Julie Trudell - Vice President of Investor Relations Lou Haddad - President, Chief Executive Officer, Director Mike O'Hara - Chief Financial Officer, Treasurer Eric Smith - Vice President of Operations, Secretary.

John Guinee - Stifel.

Welcome to Armada Hoffler's First Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, you will be invited to participate in a question-and-answer session. [Operator Instructions]. As a reminder, this conference call is being recorded today, Thursday, April 30, 2015.

I will now turn the conference over to Julie Trudell, Vice President of Investor Relations at Armada Hoffler. Please go ahead..

Good morning and thank you for joining Armada Hoffler's first quarter 2015 earnings conference call and webcast. With me this morning are Lou Haddad, CEO and Mike O'Hara, CFO. In addition, Eric Smith, our Vice President of Operations, will be available for questions.

The press release announcing our first quarter earnings along with our quarterly supplemental package was distributed this morning. A replay of this call will be available shortly after the conclusion of the call through May29, 2015. 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, April 30, 2015 and will not be updated subsequent to this initial earnings call.

During this call, we will make forward-looking statements including statements relating to the future performance of our portfolio, our development pipeline, impact of acquisitions and dispositions, our construction business, our portfolio performance and financing activities, as well as comments on our outlook.

Listeners are cautioned that these statements are subject to certain risks and uncertainties, 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 advice listeners to review the risk factors discussed in our press release this morning and in documents that we have filed with or furnished to the SEC.

We also will 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 www.armadahoffler.com.

I would now like to turn the call over to our Chief Executive Officer, Lou Haddad.

Lou?.

Thanks, Julie. Good morning and thank you for joining us. Given that it was only two months ago that I was discussing our fourth quarter results and 2015 guidance. I’m going to keep my comments brief today. I’ll discuss the highlights of the quarter and how we are executing on our strategy.

Then I’m going to focus my attention on the quality of our real estate before I turn the call over to Mike O'Hara to discuss the quarterly results in detail. We continue to execute on our strategic plan and successfully delivered on a number of fronts during the quarter.

As you can see with a number of high quality portfolio transactions that we have announced we continue to aggressively manage our assets as we take the companies to the next level.

We are pleased to report another solid quarter with FFO per share of $0.17 and Normalized FFO of $0.19 per share, which was at the higher-end of our expectations, and we have raised the bottom-end of our 2015 Normalized FFO per share range by $0.01. At quarter end, occupancy across the core portfolio was 95.6%.

Our successful leasing is evidenced by the increase in quarterly GAAP and cash based store NOI, 4.3% and 6.3% respectively compared to the first quarter of 2014. And while we are pleased with this organic increase, remember, it is primarily the NOI from our development pipeline that we expect to drive our growth.

As for our pipeline projects, during the quarter we delivered over 200,000 square feet of fully-leased office space in Hampton Roads, Virginia including two build-to-suit office buildings for the Commonwealth of Virginia which are under 15-year leases for both locations.

We also delivered a new office and manufacturing building for Oceaneering International, which was also pre-leased for 15 years. Lastly, we delivered Sandbridge Commons, a new 70,000 square foot shopping center in Virginia Beach anchored by a Harris Teeter. Currently, this property is close to 90% leased.

Work began on the Johns Hopkins project this quarter. As a reminder, this $66 million development project is adjacent to John Hopkins’ main campus. It will be a multi-use facility with residential and retail space along with structured parking. We anticipate completion by the third quarter of 2016.

Turning to dispositions, we continue our long-standing strategy of selling non-core assets in order to redeploy the capital on our balance sheet as well as selectively monetizing the wholesale-to-retail spread on our development projects.

During the quarter, we also announced that we entered into a definitive agreement to sell Whetstone Apartments in Durham, North Carolina for approximately $35.6 million, representing an implied cap rate of 5.7%. This was an opportunistic sale for us.

We received an unsolicited offer that yields a profit well in excess of 20% despite the fact that the asset was delivered in the third quarter of 2014 and was in the early stages of lease up. Whetstone is our fourth disposition announced in six months and we will redeploy that capital in a way that best creates value for our shareholders.

We continue to pursue strategic acquisitions that complement our growth from the development pipeline.

During the quarter we closed on the previously announced acquisitions of Perry Hall Marketplace and Stone House Square, two grocery anchored retail centers located in Maryland, for an aggregate of approximately $20 million of cash -- net of $15 million of proceeds from the sale of the Sentara Williamsburg office building -- and 415,500 shares of common stock.

