Armada Hoffler Properties, Inc. Aktie

Good morning, ladies and gentlemen, and welcome to the Armada Hoffler Properties Fourth Quarter 2025 Earnings Call. [Operator Instructions] This call is being recorded on Tuesday, February 17, 2026.

I would now like to turn the conference over to Chelsea Forrest, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining Armada Hoffler's Fourth Quarter 2025 Earnings and 2026 Guidance Conference Call and Webcast. On the call this morning, in addition to myself, is Shawn Tibbetts, Chairman, President and CEO; Matthew Barnes-Smith, CFO; and Craig Ramiro, EVP of Asset Management.

The press release announcing our fourth quarter earnings, along with our supplemental and guidance packages were distributed yesterday afternoon. A replay of this call will be available shortly after the conclusion of the call through March 19, 2026. 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 herein are as of today, February 17, 2026 and will not be updated subsequent to the financial earnings call.

During this call, we may make forward-looking statements, including statements related to the future performance of our portfolio and potential dispositions of our multifamily portfolio, our real estate financing programs and our construction business and the use of the proceeds from such dispositions, our rebranding and the efforts thereof, the consequences of our strategic transformation, the impact of acquisitions and dispositions, our liquidity position, our portfolio performance and financing activities as well as comments on our 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. The 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 have 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 at armadahoffler.com.

I will now turn the call over to Shawn.

Good morning, and thank you for joining us. Yesterday, we formally announced the rebranding of the company as AH Realty Trust, effective March 2, which marks a defining moment in the evolution of the firm. Given the significance of yesterday's announcement, we will keep our discussion of the fourth quarter and full year 2025 brief.

Today's call is less about a single quarter and more about the transformation of the company and our path forward. This past year marked a pivotal period for the company, particularly with respect to capital allocation, balance sheet strategy and how we operate the business. I'll begin this morning by discussing the strategic decisions we announced yesterday and the rationale behind them. I will introduce Craig Ramiro, EVP of Asset Management, to talk through highlights from the portfolio, and Matt will cover our fourth quarter results and provide details on 2026 guidance.

I stepped into this role 1 year ago with a clear objective to evaluate every aspect of our business, our portfolio, capital structure, operating model and long-term positioning. Over the past 12 months, we have done exactly that, reviewing every layer of the business, challenging long-held assumptions and focusing on where we believe we can create the most durable value for shareholders. This comprehensive process backed with full support from the Board resulted in a clear path that we believe positions the company to maximize shareholder value over time.

At our core, we are a public REIT focused on well-positioned retail and office assets in growing markets. Alongside the relaunch of Armada Hoffler as AH Realty Trust, we announced the planned exit and divestitures of our multifamily portfolio and fee income businesses, including construction management and real estate financing. These were difficult but necessary actions designed to simplify the company, improve the quality and predictability of our income stream and meaningfully reduce leverage.

I am pleased that we have already made substantial progress on these initiatives. We are under an LOI for 11 of our 14 multifamily assets with a global real estate investment and management firm following a disciplined and targeted marketing process that began months ago, drawing strong interest from multiple credible parties. These negotiations are materially far along, and we believe we are approaching final terms at an attractive price point and value. Despite the high quality of our assets, public market valuations do not reflect the underlying private market value of the portfolio. Exiting the multifamily portfolio unlocks significant embedded value by harvesting the arbitrage between public and private market valuations and accelerates our deleveraging program. In addition, the exit of our construction business is effectively complete, and we are substantially finalized on terms with the buyer.

Lastly, we have executed an LOI with an institutional buyer to acquire the interest in 2 of our 4 real estate financing investments, and we are in discussions with our partner to exit a third. The remaining investment is currently in the market with comparable cap rates in the low 5 cap range, and we expect that transaction to be completed in the near term. These transactions take time to fully execute, but we are confident in the meaningful progress made to date toward derisking the business. Given this progress, we have removed the associated revenue streams from our 2026 outlook.

With this transition, we believe we will improve the company's long-term growth trajectory and position us to deliver shareholder value more consistently over time as we become a more focused REIT, no longer operating fee-based businesses with inconsistent income and no longer deploying capital towards sectors where our scale and advantage were limited. We believe with significantly reduced leverage and a streamlined operating model, we will be a stronger, leaner and more agile firm, better positioned to produce predictable earnings and sustainable cash flow growth in 2027 and beyond.

At the same time, we are intensely focused on the operation of the company's retail and office portfolio. We believe the best way to drive durable value is to be the best operator in our markets, maintaining rigorous operational oversight and driving consistent performance improvements across the portfolio. That means efficiently managing expenses, deepening our understanding of market and property level performance while acting as a disciplined capital allocator and redirecting capital when assets no longer meet our investment thresholds.

The Board and management team hold a strong conviction that exiting the multifamily sector and fee income businesses, strengthening the balance sheet and concentrating on sustainable cash flow and disciplined growth most benefits the long-term value of the company. While the quarter itself is not the focus of today's call, it reinforces the stability of our retail and office assets and provides a strong foundation as we enter 2026. As we discuss guidance for the new year, as previously mentioned, it is important to note that 2026 guidance reflects the discontinued operations of the multifamily portfolio and the fee income portions of the business.

While 2026 represents a transition year for the company, I want to underscore that throughout this period, we continue to maintain full dividend coverage from the cash flows generated by our operating properties, while also meaningfully reducing debt. To provide added transparency around this shift, we included an FFO bridge in our guidance materials posted to our investor website. The bridge walks from reported 2025 FFO to a pro forma 2025 FFO that removes discontinued operations and then to post-transformation FFO, which reflects the company as it will operate going forward.

By removing contributions from the construction management business, the real estate financing platform and the multifamily assets, investors can clearly assess the value of the streamlined retail and office portfolio. Importantly, by the end of the transformation, leverage is expected to improve by approximately 2 full turns, further strengthening the balance sheet and enhancing long-term resilience. Matt will discuss the guidance in detail.

As we look ahead, our focus is on disciplined, high-quality, consistent growth and a simplified operating model. With lower leverage and a clearer operating model, we are in a stronger position to pursue accretive acquisitions that offer embedded upside in key growth markets that meet our fundamentals. This transformation only happens with a dedicated team.

Over the past year, we have stripped the company down to its foundation and are building it back up with the right people, the right focus and the right operating discipline. It begins with our people, and we are confident in the team we have assembled to execute this plan. This marks a new day for the firm, and I'm excited about reducing risk and positioning the company for future growth. As we enter this next chapter, we do so with a clearer strategy, a more focused portfolio, a streamlined organization and a stronger financial foundation. We are not simply repositioning the company, we are fundamentally changing the quality of the business. We believe this transformation will result in a significantly stronger foundation that positions us to deliver predictable earnings, sustainable cash flow growth and long-term outperformance.

