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Agree Realty Continues to Expand

Zacks Equity Research

Agree Realty Corporation (ADC) – a real estate investment trust (:REIT) – announced that it has acquired four Applebee’s International Inc.’s restaurants along with one store of Advance Auto Parts Inc. (AAP) in late December 2012. The average purchase price of the properties came in at approximately $10.1 million.

With the abovementioned transaction, the company’s total acquisitions in 2012 reached roughly $81.5 million – more than double the total value of the 2011 acquisitions. The company acquired properties spanning approximately 400,000 square feet located in 15 states. The properties are spread along 13 retail sectors and have an average lease term of 14.5 years. Roughly 68% of the annualized base rents, generated from these 2012 acquisitions, are from investment-grade retailers.

Applebee’s International Inc. is a wholly-owned restaurant chain of DineEquity, Inc. (DIN). The acquired restaurants are located in Harlingen, Wichita Falls and Florida regions. All the properties have a new 20-year lease and comprise fixed annual rental increases.

Advance Auto Parts is the second-largest automotive replacement parts and accessories retailer in the U.S., based on revenues and store count. The acquired Advance Auto unit is situated in Virginia at an outlet of a Wal-Mart Stores Inc.’s (WMT) supercenter.

Through this strategic initiative, Agree Realty expects to enhance its portfolio quality, which in turn could be accretive to its earnings going forward. In addition, it aims to retain high-end tenants through long-term lease deals, thereby guaranteeing a consistent source of income.

Lately, Agree Realty has been actively repositioning its portfolio by divesting assets that have limited opportunities and acquiring properties, which have the potential to generate higher returns. Over the last two months, the company acquired many premium assets. In November, it acquired a $3.0 million worth of unit from Harris Teeter – a wholly-owned subsidiary of Harris Teeter Supermarkets, Inc. (HTSI). In late December, agree Realty acquired two premium assets – LA Fitness property in Illinois and an AutoZone store in Minneapolis – for approximately $11.6 million.

We presently have a long-term ‘Neutral’ recommendation on Agree Realty. Also, it holds a Zacks Rank #3 (Hold).

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