Reit Magazine - January/February 2021 - 54

Agree Realty Corp.

retail tenants operating across
20 sectors and are located in 40
states, expanding its portfolio to
over 1,100 properties.
Investments are concentrated
in 10 recession-resistant retail
sectors that include home
improvement, general merchandise, grocery stores, auto-parts
stores, tire and auto service, and
off-price retail. Walmart heads
the list of top tenants, which
also includes Costco, TJ Maxx,
Home Depot, and Walgreens.
As of early December, the
portfolio was 99% leased. Rent
collections for each month from
September through December
stood at 99%.

PARTNERING WITH
THE BEST
Agree Realty and its real estate
portfolio have been constructed
not only to withstand, but to
flourish during trying times,
according to its CEO.
" Our mission is to be a
partner to the best retailers
in the world, and it would be
an understatement to say that
COVID-19 has produced a
trying time, " Agree says. The
pandemic has created a " massive disruption " that the best
retailers have navigated and, in
many instances, thrived from
due to their logistics and distribution platforms, according
to Agree. " Our fortress balance
sheet and partnership with these
companies has enabled us to
achieve sustained success, " he
says.
Agree says the company's
growth strategy focuses on the
acquisition and development of
net lease retail assets, as well as
serving as a capital partner to
third-party developers.
Today, the Agree Realty
portfolio is comprised of 86%
national and super-regional tenants operating in e-commerce
and recession-resistant sectors
and 66% of tenants are rated
investment grade.

54 |

reit

" Over the last two years the
company has greatly reduced its
exposure to health and fitness,
movie theaters and entertainment retail, which are some of
the lowest-rated sectors in the
peer set, " says Simon Yarmak,
managing director at Stifel
Nicolaus & Co. " As a result,
the quality of the portfolio
has been built up and pared
down through dilution and
disposition of some of the more
challenged categories hit hard
during pandemic. "
In most cases, the company
buys retail net lease assets from
third party sellers, but it also
will execute on select sale-leasebacks with industry-leading
tenants. Agree Realty is also
growing its ground lease portfolio. As of Sept. 30, this portfolio
spanned 73 properties in 25
states and represented over
9% of the total portfolio.
" Our ground lease portfolio
is a good example of the careful
portfolio construction and
detailed real estate analysis
we consistently do to mitigate
risk and maximize quality. It
provides a compelling risk-adjusted value proposition for our
shareholders, " Agree says.

TOP PERFORMER
The REIT's acquisition total for
2020 of $1.315 billion has been
balanced by $1.35 billion raised
in equity and an inaugural
public bond of $350 million.
Together, these moves reveal a
rapidly growing company with
a 5.3% year-over-year increase
in the third quarter dividend.
" Agree Realty took themselves to another level this year,
and the stock is one of the best
performing within its peer set, "
Yarmak says. He adds that the
$1.3 billion in 2020 acquisitions
almost doubles what the company did in 2019, " and over the
last several years they've been
able to outdo themselves, year
in and year out. " Yarmak says he

A Hands-On History
While acknowledging the unique challenges the
pandemic created, Joey Agree readily admits that he
was well prepared by his father, Agree Realty Executive
Chairman Richard Agree, who he describes as " the
ultimate mentor and role model. "
The elder Agree established Agree Development
Company in 1971 and over the next 23 years developed
more than 40 community shopping centers in the
Midwest and Southeast. In 1994, the company changed
its name to Agree Realty Corp. and went public with
an initial purchase offering that raised approximately
$50 million.
By 2008, Agree Realty owned 70 properties, most of
which it had developed. Over 70% of rents stemmed
from a three large retailers, Walgreens, Kmart, and
Borders Books. " At the time, I was a young executive
building a team, and we owned Borders' flagship store in
Ann Arbor, " recalls Joey Agree.
" Amazon was solely a digital book retailer back then,
and Borders was the first retailer it eviscerated. I had
a front row seat into the future of e-commerce, " Agree
recalls. " I could see that price transparency for the
consumer was becoming increasingly available, and
that hard and soft goods were easily commoditized and
could be sold more cheaply online, eroding margins and
reducing top-line revenues. The entire paradigm of the
retail industry was about to change-and so was Agree
Realty, " he adds.
By the time he was appointed COO in 2009, Agree
was developing the strategy that would propel the
company to its current position. When Borders declared
bankruptcy in 2011, the REIT was already marketing
the closed stores it owned for potential re-tenanting or
disposition. A 2010 secondary common stock offering
raised $31 million, and Agree Realty, once solely a developer, was poised to start acquiring high-quality, net-lease
retail assets.



Reit Magazine - January/February 2021

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