Armada Hoffler Properties (NYSE:AHH) used its fourth-quarter 2025 earnings call to outline a major strategic reset that management said is intended to simplify the business, improve earnings predictability, and reduce leverage. The company also announced it will rebrand as AH Realty Trust, effective March 2, 2026.
Strategic shift: exit multifamily and fee-income businesses
Chairman, President and CEO Shawn Tibbetts said the company plans to exit its multifamily portfolio and wind down fee-income operations, including construction management and its real estate financing platform. Tibbetts framed the moves as “difficult but necessary,” aiming to make Armada Hoffler a more focused REIT centered on retail and office assets in growing markets.
- Multifamily: The company is under a letter of intent (LOI) for 11 of 14 multifamily assets with a global real estate investment and management firm. Tibbetts said negotiations are “materially far along,” and in Q&A he described pricing as “fair and competitive” and referenced a mid-5 cap range. Management said two remaining assets (excluding Smith’s Landing) are expected to be brought to market soon.
- Construction business: Tibbetts said the exit is “effectively complete,” with terms “substantially finalized” with a buyer.
- Real estate financing investments: The company has an LOI with an institutional buyer to acquire interests in two of four investments and is discussing an exit from a third with its partner. The fourth investment is being marketed, with Tibbetts noting comparable cap rates in the low-5 cap range and expectations for a near-term closing.
With progress on these initiatives, management said it removed the related revenue streams from 2026 guidance. Tibbetts also said the company included an “FFO bridge” in guidance materials to help investors evaluate results excluding discontinued operations.
Portfolio update: retail and office operations
EVP of Asset Management Craig Ramiro said the company’s focus is now “squarely on execution at the property level” across retail and office.
Retail: Retail same-store NOI in the fourth quarter increased 5.6% GAAP and 3.4% cash, with positive renewal spreads of 15% GAAP and 10% cash. Ramiro said results were supported by new leasing and rent commencements, including backfilled anchor spaces in Atlanta, Durham, and Virginia Beach.
Retail occupancy ended the year just under 95%, affected by anchor vacancies tied to the bankruptcies of Conn’s, Party City, and Jo-Ann Fabrics totaling 92,000 square feet. Ramiro said the company has leased or is “at lease” on more than 60,000 square feet at an average re-leasing spread of over 40%. Roughly a third of that backfilled space is expected to commence rent in 2026, with the balance starting by mid-2027.
Ramiro also pointed to redevelopments and leasing at The Interlock and Columbus Village. At Columbus Village, he said Trader Joe’s and Golf Galaxy opened in the former Bed Bath & Beyond box during the fourth quarter, and the project has been re-leased at 60% higher rents. At full occupancy, the redeveloped Columbus Village is expected to generate more than $1 million of new annual base rent, with “the majority” anticipated in 2026.
Headwinds cited for 2026 include first-quarter expirations of West Elm at Town Center and Harbor Point (totaling 20,000 square feet). Ramiro said the company expects retail occupancy to decline about 55 basis points from these expirations, though the NOI impact is muted because the leases are below market. He added the company believes it can re-lease the space at two to three times higher rents.
Office: Office same-store NOI rose over 10% GAAP and nearly 17% cash in the fourth quarter, with renewal spreads of 9% GAAP and 2.5% cash. Ramiro said leasing and rent commencements at Town Center (including Two Columbus), Wills Wharf, and Harbor Point supported results. For 2025, office same-store NOI increased 6% GAAP and 7% cash, aided by occupancy gains at The Interlock, Wills Wharf, and Two Columbus.
Ramiro highlighted additional initiatives, including relocating and downsizing the company’s offices within Town Center. He said the move will unlock 38,000 square feet in AH Tower that has already been re-leased at an average of $35 per square foot, creating $1.3 million of new annual base rent expected to be fully realized in 2027 with partial recognition in 2026.
For 2026, Ramiro said office same-store NOI growth is expected from rent commencements at The Interlock (nearly $1 million of new base rent during the year), partly offset by vacancy at One City Center in Durham and Wills Wharf in Harbor Point. He noted the company is not forecasting new rent commencements at either property in 2026, though it is seeing “good activity and interest” to re-lease the space.
