AHRT 10-K & 10-Q changes, risk factors and insider trading
AH Realty Trust, Inc. (also AHRT-PA) · NYSE · Real Estate · CIK 1569187 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Our recently announced strategic repositioning may not be successfully executed and could materially and adversely affect our business, financial condition, results of operations, cash flow, and ability to make distributions to our stockholders.”
Removed heading “The success of our activities to design, construct, and develop properties in which we will retain an ownership interest is dependent, in part, on the availability of suitable undeveloped land at acceptable prices as well as our having sufficient liquidity to fund investments in such undeveloped land and subsequent development.”
Removed heading “Our real estate development activities are subject to risks particular to development, such as unanticipated expenses, delays, and other contingencies, any of which could materially and adversely affect our financial condition, results of operations, and cash flow.”
Removed heading “Risks Related to Our Third-Party Construction Business”
Removed heading “Adverse economic and regulatory conditions, particularly in the Mid-Atlantic region, could adversely affect our construction and development business, which could have a material adverse effect on our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations.”
Removed heading “There can be no assurance that all of the projects for which our construction business is engaged as general contractor will be commenced or completed in their entirety in accordance with the anticipated cost, or that we will achieve the financial results we expect from the construction of such properties, which could materially and adversely affect our results of operations, cash flow, and growth prospects.”
Removed heading “We recognize revenue for the majority of our construction projects based on estimates; therefore, variations of actual results from our assumptions may reduce our profitability.”
Removed heading “Construction project sites are inherently dangerous workplaces, and, as a result, our failure to maintain safe construction project sites could result in deaths or injuries, reduced profitability, the loss of projects or clients, and possible exposure to litigation, any of which could materially and adversely affect our financial condition, results of operations, cash flow, and reputation.”
Removed heading “Our failure to successfully and profitably bid on construction contracts could materially and adversely affect our results of operations and cash flow.”
Removed heading “If we fail to timely complete a construction project, miss a required performance standard, or otherwise fail to adequately perform on a construction project, we may incur losses or financial penalties, which could materially and adversely affect our financial condition, results of operations, cash flow, cash available for distribution, ability to service our debt obligations, and reputation.”
Removed heading “Unionization or work stoppages could have a material adverse effect on us.”
Largest changes
“Our third-party construction activities have been, and are expected to continue to be, primarily focused in the Mid-Atlantic region, although we have also historically undertaken construction projects in various states in the Southeast, Northeast, and Midwest regions of the U.S. …”see in full comparison
“If we fail to timely complete a construction project, miss a required performance standard, or otherwise fail to adequately perform on a construction project, we may incur losses or financial penalties, which could materially and adversely affect our financial condition, results of operations, cash flow, cash available for distribution, ability to service our debt obligations, and reputation.”see in full comparison
“Construction project sites are inherently dangerous workplaces, and, as a result, our failure to maintain safe construction project sites could result in deaths or injuries, reduced profitability, the loss of projects or clients, and possible exposure to litigation, any of which could materially and adversely affect our financial condition, results of operations, cash flow, and reputation.”see in full comparison
“The success of our activities to design, construct, and develop properties in which we will retain an ownership interest is dependent, in part, on the availability of suitable undeveloped land at acceptable prices as well as our having sufficient liquidity to fund investments in such undeveloped land and subsequent development.”see in full comparison
“Construction and maintenance sites often put our employees, employees of subcontractors, our tenants, and members of the public in close proximity with mechanized equipment, moving vehicles, chemical and manufacturing processes, and highly regulated materials. On many sites, we are responsible for safety and, accordingly, must implement appropriate safety procedures. …”see in full comparison
“Delays in completing dispositions or lower-than-expected proceeds could limit our ability to reduce leverage as planned, adversely affect our liquidity and financial flexibility, and impair our ability to comply with financial covenants or execute other elements of our strategy. In addition, during the pendency of these dispositions, we may experience declines in revenues, net income, FFO, and cash available for distribution, and we may not be able to effectively time reductions in income from asset sales with corresponding improvements in our capital structure or operating performance.”see in full comparison
Full comparison: every changed paragraph (64)
Risks Related to Our Real Estate Business
Our recently announced strategic repositioning may not be successfully executed and could materially and adversely affect our business, financial condition, results of operations, cash flow, and ability to make distributions to our stockholders.
We recently announced a strategic plan to reposition the Company, which includes, among other things, the sale of our construction business, the planned disposition of our multifamily property portfolio and our mezzanine loan portfolio, the use of disposition proceeds to reduce our outstanding indebtedness, changes to our corporate branding and public market identity, and the adoption of a revised executive compensation program intended to support the execution of this strategy. This strategic repositioning involves significant risks and uncertainties, and there can be no assurance that we will successfully implement the plan on the timing, scope, or terms we currently anticipate, or at all.
As part of this strategy, we intend to sell all or a portion of our multifamily assets over time and use the proceeds primarily to reduce outstanding debt. Real estate investments are inherently illiquid, and market conditions for multifamily assets may be unfavorable, including as a result of elevated interest rates, constrained buyer financing, pricing volatility, or reduced transaction activity. As a result, we may be unable to complete these asset sales within anticipated timeframes, at prices we expect, or on terms acceptable to us, or we may be unable to complete such sales at all. The disposition process may also be lengthy and costly, require significant management time and attention, and expose us to transactional risks, including potential indemnification obligations, required capital expenditures, or other unanticipated costs. If we classify any assets as held for sale, we may be required to record impairment charges if their estimated fair value less costs to sell is below their carrying value.
Delays in completing dispositions or lower-than-expected proceeds could limit our ability to reduce leverage as planned, adversely affect our liquidity and financial flexibility, and impair our ability to comply with financial covenants or execute other elements of our strategy. In addition, during the pendency of these dispositions, we may experience declines in revenues, net income, FFO, and cash available for distribution, and we may not be able to effectively time reductions in income from asset sales with corresponding improvements in our capital structure or operating performance.
We also intend to sell our mezzanine loan portfolio as part of this strategic repositioning. The disposition of these investments will reduce the interest income generated by our real estate financing investments, and there can be no assurance that the resulting reduction in income will be offset by improvements in our balance sheet, cost of capital, or long-term earnings profile. In addition, we may not be able to sell these investments on acceptable terms or at all, which could result in realized losses or additional impairments.
In connection with our strategic repositioning, we intend to rebrand the Company and change our corporate name and stock ticker symbol. These changes may result in a loss of brand recognition or brand equity, confusion among investors, tenants, lenders, or other stakeholders, reduced market visibility, or increased stock price volatility, any of which could adversely affect our access to capital, investor base, or market valuation.
We have also adopted a revised executive compensation program intended to align management incentives with the successful execution of our strategic plan. There can be no assurance that this compensation structure will effectively incentivize or retain key members of senior management or that management’s interests will be fully aligned with those of our stockholders. If we are unable to retain key personnel, or if management fails to execute the strategic plan effectively, our business and results of operations could be materially and adversely affected.
If we are unable to complete the planned asset sales on acceptable terms or within expected timeframes, fail to achieve the anticipated reduction in leverage, experience sustained declines in earnings or cash flow, or otherwise fail to realize the intended benefits of our strategic repositioning, our business, financial condition, results of operations, cash flow, the market price of our common stock and Series A Preferred Stock, and our ability to make distributions to our stockholders could be materially and adversely affected.
