about $117.3 million, and there’s $58.2 million of work yet to be completed.

While net income from this segment of the company is small, Haddad said AHH’s construction expertise is a competitive advantage, because it allows the company to hold down costs while building properties that later go into its portfolio.  The IPO included 24 properties, mostly in Virginia.

The IPO, which raised a total of $218.5 million in gross proceeds, has allowed the company to be well capitalized, Haddad said. AHH has repaid about $150 million of debt outstanding, and it entered into a new $100 million senior secured revolving credit facility, with an option to increase the borrowing capacity to $250 million.

In concluding remarks, Haddad noted that the current and fifth development phase of Town Center of Virginia Beach –which includes a 15-story tower – is 50 percent preleased.

Going forward, he hinted that change is coming to Town Center, the company’s flagship, mixed-use project and the home of its headquarters. ”We pretty much filled up all the nooks and crannies, getting close to 100 percent occupancy for office,” said Haddad. We’ll need to shuffle some tenants around as soon as we can get this new tower online, because we have to provide some relief to people. We’re going to make some strategic decisions that will involve spending some money, lengthening some leases and perhaps switching some tenants around.”

Virginia Business profiles Haddad in the interview section of the September issue.