With that, I'll turn it over to Craig Ramiro, EVP of Asset Management. Craig has been with the company for more than a decade and has been deeply involved in every aspect of our real estate operations. In addition to his extensive real estate experience, he brings a Big 4 public accounting background, which further strengthens his strategic and financial oversight. He leads our asset management team with exceptional focus and discipline and his deep expertise continues to be instrumental in driving our success. Given his experience and intimate knowledge of the portfolio, I'm pleased to have him join the call for the first time to walk through the portfolio highlights.

Thank you, Shawn, and good morning, everyone. As Shawn outlined, with the portfolio now fully focused on retail and office, our attention is squarely on execution at the property level. I'll briefly cover fourth quarter operating performance and then spend time on what we see ahead for the portfolio.

Retail same-store NOI for the quarter was up 5.6% on a GAAP basis and 3.4% on a cash basis. driven by new leasing and rent commencements across the portfolio as well as positive renewal spreads of 15% GAAP and 10% cash. Specifically, fourth quarter cash results reflect rent commencements for long-term backfill tenants of anchor spaces in Atlanta, Durham and Virginia Beach. Retail same-store results year-over-year were up 1% GAAP and down 1% cash. Weighing on both fourth quarter and full year same-store results was anchor space vacancy resulting from the bankruptcies of Conn's, Party City and Joann Fabrics, totaling 92,000 square feet across the portfolio.

These vacancies are reflected in year-end occupancy just under 95% that was temporarily elevated in the third quarter by short-term seasonal tenants. I'm pleased to share that as of today, we have leased or are at lease on over 60,000 square feet of this space at an average re-leasing spread over 40%. We anticipate rent commencing on roughly 1/3 of the backfill space in 2026, with the balance starting by mid-2027.

Looking ahead, we expect retail same-store NOI growth in 2026 to be supported by rent commencements at The Interlock, including Atlanta's first and only F1 Arcade that opened earlier this month as well as our successful redevelopment of Columbus Village. In the fourth quarter, both Trader Joes and Golf Galaxy opened in the former Bed Bath & Beyond box at Columbus Village. Since opening, the new Golf Galaxy location ranks in the top 5 nationwide in terms of foot traffic, and the new Trader Joes store has seen more than double the number of visits compared to their only other location in the market. Because of the vision, persistence and disciplined execution of our team over the past 2.5 years, we've successfully re-leased all of Columbus Village at 60% higher rents.

At full occupancy, the redeveloped Columbus Village is expected to generate over $1 million of new ABR, the majority of which we anticipate realizing in 2026. Negatively impacting occupancy in 2026 will be the first quarter lease expirations of West Elm at Town Center and Harbor Point, totaling 20,000 square feet. While retail portfolio occupancy is expected to decline by about 55 basis points as a result, the NOI impact is diminished given the below-market rent structures of both leases. Market conditions continue to favor existing brick-and-mortar retail with tenant demand far exceeding new supply.

Our portfolio of shopping centers and mixed-use retail assets remain well positioned to capture this demand as demonstrated by our team's ability to lease space at positive spreads. We are confident in our team's ability to re-lease both West Elm spaces at 2 to 3x higher rents given their prime locations within Town Center and Harbor Point. Office same-store NOI for the quarter was up over 10% GAAP and nearly 17% cash. driven by leasing and rent commencements in Town Center, specifically II Columbus as well as Wills Wharf and Harbor Point. Renewal spreads during the quarter were positive 9% GAAP and 2.5% cash.

Over the course of 2025, occupancy at The Interlock increased nearly 600 basis points, ending the year at over 94% leased. Year-over-year, office same-store NOI increased 6% GAAP and 7% cash, supported by occupancy gains at The Interlock, Wills Wharf and II Columbus. Leased occupancy at II Columbus increased 500 basis points during the fourth quarter, partially offsetting our recapture of 8,000 square feet of space in 4525 Main to accommodate the relocation, consolidation and long-term extensions of existing tenants in the building. This resulted in a marginal decrease in occupancy during the quarter to 96.4%, but we are already at lease with a backfill tenant at a double-digit re-leasing spread with lease execution anticipated by the middle of this year.

By the second quarter of this year, we expect to complete the downsize and relocation of the company's offices within Town Center to space that has sat vacant for nearly 3 years. As a result of our intentional move to occupy the most cost-effective space in the development, we unlocked 38,000 square feet of premier workspace in AH Tower, all of which has been re-leased at an average rate of $35 per square foot, the highest rents in the market, creating $1.3 million of new ABR that we expect to fully realize in 2027 with partial recognition in 2026.

Looking ahead, we expect same-store NOI growth in 2026 from rent commencements at the Interlock, producing nearly $1 million of new base rent during the year, partially offset by vacancy at One City Center in Durham and Wills Wharf in Harbor Point. As a reminder, we reclaimed 30,000 square feet of space from WeWork at One City Center in the second quarter of this past year. In the fourth quarter, we negotiated the recapture of 9,000 square feet from an existing tenant at Wills Wharf in exchange for a $3.1 million upfront fee and in the process, consolidated most of the vacancy in the building onto a single floor.

This proactive and intentional move allowed us to accommodate an existing tenant's desire to rightsize their footprint while also giving us the flexibility to pursue larger floor prospects in the market. While we are not forecasting any new rent commencements at either One City Center or Wills Wharf in 2026, we are seeing good activity and interest in the market and remain confident in our team's ability to re-lease the space.

At Southern Post, we expect full rent commencement by existing office tenants in the fourth quarter of 2026, and we're seeing strong interest and activity on the balance of the office space. Office portfolio fundamentals are strong with nearly 8 years of WALT, high credit tenancy, only 1.7% rollover in 2026 and our team's demonstrated ability to lease space and grow rents. We see continued growth opportunity across both our retail and office portfolios through proactive leasing and tenant retention, mark-to-market adjustments on new leases, disciplined expense management and targeted redevelopment and capital investment where returns justify it. This operational focus is central to how we intend to drive consistent NOI growth and create value going forward.

With that, I'll turn it over to Matt.

Good morning, and thank you all for joining us. I will begin with a review of our fourth quarter performance, then cover our full year results before turning to our outlook for the next year and the strategic transformation of the business. I'll close with an update on our balance sheet and debt strategy as we position the company for the next phase.

This quarter and full year represents an important inflection point for the company, both in terms of financial performance and in the ongoing evolution of our platform, portfolio composition and capital structure. Starting with the fourth quarter, our results reflect continued operational excellence across the portfolio against a complex macroeconomic and capital markets backdrop. For the fourth quarter of 2025, normalized FFO attributable to common shareholders was $29.5 million or $0.29 per diluted share, above our expectations and guidance. FFO attributable to common shareholders was $23.1 million or $0.23 per diluted share. AFFO came in at $17.8 million or $0.17 per diluted share. Same-store NOI for the portfolio increased 6.3% on a GAAP basis and 7.1% on a cash basis.

Turning to the full year. 2025 was defined by foundational work repositioning the company with a strong focus on balance sheet discipline. For the full year 2025, normalized FFO attributable to common shareholders was $110.1 million or $1.08 per diluted share above guidance. FFO attributable to common shareholders was $79.4 million or $0.78 per diluted share. AFFO came in at $75.6 million or $0.74 per diluted share. Same-store NOI for the portfolio increased 2.8% on a GAAP basis and 2% on a cash basis.

