Armada Hoffler Properties, Inc. (AHRT) Earnings

Management highlights

### Strategic Transformation Progress - Completed all core transformation commitments five months after announcing the restructuring plan, faster than originally expected. Sold 9 of 11 planned multifamily properties for $485 million to Harbor Group International, with the remaining two properties (Greenside and Premier) under contract for a combined $77 million. Exited the construction business entirely and substantially wound down the real estate financing platform, with only one position remaining to exit. - Completed the most significant balance sheet deleveraging in company history: $460 million of multifamily disposition proceeds were used for debt reduction, including $353 million of variable rate debt paid down in the second quarter alone. As of quarter end, all debt is 100% fixed or economically hedged, with a weighted average interest rate of 4.3%. Net debt to total adjusted EBITDA fell to 7.1x from 8.3x last quarter, on track to reach the 5.5x to 6.5x target leverage range. - Refreshed the board of directors with two new independent directors (Theodore Bigman and Lori Whitman) aligned to the new pure-play business strategy, exiting two prior directors. ### Capital Allocation - The board doubled total authorized share repurchase capacity to $100 million, reflecting confidence in the company's intrinsic value. As of June 30, 2026, 5.6 million shares have been repurchased for $33.2 million at a weighted average price of $5.92 per share, leaving $54.1 million in remaining capacity. - Capital allocation prioritizes closing the gap between share price and intrinsic value, with priority uses including share repurchases, targeted and outparcel redevelopment of the existing portfolio, and selectively accretive acquisitions (no acquisitions for growth are planned for 2026). ### Operating Portfolio Performance - Retail portfolio: Anchor vacancy fell to just 3% after backfilling former big-box vacancy (Bed Bath & Beyond, Party City, Joann) with high-traffic tenants. Shopping center foot traffic increased 6.6% year-over-year in the quarter, and is 11% above 2Q2019 levels. 5,000 square feet of vacant Town Center retail has already been re-leased, with remaining vacancy viewed as an opportunity to curate the merchandising mix for higher rent growth. - Office portfolio: The company captured $1.3 million in new annual base rent after vacating its own corporate office space to re-lease it at top market rent, lowering internal occupancy costs while capturing premium rental income. The portfolio benefits from a broad flight-to-quality trend for amenity-rich mixed-use office space, with blue-chip anchor tenants and a 7.5-year weighted average lease term.

Guidance

- Raised full-year 2026 FFO as adjusted guidance to 53 cents to 57 cents per diluted share, up from the prior range. - Updated full-year 2026 same-store cash NOI growth guidance to 2.5% to 3.5% for the retail segment (upward revision from prior range). - Updated full-year 2026 same-store cash NOI growth guidance to 2.75% to 3.75% for the office segment (upward revision from prior range). - Guidance assumes completion of all remaining multifamily asset dispositions (excluding the retained Smith's Landing property), exit of the remaining real estate financing position, ~$57 million of additional secured debt paydown from pending dispositions, and ~$100 million of additional net unsecured debt paydown, with no acquisitions planned for full-year 2026.

Segment performance

1. Retail Segment: Total portfolio second quarter same-store NOI increased 2.9% year-over-year, with 5.7% year-over-year growth for the open-air shopping center sub-segment and 32% year-over-year growth for mixed-use retail at The Interlock. 75% of retail NOI comes from open-air anchor-anchored shopping centers, and 25% comes from mixed-use ecosystem retail. The retail portfolio ended the quarter at 95% lease occupancy and 91% economic occupancy. Portfolio-wide cash spreads were 5.2% positive for new retail leases and 8.7% positive for retail renewals. Year-to-date retail same-store NOI is up 2.5% year-over-year. 2. Office Segment: Second quarter same-store NOI increased 8.3% year-over-year, with 10% growth at Harbor Point, 2.5% growth at Town Center, and 23% growth at The Interlock. Harbor Point contributes 55% of office same-store NOI, Town Center contributes 25%, and The Interlock contributes 8%. The office segment ended the quarter at 97% lease occupancy and 90% economic occupancy. Cash spreads on office renewals were 22% positive overall, and 21.6% positive on a portfolio-wide basis. Year-to-date office same-store NOI is up 4.5% year-over-year. 95% of office square footage is located within walkable, amenity-rich mixed-use environments, with no standalone suburban office assets. Blended total same-store cash NOI for both segments increased 5.3% year-over-year in the second quarter, while total property portfolio NOI hit $35.3 million, a 2.2% year-over-year increase.

Risks & headwinds

- An estimated $875 billion of commercial real estate mortgage debt is scheduled to mature industry-wide in 2026, most originated at 3% to 4% rates and now facing 6% to 7% refinancing rates. The company mitigates this risk via its fully hedged fixed rate debt profile at a 4.3% weighted average rate and proactive refinancing of upcoming maturities. - One City Center in Durham expects lease and economic occupancy to decline to ~65% in the third quarter of 2026 due to scheduled lease expirations, though management remains optimistic given the asset's quality and market position. - Southern Post office has 44.9% current economic occupancy, though management expects this gap to narrow as free rent periods expire. - Reaching the 5.5x to 6.5x target leverage range depends on the successful closing of pending remaining multifamily and real estate financing dispositions. - 2027 unsecured loan maturities (including the revolving credit facility and unsecured term loans) require active refinancing planning, with management working to consolidate existing term loans under a recast primary credit facility later in 2026.

Analyst Q&A

• Q: An analyst asked about 2027 tenant lease expirations: whether proactive discussions have started, if any large move-outs or challenging renewals are expected, and what renewal spread projections look like. /

  A: Management noted their team proactively engages with tenants 1-2 years before lease expiration to minimize rollover risk. For 2027 retail expirations, most are long-tenured anchor spaces with no material expected risk, and many below-market anchor spaces offer rent growth opportunity. On the office side, there is minimal rollover at 99% leased Town Center, and management is confident about re-leasing upcoming expirations at The Interlock given strong current asset momentum. Overall, management is confident in managing 2027 rollover successfully.

• Q: An analyst asked if the current high 95% retail and 97% office occupancy allows the company to reduce free rent and tenant improvement (TI) concessions, or if leasing economics will stay similar to recent quarters. /

  A: Management noted the company has pricing power for mixed-use office assets due to favorable supply-demand dynamics and the market bifurcation between strong mixed-use and weak standalone suburban office. For 75% of retail NOI coming from open-air shopping centers, constrained new supply allows rent increases, with double-digit spreads already observed at properties like Southgate Square. Mixed-use retail and office may require higher TI to curate the right tenant mix, but management only approves deals that meet required return thresholds.

• Q: An analyst asked which near-term growth opportunities management is most excited about. /

  A: Management highlighted outparcel development and redevelopment as the most attractive opportunity, as it is capital efficient, delivers incremental earnings quickly, and creates new NOI from underused existing portfolio land. A recent example is the lease of an undeveloped parking lot area at Southgate Square to Seven Brew Coffee, creating new value from previously unused space. Management actively searches the entire portfolio for similar low-capital, high-return incremental opportunities.

• Q: An analyst asked for the timing of when signed but not yet occupied (SNO) office NOI will come online. /

  A: Management confirmed that of the $4.6 million in total SNO annual base rent for office, over half will commence rent in the second half of 2026, with the majority of the remainder coming online in 2027, primarily at The Interlock as recently signed leases exit free rent periods.