Agree Realty Prices Stock Offering

Zacks

Real estate investment trust (:REIT) Agree Realty Corp. (ADC) announced the pricing of an equity offering of 1.65 million shares, which is projected to generate $49.2 million as gross proceeds. The company also granted the underwriters an option to buy up to an additional 0.2 million shares. The offering is anticipated to complete on Nov 27, 2013.

Agree Realty expects to utilize the net proceeds from the offering for debt payment, investment in developmental activities, asset acquisitions, and meeting other corporate needs. In particular, the company plans to lower its outstanding debt under its current unsecured revolving credit worth $85 million. Citigroup, Inc. (C) acted as the sole underwriter for the offering.

We believe that though the offering will result in share dilution for the company, the payment of debt is encouraging as it will reduce interest expenses. Also, strategic investments will help Agree Realty enhance its portfolio quality.

Notably, in October, Agree Realty reported its third-quarter 2013 results with adjusted FFO (fund from operations) per share of 55 cents increasing 1.8% year over year. Results reflected top-line growth along with portfolio enhancing efforts.  However, higher operating expenses were the headwind for the quarter.  

During the third quarter, Agree Realty acquired seven retail properties and completed its third Wawa (Casselberry, Fla.) development activity. Also, it continued with the redevelopment work of a building in Ann Arbor, Michigan, which is preleased to Walgreen Co. (WAG). As of Sep 30, 2013, total assets stood at $443.6 million while cash and cash equivalents stood at $5.8 million.

Agree Realty currently has a Zacks Rank #3 (Hold). Among other REIT-equity trust retail stocks , American Assets Trust, Inc. (AAT) is a better ranked stock carrying a Zacks Rank #2 (Buy).

Note: Funds from operations, a widely accepted and reported measure of REITs performance, are derived by adding depreciation, amortization and other non-cash expenses to net income.

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