Importantly, the year also reflects a deliberate strategic shift towards simplification of the platform, higher quality and more predictable earnings streams and enhanced balance sheet resilience through positive cash flow. Starting the year with rightsizing of the dividend represents not merely a financial transaction, but a structural evolution of the company. As we look forward, we are evolving into a more focused, more transparent and more predictable operating platform. Shawn discussed the planned disposition of the multifamily portfolio, the real estate financing platform and the construction entity.

I will now walk through management's estimates related to this repositioning, referring predominantly to the guidance presentation released yesterday afternoon. If these initiatives are executed as we expect, we expect to focus the redeployment of that capital in 3 areas: primarily paying down our debt balance, investing in retail centers in carefully selected markets and if the opportunity arises, utilization of our share repurchase program. This repositioning is designed to create a business that is simpler to understand, easier to value and more closely aligns with long-term institutional capital.

Post transformation, we will be positioned as a simplified pure-play retail and office REIT characterized by focus on reoccurring contractual cash flows with no reliance on fee or nonrecurring income. This year, we will report our results in the most fundamental and transparent way using NAREIT-defined FFO for our earnings metric, cash same-store growth metrics to be consistent with other REITs in our space and leverage at a net debt-to-EBITDA level.

Starting with the guidance presentation, please bring your attention to Page 2, which outlines our 2026 estimates. For this transformation year, we will be guiding towards NAREIT FFO less the discontinued operations between $0.50 per diluted share to $0.54 per diluted share with the following assumptions: disposition of the general contracting and real estate services business in Q1 of 2026, disposition of the multifamily portfolio with the exception of Smiths Landing in 2026, realization of the 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 of just over 1.7%, acquisitions of approximately $50 million of retail properties with a cap rate range of 6.25% to 7% in the second half of 2026. Secured debt paydowns of approximately $270 million as a result of the multifamily disposition, net unsecured debt paydowns of approximately $400 million.

Page 4 of the guidance presentation illustrates an FFO bridge starting at our reported 2025 NAREIT FFO of $0.78 per diluted share and walking through the transition ending with management's estimated NAREIT FFO for the full year post transition of $0.64 per diluted share. As you can see, post transition, we expect to significantly reduce our leverage into a net debt-to-EBITDA range of 5.5x to 6.5x.

Page 5 provides a reconciliation of our 2025 actual NAREIT FFO results less our newly discontinued operations, illustrating a comparative pro forma FFO number that gives some context to the expected FFO growth post transformation. There is no question that deleveraging brings some dilution but dramatically decreases risk and backstops the dividend.

Most importantly, Page 6 illustrates our AFFO payout ratio, both in 2026 and post transition. Management committed to the market that the cash from the properties would cover the cash dividend going forward, and we do not intend to waiver from that sentiment. You will see in the post-transformation column of the table that there are no noncash entries in the change in fair market value of derivatives. I will discuss our debt strategy later in my remarks. However, it is worth noting here that we are intentionally reducing our reliance on derivative products, expecting to have transitioned the balance sheet to fixed rate long-term debt as our hedges mature at the end of 2026.

Finally, the guidance presentation focuses on growth. The reduction of debt enables the company to have a balance sheet that will unlock our ability to grow. Page 7 shows post transformation, our earnings profile will consist of roughly 50% retail and 50% office NOI with 94% of that NOI in mixed-use communities.

Page 8 demonstrates the potential opportunity and estimated NOI trend with organic growth, planned 2026 acquisition growth and the potential future acquisition growth. Page 9 illustrates both NOI and leverage trends on a historical and post-transformation basis, demonstrating strong retail and office NOI performance and a significant reduction in debt. Please note, our focus in 2026 is on transformation rather than expansion, prioritizing earnings quality, durability of cash flows and balance sheet strength over short-term growth metrics.

Turning to the balance sheet. Our capital strategy is anchored in 3 principles: resilience, discipline and proactive risk management. We are actively managing our upcoming maturities with 3 scheduled maturities in the near term, a $95 million unsecured term loan maturing in May of 2026, Thames Street Wharf maturing in September of 2026 and the Constellation Energy Building maturing in November of 2026.

Our approach to addressing these maturities is structured and multifaceted, centered around placing long-term fixed rate debt, either at the property or the corporate level. We are currently already in the market with each of these loans receiving preliminary pricing and terms similar to our inaugural debt private placement, which closed last July. This long-term fixed rate approach is designed to reduce volatility in our cash flow and earnings, enhance financial resilience and ensure the company operates from a position of balance sheet strength. As the transformative initiatives finalize and we use the capital to pay down debt, the company will be in a much better position to ladder in long-term debt private placements and other long-term fixed rate debt, extinguishing our reliance on derivative products as they mature.

I will now turn the call back to Shawn.

Thank you, Craig, and Matt. I'll close by paraphrasing something Nick Saban often says. The key to sustained success is getting the right people on the bus, aligned around the same principles and standards and focused on executing at a high level. Over the past year, that is exactly what we have done. We are no longer the company we once were. We've streamlined, refocused and rebuilt the organization in a way that reflects who we are today, aligned, disciplined and operating with clarity of purpose. The days of being sprawling complex Octopus are behind us. We are a new company with a sharper strategy, a stronger team and a more accountable operating model. When focus, accountability and alignment come together, results follow.

With that, operator, we are ready to open the line for questions.

[Operator Instructions] And your first question comes from the line of Viktor Fediv from Scotiabank.

Matt and probably Sean as well. So in terms of your long-term growth trajectory, on the Page 8 of your guidance presentation, you highlighted the potential for like $10 million of annualized commercial NOI addition starting from 2027 and beyond, which implies around $150 million of acquisitions if you just assume 6.5% cap rate. So how do you plan to finance this? And what are your key assumptions, particularly around share price and debt cost for these to be achievable?

Viktor, thank you for the question. I think this starts with the theme here, right? We want to maintain the appropriate leverage point, right? So we, I think, have done what we said we would do here and demonstrated we're willing to do what is needed to unlock the value of the existing portfolio. That said, we want to be balanced in our approach, we want to be disciplined in our approach, and we want to be consistent in our growth. So there's a balance here.

To your point, we think there's obviously debt capital available. But at the right time, we would like to balance the capital stack by continuing to add equity, but we're not going to do that at any cost, right? And so at the end of the day, the shares need to be trading at the right level relative to NAV for us to even think about that. So what you're seeing us project here is we think we can get to that point, and we think it makes sense in the out 27 years, if you will, to '27, '28 to look for acquisitions that meet kind of our threshold and our crosshairs.

Matt, anything you want to add to that relative to the capital stack?

No, I think you covered it well.

Got it. And then if you look, let's say, 5 years from now, where do you see AH Realty trough in terms of retail to office NOI, please?

