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Stonegate Capital Partners Updates Coverage on Armada Hoffler Properties, Inc. (NYSE: AHH)

DALLAS, TX / ACCESSWIRE / November 21, 2018 / Armada Hoffler Properties, Inc. (AHH):


Armada Hoffler Properties, Inc. (AHH), was originally founded in 1979 and today still operates as a full-service real estate company. AHH develops, constructs, owns and manages high quality, institutional grade office, retail and multi-family properties throughout the Mid-Atlantic and Southeastern regions. The company is incorporated in Maryland and operates as a real estate investment trust (REIT) for tax purposes. AHH is headquartered in Virginia Beach, VA, where its flagship property Town Center is also located.


Armada Hoffler has demonstrated its ability to deliver sustainable, low-risk growth to investors through its diversified real estate portfolio, which includes a healthy development pipeline. With May 2018 marking five years since the IPO, it is notable that AHH has almost tripled its market cap over that time frame, growing earnings, NAV and dividends annually, with a total return in excess of 75%.

  • The company's operating portfolio consists of approximately 4.6M+ rentable square feet and approximately 1,600+ apartment units.
  • AHH has dependable cash flow created by occupancy at ~ 96%.
  • As last reported, AHH had delivered ~ $264 million of projects since its IPO in 2013, and the company had ~$516M in the development pipeline.
  • With its internal construction team and developers, AHH can manage costs and timing on projects, creating immediate equity when taking properties online at an estimated 20% spread; this factor not only gives the company several advantages in the marketplace but also significantly differentiates AHH from other publicly traded REITs operating as pureplay acquirers of income-producing properties.
  • Its construction business gross profit was $7.4M in FY 2017, and management guides to $5.9 - $6.4M annual gross profit for this segment in 2018. AHH reported $25.2M in its construction backlog as of 9/30/18 and has stated the expectation to finish construction and close on the sale of a build-to-suit distribution center in Q418.
  • The company constantly re-evaluates its properties and disposes of noncore assets when identified so that capital can be redeployed; management most recently announced the sale of the Wawa outparcel at a 5.4% cap rate in Q218, with the sale proceeds utilized for balance sheet purposes.
  • AHH reported a normalized FFO/diluted share of $0.24 and AFFO/share of $0.20 for Q318; at $15.07, the dividend yield is 5.3% on the most recent quarterly dividend paid of $0.20; the company continues to benefit from both strong growth in its portfolio in addition to its non-traditional sources of income such as profits from third-party construction, mezzanine interest income, and certain build-to-suit asset sales.
  • AHH announced subsequent to quarter-end that an agreement had been reached to sell its at-cost purchase option to the developer on Annapolis Junction for $5M, which will be recognized over 4 quarters (beginning Q418) with an extension granted on the maturity of the mezzanine loan.

We believe that AHH offers a well-diversified real estate investment opportunity for the marketplace, with a current share price trading well below the $15.55 midpoint of our estimated NAV per share range.

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About Stonegate Capital Partners

Stonegate Capital Partners is a Dallas-based corporate advisory firm dedicated to serving the specialized needs of small-cap public companies. Since our inception, our mission has been to find innovative, undervalued public companies for our network of leading institutional investors who seek high-quality investment opportunities.



SOURCE: Stonegate Capital Partners