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On Thursday, Joey Agree, the president and CEO of Agree Realty (NYSE: ADC) joined Benzinga’s PreMarket Prep to discuss the real estate market, the impact of COVID-19 and potential opportunities to buy distressed properties.
Agree shares have performed well for long-term investors since the CEO took over the portfolio back in 2010, but the stock is down 21.8% in the past six months due in large part to COVID-19 concerns.
Distressed Real Estate Demand On The Rise
The Wall Street Journal reported this week that demand for distressed commercial real estate is on the rise as investors look to make the type of timely investments that paid off during the 2008 and 2009 financial crisis. However, Agree said his REIT focuses exclusively on high-quality real estate and looks to avoid distressed properties.
“Anybody who is focused on distressed retail real estate better understand what distressed truly looks like in the upcoming months, quarters and potentially years ahead. I think it is very difficult to get to the bottom of what we’re actually seeing,” he said on PreMarket Prep.
A number of variables are in play in valuing a real estate property, and today's unique economic environment has made performing that calculus even more difficult, Agree said.
“If you don’t understand the underlying pro forma EBITDA in a pandemic, NOI for real estate, it is very difficult to have price discovery. So I would tell anybody that is thinking about getting into distressed commercial real estate that you better have a pretty good visibility, you believe, into what distressed really means.”
'You Better Be Right' In Real Estate
The retail real estate market will likely get worse before it gets better as investors get a clearer picture of the financial impact of the pandemic, Agree said.
“This country — before the pandemic started — had challenges in retail. We’ve all read about malls and specific retailers that were failing,” Agree said.
“Distressed commercial real estate is a relative term. Be careful where you enter. Obviously there are always opportunities in distressed, but the question is what is that EBITDA discovery in any business and how do you look for it on a pro forma basis? And you better be right at the end of the day.”
Watch to the full interview with Joey in the clip below, or listen to the podcast here.
PreMarket Prep is a daily trading show hosted by prop trader Dennis Dick and former floor trader Joel Elconin. You can watch PreMarket Prep live every day from 8-9 a.m. ET here. The replay can be found on Benzinga's YouTube channel, and the podcast is on iTunes, Google Play, Soundcloud, Stitcher and Tunein.
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