Together, these acquisitions add over 185,000 square feet to the Company’s portfolio and further expand the Company’s geographic footprint in Maryland. The properties have a combined occupancy of approximately 90%. We have already begun to monetize the upside of this acquisition in the form of a signed LOI with a new tenant.

Before I turn the call over to Mike to discuss the quarter in more detail, let me spend a moment talking about how quality real-estate is fundamental to our long-term strategy.

What we, the management team, has learned in our 30 plus years together is that high quality real estate stands the test of time, appreciates over the long-term and is very difficult to duplicate. For example, the recent disposition of a non-core asset that is close to Town Center sold for a cap rate in the low 6% range.

We believe, this establishes cap rates for quality assets in the Virginia Beach central business district. That said, I’d like to refresh you on the details of Town Center. This is a $700 million central business district mixed-use project that we developed in partnership with the City of Virginia Beach, Virginia.

Town Center is a 17-block, on-going, multi-phase development. To date, the City of Virginia Beach has invested approximately $200 million in Town Center in the form of infrastructure, public facilities and over 4,000 structured parking spaces.

This investment has helped us create a vibrant downtown central business district for Virginia Beach – the largest city in Virginia. Town Center is home to over 115 commercial tenants, 410 hotel rooms and 640 multi-family units – including three high-rise buildings one of which is the tallest building in Virginia.

In addition to 750,000 square feet of office space, there are 15 restaurants, a performing arts theatre and 30,000 feet of conference space. This project has attracted new tenants both to the city with over 50% of tenants being new to Virginia Beach and over 30% of tenants being new to the Hampton Roads Market.

We believe that Town Center is unique to the region and it has no local or regional comps. In our minds, this premier asset -in a vibrant 1.7 million person MSA deserves a value on par with similar facilities in the Charlotte, Raleigh Durham and Northern Virginia markets.

If you triangulate our recent sale of an office asset, a stone’s throw from Town Center, for a 6.3% cap rate and the recent multi-family disposition with an implied cap rate of 5.7% it is not hard to conclude that the Town Center assets would command a very attractive cap rate if they were ever marketed.

Going forward, our focus and strategy remains unchanged -- we will continue to develop high-quality institutional grade office, retail and multifamily properties in attractive markets throughout the Mid-Atlantic.

We remain comfortable with our targeted pace of commencing $150 to $175 million of development projects every 18 to 24 months with a 150-200 basis point spread between development cost and retail value.

When combined with our attention to the balance sheet we have every intent, to ensure, that these quality assets and the wholesale to retail spreads that accompany them will result in both NAV and FFO accretion for our shareholders over the long-term.

The funnel for development pipeline opportunities is full and we look forward to announcing new projects in the coming quarters. With that, I turn the call over to Mike and then we will take your questions. Mike..

Total GAAP NOI in the $52.3 million to $53.3 million range, which includes approximately $8 million from development pipeline projects. The development pipeline NOI has been lowered from last quarter due to the sale of Whetstone. We are not changing the overall NOI guidance because we expect to close on a Whetstone replacement property this year.

Third-party construction company segment gross profits in the $4.5, and $5 million range, general administrative expenses in the $8.3 million to $8.6 million range, interest expense in the $14 million to $15 million range.

The midpoint of the range reflects the assumption factors in the LIBOR core yield curve which anticipates LIBOR – increase in LIBOR during the year. And $40.2 million weighted average shares and OP units outstanding, which includes the shares that were issued for the acquisition of the two Merrill Lynch Shopping Centers.

This guidance excludes any impact from future acquisitions with the exception of the Whetstone replacement, dispositions or other capital market activity. Before we turn to Q&A I’d like to make a few comments about the second quarter.

Second quarter’s normalized FFO is expected to be high in the first quarter but not reach the average run rate for the year. The reason is the development pipeline NOI and FFO growth is backend weighted reflecting tenant occupancy and leases. This is also consistent with the gradual increase from the development pipeline NOI during the year.

I’ll now turn the call back to Lou..

Thank you, Mike and thank you for your time this morning and your interest in Armada Hoffler. Operator, we would like to begin the question-and-answer session..

Thank you. [Operator Instructions] Our question today is coming from John Guinee of Stifel. Please proceed with your question..

Well, Lou, congratulations, you finally arrived. You sound like a real CEO pushing his stock price. Well done. Very well done.

