Good morning, ladies and gentlemen, and welcome to the Amanda Hoffler 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Tuesday, August 5, 2025. I would now like to turn the conference call over to Chelsea Forrest, VP of Investor Relations. Please go ahead.

Good morning, and thank you for joining Armada Hoffler's Second Quarter 2025 Earnings Conference Call and Webcast. On the call this morning, in addition to myself, is Shawn Tibbetts, CEO and President; and Matthew Barnes-Smith, CFO. The press release announcing our second quarter earnings, along with our supplemental package were distributed yesterday afternoon. A replay of this call will be available shortly after the conclusion of the call through September 4, 2025. The numbers to access the replay are provided in the earnings press release. For those who listen to the rebroadcast of this presentation, we remind you that the remarks made herein are as of today, August 5, 2025, and will not be updated subsequent to the initial earnings call. During this call, we may make forward-looking statements, including statements related to the future performance of our portfolio, our development pipeline, the impact of acquisitions and dispositions, our mezzanine program, our construction business, our liquidity position, our portfolio performance and financing activities as well as comments on our outlook. Listeners are cautioned that any 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 we advise listeners to review the forward-looking statement disclosure in our press release that we distributed yesterday and the risk factors disclosed in the document we have filed with and furnished to the SEC. We will also discuss certain non-GAAP financial measures, including, but not limited to, FFO and normalized FFO. Definitions of these non-GAAP measures as well as reconciliations to the most comparable GAAP measures are included in the quarterly supplemental package, which is available on our website at armadahoffler.com. I will now turn the call over to Shawn.

Good morning, and thank you for joining us as we review Armada Hoffler's second quarter results and share our perspective on the path forward for the remainder of 2025 and beyond. Our portfolio continues to deliver consistent NOI growth, underscoring the strength of our assets and the discipline of our execution. In parallel, we are making meaningful progress on enhancements to the balance sheet, supporting long-term growth and flexibility. We are committed to our strategic foundation, which is quality, a company value that guides how we operate and allocate capital. We're focused on maintaining a high-performing portfolio, optimizing property level performance and margin through operational excellence while delivering reliable results quarter after quarter. The second quarter results were solid across our portfolio. As outlined in our release, we delivered normalized FFO of $0.25 per diluted share, supported by consistent performance in office and retail. Office occupancy remained high at 96.3% with positive re-leasing spreads of 11.7%, while retail occupancy was 94.2% with renewal spreads of 10.8%. Multifamily experienced a modest dip in occupancy to 94%. Overall, portfolio occupancy remained healthy, averaging at least 95% for the fourth consecutive quarter. Property level income continues to outperform our 2025 guidance. As we outlined last quarter, we adjusted our expectations for construction activity this year, and we remain in line with those updated projections. I will remind you of our strategy to shift away from reliance on fee income and toward higher quality recurring property level earnings in the coming years. Therefore, we are reaffirming full year guidance. We believe that our focus on property income derived from the best properties in the market should benefit shareholders in terms of value and share multiple as the equity market recognizes our shift away from mezzanine financing deals and fees for service. We believe the…

Good morning, and thank you, Shawn. Armada Hoffler delivered another solid quarter, reflecting the strength of our mixed-use portfolio, the resilience of our operating platform and the continued execution of our financial strategy. With signs of renewed momentum across the real estate sector and tenant demand broadening, we are executing with focus whilst positioning the business for long-term growth. For the second quarter of 2025, normalized FFO attributable to common shareholders was $25.4 million or $0.25 per diluted share, in line with our expectations and guidance. FFO attributable to common shareholders was $19 million or $0.19 per diluted share. AFFO came in at $18.4 million or $0.18 per diluted share, reflecting continued alignment between our operating cash flows and the restructured dividend. Same-store NOI increased 1.4% on a GAAP basis and low 0.3% on a cash basis. Subsequent to the end of the quarter, we achieved an important milestone by successfully executing our first-ever private placement bond issuance, raising $115 million across 3-, 5- and 7-year tranches. This targeted transaction was met with institutional demand and priced with a blended interest rate of 5.86% and a weighted average term of 5.3 years. A portion of the proceeds from the private placement were used to replay the construction loan secured by Southern Post and a portion of our credit facilities and the remaining proceeds will be used for general corporate purposes. This financing advances the 3 core pillars of our capital strategy, quality. We are transitioning our balance sheet towards fixed rate, long-duration capital without reliance on derivative instruments. Several years ago, we targeted a reduction in our weighted average cost of capital through deleveraging and earning an investment- grade BBB rating on our balance sheet elements. That is not easy given where we began, and we are not claiming total…

