Armada Hoffler Properties, Inc. (NYSE:AHH) Q4 2024 Earnings Call Transcript

Armada Hoffler Properties, Inc. (NYSE:AHH) Q4 2024 Earnings Call Transcript February 20, 2025

Operator: Good morning, ladies and gentlemen, welcome to the Armada Hoffler Fourth Quarter Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session [Operator Instructions]. This call is being recorded on Thursday, February 20, 2025. Before we begin, we’d now like to note the management team is currently experiencing a severe winter storm in the region. We appreciate your patience and understanding if any technical difficulties arise during today’s call. I would now like to turn the conference over to Chelsea Forrest. Please go ahead.

Chelsea Forrest: Good morning, and thank you for joining Armada Hoffler’s fourth quarter and full year 2024 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 fourth 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 March 20, 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 here and are as of today, February 20, 2025, and will not be updated subsequent to this initial earnings call.

During this call, we may make forward-looking statements including our 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 guidance and 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 documents we filed with or 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@armadahoefler.com I will now turn the call over to Shawn.

Shawn Tibbetts: Good morning, and thank you for joining us to review Armada Hoffler’s 2024 results and the path forward for 2025. We have turned the page to the next chapter at Armada Hoffler and I’m honored to be leading the company into the future as we work toward achieving our long-term objectives, Since the last call, we’ve made significant advances in leasing, deliver developments and executed asset dispositions. I will now walk through the details. I reiterate that we remain committed to our core goals; improving the income stream and balance sheet quality. Our short-term strategy is centered on positioning the company for sustainable growth, while maintaining financial strength in an evolving market. We will remain highly focused on continuous improvement of the company’s quality as our value proposition, being surgical and intentional with enhancements to our income stream and balance sheet.

We had an impressive fourth quarter delivering normalized FFO of $0.27 per diluted share and FFO of $0.29 per diluted share. Leasing remained very strong with sustained tenant demand across all three of our asset class. Our team transacted on over 5% of the commercial portfolio during the quarter executing accretive new leases on nearly 200,000 square feet and renewing over 125,000 square feet at positive releasing spreads. While fourth quarter multi-family, trade outs were slightly negative, 2025 year-to-date trade outs have since turned positive as competing new supply in the Atlanta and Charlotte markets is absorbed. We released our 2025 guidance yesterday afternoon with a range of $1 to $1.10. We recognize that on the surface this range might be viewed as a step back from where we ended last year.

That said, we believe that the underlying decisions that led to this range, simply reflects our intentional actions to improve quality. Additionally, the range includes market dynamics and challenges we are navigating, specifically relating to construction delivery delays, interest expense and one-time transaction fees recognized as income in 2024. We are focusing committed to positioning the company for consistent long-term growth. We are taking a prudent approach to investments, emphasizing disciplined capital allocation and continuing to optimize our portfolio. Matt will walk through specific details to bridge from 2024 to 2025. Before discussing the quarter in more detail, I would like to remind you of the steps we have been and will continue taking to position the company for long-term success.

We will continue to focus on recycling stabilized assets where value has been maximized, given limited growth upside and where we feel that institutional interest is willing to pay up. The ability to make this choice and then to capitalize on better long-term opportunities that may arise.is one of the benefits of having options within the multiple sectors within our current footprint. So, in the fourth quarter, we capitalized on the heightened demand for Southeast US retail assets selling two of our non-core, fully stabilized retail assets at a blended cap rate in the low 6% range. An $82 million aggregate sales price represents more than a 20% profit spread over cost proving out the company’s initial development thesis. We are finalizing the development assets at Harbor Point.

T. Rowe Price global headquarters is nearing completion and we look forward to having their 2500 employees join the community. Similarly, we are excited about realizing the full value of the Southern Post NOI in the coming period. The mixed use community is thriving with retail centers successfully opening their doors and receiving an overwhelmingly positive response from residents and visitors alike. It has been a fantastic start and we’re excited to see the continued growth and collaboration within this ecosystem. At the same time, we are committed to investing in the right assets, particularly in the multi-family and mixed use sectors, which we believe offer significant potential for growth. As part of this strategy, we are focused on further strengthening our balance sheet by reducing leverage and enhancing our financial flexibility.