Hey, Mike, should we just look at rest of the year as maybe $0.21, $0.24, $0.24?.

John, the earnings are going to climb as we start getting the NOI coming in place and I’ll get specific on each quarter, but we feel good about our overall guidance for the year and the way it’s going to ramp up during the year..

Okay.

And then I notice Oyster Point, I think, is that a 2017 sales, is that a forward sales?.

Yes, sure, John. And I think a minute I talked about that. I said earlier we were aggressively managing this balance sheet in our asset. The Oyster Point project is the oldest building in our portfolio. Its 30 years old or so. We think it’s really well-positioned and that its right next a Town Center in or Newport New City Center over in that City.

We were until the last several months that – where two big tenants there, one is the GSA with the Air Force which is been in the project for about 20 years and for SunTrust was anchored the building.

SunTrust recently renewed and is downsizing and we’re concerning to is that our folks at the Air Force are giving us the pretty good indication that in 2017 that we’re going back to base. And that’s not definite, but the cards can be pointing that way.

But did a quick valuation and we came up with meeting to invest about $5 million to re-tenant the building. That combined with the fact that there’s a lot of new products in that city center that is being offered at a discount in order to attract tenants, shows that, that’s not a great deals of $5 million in the future.

We didn’t think that was a great market for us because anybody that we open it for sale on the open market anybody doing a reasonable amount of due-diligence would come up with the same facts.

So, what we’re really looking for was their user in that area that could use the building and therefore would be a barging to them because they didn’t get it for below replacement cost.

And as it turns out, we found just that person in the form have been in the university which has been very good us, they’ve been construction client who are going on quarter of a century. The great part about for him the great news for them is that they were going to need all the space right away.

So we work out a deal where we effectively can read the FFO for the next two years while have been slowly comes into the building and ultimately it will close in 2017.

Most probably we’ll do a 1031 with that asset, its debt and the $5 million that we would have invested in that whole building into what we would considered to be a much better long-term assets..

Okay, great. Thank you. And then two other quick questions, one is a quick one, one is a longer one. What’s your ATM size and expectations of drawing it down, that’s a correct term. And then second, you said something very interesting that we hear all the time in the Washington D.C. area, which is the Air force is moving employees back to the pace.

Can you sort of elaborate on the whole government contracting, government and employee, you have a lot of bases down there and it’s almost a far suburb of the D.C. area.

Can you talk about what’s happening in that whole defense contracting environment in your part of the world?.

Sure. First of the ATM, first of all, I want to make sure, give you the raw back if it, Bank of America will be in the left here on the ATM, as most of you recall there, they are heading up our $200 million credit facility and they’ve been – they are lead bank for quarter of a century. So we feel very good with them in the first seat on the ATM.

The size of the program is not going to be very large as anybody can see looking at our volume. We’re not talking about significant amount of throughput. At the same time, we wanted to have with that our option and hopeful we’ll be able to increase our flow through it.

However, I would remind people for the 88th time as the largest shareholder, we’re going to be real careful about selling stock particular where the stock is trading right now..

All right..

With regard with defense contracting, John, my first comment would be that this is a reason why we stay out of that business. I believe, don’t hold to this, but I believe that GSA leads in the SunTrust building is our only GSA leads across the 270 tenants we have portfolio wide, and frankly we don’t want to be in that business.

We’re hearing on the periphery, I guess, that doesn’t affect us directly. We’re hearing on the periphery that there is a significant movement and you probably hearing the same thing.

There’s a significant movement and move people back to the base with the new roles that have come out with the Homeland Security very difficult for these folks to occupy private facilities.

In fact, if the GSA were to renew the Air Force at the SunTrust building we’d have to make significant investment on the Homeland changes before we’ve even talk about improving the building. So I think it’s a trend you’re going to continue to see. We’re very fortunate in this area, I think fortunate.

I guess the silver lining of living in a dangerous world is that to really ramping on ship building.

As you see where we’re now that we home ported [ph] to six carriers and they are funded to next carrier and Newport new shipbuilding evolves with that two coming in three-year refueling and a significant our money has spent now on special forces which is also located here at Oceania [ph].

And so, we’re going to continue to see influx of people, I guess that can of which there was a better reason than what we’re all facing, but it’s good for business..

Great. Thank you very much and keep up the good work..

Thank you..