As of December 31, 2024,2025, we had total debt of approximately $1.3$1.5 billion, including amounts drawn under our credit facility, and we may incur significant additional debt to finance future appropriately leveraged acquisition and developmentredevelopment activities. Excluding unamortized fair value adjustments and debt issuance costs, the aggregate outstanding principal balance of our debt was $1.3$1.5 billion as of December 31, 2024.2025. Payments of principal and interest on borrowings may leave us with insufficient cash resources to operate our properties or to pay the dividends currently contemplated or necessary to maintain our REIT qualification. Our level of debt and the limitations imposed on us by our debt agreements could have significant adverse consequences, including the following:
We have originated, and in the future expect to originate or acquire,originated mezzanine loans, preferred equity investments, or similar investments (together "real estate financing investments"), which take the form of subordinated loans secured by second mortgages on the underlying property or loans secured by a pledge of the ownership interests of either the entity owning the property or a pledge of the ownership interests of the entity that owns the interest in the entity owning the property. As of December 31, 2024,2025, we had approximately $121.4$130.6 million in outstanding real estate financing investments. These types of investments involve a higher degree of risk than long-term senior mortgage loans secured by income-producing real property because the investment may become unsecured as a result of foreclosure by the senior lender. In addition, these investments may have higher "loan-to-value" ratios than conventional mortgage loans, with little or no equity invested by the borrower, increasing the risk of loss of principal. If a borrower defaults on our real estate financing investment or debt senior to our investment, or in the event of a borrower bankruptcy, our real estate financing investment will be satisfied only after the senior debt is paid in full. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy our real estate financing investment. As a result, we may not recover some or all of our initial investment. Additionally, in conjunction with certain investments, we issuehave issued partial payment guarantees to the senior lender for the property, which may require us to make payments to the senior lender in the event of a default on the senior note. Finally, in connection with our real estate financing investments, we may have options to purchase all or a portion of the underlying property upon maturity of the investment; however, if a developer’s costs for a project are higher than anticipated, exercising such options may not be attractive or economically feasible, or we may not have sufficient funds to exercise such options even if we desire to do so. Significant losses related to real estate financing investments could have a material adverse effect on our financial condition and results of operations.
Most of our costs, such as operating and general and administrative expenses, interest expense, and real estate acquisition and construction costs, are subject to inflation.
In 2024,2025, the consumer price index rose by approximately 3% over the previous year, following 2023's2024's increase in the index of 3%. Global supply chain disruptions, labor shortages, and increases in consumer demand still pose relevant risks in today's landscape despite relatively stable inflation year-over-year. A significant portion of our operating expenses and construction-related costs are sensitive to inflation. Operating expenses include those for property-related contracted services such as janitorial and engineering services, utilities, repairs and maintenance, and insurance. Property taxes are also impacted by inflationary changes as taxes are regularly reassessed based on changes in the fair value of our properties. We also have ground lease expenses in certain of our properties. Ground lease costs are contractual, but in some cases, lease payments reset every few years based on changes on consumer price indices.
Our operating expenses, with the exception of ground lease rental expenses and multifamily properties, are typically recoverable through our lease arrangements, which allow us to pass through substantially all expenses associated with property taxes, insurance, utilities, repairs and maintenance, and other operating expenses (including increases thereto) to our tenants.
Our operating expenses, with the exception of ground lease rental expenses and multifamily properties, are typically recoverable through our lease arrangements, which allow us to pass through substantially all expenses associated with property taxes, insurance, utilities, repairs and maintenance, and other operating expenses (including increases thereto) to our tenants. Our remaining leases are generally gross leases, which provide for recoveries of operating expenses above the operating expenses from the initial year within each lease. During inflationary periods, we expect to recover increases in operating expenses from our triple net leases and our gross leases. In addition, our multifamily leases generally have lease terms ranging from 7 to 15 months with a majority having 12-month lease terms allowing negotiation of rental rates at term end, which we believe reduces our exposure to the effects of inflation, although an extreme and sustained escalation in costs could have a negative impact on our residents and their ability to absorb rent increases. As a result, we do not believe that inflation would result in a significant adverse effect on our NOI and operating cash flows at the property level. However, there is no guarantee that our tenants would be able to absorb these expense increases and be able to continue to pay us their portion of operating expenses, capital expenditures, and rent.
Approximately 39.0%39.8% of our NOI for the year ended December 31, 20242025 was from retail properties. As a result, we are subject to factors that affect the retail sector generally as well as the market for retail space. The retail environment and the market for retail space have been, and in the future could be, adversely affected by weakness in the national, regional, and local economies, the level of consumer spending and consumer confidence, the adverse financial condition of some large retail companies, the ongoing consolidation in the retail sector, the excess amount of retail space in a number of markets, increasing competition from discount retailers, outlet malls, internet retailers, and other online businesses, and epidemics, pandemics and other health crises and measures intended to mitigate their spread. Increases in consumer spending via the internet may significantly affect our retail tenants’ ability to generate sales in their stores. New and enhanced technologies, including new digital and web services technologies, may increase competition for certain of our retail tenants. Further, the recent imposition by the United States of tariffs on imported goodsgoods, retaliatory tariffs by other countries, and global supply chain disruption could cause certain retail tenants to raise the prices on their products, lowering demand.
We face risks related to an epidemic, pandemic or other health crisis which has impacted, and in the future could impact, the markets in which we operate and could have a material adverse effect on our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations. The impact of an epidemic, pandemic or other health crisis and measures intended to prevent the spread of such an event could materially and adversely affect our business in a number of ways. Our rental revenue and operating results depend significantly on the occupancy levels at our properties and the ability of our tenants to meet their rent obligations to us, which have been in certain cases, and could in the future be, adversely affected by, among other things, job losses, furloughs, store closures, lower incomes, uncertainty about the future as a result of an epidemic, pandemic or other health crisis and related governmental actions including eviction moratoriums, shelter-in-place orders, prohibitions on charging certain fees, and limitations on collection laws and rent increases, which have in the past affected, and, may in the future affect, our ability to collect rent or enforce legal or contractual remedies for the failure to pay rent, which negatively impacted, and may in the future negatively impact, our ability to remove tenants who are not paying rent and our ability to rent their space to new tenants. In addition, the federal government has in the past allocated, and may in the future allocate, funds to rent relief programs to be run by state and local authorities. In certain locations, the funds available may not be sufficient to pay all past due rent and reallocation of such funds may result in markets in which we operate not having access to the funds anticipated. Further, certain of our tenants with past due rent have not qualified, and may not in the future qualify, to participate in such programs. In addition, some of such programs have required, and programs in the future may require, the forgiveness of a portion of the past due rent or agreeing to other limitations that may adversely affect our business in order to participate or may only provide funds to pay a portion of the past due rent. In addition, while certain locations have adopted programs that may reimburse past due rent owed by tenants who have left a community, such programs have only been adopted in a minority of our markets. Our development and construction projects also have been and could in the future be adversely affected by factors related to an epidemic, pandemic or other health crisis, although, to date, such impacts have not been material. An epidemic, pandemic or other health crisis, or related impacts thereof also could adversely affect the businesses and financial conditions of our counterparties, including our joint venture partners and general contractors and their subcontractors, and their ability to satisfy their obligations to us and to complete transactions or projects with us as intended.
Our continued success and our ability to manage anticipated future growth depend, in large part, upon the efforts of key personnel who have extensive market knowledge and relationships and exercise substantial influence over our operational, financing, development, and constructiondevelopment activity. Individuals currently considered key personnel each have a national or regional industry reputation that attracts business and investment opportunities and assists us in negotiations with lenders, existing and potential tenants, and industry personnel, and we have not currently entered into employment agreements with any of these individuals. If we lose their services, our relationships with such industry personnel could diminish.
Certain investors, tenants, employees, and other stakeholders focus on corporate responsibility, specifically related to environmental, social and governance factors. Various regulatory authorities, including the SEC,authorities also focus on such matters, and the activities and expense required to comply with new regulations or standards may be significant. Some investors may use these factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our policies relating to corporate responsibility are inadequate. Third-party providers of corporate responsibility ratings and reports on companies have increased to meet growing investor demand for measurement of corporate responsibility performance. In addition, the criteria by which companies’ corporate responsibility practices are assessed may change, which could result in greater expectations of us and cause us to undertake costly initiatives to satisfy such new criteria. Alternatively, if we elect not to or are unable to satisfy such new criteria, investors may conclude that our policies with respect to corporate responsibility are inadequate. We may face reputational damage in the event that our corporate responsibility procedures or standards do not meet the standards set by various constituencies. Furthermore, if our competitors’ corporate responsibility performance is perceived to be greater than ours, potential or current investors may elect to invest with our competitors instead. In addition, we could fail, or be perceived to fail, in our achievement of initiatives or goals regarding environmental, social, and governance matters publicly communicated, including through our Sustainability Report, or we could be criticized for the scope of such initiatives or goals. If we fail to satisfy the expectations of investors, tenants and other stakeholders or our initiatives are not executed as planned, our reputation and financial results could be materially and adversely affected.