Financial results: fourth quarter and full year 2025
CFO Matthew Barnes-Smith reported fourth-quarter 2025 normalized FFO attributable to common shareholders of $29.5 million, or $0.29 per diluted share, which he said was above expectations and guidance. Reported FFO attributable to common shareholders was $23.1 million, or $0.23 per diluted share, while AFFO was $17.8 million, or $0.17 per diluted share.
For full-year 2025, normalized FFO attributable to common shareholders was $110.1 million, or $1.08 per diluted share, which Barnes-Smith said was above guidance. Reported FFO attributable to common shareholders totaled $79.4 million, or $0.78 per diluted share, and AFFO was $75.6 million, or $0.74 per diluted share. Same-store NOI for the total portfolio increased 2.8% GAAP and 2% cash for the year.
2026 guidance: transformation year with discontinued operations removed
Barnes-Smith said 2026 guidance reflects the planned discontinuation of multifamily and fee-income contributions. Management guided to NAREIT FFO (less discontinued operations) of $0.50 to $0.54 per diluted share for 2026.
Key guidance assumptions presented on the call included:
- Disposition of the general contracting and real estate services business in Q1 2026
- Disposition of the multifamily portfolio in 2026, except Smith’s Landing
- Realization of Allure at Edinburgh in mid-2026
- Exit of the real estate financing portfolio in the second half of 2026
- Blended retail and office same-store NOI cash growth just over 1.7%
- Acquisitions of about $50 million of retail properties in the second half of 2026 at a 6.25% to 7% cap rate range
- Secured debt paydowns of about $270 million tied to multifamily dispositions and net unsecured debt paydowns of about $400 million
Management also discussed a post-transition earnings view, with Barnes-Smith referencing an estimated post-transition NAREIT FFO level of $0.64 per diluted share and a targeted net debt-to-EBITDA range of 5.5x to 6.5x. Tibbetts said leverage is expected to improve by “approximately two full turns” by the end of the transformation.
Balance sheet, dividend posture, and approach to growth
On capital allocation, Barnes-Smith said proceeds from the disposition program are expected to be used primarily to pay down debt, invest in retail centers in selected markets, and potentially fund share repurchases if opportunities arise. In response to analyst questions about longer-term growth, management said it intends to maintain appropriate leverage and be disciplined about issuing equity, emphasizing that shares would need to trade at the “right level relative to NAV” before considering equity issuance.
On the dividend, Tibbetts said the company intends to maintain dividend coverage from cash flows generated by operating properties during the transition. He added that management is “not in a hurry to hike the dividend,” emphasizing priorities of simplification and deleveraging while staying compliant with REIT requirements.
Regarding near-term financing, Barnes-Smith highlighted three upcoming maturities: a $95 million unsecured term loan due in May 2026, the Thames Street Wharf maturity in September 2026, and the Constellation Energy building maturity in November 2026. He said the company is in the market with each loan and is pursuing long-term fixed-rate debt, aiming to reduce reliance on derivatives as hedges mature at the end of 2026.
Looking further out, Tibbetts told analysts the company expects acquisitions to be more attractive than large-scale development in the near term given higher capital costs, though it remains open to “surgical” redevelopment, citing the Bed Bath & Beyond conversion at Columbus Village as an example.
About Armada Hoffler Properties (NYSE:AHH)
Armada Hoffler Properties, Inc is a publicly traded real estate investment trust (REIT) specializing in the ownership, operation and development of retail, office and mixed-use properties. The company’s portfolio primarily comprises neighborhood and community shopping centers, urban infill retail sites and select office buildings located in high-growth markets. Armada Hoffler also provides in-house property management and leasing services, leveraging its vertically integrated platform to enhance asset value and tenant satisfaction.
Founded on a legacy of commercial real estate development dating back to the 1970s, Armada Hoffler went public in 2016 through a strategic combination of private real estate entities.
