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Agree Realty Corporation (ADC - Snapshot Report), a real estate investment trust (REIT), announced the pricing of a public offering of 1.5 million common shares. Priced at $27.25 a share, the offering would help the company raise proceeds of over $40.8 million. Moreover, the underwriters have been granted a 30-day option to purchase up to 225,000 additional shares for covering over-allotments, if any.

This larger-sized public offering (it previously disclosed a plan to offer 1.3 million shares) comes as part of Agree Realty’s effort to generate cash to repay its debt, finance development activity and property acquisitions as well as for general corporate purposes.

Particularly, the company plans to use the proceeds from this public offering to pay down the outstanding debt under its $85 million credit facility. The sole book running managers for this offering was Raymond James. The offering is scheduled to close on or about Jan 18, 2013.

For Agree Realty, though the public offering would result in share dilution, the paying back of debt is encouraging as it would reduce its interest expenses. Moreover, the opportunistic acquisitions would help Agree Realty 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.

As a matter of fact, Agree Realty has been on an acquisition spree. Recently, the company announced the acquisition of 4 Applebee’s International Inc. restaurants along with one store of Advance Auto Parts Inc. (AAP - Analyst Report) in late December 2012. The average purchase price of the properties came in at approximately $10.1 million.

With the above-mentioned transaction, Agree Realty’s total acquisitions in 2012 reached roughly $81.5 million – more than doubling from 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 acquisitions in 2012, are from investment-grade retailers.

Agree Realty is mainly engaged in the acquisition and development of single tenant properties net leased to industry leading retail tenants. Currently, it owns and operates a portfolio of 109 properties, situated in 27 states and includes around 3.3 million square feet of gross leasable space.  

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

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