03-19-2021, 03:38 AM
ADC -- Agree Realty, the omnichannel equity REIT
<!-- SC_OFF --><div class="md"><p>I know most on this sub aren't focused on equity REITS, but I remain very bullish real estate this year and in the next thousand years. You are, of course, buying a piece of Earth. When that piece of Earth generates income and the company is doing everything it can to grow... you should at least consider allocating a portion of it to your portfolio. Dividend focused companies are growth companies, too.</p> <p>Agree (pronounced Ay-gree) focuses on investment grade, recognizable tenants such as Walmart. They are mostly triple net but do on occasion assist with development efforts, which aligns with how they describe their best tenants as partners. They're a bit unusual here--like STOR, a non-IG counterpart--in that they actively work with powerful companies rather than being a merely absentee landlord. Yet they still benefit from the high margins of triple net leasing--gross profit hovers at 87%, net income at 36%.</p> <p>They also are working with some ground leases. Tenant vacates, they get the land at no cost. This is extremely beneficial to them since they could choose to either develop the property or just sell it. Their history here with failed companies is also telling: they used to work with K-Mart. K-Mart failed. Agree did not.</p> <p>Their most attractive point is omnichannel retail. While competitors in the publicly traded REIT space like to focus on e-commerce resistant companies (and I own these companies too), Agree embraces e-commerce. Omnichannel means what you think it means: big box retailers will maintain dominance in retail but will also use these spaces as logistics centers for deliveries. I think their take on the future here is realistic, rather than an all or nothing take.</p> <p>Judging by their history they've offered nice growth as well. 80% return over 5 years, <em>completely disregarding dividends reinvested.</em> I maintain equity REITs are growth stocks by nature, only with more safety. For reference Walmart returned 96% over the last 5 years, only with far less diversification spread for investors. Check out a 5 year backtest if you want to see an interesting CAGR convergence where Walmart's total return is trending down and Agree's total return is trending up.</p> <p>They currently trade at a p/ffo multiple of almost 20, so the current valuation is a bit high to me. I'll buy more of them at 65 or 66 dollars a share. Current buy in yield is 3.6%, which is lower than I would like. But they are also poised to increase the real dividend. At a 4% yield I would buy without reservation and I expect to meet this target once the stimulus froth wears off.</p> <p>They recently switched to a monthly dividend model and raised their dividend by 6%. Not bad for a dusty old boomer asset class everyone thought covid would destroy. Market cap is 4 and a half billion dollars, which is a good size with growth runway for this type of company.</p> <p>And one of the best features of the company is you can talk to the CEO. Joey Agree will talk to you in his free time and answer questions you may have. I usually dislike family owned REITs, like Monmouth, but Agree is very transparent and publicly engaged. It is utterly mandatory to have good management at a REIT, or any company for that matter. It is internally managed, and the management is invested in the company just like you or I might be. They also didn't fuck around with covid rent relief since most of their tenants didn't truly need rent relief--they said pay up because we know you can afford to pay up. They did offer relief to select small tenants who truly needed it, so they aren't sharks.</p> <p>Risks are organic interest rate hikes and companies like Walmart calling it quits and selling all their wares over the internet exclusively. The likelihood of that happening is nil. Another downside is their dividends are taxed at ordinary income rates unless held in a Roth. And I suppose their IG tenants could eventually refuse to work with REITs and keep all their real estate in house, although this is highly unlikely.</p> <p>Current payout ratio is around 71%, which is very conservative for a commercial real estate company that hasn't cut their dividend since the Great Recession. Contractual rent escalations are included, too, for the inflation worriers (although this is around 1% annually, which admittedly is low... this is an unfortunate function of working with tenant companies that have negotiating power). They also demand tenant financials so they aren't flying blind; should a tenant decide to close a store they usually know well in advance.</p> <p>Just thought I'd mention a company that isn't exotic here, but rather focuses on that sweet thing we all know as cash flow. And what is likely the real future of sophisticated retailers. Unlike Amazon's loss leading retail side, Agree's tenants actually profit from their business models.</p> <p>Edit: I don't think investing subs usually worry about sources but most of this data is from Seeking Alpha authors. That website is fantastic when it comes to REITs, if not tech. I wrote this post out myself, on my phone, but I felt bad and decided to include the fact I gleaned this data from others who did the hard work of looking into SEC filings. Credit goes to them.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/ThemChecks"> /u/ThemChecks </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/m7kef8/adc_agree_realty_the_omnichannel_equity_reit/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/m7kef8/adc_agree_realty_the_omnichannel_equity_reit/">[comments]</a></span>Kind Regards R
