Armada Hoffler Properties, Inc.

Good morning, ladies and gentlemen, and welcome to the Amada Hofla third quarter 2023 earnings call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, November 2nd, 2023. I would now like to turn the conference over to Chelsea Forrest. Please go ahead.

Good morning, and thank you for joining Armada Hoffler's third quarter 2023 earnings conference call and webcast. On the call this morning, in addition to myself, is Lou Haddad, CEO, Matthew Barnes-Smith, CFO, and Sean Tibbetts, COO. The press release announcing our third quarter earnings along with our supplemental package were distributed this morning. A replay of the call will be available shortly after the conclusion of the call through December 2, 2023. The numbers to access the replay are provided in the earnings press release. For those who listened to the rebroadcast of this presentation, we remind you that the remarks made herein are as of today, November 2, 2023, and will not be updated subsequent to this 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 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 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 this morning and the risk factors disclosed in the documents we have filed with or furnished to the FCC. 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'll now turn the call over to Lou.

Thanks, Chelsea. Good morning, everyone, and thank you for joining us. Today, we reported normalized FFO for the third quarter of 31 cents per share, in line with our expectations and consistent with our four-year guidance. As you can see from our press release, the portfolio continues to deliver positive growth in same-store operating income and releasing spreads, while maintaining company-wide occupancy in the high 90s. We continue to prove that best-in-market properties yield impressive results in most any economic climate. Sean and Matt will give you the details on the quarter, as well as the current state of operations and financial metrics. I'll take a few minutes to highlight just a few examples of the key advantages to having a diversified business model. While others may be at the mercy of their particular sector and whether it's externally under pressure or out of favor, our ability to adapt to changing market conditions across asset classes and business lines gives us the unique ability to preserve earnings growth while making the right real estate decision for the long-term health of any given property versus accepting substandard outcomes in the name of preserving short-term earnings. As a case in point, we, like all landlords who hold leases with WeWork, have been asked to take substantial rent reductions in order to preserve their lease commitments. As you may know, we have two leases with this tenant in the total portfolio. At the interlock in West Midtown Atlanta, and at One City Center in Durham, North Carolina. Both are new, trophy-class, mixed-use buildings in vibrant, urban, walkable locations. We have no interest in impairing either of these prime assets with a below-market lease and are very comfortable with prospects for backfill should we choose to reclaim the space. We're always willing to help our tenants who, despite good faith efforts, may be going through a rough patch. That's just good business. However, we will not compromise superior locations with low yielding material leases in either office or retail assets. Due to the strength of the vast majority of our holdings as well as our construction and development division, we are comfortable to assert that full year 2023 guidance remains unchanged and that we expect continued earnings and dividend growth next year irrespective of the WeWork outcome or that of a handful of other smaller tenant challenges we face within a few assets. Sean will give you an update on the robust leasing activity we are seeing across the portfolio in the small amount of vacancy that we possess. The second area that diversity yields significant advantages versus narrowly focused companies is that of finance. Through a decades-long successful track record in multiple business lines, we've achieved a triple B credit rating and have accrued a large and growing stable of banks that continue to extend additional credit to us. At a time when lenders are shying away from most commercial real estate, we continue to receive increasing commitments, and we are successfully mitigating future risks through derivative purchases. The end result of which is that we've been able to continue our development activities, initiate the $50 million share repurchase program, and lock in relatively low interest rates on all portfolio debt for the next two years. Matt will fill you in on the details of these transactions. Yet another major benefit comes from our construction and development operations. With third-party fee income at all-time highs and an elevated level of backlog, our expectation is for 2023 to be our most profitable year ever, and we expect similar results in 2024. These earnings allow us to further flexibility in dealing proactively with potential issues elsewhere without endangering profit growth. Additionally, we expect development activities at our two Harbor Point joint ventures to give us a significant source of capital to reduce leverage once they are completed in about a year. This will be especially important if equity prices remain suppressed for the longer term. Sean will give you an update on that progress as well as the strong pre-leasing activity occurring at Southern Post. For years, we have been describing the advantages of our business model. Vertical integration of the development process, asset class diversification, mixed-use environments, and best-in-class properties are all important factors in our platform, as well as our value proposition. While we understand some investors focus on single asset class REITs, our ability to dominate submarkets with multi-use projects is its own unique advantage. This approach to real estate, 44 years in the making, has produced substantial growth over the last 10 years, despite the challenges of the pandemic and the current disfavor of the commercial real estate sector, which has impacted property values, consequently reducing our multiple and undervaluing our equity. While this may be viewed as respectable performance by many, it's by no means satisfactory to us. Our goal remains to demonstrate the true worth of superior assets, both property and human, and return the equity value to its previous highs, regardless of the macro environment, while providing solid interim returns to a safe and growing dividend. We fully intend to continue adding to earnings and dividends in 2024 as we wait for the market to recognize superior outperformance. Over the next one to two years, In addition to continuing measurable growth, we intend to make strategic moves that should further separate our trajectory versus that of our peers, as well as reinforce the flexibility, resiliency, and foundational strength of our diversified platform. I'll now turn the call over to Sean to review the operating metrics.