The success of our activities to design, construct, and develop properties in which we will retain an ownership interest is dependent, in part, on the availability of suitable undeveloped land at acceptable prices as well as our having sufficient liquidity to fund investments in such undeveloped land and subsequent development.
Our success in designing, constructing, and developing projects for our own account depends, in part, upon the continued availability of suitable undeveloped land at acceptable prices. The availability of undeveloped land for purchase at favorable prices depends on a number of factors outside of our control, including the risk of competitive over-bidding on land and governmental regulations that restrict the potential uses of land. If the availability of suitable land opportunities decreases, the number of development projects we may be able to undertake could be reduced. In addition, our ability to make land purchases will depend upon our having sufficient liquidity or access to external sources of capital to fund such purchases. Thus, the lack of availability of suitable land opportunities and insufficient liquidity to fund the purchases of any such available land opportunities could have a material adverse effect on our results of operations and growth prospects.
Our real estate development activities are subject to risks particular to development, such as unanticipated expenses, delays, and other contingencies, any of which could materially and adversely affect our financial condition, results of operations, and cash flow.
We engage in development and redevelopment activities and will be subject to the following risks associated with such activities:
•unsuccessful development or redevelopment opportunities could result in direct expenses to us and cause us to incur losses;
•construction or redevelopment costs of a project may exceed original estimates, possibly making the project less profitable than originally estimated, or unprofitable;
•the inability to obtain or delays in obtaining necessary governmental or quasi-governmental permits and authorizations could result in increased costs or abandonment of the project if necessary permits or authorizations are not obtained;
•delayed construction may give tenants the right to terminate pre-development leases, which may adversely impact the financial viability of the project;
•occupancy rates, rents and concessions of a completed project may fluctuate depending on a number of factors and may not be sufficient to make the project profitable; and
•the availability and pricing of financing to fund our development activities on favorable terms or at all may result in delays or even abandonment of certain development activities.
These risks could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent completion of development or redevelopment activities once undertaken, any of which could have a material adverse effect on our financial condition, results of operations, and cash flow.
In addition, the Code imposes restrictions on a REIT’s ability to dispose of properties that are not applicable to other types of real estate companies. In particular, the tax laws applicable to REITs effectively require that we hold our properties for investment, rather than primarily for sale in the ordinary course of business, which may cause us to forego or defer sales of properties that otherwise would be in our best interests or may subject us to penalties in the event any sales of our properties are not permitted under such laws. See “—The prohibited transactions tax may limit our ability to dispose of our properties.” Therefore, we may not be able to vary our portfolio in response to economic or other conditions promptly or on favorable terms.
Therefore, we may not be able to vary our portfolio in response to economic or other conditions promptly or on favorable terms.
Risks Related to Our Third-Party Construction Business
Adverse economic and regulatory conditions, particularly in the Mid-Atlantic region, could adversely affect our construction and development business, which could have a material adverse effect on our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations.
Our third-party construction activities have been, and are expected to continue to be, primarily focused in the Mid-Atlantic region, although we have also historically undertaken construction projects in various states in the Southeast, Northeast, and Midwest regions of the U.S. As a result of our concentration of construction projects in the Mid-Atlantic region of the U.S., we are particularly susceptible to adverse economic or other conditions in markets in this region (such as periods of economic slowdown or recession, business layoffs or downsizing, industry slowdowns, relocations of businesses, labor disruptions, and the costs of complying with governmental regulations or increased regulation), as well as to natural disasters that occur in this region. We cannot assure you that our target markets will support construction and development projects of the type in which we typically engage. While we have the ability to provide a wide range of development and construction services, any adverse economic or real estate developments in the Mid-Atlantic region could materially and adversely affect our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations.
There can be no assurance that all of the projects for which our construction business is engaged as general contractor will be commenced or completed in their entirety in accordance with the anticipated cost, or that we will achieve the financial results we expect from the construction of such properties, which could materially and adversely affect our results of operations, cash flow, and growth prospects.
For serving as general contractor, our construction business earns profit equal to the difference between the total construction fees that we charge and the costs that we incur to build a property. If the decision is made by a third-party client to abandon a construction project for any reason, our anticipated fee revenue from such project could be significantly lower than we expect. In addition, we defer pre-contract costs when such costs are directly associated with specific anticipated construction contracts and their recovery is deemed probable. In the event that we determine that the execution of a construction contract is no longer probable, we would be required to expense those pre-contract costs in the period in which such determination is made, which could materially and adversely affect our results of operations in such period. Our ability to complete the projects in our construction pipeline on time and on budget could be materially and adversely affected as a result of the following factors, among others:
•shortages of subcontractors, equipment, materials, or skilled labor;
•unscheduled delays in the delivery of ordered materials and equipment;
•unanticipated increases in the cost of equipment, labor, and raw materials, due to, among other things, trade tensions, disruptions, or new and significant tariffs;
•unforeseen engineering, environmental, or geological problems;
•weather interferences;
•difficulties in obtaining necessary permits or in meeting permit conditions;
•client acceptance delays; or
•work stoppages and other labor disputes.
If we do not complete construction projects on time and on budget, it could have a material adverse effect on us, including our results of operations, cash flow, and growth prospects.
We recognize revenue for the majority of our construction projects based on estimates; therefore, variations of actual results from our assumptions may reduce our profitability.
In accordance with GAAP, we record revenue as work on the contract progresses. The cumulative amount of revenues recorded on a contract at a specified point in time is that percentage of total estimated revenues that costs incurred to date bear to estimated total costs. Accordingly, contract revenues and total cost estimates are reviewed and revised as the work progresses. Adjustments are reflected in contract revenues in the period when such estimates are revised. Estimates are based on management’s reasonable assumptions and experience, but are only estimates. Variations of actual results from assumptions on an unusually large project or on a number of average size projects could be material. We are also required to immediately recognize the full amount of the estimated loss on a contract when estimates indicate such a loss. Such adjustments and accrued losses could result in reduced profitability, which could negatively impact our cash flow from operations.
Construction project sites are inherently dangerous workplaces, and, as a result, our failure to maintain safe construction project sites could result in deaths or injuries, reduced profitability, the loss of projects or clients, and possible exposure to litigation, any of which could materially and adversely affect our financial condition, results of operations, cash flow, and reputation.
Construction and maintenance sites often put our employees, employees of subcontractors, our tenants, and members of the public in close proximity with mechanized equipment, moving vehicles, chemical and manufacturing processes, and highly regulated materials. On many sites, we are responsible for safety and, accordingly, must implement appropriate safety procedures. If we fail to implement these procedures or if the procedures we implement are ineffective, we may suffer the loss of or injury to our employees, fines, or expose our tenants and members of the public to potential injury, thereby creating exposure to litigation. As a result, our failure to maintain adequate safety standards could result in reduced profitability or the loss of projects, clients, and tenants, which may materially and adversely affect our financial condition, results of operations, cash flow, and reputation.
Our failure to successfully and profitably bid on construction contracts could materially and adversely affect our results of operations and cash flow.
Many of the costs related to our construction business, such as personnel costs, are fixed and are incurred by us irrespective of the level of activity of our construction business. The success of our construction business depends, in part, on our ability to successfully and profitably bid on construction contracts for private and public sector clients. Contract proposals and negotiations are complex and frequently involve a lengthy bidding and selection process, which can be impacted by a number of factors, many of which are outside our control, including market conditions, financing arrangements, and required governmental approvals. If we are unable to maintain a consistent backlog of third-party construction contracts, our results of operations and cash flow could be materially and adversely affected.
