"Agree Realty Corp (Ticker: ADC) - Under the Radar But Worth a Look" - Another SLG Article Featured on Seeking Alpha

1. Agree Realty Corp (Ticker: ADC) - Under the Radar But Worth a Look
Base Case
At a $695 Million Market Cap, the company receives less press and coverage than many of the
bigger, more bandied about REIT names. However, there is a lot to like about the company in
my view including the following:
 Chairman, Richard Agree founded ADC 44 years ago and owns 2% of shares outstanding
 Retail Net Lease pure play  100% Retail Tenants, 97.3% Net Lease
 264 properties in 41 states; 99.5% occupancy
 52.6% investment grade tenants; 11.8 year weighted average remaining lease term
The company advertises itself as a fully-integrated, self-administered, and self-managed REIT
focused on the development and acquisition of net lease retail properties throughout the U.S.
with a portfolio of 264 assets in 41 states, with approximately 4.8 million square feet of gross
leasable space.
The company went public in 1994 and has had several secondary equity offerings since then.
ADC is very well-managed, having consistently demonstrated efficient deployment of capital
through several major and disruptive business cycles.
Recent Activities
Recently, the company announced that it had completed a follow-on public offering of 1,725,000
shares of common stock for net proceeds of approximately $53 million which it intend to use to
repay the outstanding balance under its revolving credit facility, to fund property acquisitions
and development activity, for working capital and for general corporate purposes.
During the third quarter of 2015, ADC purchased 15 retail net lease assets for approximately $37
million. The properties are located in 9 states and are 100% leased to 9 different tenants for a
weighted average lease term of approximately 12.4 years. The underwritten weighted average
capitalization rate was 8.1%.
Raising equity in this environment is a luxury afforded to a select few REITs and paying down a
revolver in the face of rising interest rates appears to be a continuation of the company’s prudent
investment of capital.
Debt Stack
Debt looks well managed with approximately 25% in near- and mid-term maturities.
Maturity Date 2015 2016-2017 2018-2019 2020+
Amount $0 $29,500,000 $52,000,000 $247,700,000
% Maturing 0.0% 9.0% 15.8% 75.2%

2. How We Got Here
My firm manages several separate account strategies and two hedge funds. All Portfolios are
supported by our trademarked AD-STAR® System, a complex financial model used to evaluate
publically-traded companies through comprehensive analysis of over ten thousand historical
financial metrics and proprietary formulas. AD-STAR® parses through every publically traded
company within the Bloomberg universe.
Among other things AD-STAR® places a high premium on a company’s historic operating
performance, including dividend coverage, return on capital, adjusted funds from operations
growth, debt burden, and many other metrics.
 8.2% Return on Capital Deployed in 2014 (AFFO plus after-tax interest expense)
 5.5% Dividend yield and expected dividend 2016 growth is 3.4%
 Price to AFFO (2016) is 13.3
 5.6% forecasted AFFO growth in 2015 and 8.1% for 2016
 Less debt than peers (38.4% Total Debt to Total Capital)
Stock Price
In a year when many REITS have struggled, ADC has outperformed its peer group including
highly regarded Realty Income and National Retail Properties. Despite this, the stock trades at a
price of just 13.3 times 2016 forecasted AFFO. We believe that ADC offers value relative to
peers, even after applying appropriate risk premiums.
The Stanley-Laman Group, Ltd. (SLG), a Registered Investment Advisor, holds ADC as a long position in its SLG
Micro-Cap Portfolio.
The preceding represents the opinions of Mr. Stanley and SLG and are not intended to be investment
recommendations.
Investing in any strategy involves the risk of loss of principal and may not be suitable for all investors. Investors are
advised to consult with qualified investment professionals relative to their individual circumstance and objectives.