Thank you. Our next question is coming from Dave Rodgers of Robert W. Baird. Please proceed with your question..

This is actually Steven Di [ph] filling in for Dave today. I wanted to ask about the replacement property for a Whetstone Apartment. And maybe you can discuss the timing and I assume that’s going to be another multifamily, just trying to reconcile kind of keeping NOI in the same place.

And then a second would just be kind of with the ATM, the line of credit, any other acquisitions in the pipeline or dispositions for that matter? Thanks..

Thanks. We’re trying to maintain flexibility. I wouldn’t conclude that the replacement property is going to be multifamily. We are comfortable in putting it in to our base model, because we’re negotiating on a number of different fronts that we feel comfortable that, that 1031 will be completed.

I’ll tell its more – we’re more – as you take my comment and place value about quality, we’re more about finding high quality asset.

The NOI is going to match up probably favorably because I doubt very seriously that we’ll buy the 5.7 cap property, but it’s still going to be a very high quality asset and most probably outside of our home market and more targeted to the markets that we’re trying to get a more of a presence there.

With regard to the City ATM as I said, it’s another tool in the chess. We will continue to evaluate dispositions. We continue to evaluate acquisitions. We’re aggressively managing this thing to where it’s going to produce the macro amount of value. I can tell you -- as I mentioned earlier the opportunities -- the pipeline is full of opportunities.

It’s a matter of finding the right ones to [Indiscernible]. We feel pretty comfortable that with some announcements this summer. It’s going to be extremely busy summer for us and we’re very excited about..

Great.

Thanks and you leaning towards one I guess property type or other or is it really just the entire pipeline is full of the diversity that sees in your current portfolio?.

I tell you, you’re going to continue to see the same kind of diversity that you see from us now. We have been – we’ve been -- as you see why is that the recent history here lasts several months, we’ve been more active in an efforts in acquiring retail property. We feel very comfortable playing in that arena.

We’ve got a number of clients that are in our existing portfolio that are translating well into opportunities outside of the market. But I wouldn’t say that we are targeting any one product type. It’s really being opportunistic.

But as you might expect we’re very comfortable in the mix [ph] world and there’s a lot of people are not comfortable in that world and that it’s where we live, so that’s going to another focus for us as well..

Great, thanks. Good quarter..

Thank you..

Thank you. Our next question is follow-up coming from John Guinee of Stifel. Please proceed with your follow-up question..

Oh, yes, I forgot to ask, can you just idle curiosity of more fully describe what you’re doing up at the Hopkins Campus?.

Sure. Thank you for your question, John. So that another one we’re really proud of. The Johns Hopkins project represents our 23rd public private partnership with the public size this time being the institution obviously its Johns Hopkins. Their goal is to revamp the total village, right outside their main gate with their main campus.

They own a number of properties there. They have partnership with us and we’re launching the first project that’s actually broken ground.

And that’s while it went several through several iterations because I think I mentioned to all of you before, when we answer they are all at -- we did not answer it with the specific cares what we think you should do. We answered it by saying we’re the best partner for you and we’ll work with you to figure out what’s best to do.

The good news is that that usually gets you the win. The bad news as you take these institutions, allow it to figure out what they want to set up, hence we’re two years into it and we get broken ground.

So, it has several iterations and gestation period but it ended up being market rate housing that is geared towards student as well as graduates and staff.

Retail on the ground, the area desperately needed whole service drug store with pharmacy obviously and so our retail is anchored by CBs and President and his staff is working with our staff and our leasing reps to build rest of that retail with the kinds of things that you would hope to see right outside of a campus of a major institutions.

There’s also sandwich between the retail and the housing structured part. We hope that that’s the first of many engagements that we’ll have with Hopkins that we hope over the next decade or so that we’re a big part of remaking that neighborhood..

It is – is your 20% partner Johns Hopkins?.

That’s on the private side as the matter of fact this is all John it’s all get pretty insist to it. Our 20% partner is our clients where our construction company Exelon building..

What his name?.

Beatty Development, Michael Beatty..

Yes. Got you. Hey, thanks a lot..

Okay..

Thank you. At this time, I would like to turn the floor back over to management for any additional or closing comments..

Thanks very much folks. We appreciate your interest in the company. And are look forward to updating you on our activities and results in the coming quarters. Take care..

Thank you. Ladies and gentlemen, thank you for your participation. This concludes today's teleconference. You may disconnect your lines at this time and have a wonderful day..