Agree Realty Corporation (NYSE: ADC) is a half billion dollar market capitalization REIT in the freestanding retail space. Maybe because of its smaller size, it is over-shadowed by highly coveted freestanding retail peers such as Realty Income and National Retail Properties. The truth is, Agree Realty has demonstrated itself to be a hidden gem in this sector.
Compared to its peers, Agree Realty is a highlight in terms of high quality tenancy, occupancy, and lease terms. Its percentage of investment-grade tenants (53 percent) is higher than anyone else in the sector, including Realty Income. The company sports occupancy of 99.4% and its weighted average lease term is approximately 12 years. It is owned by a sole operator and has a long record, being founded in 1971 and going public in 1994.
Most recently, the company has tapped into real estate tailwinds and doubled its annualized base rent. Since 2011, its level of investment has increased, speeding up the acquisition of net lease properties and virtually eliminating its exposure to shopping centers. The number of properties has more than tripled and currently consists of 263 assets in 41 states, equivalent to approximately 4.8 million square feet of gross leasable space; consequently, Agree Realty is considered a pure-play retail net lease.
Freestanding retail REITs have been growing at a two-digit pace. Revenues and FFO per share have increased by approximately 11 percent in Q2-2015, in comparison with the same period in 2014. For Agree Realty, growth rates have surpassed expectations; total revenues have gone up by 33% and FFO per share by 13 percent. In addition, while its peers expect its FFO per share to grow by 5 percent in 2015, Agree is expecting it to grow twice as much.
To be continued…
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