At the end of 2024, we disposed of two resale assets debt while diluting earning allowed us to prudently decrease debt. While the current cost of capital presents challenges, we are confident in our ability to continue refining our business model and pursuing redevelopment opportunities that add significant value. As you recall, in September, we successful executed $109 million common equity offering that reduced leverage and positioned us to add approximately 900 units across four high quality assets over the next year resulting in a 37% increase in multi-family door count. We are in the process of bringing that increase multifamily door counts to reality and look forward to updating you along the way. We believe that real estate is all about spread investing and appropriate, leverage.

Although the markets remain influx, we believe a more stabilized rate environment will allow us to enhance the quality of our debt with an eye towards longer term fixed rate instrument. Let’s quickly walk through the fundamentals across the property sectors. Consistent commercial leasing activity and rent growth have been key drivers of value creation for the company. Our ability to secure high quality tenants across our portfolio to bind with our focus while maintaining competitive rental rates has significantly contributed to long-term stability. Our office assets in mixed use environments are commanding around 15% premium above the competing central business districts in the region. The ongoing leasing momentum, coupled with double-digit releasing spreads strengthens our income stream and enhances the overall value of our assets.

Our office product continues to perform exceptionally well with occupancy currently at 97% with limited near-term rollover. Importantly, 95% of our office ADR is located in mixed communities, which create dynamic ecosystem that provide ideal environments for employers to attract top talent. This has driven sustained demand for our premium office spaces. Notably, we successfully backfilled most of the former rework space at the interlock. Additionally, we completed a significant 12,000 square foot lease with Trader Interactive at Town Center of Virginia Beach. This floor previously occupied by our own team and to meet the demand, we were able to consolidate and set a new benchmark for office rent per square foot in the submarket. Although near-term office rollover is low, we proactively identify early renewal opportunities and existing tenants or potential backfill candidates or space that we anticipate recapturing.

For example, just last month here at Town Center of Virginia Beach, we proactively negotiated long-term extensions with two existing office tenants occupying over 120,000 square feet of space that involve the simultaneous downsized of one in order to accommodate the expansion of the other renewing both tenants at positive spreads. Favorable office demand dynamics in Town Center and Harbor Point result in consistent high occupancy and shorter downtime. While others in the sector are seeing incremental progress towards the high 80s and low 90s in occupancy, our biggest challenge continues to be accommodating the growing demand for tenant expansion space given our limited available inventory. And while we’ve released the former rework space at the interlock, one floor of rework space at One City Center is scheduled to expire in the second quarter of this year.

As the single largest near-term office expiration, the team is focused on finding the appropriate long-term solution for this space. Our retail portfolio had a strong performance with 95% occupancy. We executed new leases, extensions or options, covering approximately 195,000 square feet. We recently executed a large and impactful new lease at the interlock with the Gathering Spot, a market-leading membership-only gathering hub for professionals. The 10 year old Atlanta-based organization will be moving their headquarters to our building, taking 13,000 square feet on the rooftop and an additional 21,000 square feet of office, formerly occupied by. Lever. Furthermore, we completed two significant new retail leases at Columbus Village in the Town Center of Virginia Beach with a national name brand grocer and specialty sports retailer are projected to open by the end of 2025 and rental income will be realized in 2026.

These two credit tenants will backfill substantially all of the space previously occupied by Bed Bath & Beyond. In the 18 months since Bed Bath & Beyond closed, our team has now backfilled both spaces previously occupied by the retailer having also released the former Bed Bath & Beyond space at Patterson Place to another national credit tenant. Overall, we are seeing strong demand from retail tenants looking for space in a supply constrained market. That said, we have not lost sight of the renewals and releasing required to remain at this level of occupancy. We want to acknowledge the impact of store closures within the retail sector specifically. The recently completed or announced store closures for Conn’s HomePlus, Party City and JOANN Fabrics.

