Company Overview - Armada Hoffler Properties (NYSE: AHH) is a vertically integrated, self-managed REIT focused on developing, building, acquiring, and managing high-quality office, retail, and multifamily properties, primarily in the Mid-Atlantic and Southeastern US markets [1] Stock Performance - The stock of Armada Hoffler Properties is down nearly 50% from its previous levels [1] Analyst Background - The analyst has over 10 years of experience researching companies across various sectors, including commodities and technology, and has written a blog for three years before transitioning to a value investing-focused YouTube channel [1]

Group 1 - The company has released its latest top investment picks for October 2025, emphasizing the timeliness of joining to access these opportunities [1] - The company invests significant resources, including thousands of hours and over $100,000 annually, into researching profitable investment opportunities [1] - The company offers real estate strategies at a fraction of the cost, indicating a focus on affordability for its members [1] Group 2 - The company's approach has garnered over 500 five-star reviews from satisfied members, highlighting the effectiveness of its investment strategies [2] - There is a call to action for potential members to join now to start maximizing their returns, suggesting a sense of urgency [2]

Core Viewpoint - Armada Hoffler is set to report its earnings for the quarter ending September 30, 2025, on November 3, 2025, followed by a conference call on November 4, 2025, to discuss the earnings and other relevant information [1]. Company Overview - Armada Hoffler (NYSE: AHH) is a vertically integrated, self-managed real estate investment trust (REIT) with over 40 years of experience in developing, building, acquiring, and managing high-quality multifamily, office, and retail properties, primarily in the Mid-Atlantic and Southeastern United States [4]. - The company also offers general construction and development services to third-party clients, in addition to developing and building properties for its stabilized portfolio [4]. - Founded in 1979 by Daniel A. Hoffler, the company has elected to be taxed as a REIT for U.S. federal income tax purposes [4].

Group 1 - The approach has garnered over 500 five-star reviews from satisfied members who are experiencing benefits [1] - The company invests thousands of hours and over $100,000 annually into researching profitable investment opportunities [1] - The leader of the investing group High Yield Landlord shares a real-money REIT portfolio and transactions in real-time [1] Group 2 - Jussi Askola, the President of Leonberg Capital, is a value-oriented investment expert with a focus on REIT investing [1] - The group offers features such as three portfolios (core, retirement, international), buy/sell alerts, and a chat room for direct access to analysts [1]

Core Viewpoint - The Federal Reserve has cut interest rates, which is expected to benefit real estate investment trusts (REITs) as their dividends become more attractive compared to declining bond yields [2][3]. REITs and Interest Rates - REITs act as "bond proxies," moving in opposition to interest rates, and typically rally when rates fall [3]. - Historical trends indicate that REITs tend to perform well once the bond market adjusts to rate cuts [3]. REITs with High Dividend Yields - Healthpeak Properties (DOC) offers a 6.5% dividend yield and owns 702 properties in outpatient medical, labs, and senior housing, showing signs of recovery since the September rate cut [4]. - Broadstone Net Lease (BNL) has a 6.3% dividend yield, focusing on single-tenant commercial properties with a portfolio of 766 properties across 44 states and four Canadian provinces [4][5]. - Global Net Lease (GNL) provides a 9.4% dividend yield, operating a 911-property portfolio across 10 countries, with significant improvements in operations and a recent credit rating upgrade [7][9]. Company Transformations and Strategies - Broadstone has shifted its portfolio focus away from healthcare properties, which now account for less than 4% of annualized base rent, while industrial properties make up about 60% [5]. - GNL has sold its multitenant retail portfolio for $1.8 billion, enhancing occupancy and net operating income margins, while also reducing net debt by $2 billion [9]. - Armada Hoffler Properties (AHH) and Brandywine Realty Trust (BDN) are hybrid REITs benefiting from declining rates, but both have cut dividends this year due to financial pressures [10][11]. Challenges and Future Outlook - Brandywine Realty Trust, heavily invested in office space, faces challenges from joint ventures that have led to downward revisions in FFO estimates, although potential relief may come from recapitalization efforts [12]. - The dividend payout for Brandywine was 107% of FFO in the first half of 2025, raising concerns about liquidity and sustainability of the high yield [13].

