Alpha Buying: How This Company Quietly Took Over American Storefronts

We have discussed why I favor real estate and Real Estate Investment Trusts. Since 1972, REITs have outperformed the major indexes. According to CEM Benchmarking, publicly traded real estate has outperformed every asset class except private equity since 1998. REITs have an excellent track record of paying and growing dividends.

Most people would rather chase stories than be the landlord and lender. I know far more wealthy lenders and landlords than I do rich dreamers.

Right now, most investors either hate real estate or simply do not think about it. The instant experts of the internet are convinced that real estate is heading to zero and will crash the banking system. They believe only bitcoin and AI stocks are worth buying. That is not going to happen.

Make your own call on bitcoin and AI. But consider this: who needs real estate?

Bitcoin and AI companies and their employees do. They need office space. They live somewhere. They shop at stores, pharmacies, and frequent gas stations and convenience stores. They visit doctors and labs. They travel to conferences usually held in hotels.

Those that actually manufacture products will eventually need warehouse and logistics space. Bitcoin miners need physical locations to house all those computers.

The majority of high-tech startups are going nowhere, but the people involved will still interact with real estate and make landlords wealthy regardless of how their ventures turn out.

I am not the only one who likes real estate at current prices.

I am seeing insiders who run these REITs (people who know the market better than anyone) begin making open market purchases of their own stocks.

John Rakolta Jr. is Chairman of Walbridge, one of the largest privately owned construction companies in the United States. Walbridge is a top U.S. builder of automotive and manufacturing facilities and has achieved considerable market diversity through expansion into the hyperscale data center market. He is also a Director of Agree Realty and has been aggressively buying shares in the open market recently.

While the instant experts of the internet scream “retail apocalypse” and predict the death of brick-and-mortar stores, Agree Realty ADC has not only survived but thrived by completely rewriting the playbook. Agree Realty represents everything I look for in a long-term holding: contrarian thinking, exceptional management, fortress-like financials, and a business model that generates predictable cash flows in an unpredictable world.

In 2010, while everyone was fleeing retail real estate like it was radioactive, Agree Realty management team made a prescient decision that would define the company future. They launched their acquisition platform with a laser focus on “e-commerce resistance,” a concept largely ignored by the investment community at the time.

Consider that timing. This was just two years after the financial crisis, with Amazon retail dominance becoming increasingly apparent and traditional retailers closing stores left and right. Most investors and REITs were fleeing the sector. But Joey Agree and his team saw something different. They understood that certain types of retail were not going to disappear. They were going to evolve and become more essential than ever.

This was not just lucky timing. It marked the beginning of what would become one of the most successful strategic repositioning stories in REIT history.

Agree management articulated something Wall Street was missing: the emergence of the omni-channel economy. As Joey Agree explained in 2016, “Every retailer in the country is going to have to have billions of dollars, national retailers, to experiment, to test and eventually effectuate a true omni-channel experience because you cannot be an e-commerce-based retailer or just a brick-and-mortar-based retailer today. It does not work.”

This was not corporate speak. It was a fundamental insight that would prove prophetic. While others saw physical stores as dinosaurs, Agree saw them as critical infrastructure for the new retail economy. Stores were not just selling locations anymore; they were fulfillment centers, pickup points, showrooms, and customer experience hubs all rolled into one.

The company “RETHINK RETAIL” campaign was not marketing fluff. It was a declaration of war against conventional wisdom.

Let me walk you through some of Agree greatest hits, because this is where the company investment acumen really shines:

Tractor Supply Company TSCO – Agree first acquired a Tractor Supply location in Q3 2013 when the company was still relatively unknown outside rural markets. Management saw something special: a retailer with no national competition serving the growing rural lifestyle market with products that could not easily be replicated online.

By Q2 2016, management was saying: “While neither Tractor Supply Company nor Hobby Lobby maintains a public credit rating, both possess investment-grade quality financials with very strong balance sheets.” They were ahead of the rating agencies by years.

By Q3 2018, their conviction was proven right: “We have a fantastic relationship with their real estate team. The business is really thriving. They have no national competition. They also have the highest-rated e-commerce website of any retailer.”

Today, after acquiring over 115 locations since 2013, Tractor Supply is Agree second-largest tenant at 4.9% of base rent. More importantly, TSCO was upgraded to investment grade (BBB by S&P and Baa1 by Moody) in October 2020, validating Agree early assessment of the company credit quality.

Gerber Collision In 2014, Agree identified and met with The Boyd Group, parent company of Gerber Collision, recognizing early that this was a company positioned to consolidate a highly fragmented auto collision repair market. Their first acquisition came in Q3 2017.

