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Is Now The Time To Invest In Agree Realty Corporation?

|Includes:Agree Realty Corporation (ADC), KIM, RPT, WPG

gree Realty Corp. (NYSE: ADC) has made four acquisition so far this year, the latest being the acquisition of Dick's Sporting Goods and Petsmart in St. Joseph, Missouri. The company had to pay about $8.5 million for these properties. These acquisitions took Agree Realty's portfolio to 110 properties, covering 28 states. Before the news of this acquisition, there was accelerated insider buying within the company. One of the company's directors, John Rakolta, initiated this activity by purchasing 50,000 shares at about $27.25 per share. This activity on its own is an incentive for investors; however, we'll still examine the state of Agree Realty stock to see if it would be wise to follow in the footsteps of Mr. Rakolta. We will also examine how these acquisitions will affect the company's bottom line. As of this writing, Agree Realty was trading at $28.46 per share. Share price has increased by about 4.5 percent since January 15, when Mr. Rakolta made his transaction. I love playing with figures, so I'll say this. If Mr. Rakolta cashes in on his shares right now, he'd be making a profit of over $9 million.


As was mentioned earlier, Agree Realty has made four acquisitions within the first two months of 2013. It's an RIET so it should be making these types of acquisitions. I checked on its direct competitors, Kimco Realty Corporation (NYSE: KIM), Ramco-Gershenson Properties Trust (NYSE: RPT) and Glimcher Realty Trust (NYSE: GRT) and found that none of them have made as many acquisitions as Agree Realty this year.

Agree Realty released its earnings result for fourth quarter and full year 2012, on February 27. The numbers were impressive. The company reported that funds from operations increased by 6 percent on a year-over-year basis. It's revenue increased by about 14 percent for the year. The company also noted that it purchased 25 single tenant net leased properties in 2012 for $81.5 million.


The only issue that's not in favor of Agree Realty is its financial position. The company's balance sheet indicates a total cash position of $542,000, while total debt is $125.75 million. This raises serious questions. To alleviate this issue however, the company said in a press release that it intends to use the net proceeds of a recent PO to repay a portion of the outstanding indebtedness under its $85 million credit facility, to fund development activity and property acquisitions, and for other general corporate purposes.

Overall, considering the insider trading and the company's business activities, I'd rate this stock a buy, as it is, in my opinion, undervalued at the moment.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: ADC, KIM, RPT, WPG