If we fail to timely complete a construction project, miss a required performance standard, or otherwise fail to adequately perform on a construction project, we may incur losses or financial penalties, which could materially and adversely affect our financial condition, results of operations, cash flow, cash available for distribution, ability to service our debt obligations, and reputation.
We may contractually commit to a construction client that we will complete a construction project by a scheduled date at a fixed cost. We may also commit that a construction project, when completed, will achieve specified performance standards. If the construction project is not completed by the scheduled date or fails to meet required performance standards, we may either incur significant additional costs or be held responsible for the costs incurred by the client to rectify damages due to late completion or failure to achieve the required performance standards. In addition, completion of projects can be adversely affected by a number of factors beyond our control, including unavoidable delays from governmental inaction, public opposition, inability to obtain financing, weather conditions, unavailability of vendor materials, availabilities of subcontractors, changes in the project scope of services requested by our clients, industrial accidents, environmental hazards, labor disruptions, and other factors. In some cases, if we fail to meet required performance standards or milestone requirements, we may also be subject to agreed-upon financial damages in the form of liquidated damages, which are determined pursuant to the contract governing the construction project. To the extent that these events occur, the total costs of the project could exceed our estimates and our contracted cost and we could experience reduced profits or, in some cases, incur a loss on a project, which may materially and adversely affect our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations. Failure to meet performance standards or complete performance on a timely basis could also adversely affect our reputation.
Unionization or work stoppages could have a material adverse effect on us.
From time to time, our construction business and the subcontractors we engage may use unionized construction workers, which requires us to pay the prevailing wage in a jurisdiction to such workers. Due to the highly labor-intensive and price-competitive nature of the construction business, the cost of unionization or prevailing wage requirements for new developments could be substantial, which could adversely affect our profitability. In addition, the use of unionized construction workers could cause us to become subject to organized work stoppages, which would materially and adversely affect our ability to meet our construction timetables and could significantly increase the cost of completing a construction project.
As of December 31, 2024,2025, Daniel Hoffler, our Chairman Emeritus,Hoffler owned approximately 5.2%5.1% and, collectively, Messrs. Hoffler, Haddad,Hoffler and KirkHaddad owned approximately 9.6%7.4% of the combined outstanding shares of our common stock and OP Units (which OP Units may be redeemable for shares of our common stock). Consequently, these individuals may be able to significantly influence the outcome of matters submitted for stockholder action, including the approval of significant corporate transactions, including business combinations, consolidations, and mergers.
Conflicts of interest may exist or could arise in the future as a result of the relationships between us and our affiliates, and our Operating Partnership or any partner thereof. Our directors and officers have duties to our company under Maryland law in connection with their management of our company. At the same time, we, as the general partner of our Operating Partnership, have fiduciary duties and obligations to our Operating Partnership and its limited partners under Virginia law and the partnership agreement of our Operating Partnership in connection with the management of our Operating Partnership. Our fiduciary duties and obligations as the general partner of our Operating Partnership may come into conflict with the duties of our directors and officers to our company. Messrs. Hoffler, Haddad,Hoffler and KirkHaddad own a significant interest in our Operating Partnership as limited partners and may have conflicts of interest in making decisions that affect both our stockholders and the limited partners of our Operating Partnership.
In particular, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities, and qualified real estate assets. The remainder of our investment in securities (other than government securities, securities of TRSs, and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities, securities of TRSs, and qualified real estate assets) can consist of the securities of any one issuer, and for taxable years beginning after December 31, 2017 through December 31, 2025, no more than 20% of the value of our total assets can be represented by the securities of one or more TRSs. For taxable years beginning after December 31, 2025, up to 25% of the value of our total assets can be represented by the securities of one or more TRSs. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.
In recent years, numerous legislative, judicial and administrative changes have been made to the U.S. federal income tax laws applicable to investments in real estate and REITs, and it is possible that additional legislation may be enacted in the future. There can be no assurance that future changes to the U.S. federal income tax laws or regulatory changes will not be proposed or enacted that could impact our business and financial results. The REIT rules are regularly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department, which may result in revisions to regulations and interpretations in addition to statutory changes. If enacted, certain of such changes could have an adverse impact on our business and financial results. In addition, various provisions of the Code are set to expire at the end of 2025, including the 20% deduction described above and other provisions that may be favorable to REITs and their shareholders.
Management's Discussion & Analysis (MD&A)
New heading “Discontinued Operations”
New heading “Consolidated Results of Continuing Operations”
New heading “Rental Revenues”
New heading “Interest Income”
New heading “Rental Expenses”
New heading “Real Estate Taxes”
New heading “Depreciation and Amortization”
New heading “General and Administrative Expenses”
New heading “Acquisition, Development, and Other Pursuit Costs”
New heading “Impairment Charges”
New heading “Gain on Real Estate Dispositions, Net”
New heading “Non-Operating Income and Expenses”
New heading “Discontinued Operations - General Contracting and Real Estate Services Data”
New heading “Private Placement Notes”
New heading “Cash Flows from Continuing Operations”
Removed heading “General Contracting and Real Estate Services Revenues”
Removed heading “Real Estate Financing Segment Data”
Removed heading “Consolidated Results of Operations”
Removed heading “Recent Common Stock Offering”
Largest changes
“The Note Purchase Agreement includes customary events of default, including but not limited to non-payment, breach of covenants, representations or warranties, cross defaults, bankruptcy or other insolvency events, judgments, Employee Retirement Income Security Act 1974 (ERISA) events, and if any guarantee ceases to be in full force and effect. In certain cases, the events of default are subject to customary periods to cure. …”see in full comparison
“We recognize general contracting revenues as a customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services. For each construction contract, we identify the performance obligations, which typically include the delivery of a single building constructed according to the specifications of the contract. …”see in full comparison
We also believe that the computation of FFO in accordance with Nareit’s definition includes certain items that are not indicative of the results provided by our operating property portfolio and affect the comparability of our period-over-period performance. Accordingly, management believes that Normalized FFO is a more useful performance measure that excludes certain items, including but not limited to,see in full comparisondebt extinguishment losses and prepayment penalties, impairment and accelerated amortization of intangible assets and liabilities, propertyacquisition, development, and other pursuit costs, debt extinguishment losses, prepayment penalties, impairment of intangible assets and liabilities, mark-to-market adjustmentsforon interest rate derivatives not designated as cash flow hedges, amortization of payments made to purchase interest rate caps and swaps designated as cash flow hedges, provision for unrealized non-cash credit losses, amortization of right-of-use assets attributable to finance leases, severance related costs, and other non-comparable items. Stock compensation normalization accounts for the double-issuance of stock compensation due to a modification in the structure of executive compensation grants, removing the impact of grants in the current year that are related to the prior year's performance. New grants are now issued in the year in which performance relates. It also removes the impact of a one-time acceleration of 100% of stock compensation awarded to our former Chief Executive Officer in relation to prior year performance. This adjustment also specifically excludes the impact of the special award granted in June 2025 to a select group of employees including the executive officers. Other equity REITs may not calculate Normalized FFO in the same manner as we do, and, accordingly, our Normalized FFO may not be comparable to such other REITs' Normalized FFO.
“Discontinued Operations - General Contracting and Real Estate Services Data”see in full comparison
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We are a vertically-integrated, self-managed REIT with over four decades of experience managing high-quality properties located primarily in the Mid-Atlantic and Southeastern United States. As of December 31, 2024,2025, our stabilized operating property portfolio was comprised of 46 retail properties, 14 office properties, and 11 multifamily properties. In addition to our operating property portfolio, we had 2three retail properties, 1two office property,properties, and 1three multifamily propertyproperties in various stages of predevelopment, development, redevelopment, or stabilization as of December 31, 2024.2025. We also providehave historically provided general contracting services to third parties and investinvested in development projects through mezzanine lending arrangements and equity investments.
