Armada Hoffler: Solid Dividend At A Great Price

Company Overview - Armada Hoffler Properties, Inc. is a REIT established in 2012, headquartered in Virginia Beach, VA, focusing on owning, acquiring, developing, and leasing a diversified portfolio of office, retail, and multifamily properties across the U.S. [2] - The company has a conservative leverage strategy and strong liquidity, providing a margin of safety for investors [2] Portfolio Composition - The REIT's portfolio includes 59 properties totaling 6.2 million square feet, with nearly half of the net operating income (NOI) derived from retail properties, and the remainder from office and multifamily segments [3] - The mixed-use communities strategy allows for synergy among the three property types, with 2.7 million square feet of commercial space, 2.1 million square feet of Class A office space, 0.6 million square feet of retail, and 1,151 multifamily units [10] Market Outlook - The outlook for retail and office real estate is positive, with demand outpacing supply in the retail market and improving occupier demand in the office sector [10] - However, a slight oversupply in the apartment market is expected to decelerate rent growth and increase vacancy rates [10] Financial Performance - Recent results show modest growth in rental income, a decrease in adjusted funds from operations (AFFO), but significant growth in same-store cash NOI [15] - As of March 31, portfolio occupancy was 94.7%, with retail at 95.4% and office at 93.6%, while multifamily occupancy decreased slightly to 95.1% [15] Leverage and Liquidity - The REIT has a conservative debt structure, with 61.48% of assets funded by debt, a debt to EBITDA ratio of 7x, and an interest coverage ratio of 2.43x [17] - The portfolio is rated BBB, and upcoming debt maturities are manageable [17] Dividend and Valuation - Armada Hoffler currently pays a quarterly dividend of $0.205 per share, yielding 7.19%, with a payout ratio of 61.88% [18] - The stock trades at a price to funds from operations (P/FFO) multiple of 9.11, lower than the average of 10.39 for similar diversified REITs, indicating good value [19] Conclusion - The shares of Armada Hoffler are considered attractive due to their low FFO multiple and implied cap rate, with expectations of improved profitability and a well-diversified portfolio [21]