Combined, these three retailers represent over 115,000 square feet of space in our retail portfolio or 1.5 million of ADR. Fortunately, we’ve already received unsolicited inbound interest from potential backfill tenants on all of this space demonstrating the continued demand for well-located retail centers. As we continue to monitor these developments, we remain focused on mitigating any risk to our portfolio. The multi-family portfolio continues to operate well at 95.3% occupancy. The rent growth in our markets such as Baltimore and Virginia Beach continue to create lift and we stand by our thesis, well-located amenitized and high-quality assets, outperform the competition within the sub-markets. As you know, there is some evidence that supply pressures may be easing and we have started to recognize the start of this effect in our Southeast sub-markets.

This should result in Improvement in rent as supply incrementally absorbs over 2025 and into 2026. Earlier this year, residents began moving into Allied at Harbor Point. This property stands out as the premier multi-family asset in the area offering stunning waterfront views and a range of top tier amenities. Allied is already receiving positive feedback and we’re confident it will continue to be a highly sought after destination for residents seeking an exceptional living experience in this vibrant location. We have taken intentional steps to focus our investments on the right assets that align with our strategic long-term objectives. While the current cost of capital remains a challenge, we are committed to refining our business model and staying disciplined in how we deploy capital.

We remain confident in the long-term value of our portfolio, particularly, as we continue to unlock redevelopment opportunities within our existing assets. These projects are poised to drive meaningful value and enhance returns for our shareholders. We believe these development opportunities will position us for future success as market conditions involve. I will now turn the call to Matt.

Matthew Barnes-Smith: Good morning, and thank you, Shawn. I’ll start by giving a brief overview of our quarter four and full year results and conclude with an update on our balance sheet and some additional insights into our initial earnings guidance for 2025. For the fourth quarter 2024, we reported a normalized FFO of $0.27 per diluted share and FFO of $0.29 per diluted share. The variance between FFO and normalized FFO during the quarter is due to the change in fair market value of our derivatives reflecting a more constructive macroeconomic rate environment. For the full 2024 fiscal year, we achieved FFO of $1.02 per diluted share and normalized FFO of $1.29 per diluted share. In the fourth quarter, we delivered solid financial results, driven by strong portfolio performance and disciplined asset management.

This was primarily driven by higher rental income, along with our continued focus on operational efficiency and tenant retention. All three segments posted positive releasing spreads, the Retail segment achieved a 11.1% GAAP spread with the Office segment achieving an 18.7% GAAP spread. These results were 2.9% and 3.5% on a cash basis respectively. Our multi-family portfolio reported a combined trade out spread of negative 0.8% for the quarter. Renewal spreads on on apartment leases remains strong at 4.7% for the fourth quarter. The 2025 year-to-date stabilized trade out are showing improvements with a combined trade out of positive 0.6%. Our portfolio same-store NOI growth is $1.3 million at 3.6% on a GAAP basis, and $0.8 million at 2.3% on a cash basis.

The Office segment was a standout performance this quarter posting 12.3% GAAP and 7.9% cash same-store growth, excluding the termination fee mentioned previously. During the fourth quarter, we successfully completed 315,000 square feet in new leases and renewals. Our overall portfolio occupancy at the end of the fourth quarter stood at 96%, slightly increasing compared to the prior quarter, and in line with our expectations. We continued to see strong demand for high quality assets and expect tis strength to continue in 2025. The Construction Management segment posted $2.1 million of gross profit as paragraphed previously, we expect that this segment’s financial performance to return closer to historical levels in the short-term and likely below historical levels over the next couple of years placing some expected downward pressure on earnings.

As you will see in our guidance presentation, we estimate construction gross profit to be between $6.8 million and $8.6 million in 2025. For the fourth quarter, our stabilized leverage remained at 5.8 times. We have discussed in detail our ongoing efforts to transform the balance sheet towards long-term fixed rate unsecured debt We are pleased to report that we continue to make progress in executing this strategy. As a result, we have successfully maintained our Triple B credit rating from Morning Star DBRS, along with an upgraded stable outlook trend even under the backdrop of bringing our large multi-family asset, The Allied on balance sheet with the expected earnings pressure throughout the 18 months lease out period. Mitigate the risks associated with rising interest rates, we have successfully hedged a 100% of our variable rate debt exposure ensuring stability and predictability in our interest expenses.

