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Moody's assigns 1st rating to Agree Realty

Moody's assigned a Baa2 issuer rating to Agree Realty Corp., with a stable outlook, the first rating assigned by the agency to the single-tenant retail real estate investment trust.

Moody's said in a note that the rating takes into account Agree Realty's conservative and disciplined approach to leverage, its ample liquidity, moderate funds-from-operation payout ratio at 74% and almost fully unencumbered asset pool.

Agree Realty's small size in terms of gross assets in comparison to its sector peers constrains the company's rating, Moody's said, adding that the company's portfolio is fully concentrated in retail with sizable tenant exposure to Walgreens and geographic exposure to Michigan.

Moody's counted potential key person risk in the company's executive leadership team and several of its corporate governance policies not being in alignment with the industry's current and best practices as additional credit considerations, among others.

The stable outlook reflects Moody's expectations that Agree Realty will maintain strict discipline over its leverage and liquidity, while continuing to grow on an accretive basis. The rating agency also expects the company to further diversify its portfolio and expand its access to capital.