Core Viewpoint - Diversified REITs are currently undervalued, trading at an implied cap rate of 9.2%, which is 24% lower than the average implied cap rate of 7.4149% that they should trade at based on their underlying assets [20][21]. Group 1: REIT Structure and Valuation - REITs must derive at least 75% of their income from passive real estate assets, with many having nearly all assets in physical real estate [1]. - The market price of a REIT should generally align with the value of its underlying real estate, but significant dislocations can occur, particularly in diversified REITs [2][3]. - Diversified REITs own multiple types of real estate, and their valuation should reflect a weighted average of the cap rates of these asset types [4][5]. Group 2: Cap Rate Analysis - Cap rate is defined as the net operating income (NOI) as a percentage of the sale price, with implied cap rates reflecting the market's valuation of REITs based on their NOI [6][9]. - The average implied cap rates for various property sectors are: Industrial at 6.5%, Multifamily at 5.9%, Retail at 7%, Office at 9.9%, and Diversified at 9.2% [13]. - The calculated average implied cap rate for diversified REITs is significantly lower than the expected cap rate based on their asset types, indicating a potential investment opportunity [20]. Group 3: Market Disparities and Investment Opportunities - The 24% gap between the current trading cap rate of diversified REITs and the calculated cap rate suggests that these REITs are undervalued [20][21]. - Factors contributing to this valuation disparity include the size of the companies, thematic investing trends, and the complexity of analyzing diversified REITs [29][31][33]. - Despite the challenges, the fundamental value remains intact, presenting an opportunity for investment in diversified REITs [34][35].

Group 1 - The investment approach has received over 500 five-star reviews, indicating high satisfaction among members who are experiencing benefits [1] - The company invests significant resources, over $100,000 annually and thousands of hours, into researching profitable real estate investment opportunities [1] - REIT share prices (VNQ) have been on a steady decline for the past three years due to rising interest rates, leading to some of the highest yields seen in many years [1] Group 2 - Jussi Askola leads the High Yield Landlord investing group, providing real-time updates on his REIT portfolio and transactions [2] - The group offers features such as three distinct portfolios (core, retirement, international), buy/sell alerts, and direct access to analysts for inquiries [2] - Jussi Askola is the President of Leonberg Capital, a value-oriented investment firm that consults various investment entities on REIT investing [2]

Core Viewpoint - The recent non-binding takeout offer for Plymouth Industrial signifies a growing trend in M&A activity within the real estate sector, driven by favorable market conditions and significant valuation disparities among REITs [1][6]. Group 1: M&A Activity Drivers - The median REIT is currently trading at 81.8% of NAV, with some REITs as low as 46% and others at 198%, creating opportunities for accretive M&A transactions [1][6]. - Strong fundamentals in REITs are evident, with 60.7% of REITs beating earnings in Q2 2025, indicating robust performance in the sector [5][6]. - There is ample capital available for acquisitions, with private equity firms and publicly traded REITs well-capitalized following the reopening of equity and debt markets post-pandemic [6][7]. Group 2: Sector-Specific Transaction Volume - Industrial REITs have been particularly active, acquiring 90 properties in 2025 for a total of $3.94 billion [8]. - In the shopping center sector, Blackstone's buyout of ROIC and 86 individual property purchases by shopping center REITs totaling $2.39 billion highlight increased M&A interest [9]. - The multifamily sector has seen significant activity, with Equity Residential acquiring a portfolio from Blackstone for $964 million and BSR REIT selling to Avalon Bay for $618 million, alongside $2.7 billion in individual asset purchases [10]. Group 3: Targeted REITs for Acquisition - Whitestone REIT is a potential target due to its trading at $12.91, significantly below its NAV of $17.88, despite strong asset performance [12][17]. - Centerspace is trading at 73.9% of NAV, with a unique portfolio that is outperforming in its markets, making it an attractive acquisition target [18][19]. - Kite Realty is noted for its large discount to NAV and strong cash flows, presenting an opportunity for accretive acquisitions [21][23]. - Farmland Partners is strategically selling assets to buy back stock, potentially leading to a full company sale in the future [24][25]. - Armada Hoffler is trading at a substantial discount to NAV, with a market price of $7.15 compared to an NAV of $12.49, indicating a significant acquisition opportunity [25][30].

