Agree Realty Corp (ADC)

NetscribeREIT (54.55) Submitted: 3/12/07 6:06 AM : Start Price: $30.14 ADC Score: 9.80

Agree Realty Corporation (ADC) is a fully integrated, self-administered and self-managed real estate investment trust (REIT) based in Farmington Hills, Michigan. The company is engaged in the business of developing, acquiring and managing of single tenant, grocery anchored and big box retail properties leased to national tenants. The company’s portfolio comprises of 60 properties spread across 15 states of the U.S.


The $10 billion U.S. shopping-center industry has showed solid performance in 2006; with lenders funded deals at record prices and retailers looked to expand. However, according to McGraw-Hill Construction, new construction (new starts and additions) of U.S. retail space slowed by 6% y-o-y for the first 10 months of 2006. This has stimulated the demand for existing shopping malls.


The interest rate has been stabilized after 17 straight hikes in mid of 2006. This should enhance consumer-spending power. Moreover, factors like easing of inflationary pressure along with gaining momentum in job growth rate should push up the shopping activities, thereby boosting the demand for shopping mall.


The company’s fund from operation (FFO) for fourth quarter 2006 has improved by 15%, thanks to a reduction in general and administration costs. The company’s 99.7% of its portfolio was leased during the year. The company's base rental income is secured with 67% coming from three of its largest tenants Borders, Walgreen and Kmart. Moreover, the stability of rental income is backed by the fact that less than a percent of its leased square footage is set to expire in 2007, while this figure raising to 9.8% for 2008. A secured stable income and healthy occupancy rate make the company a good buy.

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