Armada Hoffler Properties (AHH)

Entering "deep value" territory, but with catalysts afoot

Lou Haddad & Dan Hoffler in front of the Armada Hoffler Tower in Virginia Beach

There are several ways to impair a REIT’s share price: dilutive equity issuance, dividend cuts, and being diversified in a way that makes valuation and comparison difficult. AHH hits all three and as a result now trades at both a share price and multiple below its COVID lows. Since the end of 2020, the company has:

• Grown share count by 7.35% annually

• Grown the dividend by 5.84% annually, but recently cut by more than 30%

• Funds from operations have been flat, as has tangible book value per share

• The share price is down 38%, with 31% of that decline occurring in 2025

• Currently trading at 6.58x NTM FFO

The stock has entered the “looks cheap” universe with plenty of dumpster divers kicking the tires. While you can certainly argue that the REIT is significantly below NAV, perhaps by as much as 30%, it’s not clear that the market has ever really had much regard for the portfolio value. Since 2014, AHH has traded at an average 17% discount to NAV, compared to the 7% discount for the broader REIT universe.

I believe the company’s skill set lies in developing or redeveloping assets and then selling them to larger, often better-resourced owners. As a result, the stock works best when AHH is active in the market and languishes in “pencils down” environments.

This post will kick off my ongoing coverage of Armada Hoffler, so I will be laying the foundation for what, in my opinion, will matter for AHH 0.00%↑ performance over the next 18-24 months, including:

• The company’s DNA as primarily a contractor and developer

• Mixed-use as a strategy and a differentiator

• Their big bet on the Baltimore Harbor

• What will drive shareholder returns, and how new management can catalyze those changes

Company Background and Strategy

Like all great real estate stories, AHH starts with a rich guy giving a kid a chance he probably didn’t deserve. Dan Hoffler founded what would become Armada Hoffler in 1979 as a commercial contractor and developer. Hoffler secured $2.7 million in initial funding from Jim Fisher, chairman of Armada Petroleum, who believed in his vision to develop corporate headquarters in the Greenbriar region of Chesapeake, Virginia, what was then considered the equivalent of "building in Outer Mongolia."