This strategy not only enhances our financial resilience, but also positions us for stronger cash flow management in the coming quarters. Additionally, 56% of our debt is unsecured as of yearend, up from 22% three years ago. Looking ahead, we remain committed to maintaining dispositions through 2025. Now, let’s discuss our 2025 guidance. As you saw in our guidance presentation released last night, we are providing a normalized FFO guidance range of $1 to $1.10 per diluted share. The primary factor affecting the guidance range is the delays in the delivery of our Harbor Point projects, which as mentioned on prior earnings calls has shifted some of the NOI and earnings expectations. This coupled with the increased interest expense from our recently completed development pipeline will burden earnings until we have leased up this space and stabilize these assets.

Additionally, the stabilization of Chandler Residencies which is now expected to occur in the second quarter of 2025 rather than earlier in the year as previously anticipated. Lastly, we aim to execute leases on the remaining vacant commercial spaces at Southern Post in 2025 to bring this new mixed use property to stabilization in 2026. We also anticipate lower construction gross profit, increased real estate financing income as we maintain approximately $80 million of principal outstanding and the dilutionary effects of our September capital raise. These factors, whilst challenging are being actively managed and our team remains focused on establishing a solid foundation for future sustained growth focused on continual improvement to the quality of earnings and the quality of our assets as well as proactive balance sheet management.

I will now turn the call back over to Shawn.

Shawn Tibbetts: Thank you, Matt. I’d like to take a moment to sincerely thank the entire Armada Hoffler team. Your hard work, dedication and resilience have been critical to the company’s success. I truly appreciate your commitment to excellence and I’m proud to work alongside each of you as we enter the next chapter of Armada Hoffler. Like to extend my gratitude to all of our investors, both longstanding and new for your trust and confidence in our company. Thank you to everyone who joined us today on the call and I appreciate your interest in our story. We look forward to the future opportunities and leveraging our capabilities to create additional shareholder value. Operator?

Q&A Session

Operator: [Operator Instructions] Your first question comes from Robert Stevenson from Janney Company. Please go ahead.

Robert Stevenson: Good morning, guys. What the market look like going forward on the Mez side? Any of your historical partners starting new apartment projects might need that type of financing in 2025 at this point?

Shawn Tibbetts : Rob, good morning, this is Shawn. Thank you for the question. Yeah, we’re getting inquiries about financing those types of deals. As we discussed in the past quarters we think that the pressure in the lending market has actually accelerated some of this. In other words, there’s a gap that needs to be filled right? When the loan to value has pulled back. That said, we take a look at each and every one of these, but we have committed to the market that we want to be roughly $80 million in principal outstanding. We are sitting above that now. So, we’re looking at a timeline of when these roll back in and trying to ladder, if you will that capital. There’s some good deals out there and yes there’s some activity.

But we are not prepared to execute one as we sit here today. So yes, theoretically, if we wanted to deploy capital thinking of two deals off the top of my mind right now that we could deploy, but we think the quality story is best maintained if you will at the levels that we previously described.

Robert Stevenson: And I guess any new investments there. Does it need to be sort of a loan to own rather than just a straight loan if you are looking to bring that net balance over time that incremental investments would have to have some sort of kicker there for you in order to make it attractive enough?

Shawn Tibbetts : Yeah, I think they’re all the above are possible. At the end of the day, the question becomes for us, what is the risk-adjusted return on that capital, right? And can we can – does the street give us more credit for deploying the capital into a rent kind of deriving asset and asset that derives rent. But yeah, I think there’s opportunity for both. We are just not prepared to pull that trigger as we sit here today.

Robert Stevenson: Okay. And it seems like from your comments for TUB’s office market really strong. But, two of your three apartment assets in that home market are sub-94% occupancy. Can you talk about how much supply that market has been seeing or is this just a price point issue given that you guys have higher rents from the market given the location?