Part I. Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's total assets increased to $2.58 billion, while net income and operating cash flow significantly decreased year-over-year [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets grew to $2.58 billion, driven by income-producing property investments, while total equity slightly decreased Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$2,576,672** | **$2,512,863** | | Net real estate investments | $1,977,732 | $1,745,078 | | Cash and cash equivalents | $52,111 | $70,642 | | **Total Liabilities** | **$1,715,881** | **$1,623,194** | | Indebtedness, net | $1,446,820 | $1,295,559 | | **Total Equity** | **$860,791** | **$889,669** | [Condensed Consolidated Statements of Comprehensive (Loss) Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income) Net income for Q2 2025 improved year-over-year, but the six-month period showed a net loss due to a sharp decline in general contracting revenues Financial Performance Summary (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $101,263 | $184,736 | $215,906 | $378,218 | | General contracting revenues | $31,976 | $116,839 | $78,590 | $243,814 | | Net income | $6,717 | $3,279 | $2,374 | $21,004 | | Net income (loss) attributable to common stockholders | $3,062 | $285 | $(2,630) | $11,471 | | Diluted EPS | $0.04 | $— | $(0.03) | $0.17 | [Condensed Consolidated Statements of Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) Total equity decreased to $860.8 million, primarily due to dividends, distributions, and a net loss for the period - Total equity declined by **$28.9 million** in the first six months of 2025, driven by net loss, dividends, and distributions[11](index=11&type=chunk) - Dividends and distributions declared on common shares and units totaled **$25.5 million** ($0.280 per share/unit) during the first six months of 2025[11](index=11&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased significantly, leading to a net decrease in cash of $17.6 million for the six-month period Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $11,210 | $63,880 | | Net cash used for investing activities | $(38,982) | $(53,182) | | Net cash provided by (used for) financing activities | $10,150 | $(19,167) | | **Net decrease in cash** | **$(17,622)** | **$(8,469)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's operations as a vertically integrated REIT, key segment information, and a significant property consolidation - The company is a vertically integrated, self-managed REIT focused on retail, office, and multifamily properties primarily in the Mid-Atlantic and Southeastern U.S.[17](index=17&type=chunk) - The company operates in five business segments: retail real estate, office real estate, multifamily real estate, general contracting and real estate services, and real estate financing[30](index=30&type=chunk) - On April 29, 2025, the company acquired the remaining interest in the Harbor Point Parcel 4 (Allied | Harbor Point) project, leading to its full consolidation and a recognized **gain of $6.9 million**[55](index=55&type=chunk)[56](index=56&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Normalized FFO declined due to a weaker construction business, though the real estate portfolio remained resilient and the company advanced its unsecured debt strategy Q2 2025 Key Performance Indicators | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income (to common stockholders) | $3.9M | $0.4M | | Diluted EPS | $0.04 | $0.00 | | Normalized FFO | $25.4M | $30.2M | | Normalized FFO per share | $0.25 | $0.34 | | Stabilized Portfolio Occupancy | 94.9% | N/A | - Same Store Net Operating Income (NOI) increased by **1.4%** on a GAAP basis compared to Q2 2024[170](index=170&type=chunk) - The third-party construction backlog stood at **$106.6 million** as of June 30, 2025, with a gross profit of $1.4 million for the quarter, a significant decrease from the prior year due to project completions[170](index=170&type=chunk)[183](index=183&type=chunk) - Subsequent to quarter-end, on July 22, 2025, the company issued **$115.0 million** of senior unsecured notes to repay a construction loan and pay down its revolving credit facility[147](index=147&type=chunk)[174](index=174&type=chunk) [Segment Results of Operations](index=39&type=section&id=Segment%20Results%20of%20Operations) Office and Multifamily NOI grew due to property consolidations, while Retail NOI decreased from dispositions and the General Contracting segment saw a significant profit decline Segment Net Operating Income (NOI) / Gross Profit - Q2 2025 vs Q2 2024 (in thousands) | Segment | Q2 2025 | Q2 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Retail | $18,311 | $19,280 | $(969) | (5.0)% | | Office | $15,445 | $14,779 | $666 | 4.5% | | Multifamily | $8,724 | $8,233 | $491 | 6.0% | | General Contracting | $1,384 | $4,339 | $(2,955) | (68.1)% | | Real Estate Financing | $1,746 | $2,199 | $(453) | (20.6)% | Same Store NOI Growth - Q2 2025 vs Q2 2024 | Segment | Same Store NOI Change | % Change | | :--- | :--- | :--- | | Retail | +$0.1M | 0.5% | | Office | +$0.2M | 1.6% | | Multifamily | +$0.2M | 3.0% | [Consolidated Results of Operations](index=43&type=section&id=Consolidated%20Results%20of%20Operations) Total revenues decreased significantly due to a drop in general contracting, but a gain on consolidation helped increase net income Consolidated Results - Q2 2025 vs Q2 2024 (in thousands) | Line Item | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $101,263 | $184,736 | $(83,473) | | Total Expenses | $81,295 | $166,181 | $(84,886) | | Operating Income | $19,968 | $18,555 | $1,413 | | Gain on consolidation | $6,915 | $— | $6,915 | | Net Income | $6,717 | $3,279 | $3,438 | [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained adequate liquidity through cash and credit facilities while continuing its strategic shift toward unsecured debt - Liquidity sources as of June 30, 2025 include **$52.1 million** in cash and **$114.5 million** available on the revolving credit facility[209](index=209&type=chunk) - The company is continuing its strategic shift to unsecured debt, which represented **54.5%** of total borrowings as of June 30, 2025, up from 53.9% a year prior[210](index=210&type=chunk) - No shares were issued under the ATM Program in the first half of 2025; **$178.5 million** remains available as of August 1, 2025[213](index=213&type=chunk) - No shares were repurchased in the first half of 2025; **$37.4 million** remains available under the Share Repurchase Program[215](index=215&type=chunk) [Non-GAAP Financial Measures](index=53&type=section&id=Non-GAAP%20Financial%20Measures) Both FFO and Normalized FFO decreased year-over-year, reflecting weaker performance from the general contracting segment FFO and Normalized FFO Reconciliation (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net income (loss) attributable to common stockholders | $3,907 | $375 | | **FFO attributable to common stockholders** | **$18,971** | **$22,439** | | FFO per diluted share | $0.19 | $0.25 | | **Normalized FFO attributable to common stockholders** | **$25,390** | **$30,204** | | Normalized FFO per diluted share | $0.25 | $0.34 | [Quantitative and Qualitative Disclosures about Market Risk](index=55&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's market risk exposure has not materially changed since the end of fiscal year 2024 - There have been **no material changes** to the Company's market risk since December 31, 2024[263](index=263&type=chunk) [Controls and Procedures](index=55&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective** as of June 30, 2025[265](index=265&type=chunk) - **No material changes** were made to the internal control over financial reporting during the quarter ended June 30, 2025[266](index=266&type=chunk) Part II. Other Information [Legal Proceedings](index=56&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any legal proceedings expected to have a material effect on its business - The company is not a party to any legal proceedings that it believes to be **material**[269](index=269&type=chunk) [Risk Factors](index=56&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred from the risk factors previously disclosed in the company's Annual Report - **No material changes** from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024 have occurred[270](index=270&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No shares were repurchased under the share repurchase program, and no unregistered equity securities were sold during the period - **No shares were repurchased** under the company's Share Repurchase Program during Q2 2025. As of June 30, 2025, **$37.4 million** remained available for repurchases[273](index=273&type=chunk) - During Q2 2025, **11,918 shares** were surrendered by employees to satisfy tax obligations related to vested restricted stock awards[274](index=274&type=chunk)[275](index=275&type=chunk) [Other Information](index=57&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[278](index=278&type=chunk) [Exhibits](index=58&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q

