Commercial real estate has been in a state of upheaval for several years. With the ever-present threat of online shopping decimating brick-and-mortar stores over the last fifteen years, it’s no surprise that many gave up on the industry, believing it was in a steady decline.
2020 brought COVID-19, and with it came another blow to the commercial real estate market, this time in the commercial office space market. Overnight, millions of Americans and their bosses realized they could save hours of commuting and costly office space costs by switching to work-from-home environments.
While the death of commercial real estate has certainly been predicted many times before, it seems as though the industry has found its inflection point and begun to stabilize, at least on the retail real estate side. Legitimate companies, like First National Realty Partners, have weathered the storm due to their heavy involvement in stable real estate that leases to recession-resistant companies like grocery stores, convenience stores, and fast food.
What Is Agree Realty?
Agree Realty is a major player in the world of Real Estate Investment Trusts (REITs). Typically, a REIT exists as an investment vehicle to allow retail stock investors to own shares in a real estate investment firm. The company then rewards its shareholders with higher-than-average dividend payments from its quarterly earnings.
Agree Realty specializes in net lease retail real estate. “Net lease” means that the renter pays the landlord the rent just like any other tenant, but they also pay for other expenses, like property taxes and insurance.
This takes a huge weight off the landlord’s shoulders and allows them to offer long-term leases to their tenants, as stability is key to maintaining these arrangements. One major downside of commercial real estate is the difficulty in finding new tenants when a space becomes vacant, and long leases make for stable tenants.
Who Are Their Competitors?
While Agree Realty is a major player in the net lease retail sector, they are not even close to the top of the stack.
Realty Income Corp
Realty Income Corp is the largest retail-focused REIT, valued at over $40 billion. While it may be far larger than Agree Realty, its monthly dividend is similar, at around 4.5% annually. The advantage Realty Income Corp has is its ability to make large purchases of multiple properties, giving it a discount. This stands out against smaller players, like Agree, that may only be able to purchase a single property at a time.
National Retail Properties
National Retail Properties may be a closer comparison to Agree Realty in terms of size. Like Agree Realty and Realty Income Co., National Retail focuses on the net lease retail sector. Their specialty is diversification among tenants. No single tenant makes up more than 10% of their leases, which means that should one of their major clients go belly up, National Retail has its other clients to fall back on. Its dividend is also similar to Agree and Realty Income at around 5%.
RealtyMogul
This is not a publicly traded company, but rather what is billed as a crowdfunded real estate investment firm. Instead of receiving dividends, investors receive distributions that they may accept as money or reinvest by purchasing additional private shares in the company. RealtyMogul’s primary competitors are companies like First National Realty Partners.
Why Are These Companies Still Thriving?
Net lease retail is a stable business model when combined with intelligent purchases in economically stable areas. While many retail shopping centers have gone bankrupt and remain vacant, this has led the retail sector to consolidate into thriving shopping centers housing clients who can weather an economic storm.
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