Discontinued Operations
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing in Item 8 of this Annual Report on Form 10-K. All historical financial information has been retrospectively adjusted to reflect the general contracting and real estate services segment as discontinued operations. The decision to exit the general contracting and real estate services segment resulted in the reclassification of approximately $132.5 million in revenue for the year ended December 31, 2025 to discontinued operations.
General Contracting and Real Estate Services Revenues
We recognize general contracting revenues as a customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services. For each construction contract, we identify the performance obligations, which typically include the delivery of a single building constructed according to the specifications of the contract. We estimate the total transaction price, which generally includes a fixed contract price and may also include variable components such as early completion bonuses, liquidated damages, or cost savings to be shared with the customer. Variable components of the contract price are included in the transaction price to the extent that it is probable that a significant reversal of revenue will not occur. We recognize the estimated transaction price as revenue as we satisfy our performance obligations; we estimate our progress in satisfying performance obligations for each contract using the input method, based on the proportion of incurred costs relative to total estimated construction costs at completion. Construction contract costs include all direct material, direct labor, subcontract costs, and overhead costs directly related to contract performance. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions and final contract settlements, are all significant judgments that may result in revisions to costs and income and are recognized in the period in which they are determined. Additionally, the estimated costs at completion are affected by management’s forecasts of anticipated costs to be incurred and contingency reserves for exposures related to unknown costs, such as design deficiencies and subcontractor defaults. The estimated variable consideration is also affected by claims and unapproved change orders, which may result from changes in the scope of the contract. Provisions for estimated losses on uncompleted contracts are recognized immediately in the period in which such losses are determined.
We recognize real estate services revenues from property development and management as we satisfy our performance obligations under these service arrangements.
We assess whether multiple contracts with a single counterparty may be combined into a single contract for the revenue recognition purposes based on factors such as the timing of the negotiation and execution of the contracts and whether the economic substance of the contracts was contemplated separately or in tandem.
Segment Results of Continuing Operations
As of December 31, 2024,2025, we operated our business in fivefour segments: (i) retail real estate, (ii) office real estate, (iii) multifamily residential real estate, (iv) general contracting and real estate services, and (viv) real estate financing. See “—Real Estate Financing Segment Data” below for additional information regarding the real estate financing segment and its introduction as a reportable segment during the year ended December 31, 2024. Our general contracting and real estate services segment is conducted through our TRS.
NOI is the primary measure used by our chief operating decision-maker to assess segment performance and allocate our resources among our segments. We calculate NOI as segment revenues less segment expenses. Segment revenues include rental revenues for our property segments, general contracting and real estate services revenues for our general contracting and real estate services segment,segments and interest income for our real estate financing segment. Segment expenses include rental expenses and real estate taxes for our property segments, general contracting and real estate services expenses for our general contracting and real estate services segment,segments and interest expense for our real estate financing segment. NOI is not a measure of operating income or cash flows from operating activities as measured by GAAP and is not indicative of cash available to fund cash needs. As a result, NOI should not be considered an alternative to cash flows as a measure of liquidity. Not all companies calculate NOI in the same manner. We consider NOI to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the core operations of our real estate, construction,estate and real estate financing businesses. See Note 3 to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for a reconciliation of NOI to net income, the most directly comparable GAAP measure.
We define same store properties as those that we owned and operated and that were stabilized for the entirety of both periods compared. We generally consider a property to be stabilized upon the earlier of: (i) the quarter after the property reaches 80% occupancy or (ii) the thirteenth quarter after the property receives its certificate of occupancy. Additionally, any property that is fully or partially taken out of service for the purpose of redevelopment or is impacted by significant disruptive events (e.g. fire, flood) is no longer considered stabilized until the redevelopment or repair activities are complete, the asset is placed back into service, and the stabilization criteria above are again met. A property may also be fully or partially taken out of service as a result of a partial disposition, depending on the significance of the portion of the property disposed. Finally, any property classified as held for sale is taken out of service for the purpose of computing same store operating results.
Since our Annual Report on Form 10-K for the year ended December 31, 2023, we retrospectively reclassified certain components of mixed-use properties between the retail, office, and multifamily real estate segments in order to align the components of those properties with their tenant composition. As a result, (i) NOI for the year ended December 31, 2023 increased $1.6 million and $0.2 million for the retail and office real estate segments, respectively, and decreased $1.7 million for the multifamily real estate segment and (ii) NOI for the year ended December 31, 2022 increased $1.0 million and $0.6 million for the retail and office real estate segments, respectively, and decreased $1.6 million for the multifamily real estate segment. These reclassifications had no effect on total property NOI as previously reported. These reclassifications had no impact on our general contracting and real estate services or real estate financing segments.
Rental revenues and NOI for the year ended December 31, 2025 are materially consistent with the year ended December 31, 2024. This is primarily due to the commencement of operations at Southern Post Retail, offset by the dispositions of Market at Mill Creek and Nexton Square.
Rental revenues for the year ended December 31, 2024 increased $3.5 million, or 3.5%, compared to the year ended December 31, 2023. The increase in rental revenues resulted primarily due to less bad debt recognized in 2024. NOI for the year ended December 31, 2024 is materially consistent with the year ended December 31, 2023.
(1) Same store excludes Chronicle Mill Retail, Southern Post Retail, TheAllied Interlock| Harbor Point Retail, and Columbus Village II,II asdue wellto as Nexton Squareredevelopment, and Market at Mill Creek whichand wereNexton disposedSquare due to their dispositions in the fourth quarter ofDecember 2024.
(2)Same store excludes PembrokeChronicle SquareMill andRetail, Southern Post Retail, The Interlock Retail, and Columbus Village II, as well as ColumbusNexton VillageSquare IIand dueMarket toat redevelopment.Mill Creek which were disposed in the fourth quarter of 2024.
(3)Same store rental revenues and same storeStore NOI for the year ended December 31, 20242025 areexcludes materiallya consistent$1.3 withmillion assignment fee received from a tenant at The Interlock Retail. The impact of the same is included in Non-Same Store NOI for the year ended December 31, 2023.2025.
Same store rental revenues and same store NOI for the year ended December 31, 2025 are materially consistent with the year ended December 31, 2024.
Rental revenues and NOI for the year ended December 31, 20242025 increased $12.2$8.1 million, or 14.7%,8.6%, and $9.8$5.3 million, or 19.0%,8.7%, respectively, compared to the year ended December 31, 2023.2024. The increases in rental revenues and NOI resulted primarily due to the receipt of a$3.8 million in termination feeand assignment fees from one of our tenants at The Interlock Office and Wills Wharf Office, the commencement of operations at Southern Post Office, and the additionconsolidation of newAllied tenants| atHarbor WillsPoint Wharf,Office Garage, as well as theincreased acquisitionoccupancy ofat Armada Hoffler Tower Office, The Interlock OfficeOffice, inand MayThames 2023.Street Office.
(1)Same store excludes Chronicle Mill Office, Southern Post Office,Office and TheAllied Interlock| Office.Harbor Point Office Garage.
(2)Same store excludes WillsChronicle WharfMill Office, Southern Post Office, and theThe ConstellationInterlock Office.
(3)Same Store NOI for the year ended December 31, 20242025 excludes a $4.0$3.8 million in termination feefees and assignment fees received from one of our tenants at theThe Interlock Office and Wills Wharf property and the effect of $0.7 million of accelerated straight-line rent resulting from the termination of such tenant's lease.Office. The impact of the same is included in Non-Same Store NOI for the year ended December 31, 2024.2025.
Same store rental revenues and same store NOI for the year ended December 31, 20242025 increased $4.8$5.2 million, or 6.2%,5.7%, and $3.7 million, or 7.7%,6.3%, respectively, compared to the year ended December 31, 2023.2024. The increases in same store rental revenues and same store NOI resulted primarily due to the receiptincreased of a termination fee from one of our tenantsoccupancy at WillsArmada WharfHoffler Tower Office, The Interlock Office, and theThames additionStreet of new tenants at Wills WharfOffice.