By Q1 2018, management was already calling Gerber “the premier auto collision operator in the United States” and committed to working with them across all three growth platforms. By Q1 2022, they were describing their strategy as “identifying early on a retailer that we thought was in a tremendous position to access a fragmented space and had the balance sheet capabilities to do so.”

The result? Agree built a preferred development relationship with Gerber, developing over 20 locations to support their organic growth. Today, Gerber Collision is their 12th largest tenant with over 95 locations representing 2.3% of base rent.

Sunbelt Rentals First acquired in Q4 2015, Sunbelt Rentals represented Agree’s bet on the shift from equipment ownership to rental in the construction industry. As management explained in Q4 2019: “the only investment-grade operator in the country. If you look at the equipment ownership versus rental in this country… it is very, very low relative to Western Europe. And so, there’s a big opportunity in this country for equipment rental rather than ownership.”

The parent company, Ashtead Group, achieved investment grade ratings (BBB- by S&P in August 2018, Baa3 by Moody), and by Q1 2022, management noted that “Our decision to invest in Sunbelt Rentals was recently reinforced by their upgraded BBB rating by Fitch.”

Sunbelt is now Agree 13th largest tenant with over 55 locations, representing 2.3% of base rent.

TJX Companies TJX Agree relationship with TJX (parent of T.J. Maxx, Marshalls, and HomeGoods) dates back to 2012 when they developed their first T.J. Maxx. The company recognized early that off-price retailers had a sustainable competitive advantage in their treasure-hunt shopping experience and deep vendor relationships.

The insight proved prescient. As management noted in Q2 2017: “At the same time, in terms of women’s apparel, you look at T.J. Maxx…the off-price retailers have thrived.” By Q4 2017, they were saying: “the TJX Companies…is now our #5 tenant. We have a strong bias towards off-price retail and the experience and value proposition that it provides for consumers.”

Today, TJX is their 6th largest tenant at 3.1% of base rent, and the company continues to expand aggressively. Since 2012, Agree has acquired or developed over 55 TJX locations.

Let me give you a comprehensive look at Agree top tenants, because this portfolio tells the story of a company that has systematically assembled the cream of American retail:

Top 15 Tenants by Annualized Base Rent:

Walmart WMT (5.9%, $38.5M ABR) – The undisputed king of retail, with the most advanced omni-channel operation in the world. Investment grade (AA from multiple agencies).
Tractor Supply TSCO (4.9%, $31.8M ABR) – Dominant rural lifestyle retailer with no national competition. Upgraded to investment grade in 2020 (BBB/Baa1).
Dollar General DG (4.4%, $28.4M ABR) – Leading small-box discount retailer serving rural and urban markets where traditional retailers can’t compete economically. Investment grade (BBB/Baa2).
Best Buy BBY (3.3%, $21.7M ABR) – The last major electronics retailer standing, with a successful omni-channel model and services business. Investment grade (BBB/Baa1).
Kroger KR (3.2%, $20.5M ABR) – One of America’s largest supermarket chains with advanced digital capabilities and strong market positions. Investment grade (BBB-/Baa1).
TJX Companies TJX (3.1%, $20.0M ABR) – Off-price retail leader with T.J. Maxx, Marshalls, and HomeGoods. Investment grade (A-/A2).
CVS PharmacyCVS (3.1%, $19.9M ABR) – Healthcare-focused pharmacy chain with integrated health services. Investment grade (BBB/Baa2).
Dollar Tree DLTR (2.8%, $18.3M ABR) – Fixed-price point retailer with defensive characteristics. Investment grade (BB+/Ba1 – sub-investment grade but improving).
O’Reilly Auto Parts ORLY (2.8%, $18.3M ABR) – Leading automotive aftermarket parts retailer with strong same-store sales growth and e-commerce resistance. Investment grade (BBB+/Baa1).
Hobby Lobby (2.8%, $18.2M ABR) – Dominant craft retailer with no direct national competition and products difficult to replicate online. Privately held but with investment-grade quality financials.
Lowe’s LOW (2.8%, $17.9M ABR) – Second-largest home improvement retailer with strong omni-channel capabilities. Investment grade (BBB/Baa2).
Gerber Collision (2.3%, $15.2M ABR) – Leading auto collision repair chain owned by Boyd Group. Investment grade parent (BBB-/Baa3).
Sunbelt Rentals (2.3%, $15.0M ABR) – Equipment rental leader owned by Ashtead Group. Investment grade parent (BBB/Baa3).
7-Eleven (2.2%, $14.2M ABR) – Convenience store leader with defensive location characteristics. Investment grade parent.
Burlington BURL (2.2%, $14.0M ABR) – Off-price apparel retailer with strong growth trajectory. Sub-investment grade but improving credit profile.