Yes. I think as we've talked about here, and thank you for the question, we like to operate and we intend to operate going forward where we can add the most value. And I think it's pretty clear that we add the most value in both retail and office. And in the short run, we are focused on retail and specifically the type of retail that we have in our portfolio, right? And we're somewhat agnostic in that regard because, again, we add the most value there. I think if you talk to Craig, and I'm going to ask him to chime in here, we have our eye on a couple of opportunities now. That does not mean we're going to pull the trigger. But as you're aware, we've embedded in the model about $50 million of capital to outlay to go into acquisition mode if, in fact, that makes the most sense for us, but we're not beholden to that.

Craig, do you want to add a little more color there?

No, I think that's good context, Shawn. I'll only add that, look, our team has shown the ability to continue to lease space and grow rents. And so we will look for acquisition opportunities that display those same fundamentals in the right target markets, population growth, income growth, below market rents and the ability to drive and create value. So our eyes are open. We are always active in the market, and we look forward to executing on our strategy.

Got it. And then just a quick follow-up on that. So obviously, you're looking within geographies where you have some expertise and competitive advantage. Just trying to understand how wide your opportunity set is now in terms of -- you have kind of planned to acquire $50 million this year, but how wide is kind of under consideration pool now for you? And what are the key metrics you are kind of paying the most attention to?

Sure. I think, Viktor, the answer is best rooted in markets that have fundamentals that we like and meet our investment thresholds. A little more deeply there, markets with growth, markets with population growth, you know as well as I that we operate in secondary markets. That way, we can build a moat and be the best operator. We're not intending on going into Tier 1 cities and battling out with folks that are 50x our size. Our cost of capital and our expertise primarily exists in the secondary market. So we like markets that are a reflection of the markets that we're in today. We're not stuck in this geography, but we are mindful about the demographics and the fundamentals specifically that exist in the markets and what their growth looks like on a go-forward basis.

And your next question comes from the line of Andrew Berger from Bank of America.

Congratulations on putting these plans into motion. Could you just talk maybe high level about your latest thoughts on mixed-use communities and whether these retail investments that you're targeting are still within mixed-use communities or are these separate? And I guess also to that point, on the office side, it sounds like you're not looking to invest in office at the moment. Maybe just any more color there as you think over the next couple of years about that split that you were talking about before with the retail versus office, if office is something you'd be willing to sell if you get the pricing on those assets a bit more in favor.

Andrew, yes, we are obviously capable in the mixed-use space, right? We have quite a significant chunk of our portfolio that sits in mixed use. So we like mixed use. But that said, as I mentioned earlier to Viktor, we like all of retail, and we're willing to look at all of that retail. In terms of office, I'll answer the latter part of your question first. We're capital allocators in the end. And that is what we focus on. So if there is an opportunity to harvest capital at an appropriate price, we will do so. We don't have intentions of doing so as we sit here today. But we think that the office market does recover, specifically the high-quality trophy type assets that we hold. And so we'll take a look at that. And we continuously look at that over time. But we believe right now, the best focus for us is in the retail space.

Great. And could you just provide a little bit more color on the multifamily dispositions? Just maybe anything around the pricing for that? And any more color on the timing?

Sure. As you're aware, we are under LOI with 11 out of the 14 assets. To be clear, the remaining 2, notwithstanding the Smith's Landing asset, we will take to market in the near future. So I think the best way to describe this is, number one, we're looking at fair and competitive pricing relative to market comps on the assets that we own. We're thinking in the mid-5 cap range, just to give you a number. In terms of progress, we feel really good about this. The buyer as well as ourselves have been leaning in heavily here, and we've been working feverishly to get there. We made tremendous progress. Obviously, the goal is to derisk the company, remove the uncertainty, set ourselves up for healthy growth.

So I want to make sure we keep kind of as our North Star here, the deleveraging aspect, selling these assets, harvesting the arbitrage and applying that to the leverage, driving down that leverage on our balance sheet. But yes, we feel good. I mean we hope to come back to the market very soon and talk more definitively about the deal that we're able to get to. So we're excited about that. Actually, I just want to say, while I have an opportunity here, I'm proud of this team and the amount of progress we've made. And we feel good about it, and that's why we chose to share this with the market today.

Great. And maybe just one final one for me on the dividend. You did address the 95% payout ratio earlier. I guess the question is where would you like to see that trend over time? It's 95% on 2026 as well as post transformation. Should we be thinking about it just over the next couple of years as trending lower from there? Like can you just talk a little bit like is there any other metric we should be looking at besides from AFFO payout ratio, just to kind of get a sense of how you and the Board are thinking about the dividend?

Sure. I think it's important to note that we were cash flow positive in 2025, which is great. Happy to get us there. Obviously, it was a challenging environment to get there, but I think that's the first sign of help. We'll be cash flow positive in 2026, which is good. I think you should be thinking about this with us being conservative with our capital, right? And we want to pay out a nice dividend, but we don't want to overpay a dividend. So at the end of the day, you're not going to see us aggressively hike that. You're going to see us stay in compliance with the REIT standards, right, but also put the capital back to shareholders in an appropriate manner. I guess that's a long way of saying we are not in a hurry to hike the dividend. We're in a hurry to simplify this company and delever this company. And the dividend will fall into place as the company grows and as the cash flows grow.

And your last question comes from the line of Jon Petersen from Jefferies.

I was hoping you could talk about development as part of your long-term strategy for growth. It seems like in the near term, the focus is maybe more on acquisition of retail properties, but do you anticipate being a developer in the future?

Jon, thank you for the question. Great question. Obviously, development has helped build a good piece of the portfolio that we own today. That being said, as you're aware, capital cost, cost of capital are up relative to where they were in our past. And we -- although we are willing to do development where it makes sense, we believe there's a risk-adjusted spread that's required there. So we think the most accretive given the timing would be acquisition in the short run. That said, we are willing to do development surgically and in the right space. And I'll just offer as a proxy, the Bed Bath & Beyond conversion to Trader Joes, right? That was a quick conversion of an existing box. And as Craig mentioned, we experienced almost 60% increase over the former rents and a relatively short duration. So we're looking for surgical development opportunities, really thinking redevelopment. We do have conversations frequently about development with partners, but I think you're going to see us partner with others to do development as opposed to large-scale development pipelines as you've seen us deploy in the past.

Okay. That makes sense. I was hoping to maybe also get more context on the growth from your core businesses, retail and office is expected in 2026. I think the guidance is for 1.7% same-store NOI, but your fourth quarter growth number was quite a bit higher than that. So are there any sort of headwinds or move-outs in the office portfolio? And maybe are you able to parse out expected growth in office versus retail in '26 on a same-store basis?

Sure. I'll start by saying the team has done a tremendous job working ahead of the curve on move-outs, vacancies. And I think Craig can give you some more color here. But at the end of the day, we see upside. I think Craig mentioned the West Elm in his comments previously. We see opportunity there given the very low rent relative to the market there. So Craig and his team have been working on this. As you know, we take very seriously the rollover and vacancies, and we like to stay ahead of those.