Rental revenues and NOI for the year ended December 31, 20242025 increased $2.1$7.8 million, or 3.8%,13.4%, and $3.3 million, or 9.8%, respectively, compared to the year ended December 31, 2023.2024. The increaseincreases in rental revenues and NOI resulted primarily due to the commencement of operations at Chandler Residences in 2024 as well as increased occupancy at Chronicle Mill and The Everly. NOI for the yearconsolidation endedof DecemberAllied 31,| 2024Harbor is materially consistent with the year ended December 31, 2023.Point.
(1)Same store excludes Chandler Residences, Allied | Harbor Point, Greenside Apartments, and Solis Gainesville II.
(12) Same store excludes Chronicle Mill Apartments and Chandler Residences.
(2) Same store excludes 1305 Dock Street, Chronicle Mill Apartments, and The Everly as well as properties disposed in 2022.
General Contracting and Real Estate ServicesFinancing Segment Data
General contracting and realReal estate servicesfinancing revenues,interest expenses,income, interest expense, and gross profit for the years ended December 31, 2025, 2024, 2023, and 20222023 were as follows ($ in thousands):
Real estate financing gross profit for the year ended December 31, 2025 decreased 28.0% compared to the year ended December 31, 2024, primarily due to decreased interest rates on Solis Gainesville II, The Allure at Edinburgh, and Solis Kennesaw during 2025, combined with the absence of income from the Solis City Park II investment following its redemption in 2024. These impacts were partially offset by higher principal balances across multiple investments.
Consolidated Results of Continuing Operations
The following table summarizes our results of continuing operations for the years ended December 31, 2025, 2024, and 2023 (in thousands). The 2024 and 2023 columns have been restated to exclude the general contracting and real estate services segment:
Rental Revenues
(1)50% and 90% of gross profit attributable to our T. Rowe Price Global HQ and Allied | Harbor Point development projects, respectively, is not reflected within general contracting and real estate services revenues due to elimination. The Company is still entitled to receive cash proceeds in relation to the eliminated amounts. Prior to any gross profit eliminations attributable to these projects, operating margin for the years ended December 31, 2024, 2023, and 2022 was 3.5%, 3.7%, and 3.7%, respectively.
General contracting and real estate services segment gross profit for the year ended December 31, 2024 was materially consistent with the year ended December 31, 2023. We expect general contracting and real estate services revenues to gradually decrease over time.
TheRental changesrevenues inby third party construction backlogsegment for each of the years ended December 31, 2025, 2024, 2023, and 20222023 were as follows (in thousands):
Rental revenues increased $12.9 million, or 5.0%, during the year ended December 31, 2025 compared to the year ended December 31, 2024.
Retail rental revenues for the year ended December 31, 2025 were materially consistent with the year ended December 31, 2024. This is primarily due to the commencement of operations at Southern Post Retail, offset by the dispositions of Market at Mill Creek and Nexton Square.
Office rental revenues for the year ended December 31, 2025 increased 8.6% compared to the year ended December 31, 2024, primarily due to the consolidation of Allied | Harbor Point Office Garage and the commencement of operations at Southern Post Office, as well as increased occupancy and rental rates at Armada Hoffler Tower Office, The Interlock Office, Thames Street Office, and Two Columbus Office.
Multifamily rental revenues for the year ended December 31, 2025 increased 13.4% compared to the year ended December 31, 2024, primarily due to the consolidation of Allied | Harbor Point and a full year of operations for Chandler Residences.
Interest Income
Interest income for the year ended December 31, 2025 decreased $1.8 million, or 10.3%, compared to the year ended December 31, 2024, primarily due to the redemption of the Solis City Park II investment in July 2024, as well as decreased interest rates for Solis Gainesville II, The Allure at Edinburgh, and Solis Kennesaw, partially offset by increased principal balances for other real estate financing investments.
Rental Expenses
Rental expenses by segment for each of the years ended December 31, 2025, 2024, and 2023 were as follows (in thousands):
Rental expenses increased $4.5 million, or 7.2%, during the year ended December 31, 2025 compared to the year ended December 31, 2024.
Retail rental expenses for the year ended December 31, 2025 decreased 4.3% compared to the year ended December 31, 2024, primarily due to the dispositions of Nexton Square and Market at Mill Creek and decreased expenses at The Interlock Retail, partially offset by the commencement of operations at Southern Post Retail.
Office rental expenses for the year ended December 31, 2025 increased 8.0% compared to the year ended December 31, 2024, primarily due to the consolidation of Allied | Harbor Point Office Garage and the commencement of operations at Southern Post Office, as well as increased utilities at our Harbor Point properties.
Multifamily rental expenses for the year ended December 31, 2025 increased 17.1% compared to the year ended December 31, 2024, primarily due to the consolidation of Allied | Harbor Point and a full year of operations for Chandler Residences.
Real Estate Taxes
Real estate taxes by segment for the years ended December 31, 2025, 2024, and 2023 were as follows (in thousands):
Real estate taxes increased $1.8 million, or 7.7%, during the year ended December 31, 2025 compared to the year ended December 31, 2024, consistent with new properties coming online.
Retail real estate taxes for the year ended December 31, 2025 were materially consistent with the year ended December 31, 2024.
Office real estate taxes for the year ended December 31, 2025 increased 9.3% compared to the year ended December 31, 2024, primarily due to the consolidation of Allied | Harbor Point Office Garage.
Multifamily real estate taxes for the year ended December 31, 2025 increased 23.9% compared to the year ended December 31, 2024, primarily due to the consolidation of Allied | Harbor Point and the commencement of operations at Chandler Residences in the latter half of 2024.
Depreciation and Amortization
Depreciation and amortization for the year ended December 31, 2025 was materially consistent with the year ended December 31, 2024.
General and Administrative Expenses
General and administrative expenses for the year ended December 31, 2025 increased 5.5% compared to the year ended December 31, 2024 primarily due to the double-issuance of stock compensation due to a modification in the structure of executive compensation grants, including the impact of grants in the current year that are related to the prior year's performance and grants that are related to the current year's performance. New grants are now issued in the year in which performance relates. There also was a one-time acceleration of 100% of stock compensation awarded to our former Chief Executive Officer in relation to prior year performance, and a one-time special award granted in June 2025..
Acquisition, Development, and Other Pursuit Costs
Acquisition, development, and other pursuit costs for the year ended December 31, 2025 related primarily to pursuit costs on potential new construction contracts. Acquisition, development, and other pursuit costs for the year ended December 31, 2024 related to the write off of development costs related to an undeveloped land parcel in predevelopment located in Charlotte, North Carolina. Refer to Note 6 to our consolidated financial statements of this Annual Report on Form 10-K for more information.
