Jefferies initiates Armada Hoffler at “buy,” targets 31% upside on NAV discount

Published 27/06/2025, 13:50
© Reuters.

Investing.com -- Jefferies in a note dated Friday has initiated coverage on Armada Hoffler Properties (NYSE:AHH) Inc. (NYSE:AHH_pa) with a “buy” rating and a $13 price target, implying a 31% upside. 

The brokerage cites the stock’s 35% discount to net asset value (NAV), deleveraging progress, and stable cash flows as key drivers for the rating.

Armada Hoffler manages a $1.3 billion real estate portfolio across retail, office, and multifamily assets, concentrated in southeastern U.S. markets. 

The company’s geographic focus aligns with demographic growth trends, particularly in the Sun Belt. Jefferies views the current valuation as misaligned with the stability of AHH’s operations and sees scope for a re-rating.

The brokerage expects a 5% compound annual growth in funds from operations (FFO) per share through 2026, driven by same-store net operating income (NOI) gains, development completions, and falling interest costs.

AHH’s payout ratio stands at 67%, allowing flexibility for potential dividend growth. The stock currently offers a 6.1% dividend yield.

Jefferies notes that the company has lowered its net debt to EBITDA from 8.1× in 2020 to 7.1× and projects further reduction to 6.5× by 2026, aided by retained earnings and selective asset sales. The development pipeline is fully funded, and the firm sees no near-term equity requirements.

Office exposure remains a risk factor, but Jefferies notes that AHH’s office properties are located in high-demand, mixed-use environments and maintain occupancy above 95%. 

The retail and multifamily segments are expected to remain stable, supported by population growth in the firm’s core markets.

High insider ownership is also flagged as a positive, signaling alignment with shareholders. 

The company’s capital recycling and controlled development strategy are viewed as disciplined and supportive of future earnings visibility.

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