Building Success for 35 Years

Armada Hoffler

The Virginia Beach based company targets markets in Virginia, North Carolina, and nearby cities such as Washington, DC and Baltimore, Maryland, and has become an industry leader throughout that area.

The company’s most recent major benchmark occurred when it went public one year ago, in May 2013. “Our thought in going public was that we were just going to continue building on the success that we have been building for 35 years,” explains President and CEO Louis S. Haddad.

Armada Hoffler has made a name for itself over the years by leading the industry in structuring new and innovative avenues for development, particularly public-private partnerships. “We do a tremendous amount of public-private partnerships and we’ve been doing those partnerships since the mid-80s,” Mr. Haddad shares. These partnerships are formed with public entities at every level, from small municipalities all the way up to federal government.

One of Armada Hoffler’s most recent examples of a successful public-private partnership in action is the Liberty Apartments in Newport News, Virginia. The project is part of a $70 million public-private mixed use development project with the Newport News Shipbuilding division of Huntington Ingalls Inc., the Commonwealth of Virginia, and Industrial Development Authority of the city of Newport News, Virginia. The team acquired Liberty Apartments for $30.7 million, a figure comprised of a combination of Operating Partnership Units, cash and the assumption of debt. The initial rollout of Liberty Apartments has been quite strong, with approximately 50 units rented almost immediately and nearly half of the retail space either leased, under letter of intent, or in negotiation.

Another Armada-Hoffler private-public partnership project is already 100 percent pre-leased, even though it is still in the early stages. Pre-development on the 155,000 square foot facility, which is situated on 18 acres in Chesapeake, Virginia, began in the fourth quarter of 2014 and is expected to be completed in early 2015. Partners in this build-to-suit project include the City of Chesapeake, the Commonwealth of Virginia and Oceaneering International.

Successful partnerships like these require flexibility. “When you partner with a public entity you are coming together with that entity to try and disproportionately affect a market,” Mr. Haddad explains. “And, in doing so you can’t have any preconceived notions of what is going to achieve the most results.” This means maintaining the ability to consider all angles and projects, from hospitality and retail to office buildings and mixed use.

A conservative approach is also essential; Armada Hoffler did not get to where it is today by taking risks, insists Mr. Haddad. “To be a real estate company that survives on the private side for that period of time – and for us, during four major recessions – really revolves around being conservative,” he explains. “That is not the typical profile of real estate developers, but it is here. We don’t speculate on land and we don’t speculate on buildings. We very carefully manage our paths and which projects we take on.”

The company’s solid footing within the industry allows the team to gain access to the projects that they want. “We have been blessed with the ability to essentially cherry pick projects because of a long standing track record and reputation,” Mr. Haddad explains. “But the most important aspect is trying to stay conservative. Consequently, there are not a lot of grand slams on our resume, but there aren’t a lot of strike outs either – as a matter of fact I can count them on one hand.”

Armada Hoffler’s construction capabilities also set the company apart. In addition to developing and building its own properties, the team provides general construction and development services to third-party clients throughout the Southeastern and Mid-Atlantic regions of the United States. “It is completely unique in the industry,” Mr. Haddad says, and this well-developed construction arm is as beneficial as it is unusual. “It is very advantageous for us to have our own construction company and our own development company obviously. For the last 30 odd years it [the construction company] has gone into the marketplace and developed significant relationships with well-heeled clients. It has enabled us to land some very significant accounts and multiple engagements with large companies… We have a tremendous amount of third party business that, year in and year out, adds a few million dollars to our bottom line.”

The company’s development approach is also somewhat unusual. “We are fairly unique as a REIT in that the vast majority of our growth strategy is through our development arm,” Mr. Haddad explains. “We produce $150 million to $175 million worth of projects in our pipeline every 18 months or so. What we have done all this time, and will continue to do as a public company, is to create the projects at a wholesale level and put them into service in our portfolio at a retail level, versus your typical REIT which goes and purchases at a retail level.”

Armada Hoffler’s out of the box strategies are led by a management team that has been behind the wheel for many years. “Management has been unchanged for three decades,” says Mr. Haddad. “When people ask me what I attribute our long term success to, I point to that first and foremost.” In fact, the company’s Chairman and Founder, Vice Chairman, and President and CEO have worked together for 30 years. The next tier of management, which includes the Presidents of three company divisions and the CFO, average 20 years with Armada Hoffler. And the employee base as a whole averages a decade of service with the company.

The team is eager to continue building on their success but, with a strong footprint already in place, Armada Hoffler is only looking to expand within its current region. “We are not really interested in teleporting into different regions, but we could see further branching out into the mid-Atlantic.” The team knows this regional market well and knows how to get the most out of it. “I really dislike it when people talk about the country’s real estate market [as a whole],” Mr. Haddad says. “Real estate is a local business and you have to get on a local level to really ascertain what is going on in the marketplace.”

The company’s target market shows promise, but without the highs – and dangerous lows – that are present in many other United States real estate markets. “In our region, which is the tri-state area of Maryland, Virginia, and the Carolinas, business is steady and it is almost always steady,” Mr. Haddad says. “Outside of the DC market, it is really a secondary market, and as a secondary market it doesn’t really boom and it doesn’t really bust. If you look at the area traditionally, it always lags in the boom times and outperforms in the bad times. [Business here] is steady, and for a well-positioned company there are plenty of opportunities.”

The team intends to take full advantage of these upcoming opportunities. “I think what we have to do at this point in time is execute,” Mr. Haddad explains. “In 2013 we really laid the foundation for continued growth and sustained growth and now it is about execution in 2014 and 2015,” adds Julie Trudell, Vice President of Investor Relations. “This is new to our investors watching us, but certainly not new to Armada Hoffler, who has done this for 30 plus years.”

Investors may be monitoring the company for the first time, but the team refuses to lose sight of the strategies that have brought Armada Hoffler this far. Plans for 2014 and 2015 will still be executed carefully and conservatively in order to maintain the company’s long term success. “We want to grow profitably,” Mr. Haddad explains. “That is what we promised and that is what we intend to do. The company has been essentially in a growth mode for three decades and we are going to continue that into this fourth decade. But we are going to do it our way – on a conservative basis.”

March 20, 2018, 9:41 AM EDT

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