I think -- Craig, if you don't mind, would you add a little more color on what you're seeing out in 2026 and beyond?

Yes, happy to, Shawn. And Jon, thank you for the question. Yes, in my prepared remarks, I mentioned the anchor spaces that we got back with the bankruptcies of Conn's, Party City, Joann's. We've made a ton of progress there in terms of backfilling leasing. We still have a little bit of work to go. And of course, with tenant build-out and move-in, there is lag in between former tenant exiting and new tenant commencing rent. So '26, we're in that in-between period for the most part, and that's what you'll see weigh a bit on '26 growth with anticipated growth coming in '27 in the beginning and throughout '27. So that's really what's dragging on retail results for next year. Shawn mentioned West Elm, that is space that we did take back this first quarter at below market rents. So we're excited -- actually really excited about taking that space back and the ability to re-lease at 2 to 3x rents, bringing those spaces to market.

On the office side, not a ton of rollover there, right? So near-term risk is low and well diversified across the portfolio. The 2 things really causing headwinds for us, the space at One City Center in Durham, which we've all known about and have been proactively managing to try to mitigate. We're seeing good interest in the market there as well as a little bit of space we took back at Wills Wharf to accommodate our existing anchor and to offer greater flexibility to the prospects of the market. So all told, I think '26 will be a little bit of a gap year in terms of that with expected greater growth in 2027.

That ends our question-and-answer session. I will now hand the call back to Shawn Tibbetts for any closing remarks.

Sure. Thank you very much. I want to thank you all for joining us today and your interest in our company. I just want to share with you, we couldn't be more excited about this. Our team is focused. Our team is intentional, and we are looking forward to putting the company on a growth trajectory. And that's really our message here, right? We are working feverishly to put the balance sheet in the place that it should be and set ourselves up for growth for the coming years.

So thank you all for your interest today. We appreciate your time and your investment in us.

And this concludes today's call. Thank you for participating. You may all disconnect.

Good morning, ladies and gentlemen, and welcome to the Armada Hoffler AHH Third Quarter 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on November 4, 2025.

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 2025 Earnings Conference Call and Webcast. On the call this morning, in addition to myself, is Shawn Tibbetts, President and CEO; and Matthew Barnes-Smith. CFO. The press release announcing our third 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 December 4, 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 are made herein as of today, November 4, and 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 deep -- the impact of acquisitions and dispositions, our mezzanine program, our construction business, liquidity position, our portfolio performance and financing activities as well as comments on our 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 a result 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 this morning the risk factors disclosed in documents we have 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 [indiscernible] the most comparable GAAP measures are included in the quarterly supplemental package, which is available on our website at armadahoffler.com.

I will now turn the call over to Shawn.

Good morning, and thank you for joining us as we review Armada Hoffler's third quarter results. Before getting into the results, I want to thank our Board of Directors for appointing me Chairman of the Board effective the beginning of the year. I appreciate their confidence in me and our leadership team. We've made meaningful progress this year and have completed much of the hard work required to position the company for a strong performance over the next several years excellence across the platform.

Our teams are laser-focused on strengthening systems, streamlining processes in leveraging technology for data-driven insights to enhance decision-making and portfolio performance. My priority is to ensure the market properly recognizes the unique value of our portfolio as we enter 2026 as a more focused simpler, stronger REIT, for the balance sheet positioned for growth. Our progress includes aligning the dividend with property level cash flows, refreshing the leadership team for placing a director and sharpening our focus on core operations.

We also aligned our 2025 guidance with the planned reduction in fee income to better highlight the strength and the stability of our recurring property earnings. We are confident in the strategic actions completed this year and remain focused on repositioning our model offer for sustained growth and long-term shareholder value creation. Our near-term objective is to demonstrate and unlock the value embedded in our real estate through continued consistent execution and transparent communication with investors. The Armada offer portfolio continues to deliver consistent NOI growth. underscoring the quality of our assets and the consistency of our execution.

At the same time, we are making progress enhancing the balance sheet quality and proactively managing our capital base including leveraging capital recycling opportunities that strengthen long-term growth and financial flexibility. Our strategic foundation remains center on quality, a core value that guides how we operate and allocate capital. We remain focused on maintaining a high-performing portfolio, optimizing property level performance and delivering reliable results quarter after quarter.

The third quarter results were solid across our portfolio. As outlined in our earnings release, we delivered normalized FFO of $0.29 per diluted share, supported by consistent outperformance across our commercial asset classes with overall portfolio occupancy averaging 96%, including 96.5% in office, 96% in retail and 94.2% in multifamily. These results underscore steady demand and durable performance across all segments.

Property level income continues to outperform our 2025 guidance, which contributed to beating consensus for the quarter. As we outlined in previous quarters, we adjusted our outlook for construction activity this year and remain on track with those revised projections. Higher NOI, offsetting the construction adjustments has allowed us to maintain a 2025 normalized FFO guidance target range, consistent with the original 2025 guidance target range, which we are narrowing to $1.03 to $1.07 per diluted share. This reflects our continued execution of the strategic shift away from reliance on fee income into an earnings stream predominantly reliant on higher-quality recurring property level earnings.

Now let me take a few minutes and walk through our key sectors. From a broader market perspective, fundamentals remain supportive for retail. Vacancy remains close to record lows. New supply is constrained and retailers continue to show strong preference for high-traffic, open-air centers and grocery-anchored formats. According to Green Street retail pricing per square foot posted double-digit annual growth in the second quarter, reinforcing our bullish view of this asset class. Our retail portfolio continues to demonstrate strength and resilience, supported by a focused strategy of owning properties located within submarkets where we can leverage or create a competitive advantage.

Across these locations, we actively extract value through leasing, tenant reconfiguration and redevelopment initiatives, positioning our centers to benefit from broader national trends in retail. For the third quarter, our retail portfolio continued to exhibit these strong fundamentals. Renewal spreads averaged 6.5% on a cash basis, reflecting continued demand. [indiscernible] traffic across our centers, particularly in mixed-use destinations like Harper Point and Southern Coast rose 13% compared to the prior quarter, demonstrating the success of our leasing and place-making initiatives rooted in driving consistent consumer engagement and ultimately supporting rent growth.

As we mentioned last quarter, we have filled all of our big box vacancies resulting from recent bankruptcies, including [indiscernible] Party City and Joanne with higher credit cents. This includes downsizing Burlington and Southgate and Colonial Heights, we make room for a national sporting goods retailer as well as backfilling Party City with BootBarn and Jo Ann with Burlington at Overlook Village in Nashville, strengthening the merchandising mix alongside anchors such as T.J. Maxx, HomeGoods and Row.

These transactions reflect broader retail market dynamics. Nationally, big box development has been limited with few new entrants targeting in firm market -- this constraint has elevated demand for existing well-located retail space. high-credit tenants are seeking locations with strong demographic nearby residential density a complementary tenant that drive traffic. Our centers are meeting the criteria, allowing us to capture top of market rents when reposition or retenanted space.