Shawn Tibbetts : I think it’s the latter, Rob. Certainly, there are new developments in the broader market, but, within the ecosystem here the walkability, if you will is key. And so, we want to maintain rate especially when we can. So I think this is just a short-term blip, if you will. We are not concerned about it. We could easily drop by a couple bucks, but we think the equation is maintain the market rents where and when we can. And our team takes a hard look – Craig Romero and his team take a hard look at what makes the most sense is a couple of flex and another 100 basis points more on occupancy better than the inverse of that and we think we are in a pretty comfortable place there. I mean frankly, frankly, in this time of the year, Rob, we see slowdown anywhere, but we expect to be where we would normally be in the mid-90s cost of board in Town Center.

Robert Stevenson: And Matt, after you’ve been active here, you paid down some debt. You’ve done some equity raises and some asset sales in the back half of 2024. Can you comment on what the dilution is from that combo on an FFO per share basis on a quarterly basis? Just trying to figure out if there is some embedded growth that essentially gets turned on the wind up investing and a stabilized asset rather than having it sitting on the balance sheet in debt repayment, et cetera? What’s sort of embedded that in terms of the ’25 guidance here?

Matthew Barnes-Smith : Yeah, certainly. Good morning, Rob. The equity raise in September was roughly about 5 pennies worth of dilution nets once we pay down the debt there. So that is kind of what is being kind of read on from the ‘24 to the ’25 year. Does that help?

Robert Stevenson: Yep, that’s perfect. And then, last one for me, Shawn with T. Rowe headquarters ramping up, you talked about monetizing some assets et cetera. How are you and the Board thinking about the longer term play here and the timing? I mean, the terms never going to get longer than it is. Obviously, there is some work left to do there. Is that something that you guys are anticipating on whether or not at the JV or an outright sale or some other sort of transaction there that that’s going to wind up being a late ’25 type of transaction as you would love to do something there at ’26? Or is that at this point not contemplated as you guys think about the strategic plan over the next 12 to 18 months?

Shawn Tibbetts : Yeah, it’s a great question, Rob, I think as you know, in the past when we initiated the deal, we were thinking, well, we may harvest that capital as we sit here today, we don’t think that’s the most attractive option. However, we do look at this as well as the rest of the assets on an iterative basis and ask ourselves to tell what’s the next best capital allocation move. I think the truth is the market is too soft right now for office and we believe as I think you do, I don’t want to put words in your mouth, but that is a trophy asset and we are not willing to part with it at a discount especially given the credit that sits there. So I think we’ll monitor it over time. But as we sit here today, we’re excited about having T.

Rowe in that building and partnering with them for the long-term in terms of that lease. But yeah, we will continue to look at it. I think especially as markets improve, we will probably get a little more comfortable with the pricing there, but who knows, we’re happy to hold it if that’s not the case.

Robert Stevenson: Okay. Thanks guys. Appreciate the time this morning.

Shawn Tibbetts : Yes, sir.

Operator: Thank you, Robert. The next question comes from Viktor Fediv from Scotia Bank. Please go ahead.

Viktor Fediv : Good morning, everyone and thank you for taking the questions. Could you please provide some details on Southgates First occupancy, which declined to 82% in Q4, specifically, which tenant department and how is the releasing process going?

Shawn Tibbetts : Sure. That really relates to JOANN and Conn’s both in the Southgate Square complex there. Joann is dark in that location. So they’ve shut the doors. I think the good news there is, we are at lease with a backfill tenant as we sit here today. So, we’re excited about coming to market with that when we are able. And so our teams are working hard there. On the Conn’s store, it has been closed, as well. Obviously, we are sensitive to the bankruptcy proceedings here. But the trick is we are in active negotiations with a potential backfill I would say in the sporting goods category in that space. And so, it’s interesting not only the JOANN, but the Conn’s and Party City we essentially have unsolicited or active deals working on all of those spaces.

So, I think that’s a good new story. We do anticipate positive releasing activity there in terms of the spreads. So we’re excited about that. In the short run, it looks like a challenge, but in my view, that challenge has created an opportunity to potentially create lift. So we’re excited about that.