<!-- SC_OFF --><div class="md"><p>I know most on this sub aren't focused on equity REITS, but I remain very bullish real estate this year and in the next thousand years. You are, of course, buying a piece of Earth. When that piece of Earth generates income and the company is doing everything it can to grow... you should at least consider allocating a portion of it to your portfolio. Dividend focused companies are growth companies, too.</p> <p>Agree (pronounced Ay-gree) focuses on investment grade, recognizable tenants such as Walmart. They are mostly triple net but do on occasion assist with development efforts, which aligns with how they describe their best tenants as partners. They're a bit unusual here--like STOR, a non-IG counterpart--in that they actively work with powerful companies rather than being a merely absentee landlord. Yet they still benefit from the high margins of triple net leasing--gross profit hovers at 87%, net income at 36%.</p> <p>They also are working with some ground leases. Tenant vacates, they get the land at no cost. This is extremely beneficial to them since they could choose to either develop the property or just sell it. Their history here with failed companies is also telling: they used to work with K-Mart. K-Mart failed. Agree did not.</p> <p>Their most attractive point is omnichannel retail. While competitors in the publicly traded REIT space like to focus on e-commerce resistant companies (and I own these companies too), Agree embraces e-commerce. Omnichannel means what you think it means: big box retailers will maintain dominance in retail but will also use these spaces as logistics centers for deliveries. I think their take on the future here is realistic, rather than an all or nothing take.</p> <p>Judging by their history they've offered nice growth as well. 80% return over 5 years, <em>completely disregarding dividends reinvested.</em> I maintain equity REITs are growth stocks by nature, only with more safety. For reference Walmart returned 96% over the last 5 years, only with far less diversification spread for investors. Check out a 5 year backtest if you want to see an interesting CAGR convergence where Walmart's total return is trending down and Agree's total return is trending up.</p> <p>They currently trade at a p/ffo multiple of almost 20, so the current valuation is a bit high to me. I'll buy more of them at 65 or 66 dollars a share. Current buy in yield is 3.6%, which is lower than I would like. But they are also poised to increase the real dividend. At a 4% yield I would buy without reservation and I expect to meet this target once the stimulus froth wears off.</p> <p>They recently switched to a monthly dividend model and raised their dividend by 6%. Not bad for a dusty old boomer asset class everyone thought covid would destroy. Market cap is 4 and a half billion dollars, which is a good size with growth runway for this type of company.</p> <p>And one of the best features of the company is you can talk to the CEO. Joey Agree will talk to you in his free time and answer questions you may have. I usually dislike family owned REITs, like Monmouth, but Agree is very transparent and publicly engaged. It is utterly mandatory to have good management at a REIT, or any company for that matter. It is internally managed, and the management is invested in the company just like you or I might be. They also didn't fuck around with covid rent relief since most of their tenants didn't truly need rent relief--they said pay up because we know you can afford to pay up. They did offer relief to select small tenants who truly needed it, so they aren't sharks.</p> <p>Risks are organic interest rate hikes and companies like Walmart calling it quits and selling all their wares over the internet exclusively. The likelihood of that happening is nil. Another downside is their dividends are taxed at ordinary income rates unless held in a Roth. And I suppose their IG tenants could eventually refuse to work with REITs and keep all their real estate in house, although this is highly unlikely.</p> <p>Current payout ratio is around 71%, which is very conservative for a commercial real estate company that hasn't cut their dividend since the Great Recession. Contractual rent escalations are included, too, for the inflation worriers (although this is around 1% annually, which admittedly is low... this is an unfortunate function of working with tenant companies that have negotiating power). They also demand tenant financials so they aren't flying blind; should a tenant decide to close a store they usually know well in advance.</p> <p>Just thought I'd mention a company that isn't exotic here, but rather focuses on that sweet thing we all know as cash flow. And what is likely the real future of sophisticated retailers. Unlike Amazon's loss leading retail side, Agree's tenants actually profit from their business models.</p> <p>Edit: I don't think investing subs usually worry about sources but most of this data is from Seeking Alpha authors. That website is fantastic when it comes to REITs, if not tech. I wrote this post out myself, on my phone, but I felt bad and decided to include the fact I gleaned this data from others who did the hard work of looking into SEC filings. Credit goes to them.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/ThemChecks"> /u/ThemChecks </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/m7kef8/adc_agree_realty_the_omnichannel_equity_reit/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/m7kef8/adc_agree_realty_the_omnichannel_equity_reit/">[comments]</a></span>Kind Regards R