Core Viewpoint - Armada Hoffler Properties (AHH) has been upgraded to a Zacks Rank 2 (Buy), indicating a positive trend in earnings estimates which is a significant factor influencing stock prices [1][4]. Earnings Estimates and Ratings - The Zacks rating system is based on the Zacks Consensus Estimate, which reflects EPS estimates from sell-side analysts for the current and following years [2]. - Changes in earnings estimates are strongly correlated with near-term stock price movements, making the Zacks rating system useful for investors [3][5]. Impact of Institutional Investors - Institutional investors utilize earnings estimates to determine the fair value of a company's shares, leading to buying or selling actions that affect stock prices [5]. Business Improvement Indicators - The upgrade for Armada Hoffler Properties signifies an improvement in the company's underlying business, which is expected to drive the stock price higher [6]. Earnings Estimate Revisions - For the fiscal year ending December 2025, Armada Hoffler Properties is projected to earn $1.05 per share, unchanged from the previous year, but the Zacks Consensus Estimate has increased by 2.3% over the past three months [9]. Zacks Rank System Performance - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a strong historical performance, particularly for Zacks Rank 1 stocks which have averaged a +25% annual return since 1988 [8]. - The upgrade to Zacks Rank 2 places Armada Hoffler Properties in the top 20% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [11].