Thank you for joining us today and for your continued interest in Armada Hoffler. We remain focused on delivering strong operational performance and driving long-term value for our shareholders. As always, I want to recognize our dedicated team for their hard work and commitment. We look forward to keeping you updated on our progress in the quarters to come. Operator, we are now ready for the question-and-answer session.

Your first question comes from Viktor Fediv from Scotiabank.

I'd like to ask about your decision to maintain guidance, which now implies a pretty wide range of $0.50 to $0.60 for the second half of 2025. So can you provide some details on potential scenarios that would lead to AHH achieving the lower or upper end of this range?

Thank you, Viktor. Yes, obviously, we take a hard look at this, and we maintain kind of a fixed eye on this model. We think that the range is appropriate. We do have, as you know, and as we mentioned, the asset Allied in Harbor Point coming online and leasing up ahead of schedule. So we think that provides some upside. Certainly, there are headwinds in the market broadly. But given the slight increase in the guidance on construction as well as the Allied, we think it's prudent to maintain guidance and look for that upside. In terms of downside, certainly, as I said, there are things out in the market that we can't control, but Matt and his team have done a nice job getting the balance sheet in a position to defend against fluctuation in the interest rate market. So I think we're in pretty good shape. And Matt, anything you want to add?

No. The only item that I would always caution when we're forecasting is the general construction work that we do as that is a kind of percent complete work, as those projects ebb and flow over their life will depend on when the timing on booking that work can be recognized.

Yes. I think to cap it off to the point, we've got some upside opportunities and faster lease-up and that's the reason we took the rest of the position -- part of the reason we took the rest of the position in that asset at Harbor Point. So yes, I think we feel good about the range. We feel good about the midpoint.

Got it. And then just a quick follow-up on this new office floor vacated by WeWork. Just trying to understand the potential downtime. For example, if you decide to subdivide it into smaller units, what it might be in terms of downtime?

Sure. Well, I'll say the team did a nice job negotiating the downsize of WeWork. They do remain in one floor, which leaves us with 31,000 feet of vacancy. We predicted and broadcast this back in April of 2024, and we're fortunate to have continuous rent payment through the quarter here. I'll say this, we're early in the process as a result. We're just receiving the space back. There's an internal staircase there, some structural kind of enhancements that we need to make there. I would say from a marketing perspective, again, we're early in the process, but certainly, you could see a demising of the space. Obviously, we hope we could get a full floor user -- but I would say it's too early to call that, shot, but we do have some interest, and we'll continue to work on that.

And your next question comes from Jana Galan from Bank of America.

I was wondering if you could maybe provide some cap rates around your expectations for the multifamily asset acquisitions and then the cap rate expectations for the disposition that you have now in guidance?

Sure. Let's start with the multifamily. I think that we should be thinking about 6-ish for the multifamilies combined. As I mentioned in my comments, we have an opportunity to create synergy between the assets there in Gainesville. One of them is 184 units and the other is 223 units. So we have an opportunity to run them together should we choose to transact. So we think that creates additional upside and additional efficiency there in Gainesville. In terms of the disposition, we've got 100% full asset there that we've owned for about 10 years. And it's about 50% office, 50% retail. And we think that the pricing is in the mid-6s. So the good news is two things. One, the right real estate decision could be to sell that asset because we would have a significant gain over the basis, especially given it's 100% full. If that is the case, we will, if it is the right choice, transact and redeploy those capital dollars somewhere that makes accretive sense, right? So I think I look at the two as two separate business cases, although they could come together as one. But I think our view is can we make a deal that's accretive relative to our private placement kind of benchmark, which is at the 5.83 level, and that's kind of how we view this.

