Agree Realty Corporation (NYSE:ADC), a real estate investment trust (REIT), announced today the establishment of an at-the-market (ATM) equity program with potential sales of common stock up to $1,250,000,000. The program allows for shares to be sold through negotiated transactions or "at the market" offerings, potentially including block trades or sales made directly on the New York Stock Exchange.
The announcement follows the company's entry into an equity distribution agreement with multiple financial institutions, including Wells Fargo (NYSE:WFC) Securities, LLC, and others, acting as sales agents or forward sellers. Agree Realty has also entered into forward sale agreements with various forward purchasers, which may involve the borrowing and selling of shares by the forward sellers.
Under the ATM equity program, Agree Realty will not immediately receive proceeds from the sale of borrowed shares. Instead, the company plans to fully settle the forward sale agreements with the forward purchasers by specified dates, expecting to receive net cash proceeds from the sales. However, the company retains the option to cash settle or net share settle the agreements, which could result in no proceeds being received, and instead involve the exchange of cash or shares.
Sales agents will receive a commission not exceeding 2.0% of the gross sales price of all shares sold. Similarly, forward sellers will receive a commission in the form of a reduced initial forward sale price, not exceeding 2.0% of the gross sales price of borrowed shares sold.
The shares will be issued pursuant to Agree Realty's registration statement on Form S-3ASR filed on May 5, 2023, and a prospectus supplement dated today. The ATM equity program is designed to provide the company with flexible financing options for its operations and growth strategies.
In other recent news, Agree Realty Corporation has launched a public offering of 4 million shares of common stock, with Citigroup and Wells Fargo Securities as joint book-running managers. This offering is part of forward sale agreements with Citibank and Wells Fargo Bank, potentially involving up to 4.6 million shares. The company intends to use future settlements from these agreements to fund general corporate activities, including property acquisitions, development, or repayment of debt.
Agree Realty Corporation demonstrated significant growth in its Q3 2024 earnings call, raising nearly $470 million through an at-the-market program. This resulted in almost $2 billion in liquidity and increased acquisition guidance for the year to approximately $850 million. The company's AFFO per share guidance was raised to $4.12-$4.14, indicating a 4.6% year-over-year growth.
RBC Capital Markets has raised the price target for Agree Realty to $80, maintaining an Outperform rating. The analysts at RBC have signaled Q4 2024 as the most significant in terms of acquisitions for the year, backed by several factors such as a lower cost of capital and adjusted expectations from sellers. Agree Realty's credit rating was upgraded to BBB+, reflecting an improved portfolio size and credit metrics.
InvestingPro Insights
Agree Realty Corporation's recent establishment of a $1.25 billion ATM equity program aligns with its growth strategy and financial flexibility. According to InvestingPro data, the company's market capitalization stands at $7.77 billion, suggesting that this program could potentially increase its equity base by up to 16%.
The company's strong financial position is reflected in its revenue growth of 17.78% over the last twelve months, with a robust gross profit margin of 87.94%. This solid performance may have contributed to the stock's impressive 32.2% price total return over the past six months.
InvestingPro Tips highlight that Agree Realty has raised its dividend for 11 consecutive years and has maintained dividend payments for 31 consecutive years. This consistent dividend policy, coupled with a current dividend yield of 4.05%, may appeal to income-focused investors considering the new share issuance.
It's worth noting that ADC is trading near its 52-week high, with the current price at 96.93% of its 52-week peak. This could indicate investor confidence in the company's prospects and its ability to effectively utilize the funds raised through the ATM program.
For readers interested in a more comprehensive analysis, InvestingPro offers 12 additional tips for Agree Realty Corporation, providing deeper insights into the company's financial health and market position.
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