At Columbus Village [ EverGen Beach ], we are nearing completion on reformatting the former Bed Bath & Beyond Box to enhance the center with Trader Joe's and Golf Galaxy, both expected to open before the end of the year. This reconfiguration will increase rent by over 50% and by enhancing the overall tenant mix and further strengthening the appeal account center of [indiscernible] district. Overall, our retail strategy leverages market trends, tenant credit strength and experiential demand to position our portfolio for sustained outperformance. This knowledge-driven approach enables Armada Hoffler to proactively identify opportunities to optimize tenant mix, capture rent growth and maintain our centers as destination locations that attract customers and drive long-term value.

[indiscernible] side, while the broader set navigate structural headwinds, the recovery is clearly bifurcating in favor of high-quality amenitized assets in desirable, well-located markets. Our holdings sit on the right side of that divide. We continue to see occupancy stability, leasing wins and renewal spreads that capture value for premium space. As supply constraints and tenant references tilt toward quality rather than square footage growth, we believe our positioning provides a distinct advantage. Our office portfolio is 96.5% occupied and few near-term expirations. Demand continues to favor office properties a walkable amenity-rich niche-use environment where tenants benefit from retail, residential and dining access.

We continue to see interest from firms relocating from older suburban parts to dynamic centralized locations, supporting the long-term value of our office assets. The former WeWork floor in 1 city center is the largest contiguous vacant space in our portfolio, and we are seeing active interest. We recently announced a 12,000 square foot lease with Atlantic Union Bank at One Columbus and Town Center, bringing overall occupancy in Town Center to 99%. This stands in sharp contrast to the narrative seems in most major U.S. city, as office assets continue to demonstrate strong demand and sustained high occupancy, driven by their location within the region's premier mixed-use environment.

Asking rents across town center assets now average nearly 30% above the broader Virginia Beach market across office, retail and multifamily, underscoring the effectiveness of our mixed-use strategy and the enduring strength of this district is a true live-work-play destination. Our multifamily portfolio continues to demonstrate resilience, supported by healthy leasing fundamentals and proactive management.

During the third quarter, portfolio occupancy held at 94.2% in line with the second quarter. Effective lease trade-outs averaged 2.3% for the quarter with renewals averaging 4.3% trade out and new leases flat. These figures do not include the 22 units at Green side that were offline during the quarter, up modestly from an average 19.7 units in the first and second quarters. Last quarter's reported occupancy included those units, so the current figures reflect a more accurate representation of stabilized performance.

Multifamily projects starts to remain a critical factor in supporting fundamentals with construction lending down significantly compared to the 2020 to 2023 cycles, the market is moving towards improved [indiscernible]. Elevated residential borrowing rights are also keeping renters in existing units, limiting turnover and maintaining occupancy stability across our portfolio. Year-over-year from September 2024 to September 2025, national average rents increased only 0.6%. Our stabilized multifamily properties outperformed this trend by approximately 50%, achieving 0.9% year-over-year rent growth, demonstrating the strength of our assets and the effectiveness of our proactive management of products.

At Allied Harbor Point, leasing continues to progress well, and we are on track to stabilize mid-2026, earlier than projected. Prospects and residents are drawn to the building's premier waterfront location, best-in-market views and modern finishes. As the newest residential property within the Harbor Point District, Allied offers an unmatched living experience, it complements the surrounding retail office and entertainment uses, reinforcing its appeal as one of Baltimore's most desirable addresses.

At Greenside in Charlotte, remediation and enhancement work to address water intrusion in several units is progressing in phases as we have previously disclosed. The effective units I mentioned a few minutes ago, are obviously an upside opportunity once we conclude this project. These improvements will further strengthen the property's quality and long-term value, supported by its prime location near major medical and innovation districts in Charlotte.

Looking ahead, we see multiple avenues to drive FFO growth across our portfolio, guided by a disciplined capital allocation framework. Strong leasing momentum and a high return redevelopment pipeline allow us to capture rent growth and enhance property value through proactive renewals, backfills and targeted reconfiguration. At the same time, we pursue disciplined acquisitions through intentional capital recycling activity, focusing on projects to combine stabilized income with redevelopment potential where possible. [indiscernible] markets where we can create a competitive advantage, including submarket that exhibit vailed positive fundamentals beyond the typical Sunbelt trade areas where pricing is being good up, we leverage our leasing and operating expertise to unlock value, ensuring that each investment is accretive in the near term and drives long-term portfolio growth.

On the capital front, we remain focused on enhancing flexibility and mitigating balance sheet growth. Our July debt private placement, raising $115 million reflects continued confidence in the quality of our portfolio, our management team, our strategic approach and the overall strength of the company. The proceeds bolstered our liquidity position, extended our weighted average debt maturity and were used in part to fully repay the construction revolver at Southern folks, further positioning us to navigate evolving market conditions with confidence.

We continue to focus on generating an increasingly conservative balance sheet. [indiscernible] reduced leverage, ensuring ample liquidity to fund ongoing redevelopment and growth initiatives. This disciplined capital structure provides flexibility to act on attractive opportunities while preserving balance sheet strength and stability. We plan to continue expanding relationships with institutional credit investors, supporting long-term growth and maintaining financial optionality.

We remain focused on value creation through disciplined execution and intentional capital allocation. from retail leasing to office occupancy stability and multifamily lease-ups. We are building a stronger, simpler and more resilient Armada Hoffler, capable of generating consistent, predictable earnings growth. I am proud of the momentum we have generated and confident in the team's ability to deliver sustained, reliable earnings growth while enhancing shareholder value.

With that, I'll now turn the call over to Matt to provide additional detail on our financial results.

Good morning, and thank you, gentlemen. Armada Hoffler [indiscernible] as expected, underscoring the consistency of our operating platform the quality of our diversified portfolio and the continued execution of our capital strategy. With our balance sheet repositioning well underway and fundamentals stabilizing across our commercial assets classes, we entered the final quarter of the year from a position of strength and operating flexibility.

For the third quarter of 2025 normalized FFO attributable to common shareholders was $29.6 million or $0.29 per diluted share, slightly above our expectations and full year guidance. FFO attributable to common shareholders was $20.2 million or $0.20 per diluted share. AFFO came in at $19 million or $0.19 per diluted share, demonstrated continued alignment between our operating cash flows and the restructured dividend. Same-store NOI for the portfolio increased 1% on a GAAP basis. Our performance this quarter demonstrates the benefits of a simpler, more durable capital structure and disciplined execution by management across our portfolio.

As of September 30, 2025, net debt to total adjusted EBITDA stood at 7.9x, stabilized portfolio debt to stabilize portfolio adjusted EBITDA stood at 5.5x. Total liquidity for the quarter is $141 million, including availability under our revolving credit facilities. AFFO payout ratio stands at 74.9%. And after adjusting for noncash interest income, the ratio was 93.9%. Our portfolio weighted average interest rate remained consistent at 4.3%. Our diversified portfolio continues to demonstrate meaningful strength, particularly across our retail and office holdings. Leasing pipelines remain active and collections and occupancy levels have remained resilient in each of our segments, respectively.