Viktor Fediv : All right. And probably just a follow up, in terms of potential down time, what could be the reasonable expectation for these two boxes?

Shawn Tibbetts : That’s up to say, like I said, we’re at lease on the JOANN store. So I would say, depending on the build out and the required maneuvering there, if you will, in addition to kind of these bankruptcy procedures, we’d like to have something more concrete toward the end of the year. But time will tell. I think, my view on this is the center we ink a lease obviously the center that tenants in place. So, we have essentially removed the majority of the income for 2025, for the aforementioned tenants. We do have some speculative upside out there be collect a little more rent as they roll through proceedings or we are able to get a tenant in. But we are viewing that as upside, Viktor. So I think time will tell. So like I said, we’d like to see some activity in a couple of those spots this year.

Viktor Fediv : Got it. Thank you. And probably just a last one for me. So in terms of potential capital recycling, do you have any kind of offers or any active properties that you are actively marketing now in the retail side or not really?

Shawn Tibbetts : So, it’s interesting. We’ve even on the other two retails we sold in the fourth quarter, we received a fair amount of unsolicited activity. It seems like the capitals and would like to get into retail which is good. Again, we don’t want to dispose those properties that we don’t need to. But if it’s a good capital harvesting/relocate or a reallocation, we will take advantage of that. We have put providence in the market. It’s a mixed use asset just renew the lease there. We may or may not transact on that. But for us, it looks like something that we would potentially take a look at. But, we’re not at the middle here. We just want to see what the pricing is. The indicative pricing in the marketplace. So, I think the broader answer is, we will take a look as I mentioned to Rob at the entire portfolio on an iterative basis, especially when we receive unsolicited offers.

For us, it’s an equation – it’s the quality equation, right? What do we believe is core to our strategy? Improving the quality of the income stream and what do we believe is accretive in terms of reinvesting and/or retiring some debt. So I think it’s an interesting time right now with retail price – or retail cap rates better set compressed. So I think the message to you is we are looking at our assets and trying to best understand where the best opportunity sits, I think we are pretty comfortable with where we sit today. We’ll see what comes in the future.

Viktor Fediv : Understood. Thank you.

Operator: Thank you, Viktor. Next question comes from Andrew Berger from Bank of America. Please go ahead.

Andrew Berger : Good morning. This is Andrew and for Jeff Spectre. Appreciate all the color on 2025 guidance. It sounds like, maybe some of the income that you’ll receive in the near future has just been sort of shifted back a couple of quarters. So, maybe just from a high level, are you able to help us understand the trajectory as we exit ’25, maybe any color on what’s assumes for the cadence of those FFO throughout the year and whether or not you start 2025 to be the trough in earnings just trying to given the moving pieces that you are aware of today? And maybe a follow up to that as well as, Shawn, I know you said you are focused on improving the quality of the income stream as one of your main focus is maybe just if could tie in some of your key focuses to drive that earnings growth over the next couple of years.

Shawn Tibbetts : Sure. Yeah, as you uh can see we have and – let me answer you the question first, Jeff, we expect 2025 to be the trough, right. And so from here, as I mentioned to the two previous questions, we think there’s some upside. And frankly, when I say quality of the income stream, we’re talking about what the investors really want to see, at least what we hear from investors that they really want to see, which is properly income, right? And so we have a great fee income business and we are not shy about that. But our view is, we need to become hyper focused – to remain hyper focused on creating high quality property level income. As we begin to stabilize the developments in 2026, you will see, yes, we believe you are going to see increased growth there in addition to our team’s focus on managing OpEx and increasing the organic growth and the kind of underlying portfolio.

So we should see lift in the out years. In my view where we are stabilizing a foundational element this year and we’re going to continue to grow on that into ’26 and beyond. So, yeah, I think there are a couple of things. Not only these backfills that I’ve been mentioning here, hopefully also the debt markets behave, if you will in addition to the fact that we will be incrementally realizing the development income in addition to growing organically in a healthy way, the underlying portfolio income. And I think that kind of equation helps us see that ‘26 and ‘27 will certainly be improvements from ‘25. Matt, do you want to add anything to that?