What changed in the latest 10-Q
Risk Factors
There have been no material changes from the risk factors disclosed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Impairment Charges”
Largest changes
“We are currently in the process of recasting the credit facility, to include the M&T term loan facility and TD term loan facility as described below. Management is working with its lending group to finalize the revised financing arrangements and currently expects the recasting process to be completed by the end of 2026. The proposed recasting is intended to simplify our capital structure and extend maturities. …”see in full comparison
“On May 20, 2026, the Company completed the First Closing of the Multifamily Portfolio Sale for aggregate gross proceeds of $485.0 million. The Company recognized a gain of approximately $18.8 million on the sale, of which a $19.5 million gain is included in discontinued operations, and a $0.7 million loss relating to the six commercial properties sold is recorded in continuing operations. The Company used proceeds from the sale to repay or pay down approximately $265.5 million of secured debt and $195.0 million of our revolving credit facility. …”see in full comparison
“(2) Impairment recognized for the three months ended June 30, 2026 represents impairment of the multifamily properties Greenside Apartments, Solis Gainesville II, and The Everly, and notes receivable secured by the Solis Kennesaw real estate financing investments. Impairment recognized for the six months ended June 30, 2026 additionally includes impairment of notes receivable secured by the Solis North Creek, Solis Peachtree Corners, and Solis Kennesaw real estate financing investments.”see in full comparison
“Loss on extinguishment of debt for the three and six months ended June 30, 2026 represents the unamortized deferred financing costs and prepayment penalties related to the extinguishment of $265.5 million in secured debt using the proceeds from the First Closing of the Multifamily Portfolio Sale. The charge was non-operating in nature and reflects the Company's efforts to optimize its capital structure and reduce future interest expense.”see in full comparison
“Management determined that certain prospective development projects no longer met the Company's investment and strategic criteria and ceased pursuit of these opportunities. As a result, we recorded an impairment charge of $1.8 million to write off capitalized predevelopment, planning, and pursuit costs associated with these projects for the three and six months ended June 30, 2026, in line with our strategic direction.”see in full comparison
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•the inability of one or more mezzanine loan borrowers to repay mezzanine loans or similar investments in accordance with their contractual terms;
•our ability to commence or continue construction and development projects on the timeframes and terms currently anticipated;
•risks related to the orderly wind-down and disposition of our general contracting and real estate services business;
Refer to Note 1 to our condensed consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q for the composition of properties in our operating property portfolio, as well as properties undernot developmentyet or redevelopment.stabilized.
During the quarterfirst ended March 31, 2026,quarter, the Company completed a strategic review of its business and elected to divest its real estate financing and multifamily segments, which, together with the general contracting and real estate services segment, are now reported as discontinued operations. The decision to exit the real estate financing and multifamilythese segments was made in connection with the Company’s broader initiative to simplify its business model and focus on its core retail and office real estate operations. Management believes that the divestiture of these segments will allow the Company to further strengthen its balance sheet and focus on its core competencies, while reducing complexity and risk associated with non-core activities.
The Company entered into a letter of intent relating to the potential sale of its constructiongeneral contracting and real estate services business during the period, and subsequently closed on this sale on April 30, 2026. The transaction included a transition services agreement for a 90 day period of time following the closing to provide human resources, payroll services, and information technology services.
On March 13, 2026, certain wholly owned subsidiaries of the Company entered into a purchase and sale agreement with an unrelated third-party to sell eleven out of the Company's fourteen multifamily properties for a combined purchase price of $562.0 million in cash, subject to certain adjustments, with a $15.0 million non-refundable deposit (the "Multifamily Portfolio Sale"). The Multifamily Portfolio Sale is not contingent on the receipt of financing by the buyer. On May 20, 2026, the Company completed the disposition of nine properties, which included the disposition of retail components of five of the properties and the office component of one of the properties, for aggregate proceeds of $485.0 million (the "First Closing"). The nine properties that were disposed of were: (1) Encore Apartments, (2) The Cosmopolitan, (3) Allied | Harbor Point, (4) 1405 Point Street, (5) 1305 Dock Street, (6) Chronicle Mill Apartments, (7) Chandler Residences, (8) The Edison and (9) Liberty Apartments. The Company expects to complete the disposition of the remaining assets included in the Multifamily Portfolio Sale isas expectedfollows: toGreenside closeApartments inby the second quarterend of 2026.2026 and Premier Apartments by mid-2027. Two of the Company's other multifamily assetsassets, areThe activelyEverly beingand marketedSolis Gainesville II, became subject to a purchase and sale agreement as of July 17, 2026 and are expected to close by the end of the firstthird quarter of 2027.2026.
The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing in Item 1 of this Quarterly Report on Form 10-Q. All historical financial information has been retrospectively adjusted to reflect the general contracting and real estate services, multifamily, and real estate financing businesses as discontinued operations. The decision to exit these segments resulted in the reclassification of approximately $32.5$21.1 million in revenue for the three months ended MarchJune 31,30, 2026 to discontinued operations.
1.Retail real estate: The Company’s retail portfolio is concentrated in high-barrier-to-entry markets and is anchored by credit-worthy tenants, including grocery stores and big-box retailers. As of MarchJune 31,30, 2026, the retail portfolio had a leased occupancy level of 94.8%,95.1%, and renewal spreads (on a GAAP basis) of 10.7%.11.5% .
FirstSecond Quarter 2026 and Recent Highlights
The following highlights our results of operations and significant transactions for the three months ended MarchJune 31,30, 2026 and other recent developments:
•On February 16, 2026, we announced a fundamental business restructuring to eliminate complexity, strengthen the balance sheet, and relentlessly focus on operating a streamlined real estate platform. The restructuring includes:
•Exiting the multifamily property sector to unlock embedded value, reduce leverage, and sharpen focus on retail and office properties;
•Divesting construction and real estate financing businesses; and
•Launching AH Realty Trust, effective March 2, 2026, a new corporate identity that reflects the fundamental restructuring of the business.
•As part of its ongoing governance enhancements supporting the Company’s strategic transformation, AHthe Realty TrustCompany advanced its board refreshment process by nominatingelecting Theodore Bigman and Lori Wittman as independent directors; at the Company’s 2026 Annual Meeting of Stockholders (the “2026 Annual Meeting”). Following the 2026 Annual Meeting, Dennis Gartman and George Allen will retireretired from the Board followingand each of Mr. Bigman and Ms. Wittman were appointed to the 2026board’s AnnualAudit MeetingCommittee. andAdditionally, F. Blair Wimbush was appointed Chair of the Board's Nominating and Corporate Governance Committee and was appointed to the Board's Compensation Committee.
•On May 20, 2026, we completed the sale of nine multifamily properties and six of the retail and office components of the properties, for aggregate gross proceeds of $485.0 million, generating a net gain on sale of $18.8 million, after transaction costs and escrow amounts. Using these proceeds, we repaid $265.5 million of secured debt and $195.0 million of unsecured debt on our revolving credit facility. Two multifamily properties remain under contract for $77.0 million.
•On March 13, 2026, we entered into a binding purchase and sale agreement to sell an 11-asset multifamily portfolio for $562.0 million in cash, subject to certain adjustments.
•On March 27, 2026, we sold the Peachtree and North Creek real estate financing investments for an aggregate purchase price of $63.8 million and used the proceeds to pay down our debt.
•Through April 2, 2026, we repurchased 4.2 million shares of common stock for a total of $24.1 million.
•On April 30, 2026, we completed the sale of the general contracting and real estate services business for total economic consideration of $2.4 million, further advancing our strategic plan to simplify the business and focus on core retail and office operations.
•During the quarter ended June 30, 2026, we repurchased 2.0 million shares of common stock for a total of $12.4 million, bringing the total for the year to 5.6 million for a total of $33.2 million.
•On April 30, 2026, we completed the sale of the construction business for $2.4 million.
•Net loss attributable to common stockholders and holders ("OP Unitholders") of units of limited partnership interest in the Operating Partnership ("OP Units") of $33.3$24.2 million, or $0.33$0.25 per diluted share, compared to net lossincome attributable to common stockholders and OP Unitholders of $7.2$3.9 million, or $0.07$0.04 per diluted share, for the three months ended MarchJune 31,30, 2025.
•Funds from operations attributable to common stockholders and OP Unitholders ("FFO") of $20.6$15.4 million, or $0.20$0.16 per diluted share, compared to $17.2$19.0 million, or $0.17$0.19 per diluted share, for the three months ended MarchJune 31,30, 2025. See "Non-GAAP Financial Measures."
•FFO, As Adjusted from operations attributable to common stockholders and OP Unitholders ("FFO, As Adjusted") of $15.1$14.1 million, or $0.15$0.14 per diluted share, compared to $14.6$13.8 million, or $0.14 per diluted share, for the three months ended MarchJune 31,30, 2025. See "Non-GAAP Financial Measures."
•As of MarchJune 31,30, 2026, weighted average stabilized portfolio leased occupancy was 95.4%.95.9%. Retail leased occupancy wasincreased 94.8%0.3% to 95.1% and office leased occupancy wasincreased 96.0%.0.7% to 96.7%.