What strikes me about this list is the intentionality behind every single tenant. These are not random retail relationships. They are carefully curated partnerships with companies that have either achieved market dominance, possess unique competitive advantages, or operate in sectors with natural barriers to e-commerce disruption.

Perhaps most impressive is the credit quality: 68.3% of Agree base rent comes from investment-grade tenants. This is not an accident. It is the result of a deliberate strategy to partner with retailers that have strong balance sheets and sustainable business models.

The tenant mix also reveals smart sector allocation:

Grocery Stores (10.1%): Essential, frequent-visit retailers with omni-channel capabilities
Home Improvement (9.1%): Large-ticket items requiring customer inspection and immediate fulfillment
Convenience Stores (7.8%): Location-dependent businesses with defensive characteristics
Tire & Auto Service (7.8%): Services that require physical presence and specialized equipment
Dollar Stores (7.0%): Serving markets too small for traditional competitors

I want to spend a moment on Walmart specifically, because at 5.9% of base rent, they are Agree largest tenant, and this relationship exemplifies everything the company does right.

Walmart is not just surviving the retail apocalypse. They are winning it. The company has built the most sophisticated omni-channel operation in retail, with stores serving as fulfillment centers, pickup locations, and last-mile delivery hubs. Their e-commerce growth has been explosive, but rather than cannibalizing store sales, it is making their physical locations more valuable than ever.

For Agree, Walmart represents the perfect tenant: investment grade credit (AA rating), growing business model, and a real estate strategy that aligns perfectly with the omni-channel future. These are not legacy stores that might become obsolete. They are critical infrastructure for Walmart continued growth.

While the tenant quality is impressive, what really captures my attention is Agree’s balance sheet. This is what a fortress looks like:

Investment grade ratings: Baa1 from Moody’s, BBB+ from S&P
Net debt to recurring EBITDA: 4.9x actual, 3.4x proforma (including forward equity)
Fixed charge coverage ratio: 4.3x
No material debt maturities until 2028
Total liquidity: approximately $2.6 billion
Outstanding forward equity: over $1.3 billion
Revolver capacity: $1.2 billion

This gives them tremendous flexibility to take advantage of market dislocations.

With their fortress balance sheet and $2.6 billion in liquidity, Agree is positioned for accelerated growth. Management recently raised their 2025 investment guidance to $1.3-$1.5 billion (up from $1.1-$1.3 billion), reflecting confidence in their ability to find attractive opportunities.

The investment pipeline is enormous: management estimates over 169,000 net lease opportunities across their target sectors, with $92+ billion in opportunities reviewed since 2018. They have been highly selective, investing only $8.0 billion over that period, demonstrating disciplined capital allocation.

In a world where dividend cuts have become commonplace, Agree has paid 159 consecutive monthly dividends with an average AFFO payout ratio of just 75% over the past ten years. The dividend has grown at approximately 6% annually over the past decade, reaching $2.99 per share in 2024.

This is not a yield play built on an unsustainable payout ratio. It is a genuine dividend growth story backed by growing cash flows and conservative financial management.

Here is what I find most compelling about Agree Realty: they have built a dominant position in a sector that most investors still view with skepticism. This creates a sustained competitive advantage. While others avoid retail real estate, Agree gets first look at the best opportunities.

The “retail apocalypse” narrative has created a two-tiered market where strong retailers with good real estate get phenomenal terms, while struggling concepts cannot secure financing at any price. Agree benefits from both sides of this dynamic: they get attractive pricing on quality assets while weak competitors are eliminated from their markets.

In a market obsessed with the next shiny object, Agree Realty has quietly built one of the highest-quality REIT portfolios in the market by betting on American retail evolution rather than its demise. They have assembled a collection of retailers that are not just surviving the omni-channel transition. They are thriving because of it.

While others were running from retail real estate, Agree was building relationships with the winners. While others were chasing yield at any cost, Agree was building a sustainable dividend growth engine. While others were leveraging up in good times, Agree was building a fortress balance sheet for all seasons.

This is the kind of contrarian, quality-focused investment that can anchor a portfolio for decades. In a world of uncertainty, Agree Realty offers something increasingly rare: predictable, growing cash flows backed by essential real estate infrastructure and managed by a team with a *proven track record of outstanding capital allocation.

Sometimes the best investments are hiding in plain sight, dismissed by the crowd but quietly compounding wealth for those patient enough to see past the headlines.

The insiders in real estate see the opportunity.

You should as well.