[Operator Instructions] And your next question comes from Rob Stevenson from Janney.

Matt, you used the unsecured notes to repay Southern Post and the line. How are you thinking about the upcoming maturities of The Everly Encore and the TD term loan?

Yes, certainly, Rob. So first of all, as you would recall from my remarks, we have actually pulled the extension option on the TD term loan already back in May. So we have another 12 months on that. So we've kicked that can for another year. The Everly has a 12-month extension option. We do have some flexibility there. We're actually seeing some fairly constructive rates in the Freddie and Fannie markets there. Some of the [ Lifeco ] money is actually around 5% to 5.25%. So that's a pretty good cost of debt for us in current market conditions. And then to further look forward with the flexibility of the debt private placement market, the maturities for 2026 will be a combination of bank loans of maybe some [ Lifeco ] money on the fixed rate debt or potentially another private placement issuance. So we are currently with the team working through making sure we get the right maturity ladders through that. And as we kind of in earnest, really get into the meat and bones of this balance sheet transition to reduce that reliance on the derivative products and move away from the variable rate debt.

Okay. That's helpful. And then when you guys think about the Allied Harbor Point leasing up and any other sort of EBITDA enhancements that you guys are going to pick up in the back half of the year earnings-wise, where are you expecting to finish 2025 from a leverage metric perspective at this point?

Yes, that's a good question. You would have seen that our net debt leverage metric tick up a little bit here at the -- this quarter. That was because the Allied came on with the $90 million loan that we refinanced when we brought that on balance sheet. As EBITDA continues to come through, we expect that to come down into the 7.4x, 7.5x range at the end of this year, but that obviously depends on how quickly we can stabilize, not just the Allied, but also Southern Post. What I would caution, Rob, on that when we're looking at these predictions is depending on the capital structures for these a couple of assets that Shawn noted that may potentially come online from our mezzanine portfolio will obviously have an effect on that. But we are -- as we've committed to trying to bring leverage down over the long run and rightsized not just the quality of debt, but the amount of debt we have on our balance sheet.

Okay. And then lastly, Shawn, beyond the sort of 50-50 office retail asset that you talked about potentially selling, how are you and the Board thinking about other strategic dispositions over the next 6 to 12 months? Is there a target that you're looking at in terms of dollar value? Is there also -- how are you guys also thinking about the mix between selling down apartments to redeploy into apartments, selling retail, selling sort of one-offs like the South Bend asset, et cetera? How are you guys thinking about -- or how should we be thinking about you guys selling stuff over the next 12 months or so?

Thanks, Rob. Yes, I think to answer your first question, there's not necessarily a target, but there is what -- we view this internally as is there an ability to isolate kind of dislocation in the market, right? And if an asset is at or near 100% leased, as you saw us do in the end of last year, in the end of 2024, and we believe the upside is limited and there's an attractive price to be had, we think the appropriate move is to take our chips and invest them where we can grow, i.e., in a grocery-anchored center or otherwise that has a little bit of upside. And I think, again, there's not necessarily a target, but we are reviewing the list of assets that we own, i.e., the capital that we can control and looking for opportunities to lever a little bit of upside. And in that transaction. So yes, I don't think there's a specific formula other than where do we see dislocation in the short run and can we take advantage of that.

There are no further questions at this time. I will now turn the call over to Mr. Shawn Tibbetts to close. Please go ahead.

Thank you, operator. I just want to say thank you again for your interest and your willingness to participate in this journey with us. Thank you to our employees, our investors, our new investors, all the folks who support us throughout this journey. Again, thank you for your time this morning, and we look forward to updating you in future calls and future quarters.

Ladies and gentlemen, this concludes today's conference call. We thank you very much for your participation. You may now disconnect. Have a great day.