Armada Hoffler Properties, Inc. — Q1 2021 Form 10-Q
Business context and period: The filing covers the unaudited quarter ended March 31, 2021. Armada Hoffler is a REIT operating office, retail, and multifamily properties, alongside general contracting and real estate services. Its portfolio included 55 operating properties and four under development or not yet stabilized.
Financial and operating performance
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Total revenue | $81.3 million | $89.6 million |
| Net income | $6.0 million | $9.1 million |
| Net income attributable to common stockholders | $2.3 million; $0.04 per share | $5.9 million; $0.11 per share |
| Net income attributable to common stockholders and OP Unit holders | $3.1 million; $0.04 per diluted share/unit | $8.2 million; $0.11 per diluted share/unit |
| FFO attributable to common stockholders and OP Unit holders | $20.8 million; $0.26 per diluted share/unit | $22.3 million; $0.29 per diluted share/unit |
| Normalized FFO | $20.6 million; $0.26 per diluted share/unit | $24.7 million; $0.32 per diluted share/unit |
| Net cash provided by operating activities | $8.1 million | $20.3 million |
| Cash, cash equivalents, and restricted cash at quarter-end | $34.6 million | $52.8 million |
Rental revenue rose 8.2% to $45.7 million, while contracting and real estate services revenue fell 24.8% to $35.6 million. Segment NOI was $30.9 million, compared with $30.3 million. Office NOI increased 13.9% and multifamily NOI increased 28.5%, largely from properties brought into operation or acquired since Q1 2020. Retail NOI declined 12.0%. Contracting gross profit decreased to $1.3 million; operating margin was unchanged at 3.6%.
At March 31, 2021, total assets were $1.934 billion and total liabilities were $1.173 billion. Indebtedness, net, was $975.1 million, versus $963.8 million at year-end 2020. Unrestricted cash was $24.8 million. Management reported $93.2 million of available credit-facility borrowings and $48.4 million available under construction loans. Total cash, cash equivalents, and restricted cash decreased $15.8 million during the quarter. The filing does not provide a clear consolidated profit-margin measure.
Core portfolio occupancy was 94.0%, versus 94.4% at December 31, 2020: office 97.2%, retail 93.9%, and multifamily 92.2% (conventional multifamily 95.8%; student housing 85.0%).
Material changes and notable items
- Total revenue declined 9.2%, reflecting lower construction-services activity; rental revenue growth partly offset the decline. Common-stockholder net income and Normalized FFO also decreased year over year.
- Retail same-store NOI fell 7.1%, affected by Regal Cinemas lease restructurings and tenants closing or terminating leases amid the pandemic. Multifamily same-store NOI fell 9.5%, primarily due to lower occupancy and higher property taxes at Johns Hopkins Village.
- The company acquired Delray Beach Plaza for a contract price of $27.6 million plus transaction costs, with repayment of its $14.3 million mezzanine loan as part of the transaction. It sold several outparcels and properties, recognizing $3.7 million in total disposition gains.
- A $3.0 million impairment was recorded for Socastee Commons following expiration of an anchor-tenant lease and management’s assessment that the space was unlikely to be re-leased soon at sufficient rates.
- Quarter-end debt principal maturities were concentrated in 2025 ($289.5 million, 30% of total) and 2023 ($179.3 million, 18%). The company reported compliance with its debt covenants.
Outlook, risks, and contingencies
No quantified full-year earnings or operating guidance is provided. Management said COVID-19’s full impact remained unknown and anticipated continued adverse effects, particularly for retail tenants. As of March 31, the company had deferred $5.3 million of recurring rent and collected 88% of deferred rent due for Q1; it had also granted approximately $1.6 million in pandemic-related rent abatements since the pandemic began. Eviction restrictions affecting some residential properties were in force through June 30, 2021 or tied to state-of-emergency orders.
Management said it expected to meet liquidity needs over the next 12 months using operating cash flow, cash, credit availability, construction loans, and equity-market access. Subsequent to quarter-end, it refinanced the Southgate Square loan, increased revolving-credit borrowings by $17.0 million, entered into a $35.1 million construction loan for Chronicle Mill, and raised $5.4 million through ATM common-stock sales. The board declared a Q2 common dividend of $0.16 per share, a 6.7% increase from the prior quarter.
Key exposures include tenant defaults or nonrenewals, retail weakness, development and construction execution, mezzanine-loan repayment, interest-rate and refinancing risk, and possible further pandemic disruption. The company had a $34.3 million payment guarantee on Interlock Commercial senior debt, a $15.0 million standby letter of credit for Harbor Point Parcel 3, and a separate $9.5 million construction-performance letter of credit. Harbor Point Parcel 3 had a company equity commitment of up to $30.0 million; management estimated a combined equity requirement of $60 million for two planned Harbor Point projects.
Important facts for investors to verify
- Track retail tenant collections, rent deferrals, occupancy, and the impact of Regal Cinemas lease restructurings; assess any further effects from COVID-19 restrictions.
- Review construction backlog, which fell to $38.8 million from $235.6 million a year earlier, and the timing and funding requirements of development projects.
- Monitor mezzanine-loan collateral performance, Interlock Commercial leasing and stabilization, and the $34.3 million related payment guarantee.
- Assess liquidity and refinancing needs against debt maturities, especially the 2025 concentration, and confirm continued covenant compliance.
- Compare dividend commitments with operating cash generation and future capital needs; FFO and Normalized FFO are supplemental non-GAAP measures, not measures of cash available for dividends or debt service.