As expected, our retail segment showed quarterly declines in same-store NOI, reflecting the temporary downtime resulting from tenant bankruptcies such as cons, Party City, Jean and [indiscernible]. Same-store NOI decreased 0.9% on a GAAP basis and 2.5% on a cash basis. These near-term results are consistent with our strategy to create long-term value through tenant credit enhancements and capital upgrades where returns can be achieved. With over 85% of this space already under lease or LOI, we anticipate realizing initial returns on our back efforts beginning in Q4 of 2025, continuing into 2026 with full economics and over 20% rent growth achieved by mid-2027.

We Releasing spreads on renewed leases remained healthy at 5.7% on a GAAP basis and 6.5% on a cash basis. demonstrating continued tenant demand for retail space in a supply-constrained market. From a broader market advantage, fundamentals remain supportive for retail.

In the office segment, we continue to see exceptional occupancy levels at 96.5%, a modest improvement from last quarter, strong renewal spreads at 21.6% on a GAAP basis and 8.9% on a cash basis, albeit on a small amount of space that reflects the value for our premium assets in desirable locations. Our office segment posted positive same-store NOI results at 4.5% on both a GAAP and cash basis.

By focusing our capital and operational efforts on retail assets with dominant demographics, proven tendency and strong impact cash flows combined with office assets to reflect the slight towards quality and the margins for renewal upside, we are well positioned to capture our residual growth as the broader market conditions normalize. In short, the intersection of internal execution that is asset level leasing, cost control and capital reinvestment and the external tailwinds of limited new supply and retail, improving select office fundamentals, investor capital returning to quality real estate gives us confidence in the durability of our cash flows going forward.

Corporately, we continue to manage expenses tightly. G&A remains on track to be materially reduced year-over-year, reinforcing our focus on efficiency while maintaining the resources required to execute on managing our assets and redevelopment opportunities. As you all know, we have and are taking the appropriate steps to rightsize the construction entity, aligning its workforce with current backlog levels, making fiscally responsible decisions for shareholder value.

Capital markets remain selective, and we are structuring our balance sheet to reflect that reality. With our debt private placement completed in July and our liquidity stabilized through prudent cash management, we have the ability to remain patient and disciplined as the cycle evolves. We are engaged with our lending partners and are looking ahead to the back half of 2026 and our respective pending maturities. Early indications are leading us to expect that once our 2026 outstanding debt has been refinanced, we will be aiming to achieve a portfolio weighted average interest rate slightly below 500 basis points, reflecting the stability in our operating results and visibility into year-end performance we are narrowing our full year normalized FFO guidance range to $1.03 to $1.07 per diluted share, reaffirming our confidence in the trajectory of the business.

With that, I'll now turn the call back over to Sean for his closing remarks.

Thank you, Matt. I want to thank our team for their continued dedication to our shareholders and for their trust and support. Operator, we are ready for the question-and-answer session.

[Operator Instructions] Your first question comes from Viktor Fediv with Scotiabank.

So I'd like to ask about the acquisition of at least 1 real estate financing asset [indiscernible] since the asset is across the street from the Aberly, we can already see some negative effects on both occupancy, which is more than 200 basis points down year-over-year and monthly rent, which also declined more than 11% year-over-year. So can you provide some insight into the expected going-in cap rate on this asset and potential synergies for managing 2 assets altogether and as well as your expectation for same-store NOI growth for both assets over the next 2, 3 years?

Sure. Thank you for the question, Viktor. I think this -- the answer to the question starts about a year ago, we had signaled to the market that we would bring on to the balance sheet, not only Gainesville 2 but the [indiscernible]. So let's touch on Gainesville 2 first. Our strategy, our thesis there has always been, we want to run this asset combined with the Gainesville 1 asset, which is called the Everly or rebranded at the Everly. We think there are synergies there. We think it comes in to answer your question at or above our cost of capital, given that we are going to leverage synergies there, think head count reduction and a normal building as a result of running these together.

I mean just [indiscernible], we think there's about 50 basis points of value there to be gained by us. In addition to that, as we see the new supply burned off, by the way, the new supply is ours. We'll see concessions burn off and therefore, we'll see some uplift, and we expect the positive same store to get there. fairly soon after stabilization. So I think it's a good story. It's what we had intended to do for the past 12 months or so, and we're looking forward to it. Slightly different story for the [indiscernible] we have seen some very strong bids in the market in that submarket as of late. And so we're in discussions with our partner about what's the best move given the kind of high bids for that type of asset, there could be a case where we either bring it on balance sheet, which we can do and would love to do or is the better opportunity cost equation to sell that in the open market?

And look for other deals with our partner there. So more to come there. That transaction essentially is going to be deferred until next year. So that's why you saw us pull that back from coming on the balance sheet here in the third or fourth quarter of this year.

As a quick follow-up, so if let's say, this [indiscernible] asset is sold to third-party and loan is repaid before maturity? Will you receive any additional fees on top of that principle and what has already accrued?

I think it's inappropriate for me to speak on that right now, Viktor. I think let's see what happens. We'll certainly recoup our capital and have a conversation with our partner about how to how to make the best deal there. But I think given where we are and what we're seeing in the market, we've still again, got an opportunity cost question here. The good news is we are very much in the black on that asset, which is great for both us and our partners. So more to come there.

The next question comes from Rob Stevenson with [indiscernible].

Shawn, just while you're talking about the real estate financing portfolio, how should we be thinking about the Kennesaw, Georgia loan in the asset as it gets closer to stabilization? Is that 1 also more likely to be sold in the loan repaid? Or is that 1 more likely to be brought in-house?

Yes, Rob, I think that's an asset that probably doesn't fit our core strategy. So in addition to that, I think you'll see that -- you won't see us pursuing that one per se. I think that will be sold as the answer to the question. So yes, that's not one we intend to bring into the pulp.

Okay. And then beyond the $18 million or so of in-progress redevelopments, any of the 10 or so other opportunities in the supplemental expected to start in the next couple of quarters? And how extensive are the costs associated with those opportunities?

It's interesting, we've seen some attractive kind of projects there. We -- I think let me start by saying this. We are continuing to see development deal flow, it just doesn't fit the risk-adjusted spread. So our thesis is, again, back to the opportunity cost, kind of long-term value creation. We think that the capital is best spent on some of these captive projects.

That being said, I don't see anything starting like fourth quarter, probably not first quarter, but our team is doing quite a bit of diligence on a few of these. I mean think outparcel, think older kind of '90s, 2000s vintage assets with large parking lots. We're taking a look at how do we use the real estate kind of under our control and create opportunities there for Lyft in the short run. So a long way of saying, we're looking at it. Our development team is looking at it hard. We meet about it actually weekly. But I don't think we know enough now to say we're ready to fire off the next one.

That said, as you can see with the Trader Joe's, we're very excited about those types of opportunities and the list that they create.