Matthew Barnes-Smith: No. That was well said, Shawn. What I would I note is also as we get into the end of ‘25 and 2026, hopefully there will be a better macroeconomic market for us rate environment. So that will allow us to continue with our balance sheet strategy higher quality debt and we are hoping when those maturities for us come up in 2026, we will be in a better interest rate position than we are as we stand here today.

Shawn Tibbetts : Andrew it’s top of my mind or things like this Bed Bath & Beyond redevelopment and Town Center, right? We put out that a high quality grocer. And another retailer have already signed with us. This goes back to Rob’s question, apartment rents when those tenants are in place, should increase, right? And we see some lifts that kind of is ecosystem type lift in terms of rent and also realization of the tenant redevelopment opportunity as it comes online. So, we’ve a lot of variables that I would say contribute in a positive way to the equation in the out months and out years.

Andrew Berger : Great. That’s very helpful. Thank you. And maybe just a follow-up. You mentioned earlier I think it was 15% higher rents in your mixed use office assets versus the respective CBD. I was hoping maybe you could touch a little bit more on that. I guess a couple small questions would be, one, is that compared to similar quality assets in the CBDs? Or is the quality different? I guess, I am just trying to understand how much value is really kind of from the mixed use environment versus jut the quality specifically of your assets? And then, on the flip side, just kind of thinking about the multi-family and the retail, just having an office building add any value to that more. Is it kind of the retail multi-family where you are able to kind of head those synergies and be able to raise rent all around?

Shawn Tibbetts : I’ll start with the ecosystem concept. Our thesis is, and I think we’ve proven in that this ecosystem helps lift rental rates in all of those categories, mainly due to the amenities, right? Like retail in a big is an amenity to both the office and the multi-family. So this walkability in our markets, maybe different in the Manhattan, if you will is not available otherwise. And so, this creates an opportunity for both office users and apartment residents to eat downstairs at a restaurant or a shop or whatever the case maybe. To your first question, we took a look at both in terms of CBDs and across the kind of broader markets in both Baltimore and Virginia Beach. And I would say we are comparing to that average, because it’s tough to tell, right?

These are desperate markets. They’re different product types, which answers your other question. I think it’s a quality issue and frankly the tenants in the office side want to be in a mixed use location because it makes inviting their employees back to work and this kind of employee morale increase over time. So we are willing to pay up for that. And so that’s why you see the demand for us kind of increasing in these office spaces. Matt, did you have something with that?

Matthew Barnes-Smith: Andrew, just to give you some specifics as Shawn mentioned at the Baltimore market in Q4, CBRE published a Baltimore office market reports and it didn’t just look emergency across the entire Baltimore office market is just under 20%. The vacancy in the Baltimore CBD at 22% compared to only 2.25% in our mixed use community. So that shows the evidence suggests that that is the benefit of that. When you look at rental rates, CBRE reported that the Baltimore office market is the low $27 a square foot. The CBD specifically has write down that $27 mark where we are – our buildings in Harbor Point and north of the – 15% above the CBD asking rent there.

Shawn Tibbetts : Andrew, the further match point I think for the Virginia Beach market, the closest competitive market is the Norfolk CBD and the numbers Matt stated are probably more pronounced. I don’t have them sitting in front of me. But probably more pronounced in terms of rent spreads as well as occupancy. So I think in terms of being in the A position the trophy position that’s a – it’s a good place to be.

Andrew Berger : Great. Thank you very much.

Operator: Thank you, Andrew. [Operator Instructions] There are no further questions at this time. I would like to turn the call back over to Shawn Tibbetts. Please go ahead.

Shawn Tibbetts: Sure. Thank you. So I appreciate all of you taking time to walk through this with us today. We’re excited about the future here at Armada Hoffler. We do apologize for any choppiness. We are after all office owners and we are working remotely to take this call due to weather conditions. So this is not normal for us. We prefer to be in the office as any office center should be. And that said, seriously, I hope you all stay safe and we appreciate your confidence in us. Look forward to taking any questions independently if necessary. Thank you very much for your time today.

Operator: Thank you. Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.