AH Realty Trust, Inc. (AHRT) stock intrinsic value fair value estimate & owner earnings analysis

Armada Hoffler owns and operates retail centers, Class A office buildings and apartment communities, mostly in mixed-use town centers in the Mid-Atlantic and Southeast (Virginia Beach, Baltimore's Harbor Point, Newport News, Charlotte, Durham, Atlanta). It also lends to related development projects through preferred-equity notes (Solis Kennesaw, Solis Peachtree Corners and others). In the fourth quarter of 2025 it decided to sell its general contracting business, so the figures below describe the real estate business only. At year-end 2025 retail was 94.9% occupied with 15.3% renewal rent spreads, office was 96.4% occupied with 9.1% spreads, and multifamily was 94.6% occupied. Per-share values are per share or partnership unit, since the unit holders (about 23% of the company) share in the same cash flows. What the business earns. We measure cash from operations after interest, less stock compensation, less the recurring cost of keeping buildings leased (tenant improvements and leasing costs). Development spending is treated as discretionary growth. On that basis owner earnings were about $0.68 per unit in 2023, $0.44 in 2024 and $0.11 in 2025. The decline has three visible causes: cash interest rose from $45M (2023) to $73M (2025), tenant improvement spending rose from $24M to $46M (the filing does not explain the increase), and units outstanding grew from 88.9M to 101.9M after a 2024 stock sale. Interest that accrues on the preferred-equity notes is collected only when the notes are repaid, so we left the build-up ($15.2M in 2025) in the earnings rather than treating it as a timing item. Earlier years include the construction business and are not comparable, so only three years are used. Anchor. We use about $25M a year of owner earnings (roughly $0.25 per unit), the average of 2024 and 2025. 2023 is excluded because it predates the higher interest bill and the larger share count; 2025 alone is weighed down by unusually high improvement spending. In 2025 owner earnings fell about 73% from 2024. The base case does not project a rebound from the 2025 level: it starts at the 2024-2025 average and grows 2% a year, because nearly all office and retail leases carry contractual annual rent increases and recent renewals were signed at higher rents. We credit nothing for new acquisitions, new development or further lending, since those have not yet happened. Base case, about $4.90 per share: 2% annual growth for ten years, then flat. The buildings and leases continue to exist, and maintenance spending is already deducted, but we assume no growth beyond what leases contractually provide. Discounted at 6%. Bear case, about $1.80: owner earnings stay at the depressed 2025 level of about $0.11 per unit with no growth, because interest cost is now around $73M a year against roughly $1.5B of debt, improvement spending stays high, and the notes' accrued interest continues to build rather than be paid in cash. The company reported a net loss of $38.8M in the first half of 2026 against net income of $3.1M a year earlier while revenue grew about 4% to $104.9M; we could not fully reconcile the cause from the data reviewed. Bull case, about $8.40: owner earnings return to the 2024 level (about $0.40 per unit) and grow 3% a year, supported by the double-digit retail renewal spreads and contractual rent increases already being achieved, then stay flat. What could make this wrong. Higher refinancing costs on the roughly $1.5B of debt (96.3% is fixed or hedged today) would push results toward the bear case. Failure to collect on the preferred-equity notes, which mature between 2026 and 2027 and include projects such as Solis Kennesaw ($50.4M balance including accrued interest), would remove cash we have partly counted. The dividend was reduced in the first quarter of 2025, which is consistent with a thinner cash cushion. Debt is not subtracted from value separately because interest is already deducted from the cash flow used.