Dane Bowler
Value, hedge fund analyst, REITs, long/short equity

Armada Hoffler: Developing A Path To Outperformance

The Buy Thesis

Armada Hoffler (NYSE:AHH) is underpriced presently for a variety of reasons, each of which will be described in more detail later in this article:

  1. Its geographic area (Virginia) is out of favor due to low government activity
  2. Small market cap
  3. New and "unproven"
  4. No value ascribed to its in-house construction business
  5. Near-term earnings depressed by timing of development activity

Consequent to these and perhaps other factors, AHH trades at a steep discount to peers. Specifically, it is priced at 12.1X forward FFO, while the Equity REIT average is 14.6X. This discount is amplified by the fact that the forward earnings number is substantially depressed relative to its longer-term potential.

As we know, undervaluation is insufficient...

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