•As of MarchJune 31,30, 2026, weighted average stabilized portfolio economic occupancy was 90.1%.90.7%. Retail economic occupancy wasdecreased 92.5%1.6% to 90.9%, and office economic occupancy wasincreased 87.7%.2.8% to 90.5%.
•Positive spreads on renewals across all segments:
▪Retail 10.7% (GAAP) and 4.5% (Cash)
▪No renewals in office segment for the quarter.
•Executed 2011 commercialretail lease renewals and 116 new commercial leases during the firstsecond quarter for an aggregate of 130,667 of107,736 net rentable square feet. Positive spreads on both new leases and renewals:
◦New leasing spreads of 9.4% (GAAP) and 5.2% (Cash).
◦Renewal leasing spreads of 11.5% (GAAP) and 8.7% (Cash).
•Executed 3 office lease renewals and 5 new leases during the second quarter for an aggregate of 55,739 net rentable square feet. Positive spreads on both new leases and renewals:
◦New leasing spreads of 20.5% (GAAP) and 9.5% (Cash).
◦Renewal leasing spreads of 40.2% (GAAP) and 21.6% (Cash).
•Same Store Net Operating Income ("NOI") on a cash basis increased 2.2%2.9% for the retail segment and 0.7%8.3% for the office segment on a cash basis compared to the quarter ended MarchJune 31,30, 2025.
•During the second quarter of 2026, unrealized losses on non-designated interest rate derivatives that negatively affected FFO were $2.2 million. As of June 30, 2026, the value of the Company’s entire interest rate derivative portfolio, net of unrealized losses, was $4.0 million.
As of MarchJune 31,30, 2026, we operated our business in two segments: (i) retail real estate and (ii) office real estate.
We define same store properties as those properties that we owned and operated and that were stabilized for the entirety of both periods presented. We generally consider a property to be stabilized upon the earlier of: (i) the quarter after the property reaches 80% physical occupancy or (ii) the thirteenth quarter after the property receives its certificate of occupancy. Additionally, any property that is fully or partially taken out of service for the purpose of redevelopment is no longer considered stabilized until the redevelopment activities are complete, the asset is placed back into service, and the stabilization criteria above are again met. A property may also be fully or partially taken out of service as a result of a partial disposition, depending on the significance of the portion of the property disposed. Finally, any property classified as held for sale is taken out of service for the purpose of computing same store operating results.
Retail rental revenues, property expenses, and NOI for the three and six months ended MarchJune 31,30, 2026 and 2025 were as follows (in thousands):
Retail segment NOI for the three and six months ended MarchJune 31,30, 2026 was materially consistent with the three and six months ended MarchJune 31,30, 2025.
Retail same store results for the three and six months ended MarchJune 31,30, 2026 and 2025 exclude Allied | Harbor Point Retail, Liberty Retail, The Edison Retail, Point Street Retail, and Chronicle Mill Retail due to being classifieddisposed as heldpart forof sale.the First Closing of the Multifamily Portfolio Sale. They also exclude Market at Mill Creek and Nexton Square due to their disposition in December 2024 and Southern Post Retail.Retail, which is not yet stabilized.
Retail same store rental revenues, property expenses, and NOI for the three and six months ended MarchJune 31,30, 2026 and 2025 were as follows (in thousands):
Retail same store NOI for the three and six months ended June 30, 2026 increased $0.5 million and $0.8 million, or 2.9% and 2.5%, respectively, compared to the three and six months ended June 30, 2025, primarily due to new leases at Columbus Village due to commencing operations following redevelopment and the favorable resolution of a real estate tax appeal at Patterson Place, which resulted in a reduction of property tax expense during the period.
Retail same store NOI for the three months ended March 31, 2026 was materially consistent with the three months ended March 31, 2025.
Office rental revenues, property expenses, and NOI for the three and six months ended MarchJune 31,30, 2026 and 2025 were as follows (in thousands):
Office segment NOI for the three months ended June 30, 2026 increased $0.5 million, or 3.5%, respectively, compared to the three months ended June 30, 2025. The increase in office segment NOI was primarily due to new leases at 222 Central Park Office, The Interlock Office, and Thames Street Wharf. This is partially offset by an increase in utilities, salaries and compensation, and contracted property services primarily across the Harbor Point properties. Office segment NOI for the six months ended June 30, 2026 was materially consistent with the six months ended June 30, 2025.
Office segment NOI for the three months ended March 31, 2026 was materially consistent with the three months ended March 31, 2025.
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Office same store results for the three and six months ended MarchJune 31,30, 2026 and 2025 exclude Chronicle Mill OfficeOffice, due to being classifieddisposed as heldpart forof salethe First Closing of the Multifamily Portfolio Sale, and Southern Post Office.Office, which is not yet stabilized.
Office same store rental revenues, property expenses, and NOI for the three and six months ended MarchJune 31,30, 2026 and 2025 were as follows (in thousands):
Office same store NOI for the three and six months ended June 30, 2026 increased $1.1 million and $1.2 million, or 8.3% and 4.5%, respectively, compared to the three and six months ended June 30, 2025. The increase in office same store NOI was primarily due to new leases at The Interlock Office, Two Columbus Office, One Columbus, and 222 Central Park Office, partially offset by a partial termination at One City Center in the prior year.
Office same store NOI for the three months ended March 31, 2026 was materially consistent with the three months ended March 31, 2025.
The following table summarizes the results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025 (unaudited, in thousands):
Rental revenues for the three and six months ended MarchJune 31,30, 2026 increased $2.1$1.8 million and $4.0 million, or 4.3%,3.6% asand 3.9%, respectively, compared to the three and six months ended MarchJune 31,30, 2025 as follows (in thousands):
Retail rental revenues for the three and six months ended MarchJune 31,30, 2026 waswere materially consistent with the three and six months ended MarchJune 31,30, 2025.
Office rental revenues for the three and six months ended June 30, 2026 increased $1.5 million and $2.4 million, or 6.3% and 5.1%, respectively, compared to the three and six months ended June 30, 2025. The increases in office rental revenues was primarily due to new leases at The Interlock Office, Two Columbus Office, and 222 Central Park Office. In addition, higher expenses, mainly related to utilities and delivery of an expansion space at Thames Street Wharf, contributed to an increase in reimbursable income.
Other rental revenues for the three and six months ended June 30, 2026 increased $0.1 million and $0.8 million, or 3.9% and 12.6%, respectively, compared to the three and six months ended June 30, 2025. The increases in other rental revenues was primarily due to the consolidation of Allied | Harbor Point Garage in May 2025.
AHRT insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 2 Form 4 filings (2 insiders, 3 trade dates, 3,887 shares, about $24.1K) and open-market sales in 0 filings. Net open-market shares: 3,887 (purchases minus sales); net value about $24.1K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-28 | Wittman Lori |
Open-market purchase | 3,000 | $5.95 | $17.9K |
| 2026-09-15 | Bigman Theodore |
Grant/award | 2,317 | $6.47 | $15.0K |
| 2026-09-15 | Wimbush Frederick Blair |
Grant/award | 2,800 | $6.47 | $18.1K |
| 2026-09-15 | Carroll James A |
Grant/award | 941 | $6.47 | $6.1K |
| 2026-07-02 | Wimbush Frederick Blair |
Open-market purchase | 529 | $7.01 | $3.7K |
| 2026-07-01 | Wimbush Frederick Blair |
Open-market purchase | 358 | $7.00 | $2.5K |
| 2026-06-17 | Haddad Louis S |
Grant/award | 11,695 | — | — |
| 2026-06-16 | Gartman Dennis H. |
Grant/award | 2,019 | $6.81 | $13.7K |
| 2026-06-16 | Carroll James A |
Grant/award | 757 | $6.81 | $5.2K |
| 2026-06-16 | Wimbush Frederick Blair |
Grant/award | 2,300 | $6.81 | $15.7K |
Well-known investors holding AHRT (13F)
None of the 59 investors we track reported a position in their latest 13F.