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5% Yield And 30% Upside From Armada Hoffler


  • Armada Hoffler owns mostly apartment communities and they are performing remarkably well.
  • Moreover, it has a real estate construction arm that's set to profit from the boom in new real estate development.
  • Despite that, it is discounted because it is seen as a complex diversified REIT. As AHH continues to evolve into a quasi-apartment REIT, we expect its valuation to rise.
  • Looking for a portfolio of ideas like this one? Members of High Yield Investor get exclusive access to our model portfolio. Learn More »

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Armada Hoffler (NYSE:AHH) is an undervalued REIT that we estimate to have ~30% upside to fair value, and while you wait, you earn a near-5% dividend yield. Below, we present 5 reasons why now may be a good time to initiate

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This article was written by

High Yield Investor profile picture

Samuel Smith is Vice President of Leonberg Capital, he has a diverse background that includes being lead analyst at several highly regarded dividend stock research firms. He is a Professional Engineer and Project Management Professional and holds a B.S. in Civil Engineering & Mathematics from the United States Military Academy at West Point and has a Masters in Engineering.

Samuel runs High Yield Investor investing group. Samuel teams up with Jussi Askola and Paul R. Drake where they focus on finding the right balance between safety, growth, yield, and value. High Yield Investor offers real-money core, retirement, and international portfolios. The services also features regular trade alert, educational content, and an active chat room of like minded investors. Learn more.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of AHH; CPT; AVB either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (22)

Looks like AHH tanked, because of a stock offering. The offering was priced at $14.74 per share, compared to the stock's previous close of $15.58. Looks like a good deal for the new investors / underwriters, but not for the existing investors. I reviewed this article and noticed that the author did consider shareholder friendliness: "Shareholder-Friendly Management With a Clear Plan to Create Value". Usually, stock offerings are a sign of dilution and possible lack of shareholder friendliness. What is your opinion on the offer? Is the stock price punishment justified? Was there excessive debt? Looks like 40% of AHH’s debt was variable-rate. My understanding is that statistically, REITs with low leverage perform better in the long run.
High Yield Investor profile picture
@comeinvestwithme REITs constantly issue new equity if their cost of capital is lower than the expected returns. This is a sign of shareholder alignment and not the opposite.
@High Yield Investor Then why the selloff? Looks like the market thinks it was not a good deal for existing shareholders.
@comeinvestwithme If you follow "pass-through" companies, those that pay out the majority of their fcf to investors, you will see that in order to grow they must either borrow or issue shares or both because they cannot stockpile cash as a Berkshire Hathaway can do, for instance. They have no other choice. After doing so, invariably the stock takes a knee-jerk reactive hit. However, with a capable management the proceeds will be used for accretive purposes, and the shares invariably bounce back when subsequent quarters show increased NAV, due to the aforementioned influx of cash. That's the system. If you think the company is inherently investible, these short-term blips should not dissuade you from investing. In fact, they are probably the time to invest.
What is the credit rating on the company's bonds?
yardbird99 profile picture
South-Eastern US is arguably the most desirable and affordable place to live in all the US. Many baby boomers are relocating there for retirement.
I bought a starter position today at $14.25. I'm hoping we march back up to $16 after the new share issuance closes.
@Kajoobies88 Great Small Cap. I'm hoping the price goes to 8 and I load the truck with new lot's.
Thanks for the article. Need more BEAR Case Assertions Please.
Ted Waller profile picture
@Bruce Bohannon I agree. The businesses AHH is in are in a huge boom and it's easy to buy in when everything looks great. We all have made that mistake. What happens when (not if) the business cools off? Where I live there is an insane amount of apartment building going on once again. In the past this has been followed by a quick reversal and a bunch of half completed projects that took years to recover from.
@Ted Waller That is exactly why when buying REITS you buy management.
tboyette profile picture
They also in the bidding to redevelopment of military circle mall ...in Norfolk VA... I live in VA beach town center... Armada Hoffler home ... It's a well run beauty that they are re creating in several areas... I'm long
MDavid profile picture
According to SA, they’ve got a debt/ebitda ratio of ~10 which seems high. But maybe this is because of the construction business.
Brady771 profile picture
A lot of REITs have high debt/equity ratios because it is how they operate. REITs issue debt and equity to buy/develop properties, they do not retain earnings like C-corporations do.

However, AHH has a higher debt load and is attempting to improve its liquidity.
Jamjack profile picture
I like this REIT too. I am long. Thanks for the article an enjoyable read that confirms my thesis.
May have missed it, but didn't AHH omit the dividend briefly in 2020 and then re-start with a new dividend that was half of the prior? No mention of this in the article?
Pablo profile picture
@Lobeta Skipped Q2 2020, and came back lower 0.17$, now building back better with 0.17 still not .20-.21!
@Pablo Thanks for the added info. I'd wonder how this reflects on management of Ahh considering the statement made by the author..."a well-managed REIT with a track record of success..."?
Joe X profile picture
@Lobeta the vast majority of the shopping center REITs skipped 2-3 dividends during 2020, which was a response to tenant lease deferrals and deferred income. Depending on where AHH is now with taxable income, dividends should be on an upward trajectory.
Pablo profile picture
Good article. AHH is a solid company and good company at a great price.
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