Predicting Agree Realty's Position in a Decade
Agree Realty, symbolized by its ticker ADC, has undergone a significant transformation since a significant tenant's bankruptcy in 2011 forced a dividend cut. Despite the setback, Agree has expanded its net lease niche presence impressively over the past decade.
Let's delve into the 2011 dividend cut incident to comprehend Agree's journey. Initially, Agree managed a modest 81 properties, with 20% of its rent roll (around 13 retail assets and an office property) controlled by Borders. Borders' bankruptcy filing in early 2011 was a significant blow, causing Agree to reduce its quarterly dividend from $0.51 to $0.40 per share, a 20% cut. However, Agree's management cleverly navigated these challenges, settling in 2011 and 2012 with a stable dividend. By 2013, Agree showed impressive tenacity by continuing to grow, adding 28 properties to its portfolio, a 35% increase, despite the high stakes.
Agree's growth trajectory has been nothing short of remarkable in the past decade, growing from 109 properties in 2013 to approximately 2,150 today. Although it would be meaningless to quantify this growth by calculating percentages, it is undeniable that Agree has acquired a substantial number of properties in its expansion.
So, what lies ahead for Agree Realty? Given the inherent growth model of REITs, which revolves around adding new properties to their portfolios, Agree will likely outgrow its current size. However, the pace and extent of growth will depend on various factors, such as acquisition opportunities and market conditions.
Answering the question of how much more substantial Agree will be in a decade is challenging, as its current growth rate is no longer possible considering its current size. But Agree's Q1 2024 acquisition of 31 properties during a challenging interest rate environment points toward its ability to maintain growth despite market challenges.
Agree Realty is a growth-oriented REIT with an eye on expansion rather than focus solely on maintaining dividends. While the Realty Income Corporation, a notable net lease REIT, has a larger portfolio, Agree has abundant room for growth, suggesting that it still has plenty of potential to double its size in the future, with likelier outcomes even surpassing this magnitude.
As for Agree's stock value, its yield has increased as a result of the broader REIT market's decline, offering an attractive opportunity for investors seeking high returns. Although its yield is lower than Realty Income's, it suggests that investors view Agree Realty as a growth-oriented REIT with promising prospects. If you find this assessment appealing, Agree Realty could be a compelling addition to your investment portfolio.
After the 2011 dividend cut, Agree Realty focused on reinvesting its savings from reduced payouts into its finance and property portfolio, aiming to increase its net lease niche presence further. Due to these strategic investments, Agree has seen substantial growth in its money management and property acquisitions, leading to a significant expansion of its property portfolio.