And then last one for me. How are you and the Board thinking about recycling assets and using the proceeds to reduce leverage and repurchase common stock. And when might be the right time to explore something with one or more of the Baltimore assets, et cetera?

Yes. I think the answer is we are constantly or consistently thinking about that. Our job as capital allocators, as you know, is to think about the opportunity cost of that capital. So we -- as you may know, thought about an asset sale in Charlotte. We've got some strong bids, Providence Plaza, the challenge became what is the best opportunity cost like kind of equation for that capital. We saw rent growth climbing down in Charlotte, so we said let's hold on to that asset. But we are thinking about those things. You see us renewing for long-term kind of anchor leases, so on and so forth, to lock in the value in some of these assets.

And at the right time, we'll strike on deals that make sense. I don't want to say we're going to get into buyback land, but certainly, there's an attractive accretive opportunity there. I'm not sure that we'll take that versus long-term property kind of income-producing property. But yes, that's what we are doing right now, especially given the price of the equity and how that's trading in today's market. So a long way of saying opportunity cost is our main focus, and we are looking at all of the assets that we have to determine where we can create some arbitrage in terms of what the markets value in our real estate at and what the broader market would potentially [indiscernible].

The next question comes from Jane Wise with CBU Capital.

First question is, could [indiscernible] discuss the annual cost of its interest rate swaps? And what are your plans going forward with the interest rate swap activity. Also, if you were to change your approach to buying the interest rate swaps and reducing your interest as a result of the swaps, how would that impact AFFO?

Jamie. Thank you for the question. So interest rate swaps obviously changed the pricing with the market as the time. We look at that essentially as a prepaid interest when you're looking at paying that to essentially come into the total cost of the debt over the long run. We renewed back this quarter some maturing swaps that we had, we renewed them slightly early as we came within our kind of strike rate, the price that we felt were fitting with the interest expense that we wanted, total cost for full guidance.

As I've talked about many times before, we are looking over the long term a transition in this balance sheet to long-term fixed rate debt. So we would work through that cycle to reduce the reliance on derivatives as we get those long-term fixed rate debt in place. And that's what we're going to be looking for, as I mentioned in my remarks, for those financings that are maturing in 2020, 2026.

And one other question. Earlier in the year, you had mentioned that the dividend was stress tested for recessionary scenarios and also that you are expecting net debt to EBITDA to sort of end the year around the 7.4x area. I was curious if you could talk about that. Is this a dividend stress tested for 2026 and different sorts of interest rate scenarios as you look to do less hedging activity? And are those -- does management still hold by what it said earlier in the year?

Yes, certainly. So as you can recall, we rightsized the dividend to make sure that our cash flows from the properties covered the distribution, the cash distributed out of the door in the dividend. So we did that back earlier in the year and made sure that there was enough buffer there to stress test that dividend through the whole of the year, not just from a cash flow perspective, but also from the REIT compliance tax as well. As you can see, there is a number of charts in our supplemental that show the dividend distribution compared to AFFO and AFFO less noncash interest expense. So as close to a cash number as we can provide and be transparent there.

Jamie, this is Shawn. I think the answer to your question is yes. What we said in the earlier part of the year holds true. We stress tested that against many different scenarios as it relates to dividend. As it relates to the kind of derivative positions, we are on a journey here. We've committed to the market that we want to continue to get into more pure fixed rate debt and that kind of our placement of $115 million back in the middle of the year, back in the July time frame. And you're going to see us continue to navigate that journey. It won't happen overnight.

But yes, I think the answer to the question is we want to move to a more pure fixed balance sheet over time, and we intend to hold that dividend and have the ability to do so plus or minus fluctuations in the market. I appreciate the question.

And then, Jamie, to touch on the loss the last bit of the question as it relates to leverage, we still have the full debt from the development pipeline on our books. And as we lease up the Allied and Southern Post leverage will come down over the next or the coming quarters.

The next question comes from Jon Petersen with Jefferies.

Maybe I'll just stick on the dividend. I'm just curious how you think about growing the dividend, right? If we're modeling over the next few years, should dividend growth tie out with AFFO per share growth at these levels? Or -- are you going to kind of pause on raises for a while to give yourself more of a buffer? How do we think about that?

Jon, thank you for the question. I think we think about this in a conservative way, right? We just came off of a dividend restructure. And so we want to be prudent here. AFFO, as you know, for us, given the real estate financing platform is maybe not the best indicator sometimes in terms of dividends. So I think the short answer to the question is we'll raise it when we feel we responsibly can. To Matt's point, we don't want to go over dividend, and we also don't want to trip the kind of taxability concerns on the downside.

So we're looking at it. I don't know if we will grow as AFFO per se, depending on how big the real estate financing program is. But yes, we're looking at it. We will raise it responsibly, but certainly don't want to over-raise it too soon, especially given our recent journey. So I think you'll see it moving in the future. I don't think you're going to see us do anything in the next quarter or so just based on where we stand.

That's helpful. And then the $95 million term loan that's coming due next May. Should we think about proceeds from these financings that might be repaid as what will be used to pay down that loan? Or would you refinance it? How should we think about your plans there?

Yes, certainly. So we have our primary credit facility, the revolving line of credit that matures the first of January '27, and the term loans associated with that primary credit facility the first of January 2028. So already engaged with the bank group, and we will look to both our kind of side term loans to wrap them up in that primary credit facility. So we have a number of different options. We can always go back to the market and do another debt private placement, and get some long-term fixed-rate bonds there to replace that. We can wrap that into the primary credit facility or I'm sure our lending partner on that term loan that matures in May, may want to kind of reissue at those same levels.

So many different options and yes, we've already reengaged with the partners to start working through that.

All right. And then last question for me, just on Allied Harbor Point. You said stabilization by mid-next year. It's already 67.6% lease. So I'm just curious, is it fully built out like could it be 100% occupied today? Or is there still some work to do to be able to lease that up to stabilization?

So Jon, we're materially there. The challenge for us, and this is what we talked to the market about kind of sense -- since bringing this idea to fruition was balancing this kind of equilibrium, not cannibalizing the 2 assets next door. So yes, it can be fully leased up. We're just very -- we're very mindful about not bottoming out our piece of the market there. So we said to the market back in September, we were looking at roughly 24 months.

Stabilization, to your point, we will probably hit that sooner. I just want to be conservative with what we're putting out there in case we need to kind of hold rates, right? The economic equation is much better. We can hold the rates up and fill the building, take a couple of extra months and it would be kind of cannibalizing our own position in the other 2.

Our next question -- there are no further questions at this time. I will now turn the call over to Shawn Tibbetts for closing remarks. Please go ahead, sir.

Thank you, and thank you all for joining us today. We appreciate our investors' partnership with us, both on the equity and the credit side, our partners who do business with us in these submarkets in each of our markets throughout the Southeast United States. Thank you to our team. Thank you to our Board. We appreciate your attention to our story, and we look forward to continuing to create value for the long run. Thank you very much, and have a nice day.

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